MarketingMarketing Explanation

7 Forces Model: Thompson and Strickland

Industry’s Dominant Economic Features

This includes factors such as the size of the industry, the growth rate of the industry, and the level of competition in the industry.

Industry size: The size of the industry can affect the level of competition. In large industries, there are typically more competitors, which can lead to more intense competition.

Industry growth rate: The growth rate of the industry can also affect the level of competition. In growing industries, there are typically more opportunities for new entrants, which can lead to more intense competition.

Level of competition: The level of competition in an industry can be affected by a number of factors, such as the number of competitors, the similarity of products or services, and the barriers to entry.

7 (Seven) Forces Model

Sources of Competitive Forces

This includes the five forces of competition: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services, and rivalry among existing firms.

Threat of new entrants: The threat of new entrants is the likelihood that new firms will enter the industry and compete with existing firms. The threat of new entrants can be affected by a number of factors, such as the barriers to entry, the cost of entry, and the availability of resources.

Bargaining power of suppliers: The bargaining power of suppliers is the ability of suppliers to raise prices or reduce the quality of their products or services. The bargaining power of suppliers can be affected by a number of factors, such as the number of suppliers, the importance of the suppliers to the industry, and the availability of substitutes.

Bargaining power of buyers: The bargaining power of buyers is the ability of buyers to lower prices or demand higher quality products or services. The bargaining power of buyers can be affected by a number of factors, such as the number of buyers, the importance of the buyers to the industry, and the availability of substitutes.

Threat of substitute products or services: The threat of substitute products or services is the likelihood that consumers will switch to alternative products or services. The threat of substitute products or services can be affected by a number of factors, such as the availability of substitutes, the price of substitutes, and the quality of substitutes.

Rivalry among existing firms: The rivalry among existing firms is the competition between firms within the same industry. The rivalry among existing firms can be affected by a number of factors, such as the number of firms, the similarity of products or services, and the intensity of competition.

Driving Forces in the Industry

This includes the factors that are changing the industry and making it more or less attractive. For example, technological change can be a driving force that makes an industry more attractive by creating new opportunities for firms. Demographic change can also be a driving force that makes an industry more or less attractive.

Technological change: Technological change can create new opportunities for firms in an industry. For example, the development of the internet has created new opportunities for businesses in the retail, travel, and entertainment industries.

Changes in consumer preferences: Changes in consumer preferences can also make an industry more or less attractive. For example, the increasing demand for healthy foods has made the food industry more attractive.

Regulatory changes: Regulatory changes can also affect the attractiveness of an industry. For example, the passage of new environmental regulations can make the energy industry less attractive.

Market Position of the Competitors

This includes the size, strength, and strategies of the competitors in the industry.

Size: The size of a competitor can be measured by its market share, sales revenue, or assets. Larger competitors typically have more resources and can be more difficult to compete with.

Strength: The strength of a competitor can be measured by its financial strength, brand reputation, and product quality. Strong competitors are typically more difficult to compete with.

Strategies: The strategies of a competitor can be defensive or offensive. Defensive strategies are designed to protect the competitor’s market share. Offensive strategies are designed to increase the competitor’s market share.

Strategic Moves of the Competitors

This includes the plans and actions that the competitors are taking to gain a competitive advantage like developing new products and etc.

  1. Investing in research and development: This is a defensive move that can help a competitor stay ahead of the competition by developing new products or services.
  2. Expanding into new markets: This is an offensive move that can help a competitor increase its market share by reaching new customers.
  3. Acquiring new businesses: This is an offensive move that can help a competitor increase its market share by adding new products or services to its portfolio.
  4. Lowering prices: This is a defensive move that can help a competitor maintain its market share by making its products or services more affordable.
  5. Differentiating its products or services: This is an offensive move that can help a competitor increase its market share by making its products or services more attractive to customers.

Key Success Factors

This includes the factors that are essential for success in the industry. For example, in the technology industry, key success factors may include innovation and speed to market.

  • Innovation: The ability to develop new products or services that meet the needs of customers.
  • Speed to market: The ability to bring new products or services to market quickly.
  • Cost leadership: The ability to produce products or services at a lower cost than the competition.
  • Differentiation: The ability to offer products or services that are unique or different from the competition.
  • Customer service: The ability to provide excellent customer service.
  • Marketing and sales: The ability to market and sell products or services effectively.
  • Distribution: The ability to distribute products or services effectively.
  • Brand reputation: The ability to build a strong brand reputation.
  • Financial strength: The ability to raise capital and manage finances effectively.

Attractiveness of the Industry

This includes the overall profitability and attractiveness of the industry.

  • The entry barriers: How easy is it for new businesses to enter the industry? High entry barriers can make an industry less attractive, as they can make it difficult for new businesses to compete with established businesses.
  • The exit barriers: How easy is it for businesses to exit the industry? High exit barriers can make an industry less attractive, as they can make it difficult for businesses to leave the industry if they are not successful.
  • The risks associated with the industry: What are the risks associated with the industry? Industries with high risks tend to be less attractive than industries with low risks.

Source

Kangal, S. (2023). Seven Forces Model by Thompson and Strickland. iEduNote. https://www.iedunote.com/seven-forces-model-by-thompson-and-strickland

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