MANAGING INNOVATION AND ENTREPRENEURSHIP (Take home exam) Essay

MANAGING INNOVATION AND ENTREPRENEURSHIP (Take home exam) - Essay Example If these are not that effective, then entrepreneurs must have stopped using them for years. According to Porter’s five forces model, there are potential entrants that are able to play as relevant industry competitors. These new entrants are also capable of forming innovation and even imitation. China for instance is known for its low-cost products that at some point similar to existing offerings, which makes imitation not that impossible to take place. Thus, it would make sense that in order to prevent others from imitating a product; barriers to potential entrants should be made. According to Porter, barriers to entry includes economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, cost disadvantages independent of scale and government policy. We have been immersed mostly in the concepts of economies of scale and product differentiation so I would like to focus on these two as important barriers to innovation, as based on Porter’s five forces model. The economies of scale would force the entrant to face two undesirable options: come in at large scale and risk strong reaction from existing firms; choose small scale and accept cost disadvantage. In either of these choices, a new entrant needs to take the risk of losing his chance to successfully penetrate into the market. The other potential barrier to new entrant is product differentiation. Firms that already have brand identification and customer loyalties are hard to beat. Therefore, firms should therefore increase advertising, customer service, product differences and be the first into the industry in order to prevent potential entrants. Product differentiation therefore could at some point be highly associated with economies of learning, production techniques, production design and more, just to be able to create one-of-a-kind product that could bring competitive advantage and