Business Industry Analysis
- Firms seek a competitive advantage over rival firms in the same industry. Economists measure rivalry by industry concentration, according to Quick MBA. This can be measured by the Concentration Ratio, which indicates the percent of market share held by the four largest firms.
- A substitute product is a product in another industry that can act as a replacement. Threat of substitutes impacts an industry through price competition, according to Quick MBA.
- The impact customers have on a producing industry is known as buyer power. When there are many suppliers and few buyers, then buyer power is strong, according to Quick MBA.
- The power raw materials suppliers have over an industry is known as supplier power. Suppliers can exert power over a producing industry by selling raw materials at a high price, according to Quick MBA.
- Barriers to entry refer to characteristics inhibiting additional rivals from market entry. These barriers maintain a level of profits for those already in the industry, according to Quick MBA.