MGT Notes

Reference: Strategic Management (5e) – Frank T. Rothaermel (Pg 85)

Switching costs in the context of the ‘Threat of Entry’ force refers to sunk costs that a firm would have to incur if they moved from one vendor to another. This occcurs since, for example, they may need to alter product specifications, retrain employees, modify processes, etc. In some instances, these may prove to be very high barriers to entry for competing firms.