Third, the third of Porter’s 5 forces is the threat of entry of new competitors. The appearance of competitors in the industry is due to the existence of a greater number of raw materials within that sector, so the increase in supply will be high.
Given this, there are numerous protectionist barriers by which access to a sector that is already consolidated is complex. For example, lack of experience, high tariff rates, difficulty in distribution channels, specialization in work processes or market saturation, among others.
This power allows us to take advantage of our competitors and to know what services they offer in order to take initiatives in this regard. For example, we can counteract these forces by lowering the cost of product prices, increasing the cost of advertising and distribution channels, and improving sales processes.
In short, this force considers how easy or difficult it is for competitors to join the market . The easier it is for a new competitor to enter, the greater the risk that an established company’s market share will be depleted.
Threat Of Entry Of Substitute Products
Fourth, we have the threat of entry of substitute products. This is the appearance of new companies that offer products that can replace ours. The appearance of these products causes the price of the products we have to be limited. If it were the case that these increased, we would run the risk that our customers would opt for substitute products.
This strength of the Porter analysis allows us to find Senegal Email List out how these companies enter the sector and define strategies to counteract them, such as improving advertising campaigns, sales channels or better offers for customers.
A very common example is usually found in beverages, whether they are water, carbonated soft drinks or isotonic drinks.
Rivalry Between Competitors
Porter’s fifth force appears when the number of strategies among our competitors is high. The rivalry is increasing as more competitors appear, with greater size and capacity. It also influences that the costs of fixed products are high, the product is perishable, price reduction or even absorption of companies.
Analyzing the rivalry between our competitors allows us to take advantage and find out in which aspects we can unseat the competition. Either by reducing prices, offering added value to our products or increasing their production.
For example, we find it in drinks. The first case that comes to mind is precisely between Coca Cola and Pepsi.