The Price of Products and the Volume of Commodities - Essay Example

All industries have numerous substitute products available, and as such, factors such as price and quality contributes significantly to customers switching their products to their competitors. The ease of customers in finding a product offered by one company at a cheaper price, or higher quality goods increases the threat of substitute for the business (Porter, 2008). The threat of new entrants further weakens the power of an existing entity. Barriers of entry and exit in a market determine the threat of new entry for organizations ion an industry (p.129). Low capital requirements to start a business, few economies of scale in the industry, low switching costs of customers from one product to another and the ease of technology required by businesses in their operating are factors increasing the threat of new entry into an industry.

Industry rivalry according to porter determines the intensity of competition among the existing firms in the industry (p. 135). The number of competitors in the industry coupled with the capabilities of these competitors increases the intensity of industry rivalry (Porter, 2008). In case of high exit barriers in the industry, rapid growth of the industry and high fixed costs that result to huge production costs, then there is an increase in the intensity of rivalry affecting the industry. Bargaining power of suppliers argued porter determines the strength of the seller (p. 133). Either supplier can provide goods and services at either low or high costs, depending on their power.