Five Competitive Forces which affect a business and its profits in the long term are:

1. Threat of New Entrants
2. Threat of Substitution
3. Bargaining power of Suppliers
4. Bargaining Power of Buyers
5. Rivalry among Existing Competitors

I Threat of New Entrants

Barriers to Entry discourage new players form entering an industry, thhus reducing pressure on existing players. Different types of barriers are:

1. Economies of Scale: in manufacturing, operations, marketing, research, service etc. Economics can also emerge from shared funtions or operations.
2. Product Differentiation: Brand recognition, customer loyalty and Brand Perception. Heavy spending on brand building /differentiation, product differentiation important in Baby care, OTC drugs, cosmetics, investment banking, public accouting. (i dont know why). In brewing economies of scale and differentiation create big entry barriers
3. Capital Requirement: high upfront capital requirements if irrecoverable can become high entry barriers
4. Switching Costs: if the real and complete costs of switching from one supplier to another are high for the buyer then it becomes an entry barrier.
5. Access to Distribution Channels: getting Distribution Channels to carry products from new companies by giving high margins or pricing close to cost makes it difficult to enter a market. more limited the channels of distribution, the tighter the hold of existing competitors on these channels.
6. Cost Disadvantage other than Scale: -

• proprietary technology,
• favorable access to raw materials
• favorable location
• government subsidies
• steep learning curve
• strong retaliation

II Intensity of Rivalry among Competitors