What are incumbent firms?
Incumbent firms are existing companies that already exist in the industry. This is in contrast to new entrants that are entering a marketplace.
Common advantages that incumbent firms have
Some of the advantages that incumbent firms have over new organizations include:
- Established resources and capabilities: Incumbent firms already have developed or acquired the necessary resources and capabilities to run their operations.
- Brand recognition: Large organizations also likely have some degree of brand recognition, potentially giving customers greater confidence in dealing with the company than new entrants.
- Established customer relations: Incumbent firms already have established relationships with customers, potentially with established switching costs, that may lock customers into their pre-existing contracts.
- Supplier relations: In addition to established customer relations, incumbent firms also have established relationships with their suppliers.
- Financial resources: Relative to startups, incumbent firms likely have financial resources already established – saving the effort that startups spend presenting to investors to acquire financial resources.
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