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ACCA Strategic Professional · Strategic Business Leader · Competitive forces

Dunmore Retail, a large grocery chain, is worried that a global online platform could enter its home market. The platform has deep cash reserves, existing logistics skills and a loyal customer base in other sectors, but needs to acquire cold-chain distribution assets. Which assessment best applies the entry-threat analysis?

The threat is greater than for a typical start-up. Barriers to entry are relative to the entrant's capabilities, and a cash-rich firm with logistics skills and customer loyalty can overcome capital and distribution barriers that would deter a small newcomer.

  1. AEntry barriers matter less for this entrant because its existing resources let it overcome capital and access barriers, so the threat is greater than for a typical start-upCorrect
  2. BThe threat is low because the need for cold-chain assets is a barrier that applies equally to all potential entrants
  3. CThe threat is low because Porter's model only considers entrants from within the same industry
  4. DThe threat depends only on the number of existing grocery rivals, not on entrant capabilities

Explanation

Barriers are relative to the entrant's resources. A well-funded firm with logistics skills and customer loyalty can overcome capital, distribution access and brand barriers more easily than a start-up. So the barrier does not apply equally, and the threat is higher. Porter's model includes entrants from other industries.

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