7/ More examples

Localisation:
- Coca-Cola's effort in pushing for a set of "world commercials" centred on the
polar bear cartoon character presumably appealing to some worldwide values
and interests has not been appreciated by many viewers around the world.
Viewers in warmer weather countries had a hard time relating to the furry
bear.
In response, Coca-Cola switched to more costly but more effective country-specific
advertisements. For instance, the Indian subsidiary launched an advertising
campaign that equated Coke with thanda, the Hindi word for "cold." The German
subsidiary developed a series of commercials that showed a "hidden" kind of
eroticism
"the more global, the better" can be counterproductive
- Walmart improved its corporate performance by withdrawing from Germany and
South Korea
- Google and Uber by withdrawing from China, and Deutsche Bank and DHL by
withdrawing from the United States.

SHORT

1. Global Structuring & Strategizing (Chapter 10):

● Definition: Global structuring refers to the organization and coordination of a

firm's activities across international borders. Strategizing involves creating
plans that align with the company's goals while considering the global context.
● Global Matrix Structure:
○ Definition: A global matrix structure is a type of organizational structure
that balances the benefits of both product division and geographic area
structures by combining them.
○ Advantages: Promotes coordination between product lines and
geographic regions, facilitates resource sharing, and allows for dual
reporting.
○ Disadvantages: Complexity in management, potential for power
struggles, and higher costs.
○ Example: A multinational corporation like Siemens uses a global matrix
structure to manage its diverse product lines (e.g., healthcare, energy)
across different regions, ensuring that both product innovation and
regional needs are addressed effectively.
 ○ Key Figure: Figure 10.1 in your textbook, which likely illustrates how
the matrix structure balances global and local demands.

2. Collusion (Chapter 8):

● Definition: Collusion refers to an agreement between firms to limit

competition, often through practices like price-fixing, market division, or
bid-rigging.
● Industry Factors Conducive to Collusion:
○ High Concentration Ratio: Few firms dominate the market, making it
easier to coordinate prices.
○ Presence of a Price Leader: One firm typically sets prices that others
follow.
○ Homogeneous Products: Similar products make it easier to agree on
prices.
○ High Entry Barriers: Prevent new competitors from entering the market
and disrupting collusion.
○ Market Commonality: Firms operate in multiple overlapping markets,
increasing mutual dependency.
● Examples:
○ Sainsbury's Dairy Collusion: Supermarket chains in the UK, including
Sainsbury's, were involved in fixing dairy prices, harming consumers by
keeping prices artificially high.
○ British Airways & Virgin: Engaged in price-fixing agreements for fuel
surcharges, leading to hefty fines and a loss of consumer trust.
○ Key Terms: Cartel, price-fixing, anti-competitive practices, market
regulation.

3. SMEs and Exporting:

● Definition: Small and Medium-sized Enterprises (SMEs) are businesses with a

limited scale of operations, often characterized by fewer employees and lower
revenue than larger corporations.
● Specific Market Risks for SMEs:
○ Institutional Risks: Challenges arising from differences in legal,
regulatory, and political environments.
○ Resource-Based Risks: Limited financial and human resources to
navigate complex international markets.
○ Industry-Based Risks: Competition from established players and
market saturation.
● Examples:
○ MILIKET Noodles: A Vietnamese SME exporting noodles to China
faces risks related to tariff changes, cultural differences in consumer
tastes, and competition from local Chinese brands.
 ○ Vietnamese Coffee Export: SMEs exporting coffee to China might
struggle with non-tariff barriers, such as stringent quality standards and
logistical challenges.
● Key Terms: Export strategy, market entry barriers, internationalization,
competitive advantage.

4. Knowledge Management:

● Definition: Knowledge management (KM) is the process of creating, sharing,

using, and managing the knowledge and information of an organization.
● Differences Across MNE Structures:
○ Home Replication Strategy: Focuses on transferring core
competencies developed at the home country to foreign markets.
Knowledge flows from headquarters to subsidiaries.
○ Localization Strategy: Tailors products and services to local markets,
with knowledge being localized and adapted by each subsidiary.
○ Global Standardization Strategy: Emphasizes economies of scale and
standardized products, with knowledge centralized and disseminated
uniformly.
○ Transnational Strategy: Seeks to balance global efficiency and local
responsiveness, with knowledge being both centralized and adapted to
local conditions.
● Examples:
○ Samsung: Uses a transnational strategy, blending global efficiency with
local adaptation in markets like India and the US, ensuring knowledge
flows in both directions.
○ Coca-Cola: Implements a localization strategy by adapting its products
to local tastes, such as offering sweeter variants in Asia, supported by
localized R&D.
● Key Terms: Knowledge transfer, innovation, organizational learning,
transnational corporations (TNCs).

