How to Know the Fierceness of Competitive Rivalry in an Industry

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Competitive rivalry pertains to the intensity of competition between new and existing companies in a certain industry. Not all industries have the same level of competition that is why there are some conditions wherein a beginner business owner will be able to gauge rivalry. Check additional information about competitive rivalry.

Competitive rivalry is one of Porter's five forces. These "five forces" are the five main things that determine an organization's overall profitability. It is often recommended to starting business owners not only because obviously, any organization would want a nice and stable profit flow but also it tackles overall of what are the first things to consider in starting a business.

Competitive rivalry is defined as simple as the term itself. Basically, it is all about the rivalry intensity that circulates around a concentrated location of marketing and advertising of various companies. The rules are simple: if your entry to the industry turns out to be easy, the possible chances of competitive rivalry are high. Why? It is simple Mathematics - you will become an "option" for consumers. You will be part of their wide choices that is why companies should always focus on innovation for them to have a competitive edge and eventually, gain loyal customers as much or exceeding the already existing players in the race. Also, if the customers will find it effortlessly easy to switch between your products and other substitutes, this will constitute a high competitive rivalry.

Despite this though, not all companies and industries are equally competitive. Let us admit it, there are just some products and services that just cannot be surpassed because they are unique and they possess the qualities that make consumers come back for more. Do you know anyone that usually says, "If it is not this product, never mind."? In competitive rivalry, you are not exactly trying to get these kinds of customers, more like wanting them to make you their second best option, if not first.

So how do we determine if competitive rivalry is high in certain industry?

1.If there is none or very little differentiation between products, customer's loyalty will either fluctuate or go separate ways. This is because they will have a lot of options to choose from, which will obviously promote a very intense competitive rivalry.

2.If your company has the same approximate size to the rival companies, this will reduce the customer's brand loyalty. With the rapid advancement of technology, specially the internet's abundance, there are more ways to achieve advertisement and marketing improvement. Once again, too many options.

3.If all companies will have the same strategies, the competitive rivalry will be high. Picture this: you will have an ad banner right beside a competitor's banner, all stating the same things and presenting the same benefits. That is just one sample, in terms of advertising strategy.

4.If an exit barrier exists, the rivalry will once again, be high. An exit barrier is if it would cost too much to leave the industry, hence, companies will have to fight for their respective ventures.

5.Another thing is that, if the only option for expansion is to spend a lot of money, companies will fight to protect their market share in order to increase it substantially. The competition will become stiff under these conditions, as business owners will be forced to compete aggressively.

These are just some of the conditions in which competitive rivalry is more likely to exist in such a very high rating. One of the possible results of a stiff competition is pressure in terms of changes in prices such as lowering it to be able to surpass other companies' fixed prices. Apart from this, margins and other aspects will be greatly affected too, resulting in profit inconsistency and irregularity on each and every company in the industry with the intense rivalry.

If you are interested in competitive rivalry, check this link to find out more about define competitive rivalry. Also, you can check other articles in BSC Guides category.

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