Rivalry among competing sellers tends to be more intense when?

Rivalry among competing sellers is more intense when several competitors are under pressure to improve their market share or profitability, often leading them to launch fresh strategic initiatives. When companies face significant pressure to gain an advantage or enhance their performance, they are more likely to engage in aggressive tactics such as price cuts, increased marketing efforts, or innovation in products and services. This competitive dynamic is fueled by the necessity to outmaneuver rivals and attract customers, which escalates the intensity of rivalry within the marketplace.

Additionally, the presence of multiple players facing such pressures can lead to heightened competition as firms strive to differentiate themselves and capture greater market share. Each company may feel compelled to respond to the actions of its rivals, resulting in a cycle of competitive actions that intensifies the overall rivalry in the industry.

In contrast, when competitors are unequal in size and capability, smaller firms might focus on niche markets to survive instead of engaging in head-to-head competition. Similarly, high buyer switching costs can lead to more stable competitive environments, where loyal customers hinder intense rivalry as they are less likely to switch to competitors even when strategies change. Rapid market demand growth can also alleviate competitive tensions as it creates opportunities for all players to expand without needing to directly engage in aggressive competition.