5. Cultural Frameworks (Hofstede):

● Definition: Hofstede's cultural dimensions theory is a framework for

understanding cultural differences along several dimensions, such as
individualism vs. collectivism, power distance, and uncertainty avoidance.
● Key Dimensions:
○ Individualism vs. Collectivism: The degree to which people prefer to act
as individuals rather than as members of groups. Western cultures like
the US are individualistic, while Asian cultures like China are
collectivist.
○ Power Distance: The extent to which less powerful members of a
society accept and expect power to be distributed unequally. High
 power distance cultures (e.g., India) accept hierarchical order, while
low power distance cultures (e.g., Sweden) value equality.
○ Uncertainty Avoidance: A society's tolerance for ambiguity and
uncertainty. Cultures with high uncertainty avoidance (e.g., Japan)
have strict rules and rituals, while those with low uncertainty avoidance
(e.g., Denmark) are more relaxed.
● Examples:
○ Chinese Pragmatism vs. Western Legalism: In business, Chinese
companies may focus on relationships and flexibility (guanxi), while
Western companies may adhere strictly to legal contracts.
○ Negotiation Styles: Asian cultures may prioritize harmony and
long-term relationships, while Western cultures may focus on direct
communication and short-term gains.
● Key Terms: Cross-cultural communication, intercultural competence, cultural
intelligence, Hofstede’s dimensions.

6. Corporate Social Responsibility (CSR):

● Definition: CSR is a business model that helps companies be socially

accountable to themselves, their stakeholders, and the public. It involves
conducting business in an ethical manner, considering social, environmental,
and economic impacts.
● Importance in International Market Penetration:
○ CSR initiatives can enhance a company’s reputation, facilitate market
entry, and improve customer loyalty in foreign markets.
○ Companies practicing CSR are often better positioned to comply with
local regulations and address social issues, giving them a competitive
edge.
● Examples:
○ Pepsico’s Sustainable Packaging: To reduce environmental impact,
Pepsico has committed to using 100% recyclable, compostable, or
biodegradable packaging by 2025.
○ Vinbus’s Clean Energy Initiatives: A Vietnamese electric bus company,
Vinbus, promotes clean energy and sustainable urban transport,
aligning with global environmental trends.
○ Key Terms: Sustainable development, triple bottom line (people, planet,
profit), ethical sourcing, social entrepreneurship.

CHAPTER 8

Chapter 8: Managing Competitive

Dynamics (Hiếu Chap 8 - GPT )
This chapter delves into the strategies and considerations firms must account for to manage
competitive dynamics effectively. It emphasises the importance of understanding competitive
interactions, market characteristics, and resource-based considerations to maintain or gain
competitive advantages.

Conclusion
In conclusion, the chapter outlines that

+ managing competitive dynamics involves understanding the essence of

strategy as an interaction, which includes actions, reactions, and
responses that lead to a competitive advantage.
+ Firms engaged in multimarket competition need to think globally but act locally
to respond effectively to competitive actions.
+ Industry-based considerations highlight that while firms seek to reduce
competition through tacit or explicit collusion, they often find themselves in a
prisoner’s dilemma.
+ Market characteristics such as high concentration ratios, price leaders,
homogeneous products, high entry barriers, and high market
commonality can facilitate collusion. Resource-based considerations suggest
that value and rarity of resources significantly affect a firm's competitive
dynamics.

Key Points

🤝 Concentration Ratio: High concentration ratios and the Herfindahl-Hirschman

Index (HHI) determine market competitiveness.

🛠️ Price Leader: The existence of a price leader helps maintain market stability and
can punish deviating firms.

📦 Homogeneous Products: Similar product characteristics lead to price

competition and potential collusion in commodity industries.

🚧 Entry Barriers: High barriers to entry facilitate collusion by protecting established

firms from new entrants.

🔄 Market Commonality: High market commonality leads to mutual forbearance,

deterring firms from aggressive competition.

🌍 Strategy as Action: Competitive dynamics are driven by interactions, with firms

needing to balance global thinking and local actions.

🎭 Prisoner’s Dilemma: Firms often face a dilemma where cooperation (collusion)

and competition coexist.
💡 Tacit and Explicit Collusion: Tacit collusion involves unspoken understandings,
while explicit collusion involves formal agreements.

