How does the industry structure affect competitive rivalry?

The correct answer highlights that industry structures with higher entry barriers typically lead to reduced competitive rivalry. This phenomenon occurs because higher entry barriers make it difficult for new competitors to enter the market, allowing existing firms to maintain their market positions with less threat.

In markets with significant barriers—such as high capital requirements, strong brand loyalty, or regulatory restrictions—current firms do not have to contend with frequent new entrants, which can dilute their market share and increase competition. When fewer firms are potential challengers, the existing players face less pressure to drastically cut prices or increase marketing efforts, contributing to a more stable competitive environment.

In contrast, the other options misrepresent the complexities of competitive dynamics. Simply having more competitors does not guarantee lower rivalry; in fact, it can often result in increased competition depending on factors like market growth and product differentiation. Also, identical products can actually intensify rivalry as firms fight for market share without significant differentiators. Finally, suggesting that more competitors always lead to more intense rivalry overlooks other essential dynamics such as strategic alliances or the nature of competition in the market. Thus, the understanding of industry structure and its implications for rivalry is crucial for analyzing competitive behavior effectively.