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Strategic Management > Market Entry > Flashcards

Market Entry Flashcards

1
Q

Example: Migros/Coop vs Aldi/Lidl

A

M/C owned all prime locations to prevent entry, lobbied city councils, pressured suppliers, expanded low cost offering, consolidated the market

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2
Q

Planning entry (4 steps)

A
  1. Attractiveness of new market entry
  2. Choice of market (attractiveness, entry barriers)
  3. Choice of entry type (speed, prerequisites, M+A/JV/greenfield)
  4. Entry strategy (commitment, positioning)
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3
Q

Examples of Market Entry

A
  • Aldi/Lidl vs Migros/Coop

- Blablacar vs Flixbus

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4
Q

Porters 5 Forces

A
  1. Potential new entrants (entry barriers)
  2. Substitutes (impact on price elasticity)
  3. Suppliers (bargaining)
  4. Buyers (bargaining)
  5. Competition within
    (Government, regulation, taxation/policy)
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5
Q

P5F: Competition within the industry

A
  • Structure of the market and extent of competition
  • Concentration Ratio CR”X” = Market share of X largest companies in the market
  • Herfindahl Index (<0.15 perfect competition, 0.15-0.25 monopolistic competition, 0.25-0.6 oligopoly, >0.6 monopoly)
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6
Q

P5F: Substitutes

A

Cross elasticity of demand, switching costs and product differentiation

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7
Q

P5F: Buyer power

A
  • High concentration leads to high power

- better information -> higher power

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8
Q

P5F: Supplier power (4)

A
  • High concentration -> high power
  • locked purchasing relationships
  • lack of alternatives
  • unimportant customer
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9
Q

P5F: potential competitors

A

Market position is influenced by potential entrants (specific investments/sunk costs are important factors)

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10
Q

Barriers to entry (definition)

A

Factors allowing incumbents to earn positive economic profits while making it unprofitable to enter

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11
Q

Types of Barriers to entry (2)

A

Structural and

Strategic

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12
Q

Structural entry barriers (3)

A
  • Control of essential resources
  • Economies of scale/scope
  • Marketing advantage (brand loyalty, switching costs)
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13
Q

Structural entry barriers - Control of esesential resources (7)

A
  • limited supplier capacity
  • exclusive distribution channels
  • government rationing
  • location
  • natural resources
  • timing
  • patents
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14
Q

Structural entry barriers - Economies of scale/scope

A
  • declining average costs
  • minimum efficient scale
  • umbrella branding
  • overhead spread
    diversifying in adjascent markets
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15
Q

Market entry - Entrants advantage (3)

A
  • Activities in related markets
  • Technical innovation
  • Other, e.g. new distribution channels, financial strength
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16
Q

Entry Strategies (4)

A
  1. Commitment
  2. Value Chain Reconfiguration
  3. Judo Economics
  4. Niche Market
17
Q

Entry Strategies - Commitment

A

Credible commitment signals to incuments that retaliation may be unsuccessful

  • high sunk cost investments
  • exit other strategic market segments
    e. g. Philips w/ CD factory in US
18
Q

Entry Strategies - Value Chain Reconfiguration

A

Low-end disruption approach:

  • enter with innovative but inferior product
  • be ignored by incumbents
  • product improves over time, gain share
  • market leaders cannot respond to innovation in time and fail
19
Q

Entry Strategies - Judo Economics

A

Problem: big incuments have a lot to lose in ruinous price competition -> tolerate small entrants that signal niche positioning (entrant potentially still expands capacity and pushes incumbent out)

20
Q

Entry Strategies - Niche Market

A

Entrant focuses on niche market, incumbent can only retaliate across the board which is not feasible
Examples: NetCologne, German British Airways

21
Q

Strategic Entry Barriers

A
  • Commitment (e.g. incumbent commits to price war in case of entry)
  • Limit pricing (keep price low despite monopoly to signal low cost incumbent and low demand)
  • Predatory pricing (aggressively low price to trigger exit of entrant)
  • Pre-emption (overinvest in capacity, pursue overly broad horizontal product differentiation)

Strategic Management (6 decks)

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