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Threat of New Entry

Pendatang baru pada industri membuka kapasitas baru dan keinginan untuk mendapatkan bagian
dari pasar yg dapat menekan harga, biaya, dan rate investasi

pendatang baru dapat mempengaruhi kapabilitas yang ada dan cash flow untuk
menggoyang/memulai kompetisi.. Contoh :
• Pepsi di industry air botolan
• Microsoft di internet browser (Internet Explorer pada jaman Netscape merajalela, dengan
memberikan ie gratis, bundled dengan OS)
• Apple di distribusi music (iTunes)
• Firefox di Internet Browser (Innovasi, browser lebih ringan dan plugin yang banyak)
• Vivanews di News Portal

Ketika new entrants muncul dan ancaman dari dia mulai meninggi, incumbent (In business the
term "incumbent" is used for the largest company in a certain industry, for instance the traditional
phone company in telecommunications, typically called the "incumbent operator". In a sales
process, such as public tender, incumbent may also refer to the vendor that has the largest
existing commercial relationship with the issuer of the tender. In large corporations it is the
incumbent who is the holder of an office, or one that occupies a particular position.) harus
menjaga harga atau menambah investasi untuk menghalangi customer baru, contoh starbuck
yang secara agresip memodernisasi store dan menunya.
A high threat of new entrance can make an industry more competitive and decrease profit
potential for existing competitors. On the other hand, a low threat of entry makes an industry less
competitive and increases profit potential for the existing firms. New entrants are deterred by
barriers to entry.

Barrier to Entry :
1. Supply side economics of scale
Perusahaan yang memproduksi dengan volume lebih banyak (Incumbent) akan mendapatkan cogs
yang lebih rendah, karena mereka dapat menyebarkan biaya tetap ke unit yang lebih banyak,
memasang teknologi yang lebih efisien, term pembayaran yang lebih baik untuk supplier, etc
Contoh : Microprocessor → Intel, scale economic di riset, chip fabrikasi, consumer marketing
2. Demands Side Benefits of Scale
juga dikenal dengan network effect, dimana pembeli lebih suka untuk membeli produk yang dibeli
oleh pembeli2 lain yang juga berlangganan pada perusahan/incumbent. Pembeli lebih percaya
pada perusahaan yang lebih besar untuk produk yang krusial
Contoh : IBM
3. Customer Switching Cost
Biaya tetap ketika pembeli berganti supplier, contoh : Rubah Spesifikasi Produk, training staff
untuk knowledge produk baru, modifikasi proses sistem informasi (perubahan kode, term2
pembayaran, ketentuan2 yang disyaratkan supplier, mis barcode, etc). Semakin besar switching
cost, semakin sulit new entrants mendapatkan customer
Contoh : SAP atau ERP sistem yang lain
4. Capital Requirement
Terjadi ketika dibutuhkan investasi finansial yang besar untuk berkompetisi dalam sebuah industri,
hal ini dapat menghalangi new entrants. In establishing a business, you can choose between a
business with low capital requirement but with the prospect of more competitors or one with high
capital requirement but with less possible competitors.
Contoh : Fixed fasilities, membangun gudang inventori, dan dana untuk start-up
5. Incumbency Advantages Independent of size
Incumbents dapat mempunyai keuntungan dalam biaya maupun kualitas yang tidak didapati oleh
new entrants. Contoh : teknologi proprietary, access yang lebih bagus ke sumber raw material
terbaik, brand identity yang baik, pengalaman yang membuat incumbent untuk mempelajari
produksi secara efisien
Contoh : Target dan walmart, lebih memilih stores yang dioperasikan sendiri daripada shopping
center yang didirikan dikelilingi department store
6. Unequal Access to distribution channel
New entrants harus mengamankan distribusi
New entrants harus membypass distribusi bersama atau membuat sistem distribusi sendiri
Contoh : Upstart low-cost airlines → menghindari distribusi tiket melalui travel agents dan meng-
encouraged customer untuk membeli tiket online
7. Restrictive Government Policy
Dapat menghalangi atau membantu new entrants, dan juga dapat melipatkan/menghilangkan
barrier yang lain, contoh : izin requirement dan dan restriksi untuk investasi asing
GP dapat menaikkan barrier entry yang lain, misalnya expansive pateting rules yang melindungi
proprietary tech dari peniruan atau peraturan tentang environment atau keamanan yang dapat
menaikkan scale economics(Biaya?) dari new entrants
Bisa juga membantu → subsidi silang, secara tidak langsung membantu basic research dan dapat
digunakan oleh semua perusahaan baik baru maupun lama yang dapat mengurangi biaya

