istics of what they believe to be the typical customer. Following this they need to analyze the true competitive forces in their industry based on solid market research and customer understanding, not on the whims and poorly qualified perceptions of their Engineering Department.
Two approaches can be used to evaluate the industry and the competitive forces facing Hitech Transformers. First is the Porter Five Forces Model. The Porter Model focuses on five (5) specific forces that shape competition within any given industry. The second approach, The Strategic Groups within Industries Model, postulates that a limited number of groups are formed within a particular industry and these groups will capture the ôessenceö of the strategic differences between companies within an industry.
The Porter Five Forces Model focuses on the forces that shape competition within an industry (Hill & Jones, 1998, pp. 72-87). These forces are represented by the following factors:
The risk of new entry by potential competitors.
The degree of rivalry among established companies within an industry.
The stronger each of these forces, the more limited is the ability of established companies to raise prices and earn greater profits. Within this framework, for example, a strong competitive force can be regarded as a threat since it depresses profits. A weak competitive force can be viewed as an opportunity because it allows a company to earn greater profits.
This classification represents companies that are not currently competing in an industry, but have the capability to do so if they so choose. Strictly speaking, the four main barriers to entry are: brand loyalty, absolute cost advantages, economies of scale, and government regulation.
For Hitech Transformers, the quality of their appears to be high in that they are perceived as providing a ô good dependable product.ö Unfortunately, the product appears to be one that is just not...