QS Study

Industry Competitive Structures

An industry is a classification that refers to a group of companies that are related in terms of their primary business activities. It can help you create long-term strategies, see threats before they reach you and discover opportunities before they pass you by. Industry competitive structures Description of the current state of a product’s market indicating, among other items of information, the

(1) number of competitors,

(2) the relative strength of each competitor,

(3) level of demand and supply, and

(4) ease of entry into the market.

Competition with other firms is a key aspect of running a business of any size, from a brand new venture to a large corporation. In competitive markets, companies have to fight over the business of potential consumers.

High Threat of entry of new competitors when:

  • Products are undifferentiated,
  • Brand names are not well-known,
  • Initial capital investment is low,
  • Consumer switching costs are low,
  • Accessing distribution channels is easy,
  • Proprietary technology and materials is not an issue,
  • Government policy is not an issue.

In economics, perfect competition refers to an ideal competitive environment that exhibits certain key structural characteristics beneficial to consumers. The structure of a market refers to the number of firms in the market, their market shares, and other features which affect the level of competition in the market.