During the stage of the decision to internationalize, we must know the competition in our industry. One of the most useful frameworks for analysing the competitive structure has been developed by Porter, with his Porter’s five-forces model.
The goal of competition analysis is to find a position in industry where the company can best defend itself against the five forces, or can influence them in its favour. Knowledge of these underlying pressures highlights the critical strengths and weaknesses of the company and shows its position.
Let’s see each force separately:
Market competitors: It is utterly important to analyse them. The intensity of rivalry depends on some factors: the concentration of the industry, rate of market growth, structure of costs, degree of differentation, switching costs and exit barriers among others.
Suppliers: The higher the bargaining power of suppliers, the higher the costs. Commercial Managers of companies are usually a great source of information at this point. They are always in contact with their industry.
Buyers: What do they really need? Listen to them.
Substitutes: The presence of substitute products can reduce industry attractiveness and profitability because they put a constraint on price levels.
New Entrants: It means an increase of the degree of competition. What is more, they often go in for the kill.
After analyzing these forces, firms can reach some conclusions in order to “attack” its target countries/markets.