Mobility barriers

Mobility barriers are difficulties of moving the company from one strategic group to another. Because of them company is not competing with competitors with similar market profiles, but with those that sell products in the same price and quality group. Study of intra-industry mobility barriers is of particular importance to predicting the development of the sector and potential changes in the competition.

Low mobility barriers

• means that it is easy to move company from one to another strategic group,
• the least attractive sector groups can be a threat to other groups.

High mobility barriers

• means the stability of the structure of competition and security within the group,
• strategic groups protected by high barriers to mobility have good conditions for development.

Security in the industry mobility

The issue of security within the industry can be partly explained by the symmetry of mobility barriers:

• symmetric barriers to intra-industry mobility - moving to another group is just a matter of investment,
• asymmetrical barriers to intra-industry mobility - companies must have specific skills.

Summing up, the situation for the strategic group is most advantageous when it has high barriers to entry into the group and these barriers are asymmetric.

In each sector there are not only barriers to entry, but also the ability to retort on the part of its current participants and competitors.

The effects of the existence of mobility barriers

Entry barriers restrict newcomers and threaten them. They lie mainly in the cost and time. By analysing them, you should take into account following elements:

• phenomenon of economies of scale, which means that in order to obtain competitively low cost, company must have the potential to achieve the right size for all it's services, i.e. production, marketing, research and development. However, in some cases, the cost advantage is not dependent on the production capacity, but on other factors.
• transfer costs,
• access to distribution networks,
• product differentiation.

Discouraging factor for entry into industry

Ability to retort is important factor if there are weaker barriers to entry and the more likely newcomers can enter to the sector. Following factors can discourage attempts of newcomers entry to industry:

• existence of a tradition of maintaining close and cordial ties between the professional actors of the industry,
• cultivation of professional tradition, which also favour the mobilization of forces against new competition.
• ability of enterprises to mobilize their own resources,
• existing cost structure and profit margins.

Types of entry barriers

Barriers to entry and barriers to exit are basic concepts in management strategy. They identify obstacles which companies encounter going into a given segment of the market, or if they want to leave it. These barriers can be considered as an obstacle to the functioning of the free market, because they raise the cost (not just financial) of starting or ending business in given industry. The cause of creating such barriers is the desire to achieve competitive advantage by companies already present on a given market. They restrict unexpected competitive attack from new competitors, by imposing high cost of entry into the market.

The barriers to entry is a hindrance to competitors. Entry barriers can arise spontaneously (then we call them natural) or are the result of deliberate actions taken by companies operating in the given market.

Intensity of competition influence on market entry barriers

The height of barriers to entry, and thus the predictability and the intensity of competition in the market depends on many variables:

• the economies of scale of production (in conjunction with the experience curve),
• the capital requirements
• the power of product brands
• conversion costs - how much does it cost to change vendors of industrial goods on the market,
• access to distribution channels,
• access to technology,
• the government regulations (quotas, quantitative restrictions),
• the expected retaliation,
• price preventing market entry,
• experience,
• government policy.

Types of barriers to exit

Exit barriers are the costs associated with the decision of resignation of production. The costs of these decisions stem from specialization and assets involved in production, psychological barriers (inherent emotional) are also significant.

The more a given activity depends on specific technological assets, the higher are the exit barriers. The main exit barriers are:

• specialized resources (material, machines and employees)
• high fixed costs of stopping production (admission payments for employees)
• costs of providing spare parts for old products,
• emotional-attachment to own company (family tradition).

Exit barriers may be also distinguished as:

• economic (narrow specialization of assets or high fixed costs of exit),
• strategic (strong linkages and interdependency between different areas of activity),
• political and social (state intervention or pressure from trade unions),
• psychological (for many business leaders, who all his career tied to a specific area of production, it is extremely difficult to reconcile with the fact of leaving the industry and provide that information to employees, which often take it as a defeat).

