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Services Marketing
Notes Non-innovative and non-competitive public sector banks could be perceived by the new private
sector banks not to be a threat but an opportunity; while the second foray of SBI into the cards
business with General Electrics technology support could be perceived as a threat by the
established card players (as indeed they did).
Service firms that are not able to compete will have to change their service product line or else
might face extinction, like the paging services mentioned earlier. There are five forces that
decide the degree of market competition within a service firms task environment.
2.2.1 Porters Five Forces Model
Figure 2.1: Forces that Shape Industry Competition
Source: www.hbr.org
Rivalry among Existing Service Firms
With competition, service firms use tactics like price, comparative advertising, and increased
customer service or warranties. When the status quo is disturbed by one player - it could be for
more opportunities, quest for market share or the service firm feels market pressures, etc.
rivalry develops. The intensity of rivalry depends on the type of market and the differentiation
between rivals. Competition is both good and bad for the industry.
Relative Power of Customers
When customers are in a buyers market, are mature and have a plethora of choices in services
and players, their bargaining power increases. When too many service firms fight for the same
customers, it will erode the profitability of the service firms. The shakeout is being witnessed in
the satellite TV channels. With over 80 channels vying for the viewers attention, the channels
are skating on very thin margins.
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