Based on your adopted orgnaization(s), identify and discuss barriers in their IS/IT implementation ..(2000words)
Enable to answer, first we should identify the some words.
Barriers
In economics and mostly especially in the theory of competition, barriers to entry are obstacles in the path of a firm that make it difficult to enter a given market.
Barriers to entry are the source of a firm's pricing power - the ability of a firm to raise prices without losing all its customers.
The term refers to hindrances that an individual may face while trying to gain entrance into a profession or trade. It also, more commonly, refers to hindrances that a firm (or even a country) may face while trying to enter a market, industry or trade grouping. Barriers to entry restrict competition in a market.
Barriers to entry for firms into a market
Barriers to entry into markets for firms include;
* Advertising - Incumbent firms can seek to make it difficult for new competitors by spending heavily on advertising that new firms would find more difficult to afford. This is known as the market power theory of advertising.[2] Here, established firms use of advertising creates a consumer perceived difference in its brand from other brands to a degree that consumers see its brand is a slightly different product.[2] Since the brand is seen as a slightly different product, products from existing or potential competitors cannot be perfectly substituted in place of the established firm's brand.[2] This makes it hard for new competitors to gain consumer acceptance.[2]
* Control of resources - If a single firm has control of a resource essential for a certain industry, then other firms are unable to compete in the industry.
* Cost advantages independent of scale - Proprietary technology, know-how, favorable access to raw materials, favorable geographic locations, learning curve cost advantages.
* Customer loyalty - Large incumbent firms may have existing customers loyal to established products. The presence of established strong brands within a market can be a barrier to entry in this case.
* Distributor agreements - Exclusive agreements with key distributors or retailers can make it difficult for other manufacturers to enter the industry.
* Economy of scale - Large, experienced firms can generally produce goods at lower costs than small, inexperienced firms. Cost advantages can sometimes be quickly reversed by advances in technology. For example, the development of personal computers has allowed small companies to make use of database and communications technology which was once extremely expensive and only available to large corporations.
* Globalization - Entry of global players into local market make entry of local players into the market difficult.
* Government regulations - It may make entry more difficult or impossible. In the extreme case, a government may make competition illegal and establish a statutory monopoly. Requirements for licenses and permits may raise the investment needed to enter a market, creating an effective barrier to entry.
* Inelastic demand - One strategy to penetrate a market is to sell at a lower price than the incumbents. This is ineffective with price-insensitive consumers.
* Intellectual property - Potential entrant requires access to equally efficient production technology as the combatant monopolist in order to freely enter a market. Patents give a firm the legal right to stop other firms producing a product for a given period of time, and so restrict entry into a market. Patents are intended to encourage invention and technological progress by offering this financial incentive. Similarly, trademarks and servicemarks may represent a kind of entry barrier for a particular product or service if the market is dominated by one or a few well-known names.
* Investment - That is especially in industries with economies of scale and/or natural monopolies.
* Network effect - When a good or service has a value that depends on the number of existing customers, then competing players may have difficulties in entering a market where an established company has already captured a significant user base.
* Predatory pricing - The practice of a dominant firm selling at a loss to make competition more difficult for new firms that cannot suffer such losses, as a large dominant firm with large lines of credit or cash reserves can. It is illegal in most places; however, it is difficult to prove. See antitrust.
* Restrictive practices, such as air transport agreements that make it difficult for new airlines to obtain landing slots at some airports.
* Research and development - Some products, such as microprocessors, require a large upfront investment in technology which will deter potential entrants.
* Supplier agreements - Exclusive agreements with key links in the supply chain can make it difficult for other manufacturers to enter an industry.
* Sunk costs - Sunk costs cannot be recovered if a firm decides to leave a market. Sunk costs therefore increase the risk and deter entry.
* Vertical integration - A firm's coverage of more than one level of production, while pursuing practices which favor its own operations at each level, is often cited as an entry barrier
Barriers to entry for individuals into the job market
Examples of barriers restricting individuals from entering a job market include educational, licensing, or quota limits on the number of people who can enter a certain profession such as that of lawyer, and educational, licensing, and experiential requirements for people who wish to be neurosurgeons.
Whilst both types of barriers to entry attempt to guarantee that people entering those fields are suitably qualified, the barriers to entry also reduce competition. This has the effect of facilitating premium pricing for the services of regulated professions. That is, if just anyone could enter these fields, the income of the incumbents would be expected to be lower.
