International Business

- Suppliers of inputs
- Buyers of outputs
- Substitute products
- Potential new entrants
- Rivalry among competing firms

-->Five forces model

• Threat of new entrants
  • Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents  the abnormal profit rate will trend towards zero (perfect competition).
• Threat of substitute products or services
  • The existence of products outside of the realm of the common product boundaries increases the probability of customers to switch to alternatives.
• Bargaining power of customers (buyers)
  • The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. Firms can take measures to reduce buyer power, such as implementing a loyalty program. The buyer power is high if the buyer has many alternatives.
• Bargaining power of suppliers
  • The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm when there are few substitutes. If you are making biscuits and there is only one person who sells flour, you have no alternative but to buy it from them. Suppliers may refuse to work with the firm or charge excessively high prices for unique resources.
• Intensity of competitive rivalry
  • For most industries the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.

• The Industry Organasation paradigm
• Great by choice

Emphasizes industry structure in the belief that it directly influences a company’s profitability. It begins by presuming that markets demonstrate perfect competition.
Unattractive industry: where perfect competition drives down overall profitability

Are bright executives who exploit market imperfection to outperform rivals such as ZARA.
Strategy: helps managers assess the companies present situation, identify the direction it should go and determine how it will get there
Value: is the measure of a firm’s capability of selling what it makes for more than the costs incurred to make it

a strategy that aims to be the low cost producer in an industry for a given level of quality --> standardized products

are industries marked by continuous streams of branded product innovations. They opt for differentiation, creating value by generating customer insights, developing innovative products, designing high-profile marketing programs and moving products to market quickly.

is the set of linked activities the company performs to design, produce, market, distribute and support product