Examples of Mobility barriers

• Strategic assets: Companies that maintain a competitive advantage through the possession of unique strategic assets such as patents, trademarks, brand names, and proprietary technology have strong mobility barriers that make it difficult for competitors to enter their market.
• Regulatory barriers: Some industries are heavily regulated, making it difficult for companies to enter or exit the sector. Examples include the banking and insurance industries, where government regulation can make it difficult for new companies to enter the market.
• Cost of entry: The costs associated with entering a market are often high, making it difficult for companies to move from one strategic group to another. Examples include the construction and automotive industries, where the cost of entry can be very high.
• Product differentiation: Companies that have a strong brand image or a unique product offering may have difficulty moving to a new strategic group. For example, a luxury car manufacturer that is known for its high-end vehicles may have difficulty expanding into the economy car market.

Advantages of Mobility barriers

• Mobility barriers can provide competitive advantages. They can help firms create a competitive advantage by preventing competitors from entering a particular market or gaining access to resources.
• Mobility barriers can be used to protect a company’s market position. By erecting barriers to entry, a company can limit competition and protect its market share.
• Mobility barriers can protect a company’s intellectual property. By limiting access to its intellectual property, a company can protect its competitive advantage.
• Mobility barriers can help a company increase its profitability. By limiting competition, a company can increase its pricing power and profits.
• Mobility barriers can allow a company to develop long-term relationships with customers. By limiting competition, a company can create relationships with customers that can be beneficial in the long-term.

Limitations of Mobility barriers

• Mobility barriers can limit a company's ability to move to a different strategic group, as well as its ability to compete with competitors in similar market profiles.
• Companies may face an inability to access the necessary resources or capital to implement strategies that would enable them to move to a different strategic group.
• Companies may also face difficulties in terms of adapting their business model to the new strategic group, as well as in terms of creating a competitive advantage in order to succeed there.
• Companies may also face challenges in terms of customer loyalty and in terms of creating brand recognition in the new strategic group.
• Companies may also face challenges in terms of establishing supplier networks in the new strategic group, as well as in terms of securing the necessary distribution channels to succeed there.
• Companies may also face challenges in terms of being able to attract the necessary talent and resources to succeed in the new strategic group.

Other approaches related to Mobility barriers

One approach to analyzing Mobility barriers is to understand the underlying factors that influence the ability of companies to move from one strategic group to another. These factors include the following:

• Market concentration: This refers to the degree of competition in the market and how concentrated it is. Companies need to be aware that if the market is highly concentrated, it can be difficult to change strategic groups.
• Demand: Companies need to consider the demand for their products and services when considering a move to a different strategic group. If the demand is low, it may be difficult to compete in the new group.
• Cost structure: Companies need to consider the cost structure of their current group and the cost structure of the new group. If the cost structure of the new group is significantly higher than the current group, the company may not be able to afford the move.
• Resources: Companies need to consider the resources they have to make the move. This includes both financial resources and human resources. If the resources are not sufficient, the move may not be possible.

In summary, companies need to consider a variety of factors when analyzing Mobility barriers, such as market concentration, demand, cost structure, and resources. Understanding these factors can help companies make informed decisions about whether or not to make a move to a different strategic group.

Mobility barriers — recommended articles

Threat of new entrants — Market structure — Internationalization — Competitive position — Competitive risk — Related diversification — Near environment — Competitive positioning — Disruptive business model

References

• Bazzi, S. (2015). Firm Entry Barriers, Growth Constraints, and Job Creation: Theory and Evidence from Brazil.
• Caves, R. E., & Porter, M. E. (1977). From entry barriers to mobility barriers: Conjectural decisions and contrived deterrence to new competition. The Quarterly Journal of Economics, 241-261.
• Demsetz, H. (1982). Barriers to entry. The American Economic Review, 72(1), 47-57.
• Peteraf, M. A. (1993). Intra‐industry structure and the response toward rivals. Managerial and Decision Economics, 14(6), 519-528.
• Porter, M. E. (1976). Please note location of nearest exit: Exit barriers and planning. California Management Review, 19(2), 21-33.

Author: Karolina Orzeł, Joanna Grych