Pre-Emption

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来自 Ludwig-Maximilians-Universität München (LMU) 的课程

竞争策略

1691 个评分

Ludwig-Maximilians-Universität München (LMU)

竞争策略

1691 个评分

课程 1（共 4 门，Specialization Competitive Strategy and Organization Design）

In this six-module course, you will learn how businesses and organizations behave in situations in which strategic decisions are interdependent, i.e. where my actions affect my competitors' profits and vice versa. Using the basic tools of game theory, we will analyse how businesses choose strategies to attain competitive advantage. This course is also available in Chinese. Please go to our course catalog to access the Chinese version of Competitive Strategy.

从本节课中

Entering a New Market

This module is about market entry. We first look at different tools to assess the attractiveness of a market – and then discuss strategies that have proven to be helpful for entering a new market, such as positioning and marketing strategies. We also look from the other perspective, and analyse what established businesses can do to keep new competitors out of the market.

Structural Entry Barriers / Commitment12:23

Limit Pricing / Predatory Pricing 8:59

Pre-Emption 5:45

与讲师见面

Tobias Kretschmer
Professor
Institute for Strategy, Technology and Organization

So, thank you very much for staying on until here.

We'll now have a look at the final strategy of entry deterrence, which is

the idea of preemption. Now, what does preemption mean and what

forms can it take. The ideas that an incumbent

tries to preempt entry by doing something that is costly to some extent, but by

being costly you are able to keep out potential entrants from the market.

So, one example would be by over-investing to reduce the variable

cost of production, to go below the level that you would

otherwise invest without the threat of entry.

So, in other words, you're investing so much into producing very cheaply, that

it's going to be very difficult for someone else to potentially enter and be

competitive. So, that's one idea of preemption.

Another idea of preemption is to pursue a horizontal differentiation strategy by

producing lots of slightly different varieties of a similar product.

Now, what intuition does that have? Well, by producing lots of different

varieties, you're leaving less space in the market.

You're leaving less space in the product space for potential entrants to make back

their initial investment and finally turn a profit.

Right. So, simply if everything you are trying

to produce will have very close substitutes you're not going to make a

great deal of money. And so, that's the idea of preemption

through producing a lot of product variety.

Finally, you can also do that in a spatial setting, and you can choose

locations of outlets more densely than you would otherwise do if there was no

threat of entry. As I want to discuss this final strategy

using an example from my own past,

which refers back to my time at the London School of Economics, where I was

working for a couple of years. And of course if you go down to work,

if you try to, well, basically go there in the morning, then

one of the things that is very obvious is that there are plenty of coffee houses or

coffee shops close by on the way to LSE. And you can imagine why, right?

There's plenty of students going there every day.

There's lecturers, professors, staff there going every day.

There's other people that work in the vicinity.

So, it's very obvious that there's a high demand for coffee overall.

So, this is how the situation looked like.

You have the LSE here. These are all the red buildings,

and you have three coffee shops. So, you have three different outlets by

Starbucks. Now, this, you can imagine that all three

of these will be profitable. So, this one will capture all the people

coming from here. This one will capture all the people

coming from east or from the northeast. And this one captures everyone who's so

far just went by without passing any Starbucks, without passing any coffee

shop. Now, the problem here is that this leaves

some space for entrants. So, for example, a potential competing

coffee shop could open up shop here. Or he could open here.

Now, both of these are likely to get enough customers coming here from the

northwest and coming here from the southeast, so that they would be

profitable. Okay.

Now this also means that Starbucks is not going to be very happy, because these

consumers or the consumers that would otherwise go here are now already

satisfied by having had coffee from their competitors earlier on.

So, Starbucks was trying to, or may have tried to prevent this by opening up

more coffee shops than might be optimal. So, what happened here?

So, again, you have the same situation, but now there are three more Starbucks

outlets. So, one more here, one more here, and one

more here. What does that do to the profits of

potential entrants? So, if you open up shop here, then your

almost dead, because here there's going to be one shop here and one shop

there. So, your demand going to be much lower

than in this case on the left. Also, if there's one Starbucks here, then

opening up a coffee shop here is going to mean that you get less

consumers for that shop. So, in other words, by opening up more

outlets than might be optimal without the threat of entry, they were able to

preempt these two potential entrants. And recall, going back to

this picture here, these two would have very well been able to turn a profit if

we had stayed, if Starbucks had stayed at the initial three outlets.

So, in the previous three videos, we've discussed strategies that incumbents can

implement to keep a potential entrant out of the market.

So, we've looked at a number of things, we've looked at raising strategic entry

barriers, we looked at commitment. We looked at limit pricing and predatory

pricing, and we also looked at preemption.

So, with all this, you should actually be perfectly prepared to answer our brief

in-video quiz. And I'll see you after this once more for

the wrap up video. But for now just please stay on and do

the video quiz. Thanks very much.

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