MGT Notes

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

In the context of the ‘Threat of Entry’ force in Porter’s theory, Capital Requirements represents the investments in assets that a firm needs to make in order to compete. This can be in the form of buying land, installing sophisticated machinery, purchasing access to raw materials and equipment, etc. Low Capital requirements leads to a higher threat of entry force which works in favor of competitors. Capital can be thought of as a fungible resource since efficient markets will find ways to raise capital to undertake a profitable venture.