Barriers to entry and competitive strategies

Abstract

The relationships between the difficulty of entry and competitive strategies in five industries, chosen for their differing structural contexts, were tested. Statistical support was found for the value of pre-entry analysis of entry barriers and of firms' predicted responses to potential entry. In particular, the creation of idle productive capacity appears to be a potent deterrent to new entrants.* This research was undertaken while on the faculty of The University of Texas at Dallas. The author wishes to acknowledge Muhammed Daud for programming assistance, and thank the anonymous reviewers and Richard Bettis for helpful comments and suggestions. None but the author should be held responsible for remaining errors.

Perceptions regarding strategic and structural entry barriers

“…Incumbent companies were asked to indicate on a five-point Likert scale to what extent new competitors would encounter the barrier in Structural Access to distribution/selling expenses (13) Porter (1980), Yip (1982), Karakaya and Stahl (1989), Han et al (2001) Access to knowledge/skilled labour/patents/ technological change (3) Yip (1982), Harrigan (1983), Karakaya and Stahl (1989), Shepherd (1997) Advertising (14) Spence (1980), Harrigan (1981), Yip (1982), Netter (1983), Schmalensee (1983), Karakaya and Stahl (1989) Capital requirements (22) Bain (1956), Porter (1980), Harrigan (1981), Yip (1982), Karakaya and Stahl (1989), Shepherd (1997) Sales volume (23) Yip (1982) Cost disadvantages or experience disadvantages of newcomers (19) Bain (1956), Scherer (1970), Yip (1982), Karakaya and Stahl (1989), Geroski et al (1990), Han et al (2001) Costs of capital/special risks and uncertainties (18) Demsetz (1982), Shepherd (1997) Customer switching costs (7) Porter (1980), Klemperer (1987Klemperer ( , 1992, Karakaya and Stahl (1989), Shepherd (1997), Shy (2002) Differentiation (16) Bain …”

“…Strategic behaviour distribution channels (11) Singh et al (1998) Strategic behaviour knowledge/pre-emptive patents (5) Bunch and Smiley (1992), Singh et al (1998) Strategic behaviour R&D (9) Harrigan (1981), Yip (1982), Daems and Douma (1985), Bunch and Smiley (1992), Singh et al (1998) a The numbers in brackets refer to the barriers presented in Table 2 Perceptions regarding strategic and structural entry barriers 23 question. 2 Ideally the survey should have addressed new and potential competitors with feasible business plans.…”

Market Leadership Through Technology – Backward Compatibility in the U.S. Handheld Video Game Industry

“…Strategy and marketing scholars have focused on limit pricing (Srinivasan 1991), reputation (Clark and Montgomery 1998) and excess capacity (Harrigan 1981), while Gruca and Sudharshan (1995) integrate a wide variety of entry deterrence strategies in their conceptual framework, in part referring to product portfolio choices (brand proliferation, preannouncement, switching costs). However, technological parameters are not typically considered potential strategic instruments for entry deterrence.…”

Análise Empírica Dos Fatores Que Possibilitaram Entradas Na Indústria De Cimento Brasileira

“…A necessidade de capital é uma barreira à entrada porque a receita das empresas entrantes é, geralmente, inferior à das incumbentes, enquanto os gastos correntes são, geralmente, mais elevados. Isso ocorre porque, em geral, as empresas incumbentes possuem maior escala de produção, contratos com fornecedores em melhores condições, maior capacidade de financiamento de estoques e de capital de giro, melhor organização administrativa e maior grau de maturidade tecnológica (Harrigan, 1981). A necessidade de uma escala mínima para a produção é outra possibilidade de barreira à entrada.…”