All Porter’s Five Forces are great to study, but the single force that matters the most is threat of new entrants.
If you can’t check this box, you should just move on to the next company.
#RandomThoughts
If you can’t check this box, you should just move on to the next company.
#RandomThoughts
If demand is so great to where any company can earn high returns on capital, other businesses will notice and enter the market to compete for the profit pool.
Demand will then be distributed across more players and cause costs per unit to rise as fixed costs spread around fewer units sold.
Prices will then fall and cause all the original high economic profit to disappear.
Supplier/buyer power, threat of substitutes, and competitive rivalry are all important—but all can be ignored if barriers to entry do not exist as the company won’t have to worry about influencing behavior because there will simply be too many external factors to deal with.
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