T-Mobile Barriers To Entry

The important barriers to entry as discussed in Chapter 2 are known as economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, and cost disadvantages independent of scale. These barriers benefit existing companies already in operation and are significant for many reasons.

Economies of scale occurs when a company incurs cost advantages due to it’s size and scale of operation. Since the company can manufacture a large number of products, the price of the item produced decreases with costs being spread across the quantity produced. As the price decreases, the company is able to utilize the funds saved in other areas of their business. A company that utilizes economies of scale to their advantage could be Procter and Gamble. The company owns many brands in the area of consumer products and its extensive distribution network allows the company to reach billions of customers. Since they own numerous different brands that

This occurs when a company strives to differentiate themselves from their competitors’ products or services. Companies that attempt to win over customers this way tend to expend a larger sum of money then their competitors. The objective is to develop something that customers of other brands see as unique. A real world example could be how T-Mobile went to great lengths to differentiate itself from its competitors (Verizon, AT&T, & Sprint). When T-Mobile first announced its “Uncarrier” movement, the company was able to change the playing field in the wireless industry. By eliminating two year cellular contracts, introducing new features, and paying early termination fees, they forced competitors to respond and stole millions of customers in the process. This ended up costing carriers like Verizon, AT&T, and Sprint quite a bit of money before they responded with similar