I love competition-- as long as I’m winning! Like cyclists riding through mountains, businesses face ups and downs. What role does competition play?
I love a healthy competition-- as long as I’m winning! Which is why you won’t find me competing in Colorado’s Triple Bypass, a bicycle race covering 120 miles over three mountain passes averaging two miles above sea level! Just like cyclists riding the through mountains, businesses face ups and downs. Especially when it comes to competition. The U.S. Federal Trade Commission seeks to provide fair competition by enforcing laws prohibiting collusion between competitors. For example, it’s illegal for competitors to cooperate in such a way that a winning bid is predetermined (bid rigging) or advantageous pricing structures are established (price fixing).
Competition can be quite fierce and complex. Thankfully, Michael Porter’s Five Forces model gives us a framework for analyzing an organization’s competitive environment.
The five forces are frequently used to measure competition intensity, attractiveness, and profitability of an industry or market. - Investopedia
Assuming competition is healthy, fair, and legal, what are the Five Forces and how do they affect pricing?
Whew! You made it through this weighty material-- much like a cyclist cresting the third of three peaks in the Triple Bypass. Not only does the Bypass challenge its riders to pedal up 10,805 feet in elevation gain, they also coast down 11,135 feet! But, that doesn’t mean it’s easy. Fortunately, like in business, not all of the ups and downs happen at the same time. Yet, we should be law-abiding and mindful of the power of existing rivals, suppliers, customers, new entrants, and alternative products.
Additional Resources: Harvard Business Review Video: The Five Competitive Forces That Shape Strategy (13:11)-- even if you don’t watch the whole thing, I’m curious if the books in their bookshelf appear to be heavier than the books in your bookshelf...? 🧐 Also, check out the Triple Bypass Map, click on the Grade button to see more detail! Oh, I checked, the race is only 118 miles, not 120… 🤔 Finally, Investopia offers a dry, but clear video!
by Michelle Sugerman • Leading Synergies, LLC • © All Rights Reserved
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