🔍 Resource-Based View: Competitive advantage arises from unique resources

that create value and are rare.

📊 Industry Characteristics: Various industry traits influence the likelihood of

collusion versus competition.

Summary

1. High Concentration Ratio: Markets with a high concentration ratio, as

measured by the Herfindahl-Hirschman Index, are more prone to collusion
due to fewer firms controlling the market.
2. Price Leadership: A dominant price leader can enforce market stability and
discipline among competitors, reducing the incentive to compete aggressively
on prices.
3. Homogeneous Products: Industries with similar products, such as car parts
or semiconductors, are more likely to engage in price wars or collusion due to
the lack of differentiation.
4. Barriers to Entry: Significant barriers to entry protect incumbent firms and
support collusion by limiting the threat of new competitors entering the market.
5. Market Commonality: Firms with a high degree of market overlap are likely
to practice mutual forbearance, where they avoid aggressive competition to
maintain stability.
6. Strategy Dynamics: Effective strategy involves actions and responses that
create competitive advantage, necessitating a balance between local market
actions and global strategic thinking.
7. Prisoner’s Dilemma: Firms in competitive industries often face a dilemma
where cooperation (collusion) and competition coexist, making strategic
decisions complex.
8. Forms of Collusion: Tacit collusion relies on unspoken understandings and
mutual awareness, while explicit collusion involves formal agreements
between firms.
9. Resource-Based Competitive Advantage: Unique, valuable, and rare
resources give firms a competitive edge, impacting their strategic interactions
and market positions.
10. Industry Traits: The likelihood of collusion or competition is influenced by
industry characteristics, such as the number of firms, product homogeneity,
and entry barriers.
1. Imitability

• Understanding how rivals compete is crucial, but imitating their

capabilities is challenging.

2. Organization

• A “warrior-like” culture involves intense commitment from both top

management and employees.
• Can execute stealth attacks or engage in tit-for-tat strategies.

3. Resource Similarity

• Measures how similar a competitor’s strategic resources are to the

focal firm.
• High similarity suggests a higher degree of competitive action.

4. Competitor Analysis

• Refer to Figure 8.4 for further details.

5. Institution-Based Considerations

• Antitrust Policy: Against monopolies and cartels.

• Collusive Pricing: Group of companies setting high prices together.
• Predatory Pricing: Setting prices below cost.
• Dumping: Selling products abroad at a price lower than in the domestic
market.

6. Attack and Counterattack

• Attack: Initial action to gain a competitive advantage.

• Counterattack: Response to attacks.
• Three main types of attacks:
 • Thrust: Frontal
• Feint: Pretending
• Gambit: Sacrificing a low-value market
• Awareness-Motivation-Capability (AMC) Framework:
• A competitor can only respond if they are aware, motivated, and
capable of responding.
• Emphasis on cooperation and signaling.

7. Debates and Extensions

• Strategy vs. Antitrust Policy: Balancing competition strategy and

adherence to antitrust laws.
• Competition vs. Antidumping: Navigating the fine line between fair
competition and unfair dumping practices.

8. The Savvy Strategist

• Understand the industry’s nature to facilitate competition or

cooperation.
• Strengthen resources and capabilities.
• Understand domestic and international competition rules.

Chapter 9: Diversifying and Managing Acquisitions

Globally

1. Product Diversification

• Related Diversification: Economies of scale.

• Unrelated Diversification: Economies of scope.

2. Geographic Diversification

• Involves expanding beyond domestic markets.

• Extensive international scope offers positive returns after overcoming
initial challenges.
3. Performance and Diversification

• Product Unrelated Diversification:

• Can result in either a diversification premium or discount depending on
execution.
• Geographic Diversification:
• Typically follows an S-curve where performance increases after initial
adaptation.

4. Combining Product and Geographic Diversification

• Figure 9.3 explains how combining both diversifications can increase

complexity and cost but may also enhance performance in the long term.

COMPREHENSIVE MODEL OF DIVERSIFICATION:

1. Industry-Based Diversification

• New Entrants: Diversify into related products or internationally in

growth industries; exit in declining ones.
• Interfirm Rivalry: Drives firms to diversify to reduce competition.
• Entry Barriers: High barriers encourage diversification.
• Bargaining Power: Firms diversify upstream (suppliers) or downstream
(buyers) to strengthen their position.
• Substitutes: Push firms to diversify to mitigate risks.

