---
date: '2025-01-15'
description: and competitive force shaping strategy
id: Strategy
modified: 2026-06-05 15:08:37 GMT-04:00
tags:
  - commerce4pa3
title: Strategy
created: '2025-01-15'
published: '2025-01-15'
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---
## HBR

See also: [[thoughts/university/twenty-four-twenty-five/commerce-4pa3/How-Competitive-Forces-Shape-Strategy.pdf|HBR]]

Core Argument:

- Competition goes beyond direct rivals - it includes 4 other forces that shape industry structure
- Understanding these forces reveals opportunities and threats

The 5 Forces:

1. Threat of New Entrants

- Controlled by entry barriers: economies of scale, brand identity, capital needs, access to distribution
- High barriers + strong retaliation = low threat

2. Supplier Power

- Strong when: concentrated, unique products, not dependent on industry
- Can squeeze profits by raising prices/reducing quality

3. Buyer Power

- Strong when: concentrated buyers, standard products, price sensitivity
- Can force down prices and demand better service

4. Substitute Products

- Set ceiling on prices
- Threaten profits by limiting potential returns
- Most dangerous when improving price-performance trade-off

5. Industry Rivalry

- Intense when: many competitors, slow growth, high fixed costs
- Takes form of price wars, advertising battles, product launches

Strategic Implications:

1. Position

- Find where forces are weakest
- Build defenses against competitive forces
- Example: Dr Pepper avoiding direct competition with Coke/Pepsi

2. Influence

- Take offensive moves to alter competitive forces
- Shape industry structure to your advantage

3. Exploit

- Spot and capitalize on industry changes before rivals
- Use changes in competitive forces to identify strategic opportunities

## Porter’s Five Forces Framework

![[thoughts/university/twenty-four-twenty-five/commerce-4pa3/Porter's Five Forces Framework.webp]]

1. Rivalry Among Existing Competitors

- Number of competitors
- Diversity of competitors
- Industry concentration
- Industry growth
- Quality differences
- Brand loyalty
- Barriers to exit
- Switching costs

2. Threat of New Entrants

- Barriers to entry
- Economies of scale
- Brand loyalty
- Capital requirements
- Cumulative experience
- Government policies
- Access to distribution channels
- Switching costs

3. Bargaining Power of Suppliers

- Number and size of suppliers
- Uniqueness of each supplier’s product
- Focal company’s ability to substitute

4. Bargaining Power of Buyers

- Number of customers
- Size of each customer order
- Differences between competitors
- Price sensitivity
- Buyer’s ability to substitute
- Buyer’s information availability
- Switching costs

5. Threat of Substitute Products

- Number of substitute products available
- Buyer propensity to substitute
- Relative price performance of substitute
- Perceived level of product differentiation
- Switching costs