Thread by @unseenvalue

The degree of competition in any sector is largely determined by “Threat-of-Entry”

Greater the threat, the worst it is for incumbents in that sector!!

An attractive space for Investors (and Management) is one where new competition is forced to overcome Durable Barricades!!

There are few clear-cut pointers to figure out such hurdles 👇

- Scale & Experience ?

- Regulatory / Legislative barriers ?

- Exclusive access to a resource or distribution channel ?

- Nature or extent of EXPECTED retaliation from incumbents ?

- Brand / Patented Technology ?

Incumbents may have access to some proprietary technology that gives them a clear cost or quality advantage not available to new entrants (or where new entrants would have to 💰💰💰in R&D)

Popular brands that have been around for decades!! – Dettol, Johnnie Walker, Fevicol etc

Regulatory / Legal restrictions are common in Healthcare!
Certain Financial Services are also protected (e.g. Pension selling)
Govt imposed tariffs / duties offers TEMPORARY advantage (as risk of reversal overhangs)

Caution – any “honest” deregulation by Govt will lower barriers

Expected / mere threat of retaliation could be a credible deterrent for a new player flirting with an entry where incumbents are already well entrenched (e.g. Insulin is an Oligopoly and incumbents like #Sanofi #Novo #Biocon #Lilly can lower prices and still make healthy EBITDA)