AFM241 Chapter 3: Chapter 3

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM241
• Professor: all

Document Summary

Economies of scale: the use of firm size and spending power to invest in expensive it and increase barriers to entry for smaller firms. Network effects: a buyer"s willingness to buy a firm"s product or service increases with the number of buyers who buy the firm"s product or use its services. Customer switching costs: refers to the fixed costs that buyers face if they decide to switch to another product or service. Capital requirements: refers to the need to invest large amounts of resources in order to compete in an industry. Incumbent advantage: existing firms may have a cost or quality advantage. Access to distribution channels: works as a barrier to entry for newcomers because they have to secure distribution of their product or service. Government policy: may limit entry into the industry via various bureaucratic constraints or controls and regulations. Hyper-competition: a new competitive environment where it is becoming increasingly difficult for firms to sustain their competitive advantage.