Question

Prepare a brief essay that includes an example of each of the following strategic moves: raising barriers to entrants (Hint: intellectual property), establishing high switching costs, creating a new product or service (Hint: the web), and establish- ing alliances. The examples do not necessarily have to involve IT. Do not use examples already presented in the text. You may use examples from actual events or your own suggestions, but the examples must be practical.

Answer 1

Raising Barriers to Entrants:

A barrier to entrants means restrictions for the new business organisations to enter into an existing market. Sometimes pre-established companies raises such restrictions so that new companies could not enter into the market of a particular product or a particular regional market and they can earn a supernormal profit for a longer period of time. Companies adopting such strategies mainly do that for their survival in long run. There are certain ways of creating such barriers which are explained below.

Patents, Copy rights and Intellectual Property – Intellectual property or Technical Know-how is very much important factor for a company to create a barrier to the entrants. If Some formulas, Designs, Process Chart, or any other technical know-how is available with only one or some limited number of companies then they get it patented from the government so that no other companies can copy or use it. In this way those technical know-how or designs becomes unavailable to the companies who are planning to enter into the market. Example design of the R15 Version 3.0 of Yamaha. No other company can copy the design of that bike so no other companies can enter into the market of Yamaha R15 Lovers.

Established Brands – Companies Establish some brands in a market while they are operating in a market for a long time. By the time consumers starts relating and thinking about that particular product only by that brand. If any new company comes in and offer the same product by another name or brand, consumers think that this is not the thing they were consuming since a long time. Brand of WOE Momo in Kolkata India. Here in Kolkata every people when they hear the word MOMO they thinks about Momo offered by the brand named WOW, and when the here the name of WOW they can only think about the MOMO although the resturent brand WOW offers much more products. MOMO is a food item in Kolkata, WOW is a chain of restaurants offering different items of snacks.

Established distribution networks – Companies establishes exclusive distribution networks for faster and smoother delivery of the products to the consumers. New entrants companies could not avail that facilities of distribution networks so they fails to deliver the products or services to the end consumers in time. Example – E-Cart the distribution channel of Flipkart in Inda. Some other companies also have to depend on flipkatr’s ecart service.

Establishing high switching cost:

High switching cost means it will incur a high amount of loss to the customer if they want to switch over to some another product or brand from some existing product or brand.

That means if a customer wants to test some new brand of the same product then he will have to face a high amount of loss. Here the loss means capital loss mainly or the amount they have already invested will be lost. Companies adopt this type of strategy to retain their customers for a long time. For Example – I have a Samsung Galaxy J7 Prime mobile phone which I purchased in June 2017, then it cost me around 15000 INR. Now Redmi offers Note 5 Pro in 11000 INR which is having much more and advanced features than Samsung Galaxy J7 Prime. Now I would love to have a Redmi Note 5 Pro. But if I go to sell the J7 Prime I can get only 7000INR. Now I could not move to the Redmi Note 5 Pro because of this loss. Switching cost may also include servicing cost or altering cost for changing the product.

Creating a new Product or Service:

Creating a new product or services always gives some competitive advantage to the companies. Companies always needs to carry on their research and development activities to create or invent some new products or services. Technology is changing rapidly, if a company wants to survive in this changing scenario then the company needs to develop some new and more advanced and refined products. Example – I have consultancy firm. I offer PAN Card preparation to Income tax notice compliance to a customer only in response to a missed call by the customer and also I provide the service to the doorstep of the customer. This service strategy gives me some competitive advantage over other firms providing same services in Idia.