DSpace at Khazar University

standards are established. Competition, in the transition to maturity, will become more
intense as rapid growth can now only be achieved by capturing customers from rival
firms. Cumulative experience no longer provides an important advantage to one firm
because all firms have now gained all the advantages that are available. A significant
feature of maturing industries is the tendency for competition to be based on price, since
firms' product offerings tend to become very similar and attempts at innovation are soon
copied.
In declining industries, only the most efficient firms can earn reasonable profits,
and the marginal players are "shaken out" of the industry. Where there are high exit
barriers, rivalry can become very intense as marginal firms hang on in the industry,
leading to chronic overcapacity.
Interrelationships between the five forces
We need to understand how a change in one of the five forces can impact upon
another. Let us suppose that, due to a technological breakthrough, entry into the
industry became much easier. If the industry is earning above average profits, new firms
are likely to enter. This in turn could make rivalry more intense, and may well feed
through to the buyers, who are now better able to play one firm off against another.
So all these forces are interconnected, and changes in one are likely Impact on the
others.
How can we forecast these structure changes?
Forecasting is notoriously difficult, but that is no reason not to try to about the
future. One way in to the problem is to look at trends the environment that looks as if
they might continue into the future. Wider environment in which the firm and its
industry are located can subdivide for forecasting purposes into the following four
sectors:
- The Political environment.
- The Economic environment.
- The Social environment
- The Technological environment.
T analysis can be useful if it encourages us to think more broadly at environmental
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