ECON 138A Lecture 1.26.11

ECON 138A Lecture 1.26.11 - Degree of difference between...

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ECON 138 1/26/2011 Threat of New Entrants: Barriers to Entry Traditional Barriers: Economies of Scale Product differentiation Capital requirements Cost advantages independent of size Access to distribution channels Government and legal barriers Nontraditional barriers: (less tangible) Strength of management team (expertise in the area of study, passionate in the industry) First mover advantage (first one offering the product or service) Network Effect Passion of the management team and employees Unique Business Model (How YOUR product satisfy customer needs) Internet Domain Name (Good internet name; hard to find a good and catchy domain name) Inventing a new approach to an industry Rivalry Among Existing Firms Number and balance of competitors
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Unformatted text preview: Degree of difference between products (substitutes? Interchangeable? Etc) Growth rate of an industry Level of fixed costs (large fixed costs means you have to pay a large amount of money every year. Should have a leveled fixed cost. Can be detrimental) Bargaining Power of Suppliers Supplier concentration Switching costs Attractiveness of substitutes (if you can get similar product from another supplier) Threat of forward integration Bargaining Power of Buyers Buyer group concentration Buyer’s costs Degree of standardization of supplier’s products Threat of backward integration Application of the Five Forces Model (picture is online on website) (another picture from book)...
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