CHAPTER 3 . THE EXTERNAL Potential Entry of New Competitors Whenever new firms c
ID: 338434 • Letter: C
Question
CHAPTER 3 . THE EXTERNAL Potential Entry of New Competitors Whenever new firms can easily enter a particular industry, the intensity of competitiveness among firms increases. Barriers to entry, however, can include the need to gain economies of scale quickly, the need to gain technology and specialized know-how, the lack of experience, strong customer loyalty, strong brand preferences, large capital requirements, lack of adequate distribution channels, government regulatory policies, tariffs, lack of access to raw materials, possession of patents, undesirable locations, counterattack by entrenched firms, and potential saturation of the market. Despite numerous barriers to entry, new firms sometimes enter industries with higher-quality products, lower prices, and substantial marketing resources. The strategist's job, therefore, is to identify potential new firms entering the market, to monitor the new rival firms' strategies, to counterattack as needed, and to capitalize on existing strengths and opportunities. When the threat of new firms entering the market is strong, incumbent firms generally fortify their posi- tions and take actions to deter new entrants, such as lowering prices, extending warranties, add- ing features, or offering financing specials The Walt Disney Company is nearing completion of its Shanghai Disneyland, a $4.4 billion complex set to open in China in 2016, complete with hotels, restaurants, retail shops, and other amenities. However, a rival firm, DreamWorks Animation SKG, is nearing completion of a $3.1 billion entertainment district named Dream Center in Shanghai right beside Disneyland and says its facility will also open in 2016. Although expensive to build, theme parks are becom ing more popular globally. Time Warner's Warner Brothers is building Harry Potter attractions around the world, including a converted movie studio outside London Potential Develonment of Suhstitute ProductsExplanation / Answer
CHAPTER 3 . THE EXTERNAL Potential Entry of New Competitors Whenever new firms can easily enter a particular industry, the intensity of competitiveness among firms increases. Barriers to entry, however, can include the need to gain economies of scale quickly, the need to gain technology and specialized know-how, the lack of experience, strong customer loyalty, strong brand preferences, large capital requirements, lack of adequate distribution channels, government regulatory policies, tariffs, lack of access to raw materials, possession of patents, undesirable locations, counterattack by entrenched firms, and potential saturation of the market. Despite numerous barriers to entry, new firms sometimes enter industries with higher-quality products, lower prices, and substantial marketing resources. The strategist's job, therefore, is to identify potential new firms entering the market, to monitor the new rival firms' strategies, to counterattack as needed, and to capitalize on existing strengths and opportunities. When the threat of new firms entering the market is strong, incumbent firms generally fortify their posi- tions and take actions to deter new entrants, such as lowering prices, extending warranties, add- ing features, or offering financing specials The Walt Disney Company is nearing completion of its Shanghai Disneyland, a $4.4 billion complex set to open in China in 2016, complete with hotels, restaurants, retail shops, and other amenities. However, a rival firm, DreamWorks Animation SKG, is nearing completion of a $3.1 billion entertainment district named Dream Center in Shanghai right beside Disneyland and says its facility will also open in 2016. Although expensive to build, theme parks are becom ing more popular globally. Time Warner's Warner Brothers is building Harry Potter attractions around the world, including a converted movie studio outside London Potential Develonment of Suhstitute Products