2. Resource-Based Diversification

• VRIO Framework: Evaluate if diversification adds value by leveraging

unique resources and capabilities.

3. Institution-Based Considerations

• Formal:
• Business groups use government connections to facilitate
diversification.
• Protectionist policies allow domestic dominance by conglomerates.
• Informal:
 • Norms and beliefs push managers to diversify for power, prestige, and
risk reduction.

4. Evolution of Firm Scope

• Economic vs. Bureaucratic Costs: Diversification balances economic

benefits with the costs of managing complexity.
• US (1950-1990): Firms refocused and downsized, reducing
diversification.
• Emerging Economies: Diversification adds more value in these regions
compared to developed ones.
MEB (Marginal Economic Benefits): Higher in emerging economies because
conglomerates serve as internal capital markets due to underdeveloped external
markets.
• MBC (Marginal Bureaucratic Costs): Lower in emerging economies
because of weaker formal institutions, more reliance on personal relationships, and
less bureaucratization.

2. Motives & Performance for M&A

Motives:

• Synergistic: Adds value by consolidating market power, leveraging

superior and complementary resources, and responding to institutional constraints.
• Hubris: Reduces value due to managerial overconfidence and fear of
missing out (FOMO).
• Managerial: Reduces value when acquisitions are overpaid for
self-interest or unintentional overvaluation.

Performance:

• Acquiring Firms: Often do not see improved performance.

• Failures:
• Pre-Acquisition: Overpaying for targets, falling into the synergy trap,
inadequate screening.
• Post-Acquisition: Poor organizational fit, culture clashes, stakeholder
concerns, and nationalistic resistance, especially in cross-border deals.

3. Debates on Diversification and Acquisitions

• Product Relatedness vs. other forms of relatedness.

• Old-line vs. New-age conglomerates.
• High road vs. Low road in integration.
• Acquisitions vs. Alliances.
4. Strategic Implications

• Understand your industry to determine the need for diversification or

acquisitions.
• Develop capabilities to ensure successful diversification and
acquisitions.
• Master global rules governing these strategies to navigate international
markets effectively.

Chapter 10: Strategizing, Structuring, and Innovating

Around the World - Key Points

1. Multinational Strategies and Structures

• Pressures for Cost Reduction and Local Responsiveness: Companies

must balance global integration with local responsiveness.

Four Strategic Choices:

1. Home Replication (International Strategy):

• Strategy: duplicate, and leverage home-country competencies.
• Advantage: Easy to implement through exports, franchising.
• Disadvantage: Lacks local responsiveness; risks alienating foreign
customers.
2. Localization (Multidomestic Strategy):
• Strategy: Adapts to local markets and consumer preferences.
• Advantage: Maximizes local responsiveness.
• Disadvantage: High costs due to duplication; too much local autonomy
can hinder corporate-wide changes.
3. Global Standardization (Global Strategy):
• Strategy: Focuses on cost efficiency through standardized products.
• Advantage: Leverages low-cost advantages.
• Disadvantage: Lacks local responsiveness; centralized control may be
too difficult.
4. Transnational Strategy:
• Strategy: Balances cost efficiency with local responsiveness.
• Advantage: Encourages global learning and innovation diffusion.
• Disadvantage: Organizationally complex and difficult to implement.

2. Four Organizational Structures

 1. International Division:
• Suitable for home replication strategy.
• Challenges: Foreign subsidiary managers often lack influence; focus
remains on domestic activities.
2. Geographic Area:
• Aligned with localization strategy.
• Advantage: Local managers have significant autonomy.
• Challenge: May create issues with global consistency.
3. Global Product Division:
• Supports global standardization strategy.
• Advantage: Focuses on cost efficiencies.
• Disadvantage: Sacrifices local responsiveness.
4. Global Matrix:
• Fits transnational strategy.
• Advantage: Balances global coordination with local flexibility.
• Disadvantage: Highly complex to manage.

3. Worldwide Learning, Innovation, and Knowledge Management

• Tacit Knowledge: Difficult to transfer, more crucial for innovation.

• Explicit Knowledge: Easier to codify and transfer.

Knowledge Management in Multinational Enterprises:

• Home Replication: Knowledge flows from headquarters to subsidiaries.

• Localization: Knowledge is developed and retained within subsidiaries.
• Global Standardization: Knowledge mostly developed at the center and
key locations.
• Transnational: Knowledge is developed jointly and shared worldwide.

4. Globalizing Research and Development

• Innovation-seeking investment drives R&D globalization.

