The rivalry or intensity at which you compete against your competition can move and change over time as the dynamics of the industry change. Competitive rivalry is an opportunity or a threat depending on how you handle it.
Do you recognize the intensity of the competition and position yourself accordingly? Or are you feeling the pressures, but don’t know where they’re coming from? The following aspects have an effect on whether you feel the pressure of your industry more or less:
- The structure of the competition: Rivalry is greater when there are many small companies and less when there’s a clear market leader.
- Growth objectives: Rivalry is greater when everyone is focused on growth (like biotech) and less when the industry is mature (like publishing).
- Exit barriers: If leave an industry is expensive or difficult, rivalries tend to be higher.
- Degree of differentiation: This factor is present in industries where products are commodities. Commodities are product and services that have no obvious differences and companies compete on price (like computers, steel, and so on). Rivalry is higher than when competitors can differentiate their products.
- The structure of the industry costs: In industries that have high fixed costs (like manufacturing), competitors tend to cut prices to fill unused manufacturing capacity, which leads to higher rivalry.