refer to the cost if a customer switch to a new vendor? can not find it in secrete sauce…
Yes, the higher the better from the firm’s perspective.
a high switching cost decreases the bargaining power of the buyer, as they would have to pay up the a$$ in order to leave their current provider
but the higher it is, the more competitive the industry gets
yseric Wrote: ------------------------------------------------------- > but the higher it is, the more competitive the > industry gets I thought a lower switching cost would mean firms would have to entice customers in other ways to retain their customers, increasing competition. I could be wrong though.
humm, i think you’re right, i believe there is a problem like this in the mockup or sample, getting late now, my brain is running out of gas… =(
schweser book 6 exam 2 afternoon question 80 A was correct! Switching costs are costs incurred by the buyer in switching from one supplier to another. High switching costs act as a disincentive for buyers to switch products and decrease the bargaining power of buyers. From the supplier’s perspective, the higher the switching costs, the greater the bargaining power of suppliers. when the company knows you wont switch bc you dont want to pay - theyre in control
In the strategy class i took in college, my prof said one great thing about Porter’s 5 Factor Model that helped me a boatload. 90% of it is putting yourself in the right “shoes.” Once you’re there just imagine what you’d do in the situation. e.g., If I’m a customer that faces little to no costs associated with switching between miller light and bud light, I’m more likely to do so than if I faced a higher switching costs. Conversely, If I’m Mr. Bud Light, and my customer can easily and with no costs switch away from my product, I have little power to extract high profits from him. (Because he’ll just switch to miller if i try) Simple example, but you can do it for most every singe “box” in porter’s model and 90% of the time you’re going to get the right answer. That being said, it assumes you’re not terrible at making decisions in your own life 