Toyota Case
1. Competitive Rivalry
Competitive rivalry exists between companies with the same or similar products/services and similar markets. Factors to be considered include:
• The number and size of competitors
• The rate of industry growth
• Differentiation and switching costs
• Fixed costs or perishable products
• Expansion
• High exit barriers
• Diverse strategies
Companies have to strife for a competitive advantage over its rivals. Industry concentration is measured through concentration ratios. A higher concentration ratio indicates that a company holds the largest share of the market resulting in a less competitive and more disciplined landscape.
Competitive advantage can be obtained by a combination of the following strategies:
• Changing prices
• Improving product differentiation
• Creatively using channels of distribution
• Exploiting relationships with suppliers
Companies should formulate a corporate strategy that addresses these areas within the five forces competitive analysis.
2. The Threat of entry
The threat of new competitors entering the market can be managed by restricting the entry barriers through:
• Economies of scale
• Capital cost of entry
• Control of distribution