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High Strategic Stakes
Competitive rivalry is likely to be high when it is important for several of the
competitors to perform well in the market. For example, although it is diversified and
is a market leader in other businesses, Samsung has targeted market leadership in the

consumer electronics market. This market is quite important to Sony and other major
competitors such as Hitachi, Matsushita, NEC, and Mitsubishi. Thus, we can expect
substantial rivalry in this market over the next few years.
High strategic stakes can also exist in terms of geographic locations. For
example, Japanese automobile manufacturers are committed to a significant presence
in the U.S. marketplace. A key reason for this is that the United States is the world’s
single largest market for auto manufacturers’ products. Because of the stakes
involved in this country for Japanese and U.S. manufacturers, rivalry among firms in
the U.S. and global automobile industry is highly intense. While close proximity
tends to promote greater rivalry, physically proximate competition has potentially
positive benefits as well. For example, when competitors are located near one
another, it is easier for suppliers to serve them and they can develop economies of
scale that lead to lower production costs. Additionally, communications with key
industry stakeholders such as suppliers are facilitated and more efficient when they
are close to the firm. [11]
High Exit Barriers
Sometimes companies continue competing in an industry even though the
returns on their invested capital are low or negative. Firms making this choice likely
face high exit barriers, which include economic, strategic, and emotional factors,
causing companies to remain in an industry when the profitability of doing so is
questionable.
Attractiveness and Profitability
Using Porter’s analysis firms are likely to generate higher profits if the
industry:
• Is difficult to enter.
• There is limited rivalry.
• Buyers are relatively weak.
• Suppliers are relatively weak.
• There are few substitutes.
Profits are likely to be low if:
• The industry is easy to enter.
• There is a high degree of rivalry between firms within the industry.
• Buyers are strong.
• Suppliers are strong.
• It is easy to switch to alternatives.
Effective industry analyses are products of careful study and interpretation of
data and information from multiple sources. A wealth of industry-specific data is
available to be analyzed. Because of globalization, international markets and rivalries
must be included in the firm’s analyses. In fact, research shows that in some
industries, international variables are more important than domestic ones as
determinants of strategic competitiveness. Furthermore, because of the development

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