New Entrants are likely to fear expected retaliation if :


1. Incumbents merespon dengan sepenuh tenaga threat dari new entrants
2. incumbents mempunyai resource untuk melawan, termasuk excess cash (An additional
amount of cash beyond what a company normally needs to have on hand) and unused
borrowing power
3. Incumbents dapat memotong harga normal
4. Industry berjalan dengan pelan, sehingga customer dapat mendapatkan volume dengan
mengambilnya dari incumbent

High Threat of entry of new competitors when:¶


• Profitability does not require economies of scale
• Products are undifferentiated
• Brand names are not well-known
• Initial capital investment is low
• Consumer switching costs are low
• Accessing distribution channels is easy
• Location is not an issue
• technology is not an issue
• Proprietary materials is not an issue
• Government policy is not an issue
• Expected retaliation of existing firms is not an issue

Threat of New Entry is Low if: lawannya

Power of Supplier
Supplier dapat menekan bisnis dengan menaikkan harga, menurunkan mutu atau mengurang
ketersediaan barang dari produk mereka yang akan berimbas pada biaya pada customer/buyer.
Supplier yang kuat dapat membuat industry semakin competitive dan mengurangi keuntungan
dari buyer, sebaliknya supplier yang lemah dapat menjadikan industri sebaliknya

Supplier group is powerful if :


1. Lebih terkonsentrasi daripada industri yang membeli produknya
Microsoft di operating system yang terangkai dengan perakit PC
2. Tidak sangat tergantung pada salah satu industry
kalau supplier melayani banyak industri, supplier tidak akan ragu untuk mengambil keuntungan
dari customer, dan apabila salah satu customer merupakan porsi besar dalam keuntungan
perusahaan, supplier akan memproteksi cust tsb
3. Customer menemui barrier switching cost apabila berganti supplier
akan lebih susah apabila cust sudah melakukan investasi pada equipment khusus
4. Menawarkan produk yang differentiated
Farmasi yang menawarkan patented drugs lebih kuat daripada farmas yang menawarkan obat
generik
5. Tidak ada pengganti
6. dapat mengancam untuk integrasi ke depan dalam industri
7. If suppliers are concentrated compared to buyers – if there are few suppliers and many
buyers – supplier bargaining power is high.
8. If suppliers can easily forward integrate – or begin to produce the buyer’s product
themselves – supplier power is high.
9. If the buyer is not price sensitive and uneducated regarding the product, supplier power is
high.

Power of Buyer
Dapat mendapatkan nilai lebih dengan memaksa menurunkan harga, menuntut
kualitas yang lebih bagus atau servis yang lebih, dan dapat membuat peserta
industri untuk saling melawan satu sama lain. Pembeli akan kuat apabila mereka
sudah menegosiasikan pengaruh kepada peserta industri (supplier dalam hal ini)
terutama apabila mereka sensitip terhadap harga, dan menggunakan kekuatan
untuk memaksa pengurangan harga.
• If buyers are concentrated compared to sellers – if there are few buyers and many sellers –
buyer power is high.
• If switching costs – the cost of switching from one seller’s product to another seller’s
product – are low, the bargain power of buyers is high.
• If buyers can easily backward integrate – or begin to produce the seller’s product
themselves – the bargain power of customers is high.
• If the consumer is price sensitive and well-educated regarding the product, buyer power is
high.
• If the customer purchases large volumes of standardized products from the seller, buyer
bargaining power is high.
• If substitute products are available on the market, buyer power is high.

And of course, if the opposite is true for any of these factors, buyer bargaining power is low.

Buyer Power is High/Strong if:¶


• Buyers are more concentrated than sellers
• Buyer switching costs are low
• Threat of backward integration is high
• Buyer is price sensitive
• Buyer is well-educated regarding the product
• Buyer purchases product in high volume
• Buyer purchases comprise large portion of seller sales
• Product is undifferentiated
• Substitutes are available
Buyer Power is Low/Weak if: opposites

The Threat of Substitutes


Subsitusi dari product yang manghasilkan fungsi yang sama atau mirip. Adanya substitusi akan
mengancam keuntungan dari industri tertentu karena cust dapat memilih untuk membeli
substitusi daripada produk industri tertentu. Dengan adanya kemungkinan substitutes, industry
dapat lebih competitif dan dapat mengurangi profit potensial untuk perusahaan dalam industri.