Classification and examples
Michael Porter classifies the markets into four general cases:
* High barrier to entry and high exit barrier (for example, telecommunications, energy)
* High barrier to entry and low exit barrier (for example, consulting, education)
* Low barrier to entry and high exit barrier (for example, hotels, ironworks)
* Low barrier to entry and low exit barrier (for example, retail, electronic commerce)
* Markets with high entry barriers have few players and thus high profit margins.
* Markets with low entry barriers have lots of players and thus low profit margins.
* Markets with high exit barriers are unstable and not self-regulated, so the profit margins fluctuate very much along time.
* Markets with a low exit barrier are stable and self-regulated, so the profit margins do not much fluctuate along time.
The higher the barriers to entry and exit the more prone a market tend to be a natural monopoly. The reverse is also not true. The lower the barriers the more likely to become a perfect competition.
source: http://en.wikipedia.org/wiki/Barriers_to_entry
Switching barriers
Switching barriers or switching costs are terms used in microeconomics, strategic management, and marketing to describe any impediment to a customer's changing of suppliers.
In many markets, consumers are forced to incur costs when switching from one supplier to another. These costs are called switching costs and can come in many different shapes.
Competition, collective switching costs, and market performance
Switching costs affect competition. When a consumer faces switching costs, the rational consumer will not switch to the supplier offering the lowest price if the switching costs in terms of monetary cost, effort, time, uncertainty, and other reasons, outweigh the price differential between the two suppliers. If this happens, the consumer is said to be locked-in to the supplier. If a supplier manages to lock-in consumers, the supplier can raise prices to a certain point without fear of losing customers because the additional effects of lock-in (time, effort, etc.) prevent the consumer from switching.
QWERTY example
Competition is also influenced by collective switching costs, especially in markets with strong network effects. Collective switching costs are the combined switching costs of all users in a particular market. For example, the QWERTY keyboard layout illustrates the difficulty of collective switching costs and the problems associated with co-ordinating an escape from a collective lock-in. Since its adoption, alternate keyboard layouts have been developed and used (e.g. the Dvorak layout). Individuals and firms who perceive an alternate keyboard layout as more efficient may still be dissuaded from choosing it on the basis of switching costs.
New users who have to choose between QWERTY and another layout may favor QWERTY because it dominates the keyboard layout market. Individual lock-in leads to collective lock-in as network effects drive more and more new users to adopt QWERTY and prevent current QWERTY users from switching to another layout.
Collective switching costs affect competition by strengthening incumbents and hindering new entrants, who must overcome both the collective and individual switching costs to be able to succeed in the market. Recognition of these switching costs has recently led to several attempts to design alternative keyboard layouts which lower the barrier to entry by retaining many of the features of QWERTY. However, none of them is in widespread use.
Switching costs are likely to be present in a large class of markets. The importance of understanding switching costs has been emphasised with the rise of information technologies, since switching costs seems to be a phenomenon that is especially strong in the information economy. Shapiro and Varian (1999) write: "[y]ou just cannot compete effectively in the information economy unless you know how to identify, measure, and understand switching costs and map strategy accordingly." Businesses are not the only ones who need to be aware of and understand switching costs. Since switching costs affect market performance, governments and regulators also have incentives to understand switching costs in order to be able to promote competition effectively.
source: http://en.wikipedia.org/wiki/Switching_barriers
Barriers to entry, exit and mobility
The idea that there are barriers preventing firms from entering markets and barriers preventing them from leaving requires that we view markets as similar to fields surrounded by gates of differing sizes and complexity. The gates have to be surmounted by firms wishing to enter or to leave.
To some extent the gates can be both raised and lowered, not just by those inside the fields but also by those outside wishing to enter. Typical barriers to entry include patents, licensing agreements and exclusive access to natural resources. A patented pharmaceutical, for instance, gives the patent holder exclusive rights for a certain period (usually a maximum of seven years) to manufacture and sell that pharmaceutical within a specified market.
The economies of scale (see article) that can be gained from being large and established in a particular field can also act as a barrier to entry. If new entrants calculate that they need to sell large volumes before they can hope to be competitive with existing firms, this acts as a deterrent to their ambition. When, for instance, did a new entrant last try to begin manufacturing for the mass car market?
Barriers to entry can also be erected by governments. Regulations covering the financial services industry are designed to act as a barrier to rogues and villains. But inevitably they also deter many honest businesses too. Forty years ago, foreign banks could not operate in Britain unless they had an office within walking distance of the Bank of England, then the industry’s regulator. Needless to say, property prices in the City of London’s “Square Mile” were among the highest in the world and acted as a powerful barrier to entry for newcomers.