• Open Innovation: Uses both internal and external knowledge to
enhance innovation.

5. Problems and Solutions in Knowledge Management

• Challenges: Resistance to knowledge inflows (“not invented here”),

communication barriers in global virtual teams.
• Solutions:
• Formal Mechanisms: Incentives for knowledge sharing.
 • Informal Mechanisms: Building networks through joint teamwork and
promoting a cohesive organizational culture.

6. Debates and Extensions

• Headquarters Control vs. Subsidiary Initiative: Balance between global

coordination and local flexibility.
• Strategic Implications:
• Understand industry evolution to choose the right strategy-structure fit.
• Develop global learning and innovation capabilities while balancing
local responsiveness.
• Master external rules from both home and host countries, and be ready
to adapt internal rules accordingly.

4 CÂU HỎI MẪU

Question 1: Present your view with the following statement:

“Understanding the culture of the host country is one of the vital
requirements when you seek to set up a business”. Using examples to
enhance your points.
Understanding the culture of the host country is indeed crucial when setting up a
business, as it directly impacts communication, management practices, and
consumer behaviour. Here are some key points and examples:

1. Communication Styles:
○ High-context vs. Low-context Cultures: In high-context cultures
(e.g., Japan, China), communication is often indirect, and much is left
unsaid, relying on context. In contrast, low-context cultures (e.g., the
USA, Germany) prefer direct and explicit communication.
Misunderstanding these styles can lead to miscommunication and
business failures.
2. Management Practices:
○ Hierarchy and Power Distance: Cultures with high power distance
(e.g., India, Mexico) accept hierarchical order without much question,
influencing organisational structures and management styles.
Conversely, low power distance cultures (e.g., Denmark, New Zealand)
prefer egalitarian (equal) structures.
○ Example: Walmart struggled in Germany partly because its American
management style, which emphasises direct confrontation and a strict
hierarchy, clashed with the German preference for consensus and
equality.
3. Consumer Behaviour:
○ Cultural Preferences and Values: Consumer preferences are deeply
influenced by cultural values. For example, in collectivist cultures (e.g.,
South Korea), products and services that emphasise community and
family appeal more. In contrast, individualistic cultures (e.g., the USA)
favour products that highlight personal achievement and
independence.
○ Example: McDonald’s adapts its menu to local tastes, offering items
like the McPaneer Royale in India and the Ebi Filet-O shrimp burger in
Japan.
4. Business Etiquette:
○ Negotiation Styles and Relationship Building: In many Asian
cultures, building long-term relationships is crucial before any business
transaction. This contrasts with the more transactional approach seen
in Western cultures.
○ Example: Starbucks succeeded in China by spending years building
relationships and understanding the local market before rapidly
expanding.

Question 2: Explain “Imitability” in the VRIO framework? To what extent

do you agree with the statement “Imitation is not likely to be a
successful strategy”? Using examples to enhance your points.
Imitability in the VRIO framework refers to the difficulty with which competitors can
replicate a company’s valuable, rare resources or capabilities. It is a measure of how
easily a resource can be copied. If a resource is difficult to imitate, it can provide a
sustainable competitive advantage.

● Complexity: Resources that are complex and not easily understood or

replicated (e.g., proprietary technologies, complex processes) are more likely
to sustain a competitive advantage.
● Company Culture: Unique company culture or brand reputation built over
years cannot be easily imitated.
● Historical Conditions: Resources that have been accumulated over time due
to unique historical conditions are difficult to imitate.

Imitation as a Strategy:

● Imitation can sometimes be successful in the short term, especially if the

imitating company can improve on the original idea or offer it at a lower cost.
● Examples:
○ Successful Imitation: Fast-followers in the technology sector often
imitate successful innovations and make incremental improvements.
For instance, Android imitated and then improved upon many features
of Apple’s iOS.
○ Unsuccessful Imitation: Pepsi has tried to imitate Coca-Cola’s brand
strength and marketing strategies but has not managed to displace
Coca-Cola’s dominance in many markets.

However, in the long run, imitation often fails to provide a sustainable competitive
advantage because:

● Lack of Originality: Consumers can distinguish between the original and the
imitator, often favouring the original.
● Continuous Innovation by Originals: Original companies often continue to
innovate, staying ahead of imitators.

Question 3: Considering the competitive dynamics, discuss in detail the

industry factors that are conducive for collusion vis-a-vis competition.

