Barriers to entry and porters five forces – a way of thinking

You need to know that I studied marketing for 3 years at Swinburne University and that allowed me to create a “way of thinking” that empowered me to see the world in a different way. I often think of people who work unusual jobs like Ambulance driver or street sweeper – they see the world differently. They see the city wake up. That’s an awesome site, right? When you arrive in the city before dawn…It’s empty. There are wild seagulls eating from the pavement, the occasional taxi or street sweeper drives past. And if you’re patient you will see people start to arrive and soon it’s awash with metrolpolis again. And the weird thing is – every person has a story.

My story – or at least part of it – is understanding marketing strategy. I dont always have the technological expertise to implement the solution I offer however I bet I can come up with the solution 100% of the time.

One of the key thoughts for me in seeing the world through eyes of strategic marketing is understading barriers to entry and Porters Five Forces. One simple example is understanding why you dont leave your bank even though you may hate them and they charge you fees. It’s hard for you to leave. You have to ring up all your utilities, cancel cards, research another bank and you choose to stay by default! These are barriers to exit – another post I will do one day soon. Barriers to entry, put simply, are any force in the market (known or unknown, political, economic or otherwise) that will prevent new players entering the market you are in.

You also need to understand growth curves. Every business or market has a bell shaped growth curve. iPods were not very popular 10 years ago (-3). Then they peaked (“0”) when everyone had one. Now they are slowly decreasing (+2) as people get iPhones and Apple Tablets.

Once the product or industry (such as water tanks in a drought!) becomes lucrative, other people want to enter the market. Eventually there is over supply and you get stuck with an average business unless you wait for others to leave or differentiate (see purple cow on e-newsletter post).

Anyway the point is have a read of the article on wikipedia (link) so that you can start to see the world in a different way…

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