This article offers several questions to see if your industry has a high or low entry threat. These threat of entry questions to ask to help you determine and detect analyse new entrants within your industry.
You may think you have a competitive advantage. A one that offers years of growth and success. What about your threat of entry? You know those new competitors you know nothing about? The ones who can afford to enter your market.
Porter’s five forces model
Michael Porter suggests that five forces influence competition and investments. The five forces are the:
- Threat of entry
- Bargaining power of suppliers
- Bargaining power of bias
- Intensity of rivalry
- Threat of substitution
It’s essential that you are strategically positioned within your industry. Firstly, to defend against these forces. Then go on the attack by manipulating to take advantage.
One of Porter’s five forces is what is called the threat of entry. This force considers how easy it is to enter your industry.
The threat of entry questions to ask
Here’s some questions to answer to help you determine barriers associated with entry into a new market or your current market:
- What are the switching costs for customers? Are they significant?
- How is easy is it to align with and access existing distribution channels?
- Will the location be a problem?
- Does profitability depend on economies of scale?
- What’s the required proprietary technology for entry?
- Are products the products in your industry different, or are they generic?
- Are brand names established, recognisable and robust?
- Will a new entrant need high initial capital investment?
- What proprietary or specialised raw material are needed to enter?
- Are government regulations, laws and policies complicated or straightforward?
- Will existing business offer retaliatory action against a new entrant?
A competitor will only enter an industry if it forecasts the potential reward for being in it is greater than the cost of overcoming entry barriers. And the cost of any retaliation that is likely to happen within the industry.
This article offered questions you could ask to see if your industry has a high or low threat of entry. These threat of entry questions to ask to help you detect and analyse new entrants within your industry. You may have a tremendous competitive advantage. But it’s important to understand your threat of entry.