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18 May 2008


Nice summary of the threat of new entrants and the issue of barriers to entry Paul.

I am a coach as well although I concentrate more of life coaching. How easy it is for new coaches to appear is certainly an issue for me since anyone can call themselves a life coach and start to give advice.

It does force down fee rates but I differentiate myself through my years of experience and the large number of satisfied clients.

Thanks for your comment George. It is always good when someone starts off.

I understand your concerns about the lack of barriers to entry in the coaching industry. It is something that I have blogged about elsewhere.

Doctors and lawyers are professions that are able to protect themselves and charge high fees because practitioners must meet tough qualification requirements.

I would add a couple of points

1 - barriers to entry is just one force and off the top of my head, I can't think of any industry that is strong in all five.

Because coaching sells to individuals, the client's buying power is weak. Closing one deal isn't make or break.

2 - the purpose of the Five Forces is to allow an assessment of the actual or possible changes in the factors. For example in the UK the debate about protecting the word "accountant" comes up every so often.

Hi Paul,

Beautiful explanation on the threat of new entrants.

Can you explain what we can do to overcome the fear of customers to accept a new product entry in the market..

It is difficult to be specific on how a new entrant can be accepted, partly because it depends on whether it is easy to compare one to the other.

If it is not, it might be a brand new market created meeting an old customer need. Think DVD and BlueRay, CDs and mp3s.

New products need to go through the cycle of appealing to innovators, early adopters etc while improved products need to highlight their relative performance advantages.

Think demonstrations, low cost trials, testimonials, product reviews & endorsements, education based marketing...

Plus take the perceived and actual risk away - company credibility issues, guarantees, delayed payments.

I don't want to go further since my blog on the threat of new entrants was more focused on assessing or protecting your industry from new entrants.

However I accept it is two sides of the same coin.

The threat of new entrants is just one element of essential business strategy covered in Pillar 3 of my business development system, the Eight Pillars of Business Prosperity.

Pillar 3 looks at your Strategic Market Position and answers the big questions:

1 - how can you choose an market or industry where the odds of you making profit are stacked in your favour.

2 - how you can establish a viable position in that market, distinct or differentiated from your competitors but attractive to your customers.

You can find out more about my full system at http://YourProfitClub.co.uk

I hear some say that this business strategy stuff is unnecessary for small businesses.

I guess that's the people who don't understand it - I think it's essential and can save you years of frustration.

the ideas behind the threat of new entrants is a great example.

If you make lots of money doing something, then unless there is something to stop other people piling in your opportunities and growth threats will be reduced.

Corporations measure "willingness to switch" to a new product by offering a discount coupon for the new item. That way you can see how much lower the new product price has to be to get loyal customers to switch brands. A new life coach might choose to do something similar while he's building reputation - for instance, offer a "free" life coaching session to a local charity in a fundraising auction.

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