<p> Porters Five Forces: Rivalry</p><p>Phil Kenkel Bill Fitzwater Cooperative Chair As the agricultural environment becomes more complex, cooperatives must become better at adapting to change and thinking strategically. Porter’s Five Forces Model is a widely used method of analyzing the competitive forces in an industry. The forces are: rivalry According to the Porter model, the first competitive force is the rivalry among existing competitors in the industry. Rivalry is typically the strongest of five competitive forces in any given industry. Rivalry is the competition that occurs as firms try to increase their market share.</p><p>In a grain, farm supply or cotton cooperative, rivalry occurs because members have other opportunities to delivery their grain, gin their cotton or purchase inputs. Rivalry often focuses on price competition with other cooperatives or independent firms attempting to sell inputs at a lower price or offer a higher price for commodities. Rivalry is usually stronger in commodity markets relative to differentiated products. Rivalry also increases when the overall market demand is growing slowly and when the industry has a high fixed cost. All of these factors are present for most agricultural cooperatives.</p><p>Cooperatives can use a number of tactics to reduce the threat of rivalry. Cooperatives can compete head to head and through efficiency attempt to offer the best net price after the patronage refund is considered. Instead of competing solely on price, the cooperative can also try to distinguish itself on the basis of superior service. Offering timely and accurate application services, sound agronomic advice and unique grain marketing programs can help you rise above pure price competition. Your members receive a little bit of ownership and involvement with every bushel of grain they deliver or ton of fertilizer they purchase. Selling this cooperative advantage helps you compete with independent rivals. Any strategy that forms a stronger relationship with your members helps to reduce the threat of rivalry. </p><p>Next week I’ll discuss the force of new competition.</p><p>8-27-2012</p>