Collusion refers to a situation where firms in an industry cooperate, either explicitly

or implicitly, to reduce competition and increase profits. Factors conducive to
collusion include:

1. Market Concentration:
○ High market concentration with a few large players makes it easier to
collude because it’s simpler to monitor and enforce agreements.
 ○ Example: The OPEC cartel controls oil production and prices among
member countries.
2. Product Homogeneity:
○ In industries where products are homogeneous, firms find it easier to
agree on prices and outputs.
○ Example: The cement industry often experiences collusion because
cement is a homogeneous product.
3. Barriers to Entry:
○ High barriers to entry prevent new competitors from entering the
market, making collusion more sustainable.
○ Example: The airline industry has high entry barriers due to the need
for significant capital investment, leading to occasional collusive
behaviours.
4. Transparency:
○ When firms can easily observe each other’s prices and outputs, it
becomes easier to maintain collusion.
○ Example: Supermarket chains often observe each other’s pricing and
promotions, leading to implicit collusion.
5. Market Stability:
○ Stable markets with predictable demand and supply conditions are
more conducive to collusion.
○ Example: The diamond industry, dominated by a few major players,
has historically engaged in collusion to control supply and prices.

Competition is fostered by factors such as:

● Low Entry Barriers: Easy entry and exit from the market increase
competition.
● Product Differentiation: Diverse product offerings reduce the likelihood of
collusion as firms compete on features and quality.
● Technological Change: Rapid technological advancements disrupt collusive
agreements by continuously changing the competitive landscape.

Question 4: Discuss the following statement – ‘A global matrix strategy’

alleviates the disadvantages of geographic area and global product
division structures.’ Use examples to present your answer.

A global matrix strategy combines both geographic and product dimensions in a

matrix structure, aiming to leverage the benefits while mitigating the disadvantages
of pure geographic or product-based structures.

Advantages of a Global Matrix Strategy:

1. Balancing Local Responsiveness and Global Efficiency:

○ Firms can be locally responsive while achieving global efficiency.
 ○ Example: Unilever uses a matrix structure to balance global brand
consistency with local market adaptations.
2. Enhanced Coordination:
○ Improved coordination across different regions and product lines.
○ Example: IBM utilises a matrix structure to ensure its diverse product
lines and global operations are well-coordinated.
3. Knowledge Sharing:
○ Facilitates better knowledge sharing and innovation across the
organisation.
○ Example: Philips has used a matrix structure to foster innovation by
sharing knowledge between its global product divisions and regional
markets.

Disadvantages Alleviated:

1. Geographic Area Structure:

○ Disadvantage: Can lead to duplication of efforts and lack of
coordination across regions.
○ Matrix Solution: By incorporating product divisions, a matrix structure
ensures global product strategies are aligned with regional operations.
2. Global Product Division Structure:
○ Disadvantage: May ignore local market needs and lead to a lack of
local responsiveness.
○ Matrix Solution: By including geographic regions in the matrix, firms
can adapt global products to local market demands.

Challenges of a Global Matrix Strategy:

● Complexity and Conflict: Dual reporting lines can lead to confusion and
conflict.
● Slow Decision-Making: The complexity of the matrix can slow down
decision-making processes.
● Example: General Electric (GE) has faced challenges with its matrix
structure, finding it difficult to balance multiple reporting lines and complex
coordination needs.

Question 5: Incumbents, the established players in the industry, use

entry barriers as weapons to keep new entrants out. Use examples of
organisations and explain 4 such barriers that were created by them as
incumbents.

Entry Barriers are strategies and tactics used by incumbents to prevent new
entrants from gaining a foothold in the industry. Here are four common entry barriers
and examples:
 1. Economies of Scale:
○ Example: Walmart leverages its massive scale to achieve low-cost
production and distribution, making it difficult for smaller retailers to
compete on price.
2. Brand Loyalty:
○ Example: Coca-Cola has built a strong brand loyalty over decades,
making it challenging for new beverage companies to attract and retain
customers.
3. Control of Essential Resources:
○ Example: De Beers historically controlled a significant portion of the
world’s diamond supply, making it difficult for new entrants to source
diamonds and compete effectively.
4. Regulatory Barriers:
○ Example: Pharmaceutical companies often influence regulatory
standards and patent laws to create high entry barriers. Patents protect
their innovations from being copied for a certain period, deterring new
entrants.
5. Network Effects:
○ Example: Social media platforms like Facebook benefit from network
effects, where the value of the platform increases with more users,
making it hard for new entrants to attract a user base.

Each of these barriers helps incumbents maintain their market position and
profitability by deterring potential new competitors.