BUSI2025 Chapter Notes - Chapter 15: Switching Barriers, Contract Manufacturer, Franchising
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When to enter them and on what scale. Long-term profit potential: balance among benefits, costs and risks: a (cid:272)ou(cid:374)tr(cid:455)"s (cid:271)usi(cid:374)ess e(cid:374)(cid:448)iro(cid:374)(cid:373)e(cid:374)t, political/regulatory environment, geographic location regional versus country-by-country positioning. Benefits: function of market size, prese(cid:374)t a(cid:374)d future (cid:272)o(cid:374)su(cid:373)er"s (cid:449)ealth. Current stage of a cou(cid:374)tr(cid:455)"s e(cid:272)o(cid:374)o(cid:373)i(cid:272) de(cid:448)elop(cid:373)e(cid:374)t a(cid:374)d politi(cid:272)al sta(cid:271)ilit(cid:455) (cid:448)s. future economic growth rate. Early vs late entry - first mover advantages and disadvantages. Advantages pre-emption of rivals, ability to build sales volume, buyer switching costs. Disadvantages pioneering costs, shifts in technology or customer needs, incumbent inertia. Choice of scale: strategic commitment and strategic flexibility level of resources firm can afford to commit. Risks associated with significant commitments long term impact / some resources are location specific. Contractual entry modes : licensing, franchising, management contracts, turnkey projects, contractual manufacturing. A common first step for many manufacturing firms. Manufacturing in a centralised location: economies of scale, location economies. It avoids the costs of establishing local manufacturing operations.
