INSY 2301 Lecture Notes - Lecture 1: Viral Marketing, Switching Barriers
22 Jun 2018
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Key Concepts in Strategy
What is a BRAND?
The symbolic embodiment of all the information connected with a product/service
oCan be a very powerful resource for competitive advantage
A strong brand proxies quality and inspires trust
oFor consumers looking to lower search costs, positive brand recognition can be
the factor that makes a firm the first stop
Technology can play a role in rapidly and cost-effectively strengthening a brand
oViral marketing occurs when consumers are enlisted to promote a brand for
free (particularly through social media)
oViral marketing can be a threat when feedback is negative
What is SCALE?
Scale Advantages: Advantages related to a firm’s size
oExample: Increased bargaining power with suppliers/buyers
Economies of Scale: A specific benefit in which the cost of an investment can be
spread across increased production or an increasing customer base
oFirms that benefit from economies of scale are scalable
Scale advantages can act as barriers to entry when they discourage new, smaller firms
What are SWITCHING COSTS?
Expenses that consumers incur to move from one product/service to another
oInclude learning costs, information and data, financial commitment, contractual
commitments, search costs, loyalty programs
Tech firms often benefit from strong switching costs (think of the Apple ecosystem)
oSeemingly dominant firms that don’t have high switching costs are vulnerable
To capture customers, a new firm must offer value added that exceeds incumbents’
value PLUS any perceived switching costs
Data can be a particularly strong switching cost for firms leveraging technology
oMoving large amounts of data can be extremely costly
What are PATENTS?
Legal protections for the intellectual property of an inventor
oTechnology and business models can be patented, usually in 20-year increments
oPatents are meant to protect against copycats, but they don’t provide
bulletproof protection
Patent Trolls: Firms that hold intellectual property with the goal of suing or extorting
large settlements from other firms
Patent litigation can be very risky, particularly when powerful firms are involved
oRivals sometimes cooperate in patent portfolio acquisition in order to avoid
risky litigation
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Document Summary
The symbolic embodiment of all the information connected with a product/service: can be a very powerful resource for competitive advantage. A strong brand proxies quality and inspires trust: for consumers looking to lower search costs, positive brand recognition can be the factor that makes a firm the first stop. Scale advantages: advantages related to a firm"s size: example: increased bargaining power with suppliers/buyers. Economies of scale: a specific benefit in which the cost of an investment can be spread across increased production or an increasing customer base: firms that benefit from economies of scale are scalable. Scale advantages can act as barriers to entry when they discourage new, smaller firms. Expenses that consumers incur to move from one product/service to another: include learning costs, information and data, financial commitment, contractual commitments, search costs, loyalty programs. Tech firms often benefit from strong switching costs (think of the apple ecosystem: seemingly dominant firms that don"t have high switching costs are vulnerable.
