Posts Tagged ‘entry barriers’

Another entry barrier gone? (The Sequel)

November 23, 2009

Back in February I suggested that an element of the “cost of advertising/building a brand” barrier to entry has been eroded considerably by the increasing ability to film and post advertisements online (and then hope like hell for some viral takeup thereof).

I used an example from my cousin‘s Rentoid startup to demonstrate how a home video camera, a few brave mates, a funny idea and a Youtube might be equally as effective as engaging a creative agency and a film crew.

Well, technology is racing ahead. The Rentoid lads have moved very hi-tech on a similar budget (i.e. pretty much free), with this Pixar-like gem:

As Steve explains, this is all done via Xtranormal (i.e. some folks who’ve done all the hard work for you).

Clearly technology is racing ahead here for budding entrepreneurs seeking an audience.

Of course, making the ad is only one piece of the puzzle. Reaching an audience is harder. The February ad looks like it had 1200 views. One in March got almost 2000. Will this vid be the breakthrough? I guess if its close to costless there isn’t much downside risk.

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Squeezing some value out of Twitter…

May 13, 2009

I have been avoiding mentioning Twitter on here on the basis it may well prove to be a passing fad. My chief concern with the businesses attempting to network or communicate via 140 character messages (other than the sheer time-wasting aspect), was that I couldn’t see much value in it from a competitive advantage perspective.

wine glass twitterThis story about small-scale wine-makers does shed light on one potential productive use. Several wineries have found it a very effective mechanism to connect with wine-buffs, and open up new markets and retail channels.

Making such connections is crucial for differentiating oneself in this very noisy and overcrowded marketplace. Trying to communicate a message about the subtle points of difference of your wines can be expensive and time-consuming if it requires engagement with the wine media (let alone broader mainstream media). This scenario represents a considerable barrier to expansion for new entrants and smaller players.

Twitter may serve to break down this barrier. It LW VV HANGING SNAKES_200x500seems especially promising with respect to connecting independent retailers and small wineries. The former have a strong incentive to find less accessible but marketable wines (as a point of differentiation from bigger chains and their buying power). If small wineries can communicate consistently about the progress of their winemaking, about successes, customer feedback, special deals etc, this can only help.

Twitter will work best for any business when it reduces the costs of doing business, increases information flows and learning, and if it can serve to replicate (or capture sufficient elements of) existing selling points in that market.

I just spent a couple of days visiting cellar doors in the Barossa. Engaging directly with the winemakers (and the wines of course) is a huge bonding mechanism. Regular tweets could go some way towards simulating that experience.

What other businesses could benefit from this sort of customer engagement?

Microbrewers?

Bands?…

A competitive spectacle

February 24, 2009

There was an excellent discussion of the Australian spectacles market in today’s Age newspaper.

A previously docile market dominated by a very large player in the midst of hundreds of effectively sole traders has been shaken up considerably by the entry of British outfit Specsavers.

The incumbent giant is the Italian firm Luxottica who added the OPSM and Laubman & Pank marques to their globally known Sunglass Hut brand via an acqusition in 2003 (as discussed in my chapter in a book called The Internationalisation Strategies of Small-Country Firms).

They may be #174 in Deloitte’s Global Retail Powers rankings, but have clearly struggled when challenged by a lower-priced, more streamlined competitor. Luxottica are a curious player in the optometry business, as they were once only a manufacturer and have vertically intregated forward into the retail business, without obviously passing on any cost savings to consumers. Their stores are typically positioned as quality, fashion-conscious purveyors.

opsm storeIn contrast, Specsavers have grown fast in their home-country, Ireland, Spain and Scandinavia through a more thrifty range of offerings and aggressive pricing. It is fascinating that Australia has become such a big target for this mob (we may soon by 15% of their business). Presumably this reflects their own observation about the easy goals that can be kicked on this previously high-margin playing field.

As the article notes, Specsavers are not the only new entrants. Woolworths is experimenting with even more pared back concern through their Big W variety stores. This may well also be a testing ground for Woolies as it prepares itself for another inevitable attempt to tackle the pharmacy regulations and become even more Wal-Mart-like.

It was always going to be hard for Luxottica to build considerable barriers to entry in this business, as there are a lot of optometry outlets (and optometrists) to be snapped up by an aggressive entrant. The challenge is now to adapt their business strategy to this new competitive dynamic.

As a glasses-wearer, I say bring it on!

Another entry barrier gone?

February 23, 2009

My post about the music business argued that technological change has reduced barriers to entry considerably. In that instance, it was a raft of new technologies that made making and distributing music so much easier. These changes rendered the previously important music labels somewhat redundant.

One further aspect of this was the scope for musicians to market themselves, as they could build their image and communicate their message through extremely low cost means (such as Myspace and Youtube).

Such gains can be seen beyond the music world. Firms can now also bypass the dominant mass-media (and its associated businesses such as ad agencies and media buyers), and attempt to communicate their message directly to consumers via the same sort of sites as the musos.

Here’s an example from web-rental business Rentoid (yes, the one run by my cousin):

It’s low budget but has a chance to go viral and build greater brand awareness than a boring print ad or a billboard (both of which would be much more expensive).

What do you think? Does it communicate an effective message?

And is this a viable strategy for many firms?