Well-established firms in a particular field or market may be tempted to raise the barriers when they see a newcomer approaching their patch. They can do this, for instance, by lowering their prices, thus making the newcomers’ products less competitive. Moreover, lowering prices may be an easy option for the incumbents since their prices may have been higher than the free-market level because of the barriers.
Monopolies exist where there are insurmountable barriers to entry. If there were no (or only low) barriers, other firms would enter such markets to participate in the monopoly profits.
Barriers to exit make it more difficult for a company to get out of a particular business than it would otherwise have been. They include things like the cost of laying off staff, and contractual obligations such as the payment of rent. For a classic high-street bank with a large number of staff and a wide network of branches, the barriers to exit from traditional banking businesses can be considerable.
Paradoxically, firms sometimes decide for themselves to erect barriers that hinder their own exit from a market. This can be a strategic ploy designed to convey to their competitors the message that they are committed to that market, and that they are not going to leave it in a hurry.
Old ideas about barriers to entry were given a new twist with the development of e-commerce. By using the internet, firms can sometimes surmount traditional barriers with an ease not previously available. Economies of scale, for instance, do not apply in quite the same way.
Much of the deregulation of the 1980s and 1990s was designed by free-market-oriented governments to lower barriers to entry in industries ranging from airlines to stockbroking. But it had only limited success. A 1996 study of the airline industry by the American government’s General Accounting Office, for example, illustrated the complex way in which barriers to entry become tightly woven into the fabric of an industry. The study found that three things—namely, limits on take-off and landing slots at certain major airports; the existence of long-term leases giving airlines the exclusive use of airport gates; and rules prohibiting flights of less than a certain distance—continued to impede new airlines’ access to airports.
Despite this, in recent years a number of low-cost carriers have managed to some extent to circumvent these barriers by using secondary airports and by marketing tickets via the internet.
Idea:
All can say is in our adopted company the NCCC ,one of their barriers in IT ,first, is the adopting of the new technology. To which adopting new technology to improve their productivity and to make the leading market in Davao. Second, was the switching costs in changing the style of management and also in the technology.
Enable to answer, first we should identify the some words.
Barriers
In economics and mostly especially in the theory of competition, barriers to entry are obstacles in the path of a firm that make it difficult to enter a given market.
Barriers to entry are the source of a firm's pricing power - the ability of a firm to raise prices without losing all its customers.
The term refers to hindrances that an individual may face while trying to gain entrance into a profession or trade. It also, more commonly, refers to hindrances that a firm (or even a country) may face while trying to enter a market, industry or trade grouping. Barriers to entry restrict competition in a market.
Barriers to entry for firms into a market
Barriers to entry into markets for firms include;
* Advertising - Incumbent firms can seek to make it difficult for new competitors by spending heavily on advertising that new firms would find more difficult to afford. This is known as the market power theory of advertising.[2] Here, established firms use of advertising creates a consumer perceived difference in its brand from other brands to a degree that consumers see its brand is a slightly different product.[2] Since the brand is seen as a slightly different product, products from existing or potential competitors cannot be perfectly substituted in place of the established firm's brand.[2] This makes it hard for new competitors to gain consumer acceptance.[2]
* Control of resources - If a single firm has control of a resource essential for a certain industry, then other firms are unable to compete in the industry.
* Cost advantages independent of scale - Proprietary technology, know-how, favorable access to raw materials, favorable geographic locations, learning curve cost advantages.
* Customer loyalty - Large incumbent firms may have existing customers loyal to established products. The presence of established strong brands within a market can be a barrier to entry in this case.
* Distributor agreements - Exclusive agreements with key distributors or retailers can make it difficult for other manufacturers to enter the industry.
* Economy of scale - Large, experienced firms can generally produce goods at lower costs than small, inexperienced firms. Cost advantages can sometimes be quickly reversed by advances in technology. For example, the development of personal computers has allowed small companies to make use of database and communications technology which was once extremely expensive and only available to large corporations.
* Globalization - Entry of global players into local market make entry of local players into the market difficult.
* Government regulations - It may make entry more difficult or impossible. In the extreme case, a government may make competition illegal and establish a statutory monopoly. Requirements for licenses and permits may raise the investment needed to enter a market, creating an effective barrier to entry.
