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THREAT OF ENTRY - Coggle Diagram
THREAT OF ENTRY
BARRIER SOURCES 7
SUPPLY-SIDE ECONOMIES OF SCALE
Production economies of scale
Found in Value Chain
Varies by industry
Efficient technology
Good supplier terms
DEMAND-SIDE BENEFITS OF SCALE / NETWORK EFFECTS
Buyers willingness depends on level of other buyers
Trust
Limits willingness to buy from newcomer
Reduces price newcomer can command
3 CUSTOMER SWITCHING COSTS
Fixed costs
Need to alter product, retrain staff or modify processes or systems
eg ERP software
4 CAPITAL REQUIREMENTS
5
INCUMBENCY ADVANTAGES
6 UNEQUAL ACCESS TO DISTRIBUTION CHANNELS
May need to displace others by price breaks, promotions
Existing tied up
Bypass or create own
eg low cost airlines book online, bypass travel agents
7 RESTRICTIVE GOVT POLICY
Aid or hindrance
amplify or nullify other barriers
licencing
Regulated industries: liqour, taxi, airlines
patenting rules
environmental & safety regulations
offering subsidies for eg research, to old & new firms
NEW ENTRANTS
New capabilites
cash flow
DIVERSIFYING entrants
Apple & music distribution
Leverage capabilities
Pressure on PRICES
Pressure on RATE of INVESTMENT
Pressure on COSTS
CAP on Profit potential
High
hold prices
Increase investment to deter
eg Starbucks aggressive modernising
Depends on
RETALIATION of incumbant
HEIGHT of entry BARRIERS