MGMT 223 Lecture Notes - Lecture 3: Switching Barriers, Customer Switching, Costco
Document Summary
Why people are e(cid:374)teri(cid:374)g the rideshare (cid:373)arket e(cid:448)e(cid:374) though it"s u(cid:374)profita(cid:271)le: you (cid:272)a(cid:374) e(cid:374)ter a (cid:373)arket being a loss-leader because you want to capture market, increasing barriers to entry. You want to enter now so you can secure a place in it and then price how you want in the future. Buyers- parents low and steady, kids high and rising, retailers high and rising: who. Suppliers- medium and rising (disney, et al would price in their own profit: who. High concentration of suppliers (high concentration means higher bargaining power) Low switching costs: price sensitivity, not just coke v. bear- think of unexpected substitutes like neckties and power drills. Threat of entry- high and rising (fads, low investments via asian manufacturers) Supply side economies of scale- spreading your fixed costs (molds) Decreasing as you outsource manufacturing: demand side benefits of scale. The more people who use it the greater the network effect (not applicable here: customer switching costs.
