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Management article
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Reference no. 82512
Authors: George S Yip
Published by: Harvard Business Publishing
Published in: "Harvard Business Review", 1982

Abstract

A study of 793 U.S. and Canadian consumer and industrial markets indicates that barriers to entry are surmountable and that direct entry may be a viable alternative to corporate growth through acquisition and to development of present markets. The entrant faces six major classes of barriers: 1) economies of scale, 2) product differentiation, 3) absolute cost, 4) access to distribution, 5) capital requirement, and 6) incumbent reaction. Direct entrants reduce or avoid barriers by taking one of two strategic approaches: 1) reducing barriers by employing the same competitive strategy as incumbents, or 2) avoiding barriers by using a different strategy altogether.

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Abstract

A study of 793 U.S. and Canadian consumer and industrial markets indicates that barriers to entry are surmountable and that direct entry may be a viable alternative to corporate growth through acquisition and to development of present markets. The entrant faces six major classes of barriers: 1) economies of scale, 2) product differentiation, 3) absolute cost, 4) access to distribution, 5) capital requirement, and 6) incumbent reaction. Direct entrants reduce or avoid barriers by taking one of two strategic approaches: 1) reducing barriers by employing the same competitive strategy as incumbents, or 2) avoiding barriers by using a different strategy altogether.

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