Stopping New Competitors by Creating Barriers to Entry
Competition is always on the horizon. Barriers are the reasons why anybody cannot start any business at any time. To compete in some industries, you must master out of the ordinary technologies or make large capital investments before you can become a player. Doing what your rivals can’t is a pretty good operational definition of “competitive advantage.”
What are your competitive advantages and is it strong enough to either prevent rivals from competing directly with you or entering your market? Creating barriers are not as hard as people make it out to be and I have outline two examples below.
For example, let take automotive manufactures. Hyundai was the little car company that had horrible quality and undependable reliability. By the mid-1990’s Hyundai has worked on it problems, but it had to convince the general public that their previous reputation is no longer valid. So, they decided to offer a warranty that has never been seen-a 100,000 mile warranty. Remember, this was still when the big three automakers were still offering 36,000 warranty. That proved to be a huge competitive advantage that catapulted them to become a major player in the automotive market. As you can see a pre-emptive strategy can be a barrier.
Another example is one close to my heart. I have a group of clients who are financial advisors. I thought them how to create a service that’s FREE to their clients, but had a high perceived value to their clients. I set up these financial advisors with complementary services providers like attorney’s who did estate planning, CPA accountants, etc. I convinced these providers to do a free seminar on estate planning for my clients, clients. My clients, clients loved it; they told there friends and my clients made a fortune.
I bet you can guess what happened next. You got it! Competitors copied this strategy. But, they forget the three critical factors such as: One, I did all the scouting and sell to the providers. In addition I did all the marketing to my clients customers to get them to attend to the seminar. Two, I convinced the providers to perform at the seminar free of charge. And three, their competitors’ intent of the seminar was different. Therefore, when competitors try to copy this competitive advantage/barrier they instantly fail and pull out. Why do they fail? They fail because first, they spend an enormous amount of money and labor to find a person who would perform a seminar for you. Second, they pay the provider some huge speaking fee. And third, they want to make money for the seminar. Why? Because they invested probably $2,500 to $5,000 for this seminar and they want to recoup their investment, plus a little profit. Therefore, their competitors’ intent is different, because my client doesn’t have to make a dime from the seminar, because it didn’t cost them anything. So the investment and risk prevented competitors from competing head to head with my clients. This was and still is a killer barrier to entry for my client competitors.
Now I gave you two examples of barriers to entry. Tell me what you think and how what entry to barriers you have placed in your business.
Bobby Ellis
Xspology.com
What are your competitive advantages and is it strong enough to either prevent rivals from competing directly with you or entering your market? Creating barriers are not as hard as people make it out to be and I have outline two examples below.
For example, let take automotive manufactures. Hyundai was the little car company that had horrible quality and undependable reliability. By the mid-1990’s Hyundai has worked on it problems, but it had to convince the general public that their previous reputation is no longer valid. So, they decided to offer a warranty that has never been seen-a 100,000 mile warranty. Remember, this was still when the big three automakers were still offering 36,000 warranty. That proved to be a huge competitive advantage that catapulted them to become a major player in the automotive market. As you can see a pre-emptive strategy can be a barrier.
Another example is one close to my heart. I have a group of clients who are financial advisors. I thought them how to create a service that’s FREE to their clients, but had a high perceived value to their clients. I set up these financial advisors with complementary services providers like attorney’s who did estate planning, CPA accountants, etc. I convinced these providers to do a free seminar on estate planning for my clients, clients. My clients, clients loved it; they told there friends and my clients made a fortune.
I bet you can guess what happened next. You got it! Competitors copied this strategy. But, they forget the three critical factors such as: One, I did all the scouting and sell to the providers. In addition I did all the marketing to my clients customers to get them to attend to the seminar. Two, I convinced the providers to perform at the seminar free of charge. And three, their competitors’ intent of the seminar was different. Therefore, when competitors try to copy this competitive advantage/barrier they instantly fail and pull out. Why do they fail? They fail because first, they spend an enormous amount of money and labor to find a person who would perform a seminar for you. Second, they pay the provider some huge speaking fee. And third, they want to make money for the seminar. Why? Because they invested probably $2,500 to $5,000 for this seminar and they want to recoup their investment, plus a little profit. Therefore, their competitors’ intent is different, because my client doesn’t have to make a dime from the seminar, because it didn’t cost them anything. So the investment and risk prevented competitors from competing head to head with my clients. This was and still is a killer barrier to entry for my client competitors.
Now I gave you two examples of barriers to entry. Tell me what you think and how what entry to barriers you have placed in your business.
Bobby Ellis
Xspology.com
posted by Xspology.com at 10:24 AM
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