How Strong Is Your Firm’s Competitive Advantage?

Appendix I

How Strong Is Your Firm’s Competitive Advantage? Summary of Factors and Strategies

Force that affects profitability	Factors affecting that force	Proactive strategies
Threat of substitutes	1. price/performance of substitute 2. buyer switching costs	1. product differentiation 2. raising buyer switching costs 3. tying
Threat of new entrants	1. supply-side economies of scale 2. demand-side economies of scale 3. buyer switching costs 4. capital requirements 5. incumbent firm advantages 6. access to distribution channels 7. government policy 8. expected retaliation	1. limit pricing 2. penetration pricing 3. product differentiation 4. raising rival firms’ costs 5. price-cost squeezes
Bargaining power of suppliers ...