NATURE AND STRENGTH OF COMPETITION

 Nature and Strength of Competition

• An important component of industry and competitive analysis involves delving into the industry’s competitive process to discover what the main sources of competitive pressure are and how strong each competitive force is.
•  This analytical step is essential because managers cannot devise a successful strategy without in-depth understanding of the industry’s competitive character. Even though competitive pressures in various industries are never precisely the same, the competitive process works similarly enough to use a common analytical framework in gauging the nature and intensity of competitive forces. 
• Porter’s five forces model is useful in understanding the competition. It is a powerful tool for systematically diagnosing the main competitive pressures in a market and assessing how strong and important each one is.
•  Not only is it the widely used technique of competition analysis, but it is also relatively easy to understand and apply.