ECONOMICS

Economics

Economics

Factors Influencing the Firms' Competitive Strategy

Any organization in the global marketplace needs to do everything it can to stay competitive or it will not survive. Organizations need to continually conduct self evaluations to remain competitive and differentiate themselves. The more completely entrepreneurs understand the underlying forces of competitive pressure, the better they will be able to assess market opportunities or threats facing their venture. Obviously, which forces dominate industry competition depend on the particular circumstances. Therefore, the challenge to the entrepreneur is to recognize and understand these forces so that the venture is positioned best to cope with the industry environment. Following are the discussion of factors which influence firms' competitive strategy.

Buyer power influences the prices that firms can charge, for example, as does the threat of substitution.

The power of buyers can also influence cost and investment, because powerful buyers demand costly service.

The bargaining power of suppliers determines the cost of raw materials and other inputs.

The intensity of rivalry influences prices as well as the costs of competing in areas such as plant, product development, advertising, and sales force.

The threat of entry places a limit on prices and shapes the investment required to deter entrants. (Stanely 2008)

Porter has identified several fatal flaws that plague entrepreneurs' strategic thinking regarding their competitive situation. Three of these flaws are:

Possessing no true competitive advantage. Imitation of rivals is both hard and risky and reflects a lack of any competitive advantage.

Pursuing a competitive advantage that is not sustainable. The entrepreneur must make sure that the competitive advantage cannot be quickly imitated.

Misreading industry attractiveness. The most attractive industry may not be the fastest-growing or the most glamorous. (Wheelen 2008)

Staying competitive in the marketplace is not for the weak of heart. Careful evaluation of the market, competitors, suppliers, buyers, substitute products, and rivals ...