BUS 446 Lecture Notes - Lecture 9: Cost Leadership, Relationship Marketing, Sunk Costs
10 Dec 2012
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The drive for competitive advantage causes a search for strategies that will forestall market threats like: New entrants to the market: solution create entry barriers, economies of scale. Decrease in unit price decrease in price increase. Volume mass produce your product: it becomes a long run equilibrium price point because everyone buys from you instead. In order to play in this type of market, you need to suck up a huge net sunk cost in the beginning + hope that you get enough market share to justify that big expenditure. Substitute products (direct + indirect substitutes: solution focus on growth markets. Look for a niche, or a geographical area, or an application where your competitor is not present: note: never fight for market share if you can avoid it. Aggressive direct competitors: solution raise buyers" switching costs. Company needs to create an incentive or get rid of the negative aspect of leaving the competitor (e. g. buying out their contract)
