Tag Archives: Nike+

Barriers to entry, a short review

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George J. Stigler won an Alfred Nobel Prize in 1982 for his work in economics sciences, and his thoughts on barriers to entry have been shaping marketing ever since. Barriers to entry are obstacles or areas that block the path of a company who is attempting to enter a market.

For those of us who either slept through marketing economics, or it has blurred together between not sleeping and partying, I think a little refresher is in order. This is just a brief overview of barriers to market entry, so let us not over examine it.

Barriers protect firms who are competing in a market, by keeping newcomers out. They are also key to a company’s pricing power, giving a company the ability to raise or lower prices without losing customers.

Common types of barriers include: Advertising, Control of resources, Customer loyalty, Economies of scale, Distributor agreements, Government regulations, Inelastic demand, Intellectual property, Network effect, Predatory pricing, Research and development, Sunk costs and Vertical integration.

Michael Porter, the Bishop William Lawrence University Professor at Harvard Business School has defined some clear effects of high and low entry and exit barriers of market entrance.

  • High entry barriers have very few players, creating higher profits.
  • Low entry barriers have many players, creating lower profits.
  • Markets with high exit barriers are seen as unstable, causing profits to fluctuate.
  • Markets with low exit barriers are more self-regulated, and profits do not fluctuate as much.

There are also four general types of competition that relate to these theories:

  1. Perfect competition: Almost no entry barriers
  2. Monopolistic competition: Low entry barriers
  3. Oligopoly: High entry barriers
  4. Monopoly: Extremely High, almost Absolute entry barriers

So what does it all mean?
Simply, that if you think about things before you act then you’re twice as likely to accomplish your goals. But more importantly, there are many things that you should consider before launching a product into a new market. And as always, I have a quick example from my school days.

Example: Nike Air Jordans are for Gods
I remember, only slightly, reviewing case studies relating to missing the mark with product launches. One such case study that has always stuck with me is the case of Nike vs. CAIR. The article revolved around how Nike, in 1997-98 was force to recall 800,000 shoes because they had almost directly translated the word “Air” into “Allah.” This is probably one of the best cases of how a company must be aware of cultural differences when entering a new market, and how different cultures now play into market entrance.

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Adidas is on the right track with their app, but they can still do so much better

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In 2003, adidas had a brilliant website for aspiring athletes. It included information regarding almost every possible type of sport training that you could think of. However, by 2010 this website seems to have been replaced by the more general popular flash site that fails to focus on specific sports. Sadly, this site had been exceptionally helpful for me, and many of my friends.

As the adidas miCoach competes against the Nike+GPS for app popularity of what is clearly becoming a cannibalized market place for runners. It would appear that while both are competing that neither are actually looking to create better athletes. Nike+GPS has just recently released its version of a intelligent GPS tracking version of the popular Nike+ edition, which comes standard on the iPod Nano. While this program is fine for your weekend warriors and general runners, but it does little for actual athletes who only use running as additional exercise to other sports.

Adidas’ miCoach appears to be on the right track by adding functions that help trainers.

Why not look to train people to be athletes and help with a larger variety in sports training?

The miCoach does provide the option for training for tennis, basketball running and football (I am assuming American). Nick Cragg was quoted on siliconrepublic saying, “The introduction of the miCoach app and sports-specific training plans was the natural next step to bring the miCoach facility to an even wider audience.” However, I believe that they are still selling the true abilities of the miCoach very short for actual athletes.

While adidas appears to be on the right track, I think that the first one to crack the market into more athletic endurance measuring will be the one who will be victorious in the rush to control the sports app market. Until that time, I would suggest that real aspiring athletes stay with the old school style of training… listen to your coach!