Rivalry among existing firms Essay

Custom Student Mr. Teacher ENG 1001-04 16 November 2016

Rivalry among existing firms

Number and size of competitors

The birth rate in these years has been increase. Thus demand for baby product increase, people are more likely to invest in this market. On the other hand, online stores also act as an important part in this industry as people nowadays spend more time in surfing the online shop. Therefore the number and the size of competitors is high, and this increase the rivalry as more firms need to compete with the same customer.

Rate of industry growth

From the forecast of the government, we can see that the average annual births will keep on increase in the coming years and the average annual births will be increased to 5600 in 2026. According to these data, we can see that the rate of industry growth will be high, and in this growing market, firms are able to improve revenue simply because of the expanding market.

Amount of fixed costs or storage costs

The amount of fixed cost compare to the total cost for the firms in baby product industry is low. The firm’s most important part of cost is the unit cost for import products. There aren’t any special equipment or machinery needed to operate the firm. Also the storage cost is low, as the size of the baby products is relatively small so the storage area will not be too large. The low fixed cost and storage cost will led to a decrease in rivalry.

Product differentiation & switching costs

In this industry, it has a low level of product differentiation and switching cost. The types of product is more or less the same, customers can find the same product in each brand. In addition, customers can freely switch from one product to another, and this cause a greater struggle to capture customers. Therefore, the low level of product differentiation and switching cost tend to increase the rivalry.

Diversity of rivals

A diversity of rivals with different cultures, histories and philosophies make an industry unstable.

Height of exit barriers

Exit barriers refer to the cost on abandoning the product. For baby product industry, firms are going to import their products instead of manufacturing it, thus there aren’t any cost of plants and equipment for manufacturing. Therefore a low exit barrier will cause to a decrease of rivalry.

Bargaining Power of Supplier

Bargaining power is the ability to influence the setting of prices. The more concentrated and controlled the supply, the more power it wields against the market.

For the baby product industry, the supplier’s product is not differentiated and the industry is an important customer to the supplier, not like those raw material supplier, its product can supply to many different industry.

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