Differences between competitors are significant and aligned more on quality and customization of products than on price or aggressive discounting and the use of promotions. As a result, price elasticity is a permanent factor of the market and also signals the use of more effective means of differentiation, including the delivery of exceptional levels of service and greater levels of product customization expertise.

Supplier Power

In the optimal industry there are also an abundance of suppliers, each with highly differentiated and highly efficient supply chains of their own, all ensuring perfectly filled orders. The supply chain then is the greatest competitive differentiator of the industry from the manufacturing and fulfillment perspective.

The highly unique approach to service that is provided by suppliers also focuses on the use of advanced planning and scheduling (APS), Collaborative Planning and Forecasting (CPFR), and Vendor Managed Inventory (VMI) to attain the highest levels of performance possible. All of these techniques together lead the suppliers being perfectly aligned with the needs of the manufacturers, and further, to the customers.

The costs of switching suppliers are as a result high, yet with the high levels of supply chain visibility and use of advanced planning techniques, there is little need to.

Threat of New Market Entry

Within the optimal industry, new entry is possible only through the development of product or service innovations that propel the industry far above all others in terms of revenue and profit potential.

Barriers to entry exist at the low-end of the market and are organized to prevent those companies looking to play the role of industry consolidator through intensive merger & acquisition...

Instead the focus is on the development of new companies who deliver significant competitive advantage for the entire industry through their use of innovation and definition of best practices in customer service.
The optimal industry also has a high level of specialist knowledge that forces out those companies who attempt to break into the market using a box-bundling approach alone. Instead, the integration of the various components needs to be completed at a very fundamental level in order for products to realize the value of being sold together. This specifically refers to the ability of the manufacturers in the optimal industry to create value through the systematic integration of product components to create new, high value products, while at the same time focusing on how they are integrated together. The integration aspects of these components, and the knowledge specifically required to complete these integrations themselves is the most significant barrier to entry from a knowledge perspective there is.

In the optimal industry there is also a strong focus on capitalizing on learned economies of scale across the entire industry, including best practices in all areas including Web-based selling systems, order management, distributed fulfillment and service. The optimal industry then is one that is a "earning industry" where the products become secondary to the education of all participants in how to become more effective at their core business processes, including their service to customers and coordination with suppliers.