1. Threat of Substitute products and services.         

 ·High – when there are many alternatives to a product or  service.          ·Low – when there are few alternatives from which to choose.         ·Ideally, an organization would like to be on a market in which there are few substitutes of their product or services.       
  - Best practices of IT.        
 - Example, Electronic product – same functions different brands.

The Competitive Environment
Threat of Substitutes

• To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists

• Example, electrical product – same function different brands

• Switching cost – costs can make customer reluctant to switch to another product or service

  2.Threat of new entrants.        
·High – when it is easy for new competitors to enter a market.        ·Low – when there are significant entry barriers to entering a market.       
 ·Entry barriers is a product or service feature that customers have come to except from organizations and must be offered by entering organization to complete and survive.       
 ·Best practices of IT.        
-Example, new bank must offers online paying bills, acc. monitoring to compete.


The Competitive Environment
Threat of New Entrants

• Many threats come from companies that do not yet exist or have a presence in a given industry or market.

• The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors.

• Example, new bank (online paying bills, acc. monitoring)

       3.Rivalry among existence competitors.     
    ·High – when competition is fierce in a market.  
    ·Low – when competition is more complacent.         
    ·Best practices of IT.         
    -Wal-Mart and its suppliers using IT 
   – enabled system for communication and track product at aisles by effective tagging system.         
   -Reduce cost by using effective supply chain.

The Competitive Environment
Rivalry Among Existing Firms

•  Existing competitors are not much of the threat: typically each firm has found its “niche”.

•  However, changes in management, ownership, or “the rules of the game” can give rise to serious threats to long term survival from existing firms

•  Example, the airline industry faces serious threats from airlines operating in bankruptcy, who do not the debts while slashing fares against those healthy airlines who do pay on debt. (MAS & AIR ASIA)

The Value Chains – Targeting Business Processes

• Supply Chain – a chain or series of processes that adds value to product and service for customer
•  Add value to its products and services that support a profit margin for the firm