* Inelastic demand - One strategy to penetrate a market is to sell at a lower price than the incumbents. This is ineffective with price-insensitive consumers.
* Intellectual property - Potential entrant requires access to equally efficient production technology as the combatant monopolist in order to freely enter a market. Patents give a firm the legal right to stop other firms producing a product for a given period of time, and so restrict entry into a market. Patents are intended to encourage invention and technological progress by offering this financial incentive. Similarly, trademarks and servicemarks may represent a kind of entry barrier for a particular product or service if the market is dominated by one or a few well-known names.
* Investment - That is especially in industries with economies of scale and/or natural monopolies.
* Network effect - When a good or service has a value that depends on the number of existing customers, then competing players may have difficulties in entering a market where an established company has already captured a significant user base.
* Predatory pricing - The practice of a dominant firm selling at a loss to make competition more difficult for new firms that cannot suffer such losses, as a large dominant firm with large lines of credit or cash reserves can. It is illegal in most places; however, it is difficult to prove. See antitrust.
* Restrictive practices, such as air transport agreements that make it difficult for new airlines to obtain landing slots at some airports.
* Research and development - Some products, such as microprocessors, require a large upfront investment in technology which will deter potential entrants.
* Supplier agreements - Exclusive agreements with key links in the supply chain can make it difficult for other manufacturers to enter an industry.
* Sunk costs - Sunk costs cannot be recovered if a firm decides to leave a market. Sunk costs therefore increase the risk and deter entry.
* Vertical integration - A firm's coverage of more than one level of production, while pursuing practices which favor its own operations at each level, is often cited as an entry barrier
Barriers to entry for individuals into the job market
Examples of barriers restricting individuals from entering a job market include educational, licensing, or quota limits on the number of people who can enter a certain profession such as that of lawyer, and educational, licensing, and experiential requirements for people who wish to be neurosurgeons.
Whilst both types of barriers to entry attempt to guarantee that people entering those fields are suitably qualified, the barriers to entry also reduce competition. This has the effect of facilitating premium pricing for the services of regulated professions. That is, if just anyone could enter these fields, the income of the incumbents would be expected to be lower.
Classification and examples
Michael Porter classifies the markets into four general cases:
* High barrier to entry and high exit barrier (for example, telecommunications, energy)
* High barrier to entry and low exit barrier (for example, consulting, education)
* Low barrier to entry and high exit barrier (for example, hotels, ironworks)
* Low barrier to entry and low exit barrier (for example, retail, electronic commerce)
* Markets with high entry barriers have few players and thus high profit margins.
* Markets with low entry barriers have lots of players and thus low profit margins.
* Markets with high exit barriers are unstable and not self-regulated, so the profit margins fluctuate very much along time.
* Markets with a low exit barrier are stable and self-regulated, so the profit margins do not much fluctuate along time.
The higher the barriers to entry and exit the more prone a market tend to be a natural monopoly. The reverse is also not true. The lower the barriers the more likely to become a perfect competition.
source: http://en.wikipedia.org/wiki/Barriers_to_entry
Switching barriers
Switching barriers or switching costs are terms used in microeconomics, strategic management, and marketing to describe any impediment to a customer's changing of suppliers.
In many markets, consumers are forced to incur costs when switching from one supplier to another. These costs are called switching costs and can come in many different shapes.
Competition, collective switching costs, and market performance
Switching costs affect competition. When a consumer faces switching costs, the rational consumer will not switch to the supplier offering the lowest price if the switching costs in terms of monetary cost, effort, time, uncertainty, and other reasons, outweigh the price differential between the two suppliers. If this happens, the consumer is said to be locked-in to the supplier. If a supplier manages to lock-in consumers, the supplier can raise prices to a certain point without fear of losing customers because the additional effects of lock-in (time, effort, etc.) prevent the consumer from switching.
QWERTY example
Competition is also influenced by collective switching costs, especially in markets with strong network effects. Collective switching costs are the combined switching costs of all users in a particular market. For example, the QWERTY keyboard layout illustrates the difficulty of collective switching costs and the problems associated with co-ordinating an escape from a collective lock-in. Since its adoption, alternate keyboard layouts have been developed and used (e.g. the Dvorak layout). Individuals and firms who perceive an alternate keyboard layout as more efficient may still be dissuaded from choosing it on the basis of switching costs.
