In regard to any of the five forces that shape competition, it is important to note that their relative strengths are context-dependent. Elaborate on this statement with the help of a real-world example.

Question

What will be an ideal response?

Answer 1

Student answers will vary. A sample answer follows:

In regard to any of the five forces that shape competition, it is important to note that their relative strengths are context-dependent. For example, the Mexican multinational CEMEX, one of the world's leading cement producers, faces very different buyer power in the U.S. versus in its domestic market. Cement is an undifferentiated commodity product. In the U.S., cement buyers consist of a few large and powerful construction companies that account for a significant percentage of CEMEX's output. This results in razor-thin margins in the U.S. In contrast, the vast majority of CEMEX's customers in its Mexican home market are numerous, small, individual customers facing a few large suppliers, with CEMEX being the biggest. Not surprisingly, CEMEX earns high profit margins in its home market. This example provides the context to show that CEMEX actually competes in two different industry conditions (albeit offering the same product), because it faces two very different competitive forces in the U.S. versus Mexico.