ADMS 1000 Lecture Notes - Lecture 3: Switching Barriers, Tim Hortons, Starbucks

• School: York University
• Department: Administrative Studies
• Course: ADMS 1000
• Professor: Paulette Burgher

Document Summary

Economies of scale: spreading the cost of production over the number of units produced, the cost per unit declines as the number of units per period increases. Capital requirements: the level or required capital for entering certain industries creates barriers for potential new entrants, for example, the airline and mining industries require a significant amount of capital to establish a new firm. Switching costs: monetary costs (physical) refers to the physical cost of switching from one supplier to another, psychological costs (mental) refers to the mental decision of switching from one supplier to another. Access to distribution centers: potential entrant would find it difficult to distribute their products or services as other larger corporations may control major distribution channels in that industry. Cost disadvantages independent of scale: some corporations have advantages such as government policies, legal protection (patents and trademarks) and proprietary products. The power held by suppliers to organizations in an industry.