What are the most important competitive forces in an industry?

I believe in today's day and age, where every offline business has the same suppliers, identical supply chains, and commoditised prices, the bargaining power of customers is something that every business needs to tackle head on. That can only be done through orbit-shifting product innovation (takes many years of R&D and trials), or customer centricity (laser sharp focus on customer satisfaction, humanised interventions, and value for money).

As per Porter's Five Forces, identified by Michael Porter the most important competitive forces in an industry are: - The threat of new entrants - Bargaining power of suppliers - Bargaining power of buyers - Threat of substitutes - Industry rivalry. Understanding these forces is crucial to developing a strategy that leverages resources and maximizes profits.

Threat of substitute products or services signifies a substantial challenge to an industry’s competitive landscape that can lead to major shifts for its sustainability. Pricing, differentiated product offerings, product quality, ease of switching, customer loyalty and industry regulations are important competitive forces that must be recognized and managed to create favorable relationships among suppliers and customers, maintain market share and generate sustainable profitability.

Buyers' bargaining power reflects their ability to influence prices and demand concessions from industry participants. Factors such as buyer concentration, price sensitivity, switching costs, and the availability of substitute products influence buyers' bargaining power. Industries with a large number of fragmented buyers or low switching costs are more susceptible to buyer power.

Buyer dominance - the ability to dictate terms, pricing, and quality - can squeeze your profitability. Understanding why is key. Concentration, info access, and switching costs empower buyers. They can demand lower prices and higher quality, creating a squeeze. Fight back: - Market segmentation: Cater to different buyer needs and price points. - Value proposition: Highlight unique value beyond just price. - Relationship building: Foster trust and long-term partnerships. Beyond resistance, consider collaboration: - Co-create products: Involve buyers in product development. - Shared value chain: Optimize efficiency and benefit both sides. - Local clusters: Build partnerships in your region for mutual advantage.

Nike, Apple, and Gap have demonstrated effective approaches in managing their suppliers' power, which is crucial for their competitive edge. - Nike focuses on innovation and product differentiation, reducing supplier influence by emphasising quality and technology. - Apple leverages its global supplier network and market dominance to secure favourable terms, minimising the impact of any single supplier. - Gap employs a diversified supplier strategy, reducing reliance on any single supplier. These strategies illustrate the importance of innovation, market presence, and supplier diversification in mitigating suppliers' bargaining power.

Something to remember is the behavioural part of business. Business is run by leaders who are humans, who could have a certain view and a possible prediction of how they ascertain various outcomes and their impacts. Sometimes, it's an idea or a technology who's time has come. Nvidia has been around (if you ask gamers) forever with their GeForce line of graphic accelerators. But they've used that foundation to outsmart and out-partner all chip manufacturers to get where they are today. Timing above all, is key.

Besides Porter 5 forces, competitive forces also account for elements that differentiates your product and influences your target segment accordingly through channels and provide competing offerings