MSP 5 Forces Analysis: Threat of Entry & Product Differentiation

The post is meant to delve into Product Differentiation as a factor in creating Barriers to Entry for new firms to join the industry.

According to Porter, below is a list of factors contributing to a Threat of Entry:

·           Economies of scale

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·           Product Differentiation

·           Capital Requirements

·           Switching Costs

> ;     Since technologies supported is a source of differentiation, having a breadth of supported technologies or a great amount of depth of talent on technologies that are hard to source talent for can be a solid differentiator.

<     Vertical marketing strategies can be a substantial source of differentiation as firms that have developed a vertical market capability (especially one that goes up the stack into vertical specific applications) have a better view of what drives value for their clients and thus are in a better position to differentiate themselves by creating and marketing value based offerings.

bsp;    The service delivery model can also be a source of differentiation. This could be via a high touch service desk with high first call resolution percentages, or via service delivery managers which bring technical expertise and can act as a vCIO in addition to managing a high level of service.

Is, I will be discussing Michael Porter’s 5 Forces strategy framework as it applies to the MSP industry. I will be starting with the factors impacting Barriers to Entry and then progress sequentially through the remainder of factors in subsequent blog posts. If you read this and you have any questions or comments, please reach out to us via the contact page on this website or add a comment to the blog. I am sincerely interested in what you have to say on this matter as this is an input into our investment thesis for the firm.

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