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The threat of new entrants is usually based on the market entry barriers. They can take diverse forms and are used to prevent an influx of firms into an industry whenever profits, adjusted for the cost of capital, rise above zero. In contrast, entry barriers exist whenever it is difficult or not economically feasible for an outsider to replicate the incumbents' position (Porter, 1980b; Sanderson, 1998) The most common forms of entry barriers, except intrinsic physical or legal obstacles, are as follows:

? Economies of scale: for example, benefits associated with bulk purchasing;

? Cost of entry: for example, investment into technology;

? Distribution channels: for example, ease of access for competitors;

? Cost advantages not related to the size of the company: for example, contacts and expertise;

? Government legislations: for example, introduction of new laws might weaken company's competitive position;

? Differentiation: for example, certain brand that cannot be copied (The Champagne)

Force 3: The Threat of Substitutes

The threat that substitute products pose to an industry's profitability depends on the relative price-to-performance ratios of the different types of products or services to which customers can turn to satisfy the same basic need...

The threat of new entrants is usually based on the market entry barriers. They can take diverse forms and are used to prevent an influx of firms into an industry whenever profits, adjusted for the cost of capital, rise above zero. In contrast, entry barriers exist whenever it is difficult or not economically feasible for an outsider to replicate the incumbents' position (Porter, 1980b; Sanderson, 1998) The most common forms of entry barriers, except intrinsic physical or legal obstacles, are as follows:

? Economies of scale: for example, benefits associated with bulk purchasing;

? Cost of entry: for example, investment into technology;

? Distribution channels: for example, ease of access for competitors;

? Cost advantages not related to the size of the company: for example, contacts and expertise;

? Government legislations: for example, introduction of new laws might weaken company's competitive position;

? Differentiation: for example, certain brand that cannot be copied (The Champagne)

Force 3: The Threat of Substitutes

The threat that substitute products pose to an industry's profitability depends on the relative price-to-performance ratios of the different types of products or services to which customers can turn to satisfy the same basic need...

General points of the essay

1. Analyze the five forces acting on BP. Which of them appear to bring the greatest threat to the company? Barriers to Entry and exit (Symbian) barriers to entry for amonopolist Capital Structure of Firms India's growing prosperity opens up a new market for luxury-goods firms Market Structure Maximize Profits Portor's Threat of Entry Proposed Market Entry Strategy for Tesco - Indian Retail Food Market The Advantages And Disadvantages Of Free Market Economy, Price Determination With Market Forces. And Government Intervention With Free Market Equilibrium Price And The More Suitable Model For The Sudan The impact of capital structure on a company’s cost of capital Transfer pricing--market-based vs. cost-based Who Determines The Prices Of Goods In Market? Government Or Free Forces Of Market Effective Communication And Barriers That May Prevent Effective Communication Within The Perioperative Setting Jail Based Treatment And Drug Re-Entry Courts Is it the case the firms must maximise profits in order to survive?

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