Process, Materials, and Measurements

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18 PROCESS, MATERIALS, AND MEASUREMENTS

examples of powerful distributors. Mass-market retail outlets often account for a dis-

proportionate percentage of sales for a company, making them relatively powerful

when compared to other retail options. Again, like suppliers, the power of distributors

is relatively weak when there are many, seemingly interchangeable options for con-

sumers, such as car rental agencies at the airport of a major city.

New entrants include anyone who might view a particular product sector as financially

lucrative enough to create a competitive product or service for sale and distribution.

Existing companies in a particular product area can create barriers to keep new

entrants out of a market by maintaining high manufacturing costs, or through develop-

ing high brand preference among consumers. The commercial aircraft industry is an

example of one with very high manufacturing barriers, or costs of entry. The athletic

shoe industry is an example of one with high brand preference barriers. Conversely,

restaurants and auto repair businesses in any given town are examples of ones with

relatively low barriers to new potential entrants.

As mentioned before, competitors in the Five Forces model are those who make a

similar product or service—one that consumers might consider interchangeable on

some level. Direct competitors are one of the most obvious market forces, as their

products are the ones adjacent on the same store shelf, often with similar features

at a similar price. Direct competition is most obvious in a typical grocery store.

The force of direct competitors is weaker when the company has a unique product

protected by patents, trade dress, or copyright protection.

Substitutes are any other competing priority for the same consumer dollar. Walking or

riding a bicycle is a substitute for using a car and purchasing gas. Eating dinner at

home is a substitute for going out to a restaurant. Not spending the money, investing

it elsewhere, or simply keeping it in the bank is also an option for consumers. No

company’s product or service is without some form of substitute.

BRAND BASICS

Brands are as old as business itself, dating back to a time when two merchants in

the same area who provided the same goods or services needed a way to differenti-

ate themselves from each other. Since literacy levels were very low, competitive pro-

prietors used unique symbols to identify their place of business, giving birth to the

logo and its associated brand. Creating and communicating differentiation, and build-

ing preference for that differentiation, are basic goals in brand building.

While it’s easy to identify a brand by its outward-facing visible elements—such

as a unique logo, the consistent use of a particular color, or a signature product—

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