which of the following is not among the factors that determine whether competitive rivalry among industry members is strong, moderate, or weak?
A whether customers’ costs to switch brands are low or high.
B whether there are few or many rival sellers, and whether there are big differences in their sizes and competitive capabilities.
C how active industry rivals are in initiating fresh competitive moves and in using the various weapons of competition to improve their market standing and business performance.
D whether industry members are vertically integrated and whether the industry is characterized by significant scale economies and rapid technological change.
E whether buyer demand for the product is growing rapidly or slowly.
The correct answer and explanation is :
Correct Answer: D. Whether industry members are vertically integrated and whether the industry is characterized by significant scale economies and rapid technological change.
Explanation:
Competitive rivalry refers to the intensity of competition among firms within an industry. The level of rivalry significantly influences industry profitability and is shaped by several key factors. According to standard strategic management frameworks—such as Michael Porter’s Five Forces—and summaries like Figure 3.7 found in strategy textbooks, there are clear determinants of how strong or weak competitive rivalry is in a given industry.
Options A, B, C, and E are all recognized factors that influence competitive rivalry:
- A. Switching costs: When customers can easily switch from one brand to another (low switching costs), rivalry tends to be stronger because firms must compete more aggressively to retain or gain customers.
- B. Number and similarity of rivals: When there are many competitors of roughly equal size and capability, competition tends to be more intense. A fragmented industry with many players naturally breeds higher rivalry as each firm fights for market share.
- C. Competitive moves and weapons: Active rivalry is also marked by the frequency and aggressiveness with which companies introduce new strategies (e.g., price cuts, innovation, advertising). These actions increase rivalry.
- E. Demand growth: Slow or stagnant market growth can intensify rivalry since firms must steal market share from each other to grow. Rapid demand growth, in contrast, may soften rivalry as companies can grow with the market.
However, Option D is the best answer because while vertical integration, scale economies, and technological change are important structural aspects of an industry, they are not direct determinants of competitive rivalry intensity as defined in standard strategic analysis. These factors more directly affect barriers to entry, cost structures, and industry evolution rather than day-to-day competitive actions among existing firms. Hence, they fall outside the core criteria used to evaluate the strength of rivalry among current competitors.