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Business Fundamentals was developed by the Global Text Project, which is working to create open-content electronictextbooks that are freely available on the website http://globaltext.terry.uga.edu. Distribution is also possible viapaper, CD, DVD, and via this collaboration, through Connexions. The goal is to make textbooks available to the manywho cannot afford them. For more information on getting involved with the Global Text Project or Connexions email us atdrexel@uga.edu and dcwill@cnx.org.

Editors: Salvador Treviño and Carlos Ruy Martinez (ITESM, Monterrey Campus, Mexico)

Contributors: Carlos Alberto Alanis, Gaspar Rivera, Jorge Echeagaray, Jose de Jesus Montes, Juana Monica Garcia, Ramiro Robles, and Roberto Sanchez

Models of industry attractiveness; the strategic perspective

In order to be successful in business, we must understand what our customer’s needs and wants are and deliver them in an efficient and profitable manner. In order to do so, we must also understand the industries in which the companies are immersed and what makes them attractive from the general point of view.

Industry attractiveness was initially described by Michael Porter in his book, Competitive Strategy (Porter 1980). Porter’s well-known Five Forces Model is often used as an analytical tool by companies when they are deciding whether or not to enter a particular industry. According to Porter, what makes an industry attractive or unattractive is determined by 5 forces:

  1. Rivalry: This force is measured by how intense the rivalry/competition relationship in an industry is. The factors affecting rivalry are: number of competitors, slow market growth, low levels of product differentiation, how aggressive competing companies are, etc. For example, retailing has always had the reputation of being a highly competitive industry, while the rail road industry is thought to be less competitive.
  2. Threat of substitutes: In Porter's model, substitute products refer to products that can be substituted for your own. Substitute products can be found within own or other industries. For example, if you decide to start an inter-city bus company, you have to consider all the other options your customers have to get from one city to another, for instance, city trains, small shuttle service, shared private cars, among others.
  3. Buyer power: The power of buyers is the impact that customers have on a producing industry. In general, when buyer power is strong, the buyer has the ability to set the price because usually there are very few buyers and many suppliers. Grain farmers are often used as an example. In most countries, there are many small farmers who grow grain, but few large buyers who have the power to set the price a farmer receives.
  4. Barriers to entry: Barriers to entry are unique offerings of companies in an industry that any company wishing to enter that industry must be prepared to overcome. Examples from developed economies are online banking and ATM services for banks and frequent flyer programs for airlines. In many cases, development of these expected products or services is quite expensive for a new entrant, and, thus, it s a barrier to entry.
  5. Supplier power: Suppliers are powerful when there are few suppliers for a company to purchase necessary items from. In a situation where there are few suppliers, it is typically difficult for a buyer to get a lower price from another supplier. An example is the oil industry, where they are many buyers, but relatively few suppliers, and most of the suppliers are members of the OPEC cartel which sets common production quotas, thereby controlling the market price for oil.

Questions & Answers

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what is microbiologist
Muhammad Reply
what is errata
Muhammad
is the branch of biology that deals with the study of microorganisms.
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What is microbiology
Mercy Reply
studies of microbes
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_Adnan
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Muhamad
they make spores
Louisiaste
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the significance of food webs for disease transmission
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Mark
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Assimilatory nitrate reduction is a process that occurs in some microorganisms, such as bacteria and archaea, in which nitrate (NO3-) is reduced to nitrite (NO2-), and then further reduced to ammonia (NH3).
Elkana
This process is called assimilatory nitrate reduction because the nitrogen that is produced is incorporated in the cells of microorganisms where it can be used in the synthesis of amino acids and other nitrogen products
Elkana
Examples of thermophilic organisms
Shu Reply
Give Examples of thermophilic organisms
Shu
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Micheal Reply
Prevent foreign microbes to the host
Abubakar
they provide healthier benefits to their hosts
ayesha
They are friends to host only when Host immune system is strong and become enemies when the host immune system is weakened . very bad relationship!
Mark
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faisal Reply
cell is the smallest unit of life
Fauziya
cell is the smallest unit of life
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ok
Innocent
cell is the structural and functional unit of life
Hasan
is the fundamental units of Life
Musa
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Micheal Reply
There are nothing like emergency disease but there are some common medical emergency which can occur simultaneously like Bleeding,heart attack,Breathing difficulties,severe pain heart stock.Hope you will get my point .Have a nice day ❣️
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en français
Adama
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ESTHER Reply
Many sites of the body have it Skin Nasal cavity Oral cavity Gastro intestinal tract
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skin
Asiina
skin,Oral,Nasal,GIt
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all
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by fussion
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Shelly Reply
part of a tissue or an organ being wounded or bruised.
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what term is used to name and classify microorganisms?
Micheal Reply
Binomial nomenclature
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Source:  OpenStax, Business fundamentals. OpenStax CNX. Oct 08, 2010 Download for free at http://cnx.org/content/col11227/1.4
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