One of the most important considerations when developing a strategy is strategic distinctiveness. Being unique from other firms gives specific reasons for customers to choose your company over others. This may allow you to charge higher prices than competitors.
However, while being unique is important, it is also important that you are able to maintain that uniqueness. If new companies are able to easily enter your marketplace, or existing firms are able to copy your positioning, then the uniqueness of your position is likely to decline over. If your firm is successful, it is likely to attract greater competition from both new and existing companies.
This article explores the role of entry barriers and mobility barriers in preventing new firms from entering your market or existing firms from converging on your position.
Entry Barriers: Difficulties for new firms to enter the industry
Entry barriers are factors that make it difficult for new firms to enter an industry. They protect existing firms by either preventing or discouraging entry, or by reducing the likelihood that new firms will succeed within the marketplace. In effect, entry barriers can buffer existing firms from more fierce competition, by protecting them from new competitors.
Some common sources of entry barriers include:
- Patents and legal protections
- Economies of scale
- Learning effects
- Difficulties in accessing distribution channel
- Network effects
- Established customer or supplier arrangements, and other switching costs
Mobility Barriers: Difficulties for existing firms to moving strategic position
Mobility barriers are similar to entry barriers, however, they concern the difficulties that existing firms will have in moving to your strategic position. If it is easy for firms to adjust their position, and to converge on the approach that your firm takes, then if you become successful, existing companies may look to change their offerings to converge on your position.
On the one hand, existing firms may have an easier time converging on your position than new companies – they already exist in the marketplace, and likely already have many resources that new firms wouldn’t have. However, while new firms can start on a fresh canvas – existing companies have legacy operations that can pose unique problems in changing their operations. Some mobility barriers that prevent existing companies from changing their operations include:
Examples of mobility barriers include:
- Existing commitments of resources that are difficult to re-configure
- Required resources and capabilities that can’t be obtained
- Existing brand reputation for specific offerings
- Existing long term customers that would be lost if the firm were to change
Further thoughts: It is important to actively consider how you will defend your strategic position
When developing a strategy, it is important to actively consider how difficult it will be for other firms to imitate your position. It is important to recognize that this threat can come from both new firms entering the market (where entry barriers will limit their ability to enter), as well as existing firms moving on your position (where mobility barriers will make it hare for them to change). Success encourages imitation – and unless there are specific difficulties that new and existing firms will face in copying your firm, this imitation is in turn likely to impact your profitability