Archive for January, 2009

Price wars

Saturday, January 31st, 2009

When product or service is launched, the new entrant tries to gain marketshare from the older, more established companies by offering discounts. The established companies may remain complacent and not do anything, especially if their product quality and customer support cannot be matched.

If the established companies is financially strong, they can try to kill the competition by offering their product at a even lower price. Finally, the company that can sustain losses for the longest period of time will dominate the market.

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Dumping

Friday, January 30th, 2009

In some countries, the cost of manufacturing is very low due to the low cost of raw material, manpower and government subsidies. These countries are able to export their products at a very low cost.

The manufacturers in countries which import these cheap products are not able to compete, as a result of which the industry is destroyed. The manufacturers association will lobby the government to impose an anti dumping duty, an import tax, which makes the imports prohibitively expensive and protect the local industry.

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Monopolies

Thursday, January 29th, 2009

Since monopolies can often dictate the price for an essential product or service, most government have regulations and laws to prevent the formation of monopolies. In case a company seems to be taking a very large market share, leaving the customer with no choice, the government usually takes legal action.
This usually involves:
1. Splitting the company into smaller organizations
2. Imposing fines and other financial penalties

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Internet entry barriers

Wednesday, January 28th, 2009

For many products online, marketing or increasing the level of awareness is the main entry barriers.  This is especially true for consumer products.  That is why people spend a lot of time cultivating gurus and experts who can hype the product.

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Manufacturing entry barriers

Sunday, January 25th, 2009

Compared to software and internet, the entry barriers for any manufacturing related operation are very high.  Thousands or millions of dollars have to be spent on procurement of land, equipment, installation of equipment and raw material, before a product is actually manufactured and sold.  Permission has to be taken from several government organisations.  Economies of scale make it easier for large companies to manufacture a product cheaply by using automated systems.

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Search engine monopolies

Friday, January 23rd, 2009

One of the reasons why there are so few popular search engines is the entry barriers to search. Not only does the algorithm have to yield the most accurate results, the company has to invest millions of dollars in data center, hardware and internet connectivity

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Business ideas

Sunday, January 11th, 2009

One of the main fears while sharing a business idea is that it can be stolen.  People may spend a lot of time , money and other resources spying on you to find out your future plans . But no two people are alike and they will find  it difficult to find someone who can implement the idea, the way you envisaged it.

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Employees

Friday, January 2nd, 2009

If  you are providing a service based on the number of people, there will be very few entry barriers.  Anyone can hire people and create an entry barrier.

Also if the technology used is proprietary,  having employees is a risk. Even if  they sign a  Non Disclosure Agreement NDA, there can leak the information out.

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Entry barriers on the internet

Friday, January 2nd, 2009

One of the advantages and disadvantages of having an online business is that entry barriers on the internet are low. If you are a new player, it is an advantage as you can compete against bigger companies.

However, if you are already earning some money online, it can be a problem since a lot of people will try to copy you. So once you start earning a certain amount online, you should invest it back in your business, to create an entry barrier, so that few can take the risk of doing what you have done. Ideally, you should try to find your own formula for what works online.

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