Entry Strategy Framework
Assessing Entry
The Entry Strategy Framework is a structured approach to assessing the attractiveness of entering a new industry. It involves analyzing the industry's structural characteristics, the potential for retaliation from incumbents, and the firm's own capabilities and advantages. The framework helps companies to identify potential entry barriers, assess the likelihood of retaliation, and develop a strategy for successful entry.
- The industry's structural characteristics, such as entry barriers and the likelihood of retaliation, must be carefully assessed before entry.
- The firm's own capabilities and advantages, such as proprietary technology or established distribution channels, can be used to overcome entry barriers.
- The potential for retaliation from incumbents must be considered and a strategy developed to mitigate its impact.
- Assess Industry Structural CharacteristicsAnalyze the industry's entry barriers, such as high fixed costs, high industry concentration, and the presence of brand loyalty. Also, assess the likelihood of retaliation from incumbents.Pro tipUse tools such as the Five Forces Framework to analyze the industry's structural characteristics.WarningFailing to assess the industry's structural characteristics can lead to poor entry decisions.
- Assess Firm Capabilities and AdvantagesAnalyze the firm's capabilities and advantages, such as proprietary technology, established distribution channels, and recognized brand names. Also, assess the firm's ability to overcome entry barriers.Pro tipUse tools such as the VRIO Framework to analyze the firm's capabilities and advantages.WarningFailing to assess the firm's capabilities and advantages can lead to poor entry decisions.
- Develop Entry StrategyBased on the assessment of the industry's structural characteristics and the firm's capabilities and advantages, develop a strategy for entering the industry. This may involve identifying opportunities for differentiation, developing a unique value proposition, and creating a plan for mitigating retaliation from incumbents.Pro tipUse tools such as the Blue Ocean Strategy to develop a unique value proposition.WarningFailing to develop a clear entry strategy can lead to poor entry decisions.
General Motors entered the recreational vehicle industry by leveraging its existing capabilities and advantages, such as its chassis, engines, and dealer network. The company was able to overcome entry barriers and establish a strong position in the industry.
John Deere entered the construction equipment industry by leveraging its existing capabilities and advantages, such as its manufacturing technology and experience in product design and service. The company was able to overcome entry barriers and establish a strong position in the industry.
The Entry Strategy Framework was developed by Michael E. Porter as part of his work on competitive strategy. It is based on the idea that companies can create a sustainable competitive advantage by entering industries that are in disequilibrium or where the market mechanism is not working perfectly.