Rivalry among competing sellers is generally more intense when?

The intensity of rivalry among competing sellers increases significantly when rivals are actively taking initiatives to compete more aggressively. This includes actions such as lowering prices, introducing new products, ramping up promotional efforts, and enhancing advertising in order to gain sales and market share. These proactive strategies indicate that companies are not only trying to attract more customers but are also willing to engage in competitive tactics such as price competition and product innovation, which can lead to intensified rivalry.

In industries where there is a high level of competition, these moves signal to all players that the market is dynamic and that maintaining or growing market share is challenging. As rivals attempt to outperform one another through various strategies, the competition escalates, leading to a fierce rivalry that can manifest in price wars, constant new product launches, and increased marketing expenditure. This kind of environment creates pressure on all firms involved and can lead to reduced profitability across the board, as companies push harder to maintain their market position.

The other scenarios outlined do not create the same level of competitive intensity. For instance, when product differentiation is high, as mentioned in the first two options, companies may compete less aggressively on price and more so on brand loyalty or innovation, which can mitigate intense rivalry. Similarly, higher barriers to entry generally deter new