Internal Entry Framework
Entry with advantages
Internal entry into an industry can be profitable if a firm has a distinctive ability to overcome structural entry barriers more cheaply than other potential entrants. This can be due to proprietary technology, established distribution channels, or a recognized brand name. The firm can also receive less vigorous retaliation by incumbents if it commands respect or is seen as non-threatening.
- A firm can overcome structural entry barriers more cheaply than other potential entrants if it has unique assets or skills.
- A firm can receive less vigorous retaliation by incumbents if it commands respect or is seen as non-threatening.
- Internal entry can be profitable if a firm has a distinctive ability to change the structural equilibrium in the target industry.
- Identify Unique Assets or SkillsDetermine if the firm has proprietary technology, established distribution channels, or a recognized brand name that can be leveraged to overcome entry barriers.Pro tipConsider the firm's existing businesses and how they can be used to support entry into a new industry.WarningBe cautious of overestimating the firm's unique advantages and underestimating the entry barriers.
- Assess Retaliation RiskEvaluate the likelihood of retaliation by incumbents and determine if the firm can command respect or be seen as non-threatening.Pro tipConsider the firm's reputation, size, and resources when assessing retaliation risk.WarningBe aware that retaliation can still occur even if the firm is seen as non-threatening.
- Analyze Industry StructureExamine the target industry's structure and determine if the firm can change the structural equilibrium.Pro tipConsider the industry's barriers to entry, mobility barriers, and the competitive landscape.WarningBe cautious of overestimating the firm's ability to change the industry structure.
General Motors used its existing assets and skills to enter the recreational vehicle industry, leveraging its chassis, engines, and dealer network to overcome entry barriers.
John Deere used its manufacturing technology and experience in product design and service to enter the construction equipment industry, overcoming entry barriers and achieving above-average profits.
The internal entry framework is based on the idea that companies can enter new industries and achieve above-average profits if they have unique advantages that allow them to overcome entry barriers. This concept is rooted in the principles of competitive strategy and the analysis of industry structures.