BUSINESS ADMINISTRATION
STRATEGIC MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Existing companies do not previously responded vigorously to new entrants
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Existing companies possess substantial resources to fight back
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Existing companies seem likely to increase prices to protect their market share
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Industry growth is fast, so newcomers can gain volume only by taking the market share from existing companies
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Detailed explanation-1: -New entrants in an industry can change the competitive environment and can significantly impact the profit of current companies. As more companies enter the marketplace, the price for products becomes lower in order to compete for consumers. Companies also face high costs to raise their entry barriers.
Detailed explanation-2: -Expected retaliation: The entry barrier increases if existing competitors have a history of forceful retaliation using substantial resources. The entry deterring price: balances the rewards from the entry with expected costs of overcoming barriers.
Detailed explanation-3: -Common barriers to entry include special tax benefits to existing firms, patent protections, strong brand identity, customer loyalty, and high customer switching costs. Other barriers include the need for new companies to obtain licenses or regulatory clearance before operation.
Detailed explanation-4: -Threat of new entrants into the U.S. airline industry The threat of new entrants is low in the airline industry due to high entry barriers. These include significant capital requirements, high operating costs, and extensive government regulation.