Threat of Substitutes – Determining Factors¶


1. if the consumer’s switching costs are low, meaning there is little if anything stopping the
consumer from purchasing the substitute instead of the industry’s product, then the threat
of substitute products is high.
2. if the substitute product is cheaper than the industry’s product – thereby placing a ceiling
on the price of the industry’s product – then a threat of substitutes high risk is the case.
3. if the substitute product is of equal or superior quality compared to the industry’s product,
the threat of substitutes is high.
4. if the functions, attributes, or performance of the substitute product are equal or superior
to the industry’s product.

The Threat of Substitutes Porter places High risk on:¶


1. Consumer switching costs are low
2. Substitute product is cheaper than industry product
3. Substitute product quality is equal or superior to industry product quality
4. Substitute performance is equal or superior to industry product performance

The Porter Threat of Substitutes Low Risk Situation : opposites +No substitute product is available

Rivalry Among Existing Competitors

The intensity of rivalry among competitors in an industry refers to the extent to


which firms within an industry put pressure on one another and limit each other’s
profit potential. If rivalry is fierce, competitors are trying to steal profit and market
share from one another. This reduces profit potential for all firms within the
industry. According to Porter’s 5 forces framework, the intensity of rivalry among
firms is one of the main forces that shape the competitive structure of an industry.

Porter's intensity of rivalry in an industry affects the competitive environment and


influences the ability of existing firms to achieve profitability. High intensity of
rivalry means competitors are aggressively targeting each other’s markets and
aggressively pricing products. This represents potential costs to all competitors
within the industry.

High intensity of competitive rivalry can make an industry more competitive and
decrease profit potential for the existing firms. On the other hand, low intensity of
competitive rivalry makes an industry less competitive and increases profit
potential for the existing firms.

Porter's Intensity of Rivalry Determining Factors¶


Several factors determine the intensity of competitive rivalry in an industry. If the
industry consists of numerous competitors, Porter rivalry will be more intense. If
the competitors are of equal size or market share, the intensity of rivalry will
increase. If industry growth is slow, the intensity of rivalry will be high. If the
industry’s fixed costs are high, competitive rivalry will be intense. If the industry’s
products are undifferentiated or are commodities, rivalry will be intense. If brand
loyalty is insignificant and consumer switching costs are low, this will intensify
industry rivalry. If competitors are strategically diverse – they position themselves
differently from other competitors – industry rivalry will be intense. An industry
with excess production capacity will have greater rivalry among competitors. And
finally, high exit barriers – costs or losses incurred as a result of ceasing
operations – will cause intensity of rivalry among industry firms to increase.

And of course, if the opposite is true for any of these factors, the intensity of
Porter rivalry among competitors will be low. For example, a small number of firms
in the industry, a clear market leader, fast industry growth, low fixed costs, highly
differentiated products, prevalent brand loyalties, high consumer switching costs,
no excess production capacity, lack of strategic diversity among competitors, and
low exit barriers all indicate that the Porter intensity of rivalry among existing
firms is low.

Porter's Intensity of Rivalry Analysis¶


When analyzing a given industry, all of the aforementioned factors regarding the
intensity of competitive rivalry Porter placed among existing competitors may not
apply. But some, if not many, certainly will. And of the factors that do apply, some
may indicate high intensity of rivalry and some may indicate low intensity of
rivalry. The results will not always be straightforward. Therefore it is necessary to
consider the nuances of the analysis and the particular circumstances of the given
firm and industry when using these data to evaluate the competitive structure
and profit potential of a market.

Intensity of Rivalry is High if¶


• Competitors are numerous
• Competitors have equal size
• Competitors have equal market share
• Industry growth is slow
• Fixed costs are high
• Products are undifferentiated
• Brand loyalty is insignificant
• Consumer switching costs are low
• Competitors are strategically diverse
• There is excess production capacity
• Exit barriers are high

Intensity of Rivalry is Low if¶


• Competitors are few
• Competitors have unequal size
• Competitors have unequal market share
• Industry growth is fast
• Fixed costs are low
• Products are differentiated
• Brand loyalty is significant
• Consumer switching costs are high
• Competitors are not strategically diverse
• There is no excess production capacity
• Exit barriers are low

Porter's Intensity of Rivalry Interpretation¶


When conducting Porter’s 5 forces industry analysis, low intensity of rivalry makes an industry
more attractive and increases profit potential for the firms already competing within that industry,
while high intensity of rivalry makes an industry less attractive and decreases profit potential for
the firms already competing within that industry. The intensity of rivalry among existing firms is
one of the factors to consider when analyzing the structural environment of an industry using
Porter’s 5 forces framework.