New users who have to choose between QWERTY and another layout may favor QWERTY because it dominates the keyboard layout market. Individual lock-in leads to collective lock-in as network effects drive more and more new users to adopt QWERTY and prevent current QWERTY users from switching to another layout.
Collective switching costs affect competition by strengthening incumbents and hindering new entrants, who must overcome both the collective and individual switching costs to be able to succeed in the market. Recognition of these switching costs has recently led to several attempts to design alternative keyboard layouts which lower the barrier to entry by retaining many of the features of QWERTY. However, none of them is in widespread use.
Switching costs are likely to be present in a large class of markets. The importance of understanding switching costs has been emphasised with the rise of information technologies, since switching costs seems to be a phenomenon that is especially strong in the information economy. Shapiro and Varian (1999) write: "[y]ou just cannot compete effectively in the information economy unless you know how to identify, measure, and understand switching costs and map strategy accordingly." Businesses are not the only ones who need to be aware of and understand switching costs. Since switching costs affect market performance, governments and regulators also have incentives to understand switching costs in order to be able to promote competition effectively.
source: http://en.wikipedia.org/wiki/Switching_barriers
Barriers to entry, exit and mobility
The idea that there are barriers preventing firms from entering markets and barriers preventing them from leaving requires that we view markets as similar to fields surrounded by gates of differing sizes and complexity. The gates have to be surmounted by firms wishing to enter or to leave.
To some extent the gates can be both raised and lowered, not just by those inside the fields but also by those outside wishing to enter. Typical barriers to entry include patents, licensing agreements and exclusive access to natural resources. A patented pharmaceutical, for instance, gives the patent holder exclusive rights for a certain period (usually a maximum of seven years) to manufacture and sell that pharmaceutical within a specified market.
The economies of scale (see article) that can be gained from being large and established in a particular field can also act as a barrier to entry. If new entrants calculate that they need to sell large volumes before they can hope to be competitive with existing firms, this acts as a deterrent to their ambition. When, for instance, did a new entrant last try to begin manufacturing for the mass car market?
Barriers to entry can also be erected by governments. Regulations covering the financial services industry are designed to act as a barrier to rogues and villains. But inevitably they also deter many honest businesses too. Forty years ago, foreign banks could not operate in Britain unless they had an office within walking distance of the Bank of England, then the industry’s regulator. Needless to say, property prices in the City of London’s “Square Mile” were among the highest in the world and acted as a powerful barrier to entry for newcomers.
Well-established firms in a particular field or market may be tempted to raise the barriers when they see a newcomer approaching their patch. They can do this, for instance, by lowering their prices, thus making the newcomers’ products less competitive. Moreover, lowering prices may be an easy option for the incumbents since their prices may have been higher than the free-market level because of the barriers.
Monopolies exist where there are insurmountable barriers to entry. If there were no (or only low) barriers, other firms would enter such markets to participate in the monopoly profits.
Barriers to exit make it more difficult for a company to get out of a particular business than it would otherwise have been. They include things like the cost of laying off staff, and contractual obligations such as the payment of rent. For a classic high-street bank with a large number of staff and a wide network of branches, the barriers to exit from traditional banking businesses can be considerable.
Paradoxically, firms sometimes decide for themselves to erect barriers that hinder their own exit from a market. This can be a strategic ploy designed to convey to their competitors the message that they are committed to that market, and that they are not going to leave it in a hurry.
Old ideas about barriers to entry were given a new twist with the development of e-commerce. By using the internet, firms can sometimes surmount traditional barriers with an ease not previously available. Economies of scale, for instance, do not apply in quite the same way.
Much of the deregulation of the 1980s and 1990s was designed by free-market-oriented governments to lower barriers to entry in industries ranging from airlines to stockbroking. But it had only limited success. A 1996 study of the airline industry by the American government’s General Accounting Office, for example, illustrated the complex way in which barriers to entry become tightly woven into the fabric of an industry. The study found that three things—namely, limits on take-off and landing slots at certain major airports; the existence of long-term leases giving airlines the exclusive use of airport gates; and rules prohibiting flights of less than a certain distance—continued to impede new airlines’ access to airports.
Despite this, in recent years a number of low-cost carriers have managed to some extent to circumvent these barriers by using secondary airports and by marketing tickets via the internet.
Idea:
All can say is in our adopted company the NCCC ,one of their barriers in IT ,first, is the adopting of the new technology. To which adopting new technology to improve their productivity and to make the leading market in Davao. Second, was the switching costs in changing the style of management and also in the technology.
No comments:
Post a Comment