A strategist, in the first place, has to know what competition is. However, several managers describe competition as a new trend among today’s competitors. Yet, competition carries 4 other forces that are as well competitors for profit that altogether shape the interaction of competing in any industry: customers, suppliers, potential entrants, and substitute products.
In order to understand the similarity of competition in all industries worldwide, whether auto industry or masterpieces market or healthcare delivery… we must evaluate the industry based on the mentioned 4 forces.
It is crucial to understand competitive forces as well as an industry’s structure in order to understand its profitability with time. Strategy requires this kind of understanding as well as the defending against the competitive forces and bringing them to the company’s benefits.
What defines the profitability of an industry is the most powerful competitive force. In fact, it differs based on the industry we are dealing with. For example, in movie theater industry, the power of the producers and the creativity to produce several types of entertainment is what matters. However, in the market for commercial aircraft, it is all about the substitutes and the power of suppliers.
As a conclusion, the structure of the industry results from a bundle of economic and technical characteristics, defining the power of each force.