Competition and Porter's Five Forces (Vocabulary)

Vocabulary flashcards covering key terms related to competition and Porter's Five Forces as presented in the notes.

Competition

Rivalry between companies selling similar products or services to gain revenue, profit, and market share.

Market competition

Motivates firms to increase sales by using the marketing mix (product, price, place, promotion).

Free market economy

The Philippines is a free market where anyone can set up a business as long as it is legal, moral, and observes public order and safety.

Direct competitors

Businesses offering similar or identical products in the same market (e.g., Coke vs Pepsi).

Indirect competitors

Businesses in the same category that solve the same problem with different products or services (e.g., Chowking vs Jollibee).

Replacement competitors

Businesses offering an alternative to your product or service, often in a different category (e.g., coffee shop vs restaurant).

Porter's Five Forces

A framework identifying five competitive forces shaping an industry and helping determine its strengths and weaknesses.

Competitive rivalry

Rivalry among existing firms; influenced by the number and diversity of rivals, product characteristics, capacity, fixed costs, and industry growth.

Threat of new entrants

The risk that new firms will enter the market; barriers to entry (e.g., capital requirements, government policy, distribution access, economies of scale, switching costs) affect this threat.

Bargaining power of buyers

The influence customers have over prices; higher when buyers are few or purchase large volumes, or when switching costs are low.

Bargaining power of suppliers

The influence suppliers have over prices; greater when there are few suppliers, switching costs are high, or the product is unique.

Threat of substitutes

The threat that alternative products can fulfill the same need; stronger when switching costs are low and substitutes are attractive.

Substitute products

Products that serve the same purpose as another product (e.g., butter and margarine).

Potential new entrants

Possible future competitors; threat depends on capital requirements, government policy, distribution access, economies of scale, product differentiation, and switching costs.

Forward integration

When suppliers expand to control distribution or sell directly to end users, increasing supplier power.

Five Forces analysis

Also known as Porter's Five Forces; an industry environment model identifying the five forces of competition.