Competitive rivalry is a measure of the extent of competition among existing firms. Intense rivalry can limit profits and lead to competitive moves, including price cutting, increased advertising expenditures, or spending on service/product improvements and innovation.
Questions to ask include:
- How intense is competition in the industry?
- What is the market share of the top companies? Is the industry fragmented or dominated by a few firms?
- What is the rate of industry sales growth? Is the industry mature or in a slow growth phase?
- Are products differentiated? Can customers switch with ease?
- Are there high fixed costs or high exit barriers that keep companies competing?
- What does the Merger & Acquisition (M&A) landscape look like? Are competitors getting stronger through mergers?
- Are there global opportunities or threats?