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Bargaining power - NEW ENTRANTS (When benefits outweigh costs (ROCE higher…
Bargaining power - NEW ENTRANTS
When benefits outweigh costs
ROCE higher than debt interest
Ex-ante barriers
Fixed costs to enter
Exogenous
Industry features
invest fixed assets
Pub
Oil industry
Pharmaceuticals
Barrier
Weak when
not large scale production
Still in introduction or growth
Strong when
At capacity
Mature/decline
Government barriers
Regulation
Licenses
Taxes
Legal barriers
Copyrights
Patents
Create temp monopolies
Endogenous
Competitor actions
Marketing investment
Loyal customers
Strong brand
Network effect
Apple Compatibility
R&D investment
increase tech
Increase Differentiation
Keep customers loyal
Level of experience
Expertise
Learned from it
Refined plans
Increased efficiency
Control Supply/Distribution
Increase investment
Get bigger
To increase efficency
Ex-post Threats not barriers!
Competitor aggression
Retaliate
Predatory pricing
Reduce prices
Unsustainable to new entrants
Increase scale
Defend
Tighten control of
Supply
Distribution
Litigation
Infringements
Legal costs
Freeze on investment
in case they lose