Intensity of Rivalry (one of Porter’s Five Forces)

See also:
Porter’s Five Forces of Competition
Threat of New Entrants
Supplier Power
Buyer Bargaining Power
Threat of Substitutes
Complementors (Sixth Force)

Porter’s Intensity of Rivalry Definition

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, then competitors are trying to steal profit and market share from one another. As a result, 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. For example, 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 thus decrease profit potential for the existing firms. In comparison, low intensity of competitive rivalry makes an industry less competitive. It also increases profit potential for the existing firms.


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Porter’s Intensity of Rivalry Determining Factors

Several factors determine the intensity of competitive rivalry in an industry, whether it increases or decrease it.

Porter’s Rivalry Intensity Increased

If the industry consists of numerous competitors, then Porter rivalry will be more intense. Whereas if the competitors are of equal size or market share, then the intensity of rivalry will increase. The intensity of rivalry will be high if industry growth is slow. If the industry’s fixed costs are high, then competitive rivalry will be intense. Additionally, rivalry will be intense if the industry’s products are undifferentiated or are commodities. If brand loyalty is insignificant and consumer switching costs are low, then this will intensify industry rivalry. Industry rivalry will be intense if competitors are strategically diverse – which means that they position themselves differently from other competitors. Then 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.

Porter’s Rivalry Intensity Decreased

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, the following indicates 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, then certainly will. And of the factors that do apply, some may indicate high intensity of rivalry and some may indicate low intensity of rivalry; however, the results will not always be straightforward. As a result, consider the nuances of the analysis and the particular circumstances of the given firm and industry when using the data to evaluate the competitive structure and profit potential of a market.

Intensity of Rivalry is High if…

If any of the following occurs, then intensity of rivalry is high.

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

Intensity of Rivalry is Low if…

If any of the following occurs, then it may indicate that the intensity of rivalry is low.

  • Competitors are few
  • Unequal size among competitors
  • 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. In comparison, 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.

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Intensity of rivalry

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Intensity of rivalry

Sources on Porter’s Intensity of Rivalry

Harrison, Jeffrey S., Michael A. Hitt, Robert E. Hoskisson, R. Duane Ireland. (2008) “Competing for Advantage”, Thomson South-Western, United States, 2008.

Porter, M.E. (1979) “How competitive forces shape strategy”, Harvard Business Review, March/April 1979.

Porter, M.E. (1980) “Competitive Strategy”, The Free Press, New York, 1980.

Porter, M.E. (1985) “Competitive Advantage”, The Free Press, New York, 1985.

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7 Responses to Intensity of Rivalry (one of Porter’s Five Forces)

  1. Rebecca March 18, 2016 at 7:29 am #

    Exactly, thanks for the best explanation very wide but I have indeed understood, keep up the examples and illustrations

    • CONSTANTINE October 26, 2016 at 7:54 am #

      THIS HAS BEEN VERY HELPFUL TO ME, IT HAS BRUSHED AWAY THE CONFUSION WHICH I HAD ON THIS PORTER RIVALRY THING

  2. Wonder May 22, 2016 at 10:37 am #

    well explained thanx

  3. GABBY June 2, 2016 at 1:34 pm #

    thanks a lot for good work done

  4. Dilawar khan December 21, 2016 at 11:58 am #

    very good explanation kindly give some examples also

  5. malima March 31, 2017 at 10:10 am #

    good but not complete since the one are learning are first time learners so illustrations are inevitable

  6. Nisar Mohyuddin May 26, 2017 at 11:32 pm #

    In the competitive world Industries Internal rivalries is the subject needs more to be studied & analysed.

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