What is competition (Porter-style framing)?

• A. Firms compete to earn profits, including pressure from rivals, entrants, substitutes, buyers, and suppliers.
• B. Competition only from rivals.
• C. Competition from marketing channels.
• D. Competition from government regulation.

Answer: (A)

Porter-style framing sees competition as the set of forces that determine an industry's profitability by shaping prices and costs. It isn’t just about the actions of existing rivals; it includes five sources of pressure: rivalry among current competitors, the threat of new entrants, the threat of substitute products or services, the bargaining power of buyers, and the bargaining power of suppliers. Each force can push profitability up or down by altering prices, costs, or required investments. The option that describes competition as the combined pressure from rivals, entrants, substitutes, buyers, and suppliers best matches this framework. The other choices are too narrow or focus on factors outside the five-forces view.