Barriers to Entry Calculation Assignment: Calculate the size of the barriers to entry into the branded segment of the cereal industry. What would it cost a new entrant to build competitive market share in this industry? Is it worth it for a new entrant to enter into the branded segment of the cereal business? Show calculations. Cite page numbers for data. Where data isn’t available, clearly state assumptions (and make sure your assumptions aren’t contradicted by the data). (Turn in an excel spreadsheet with your calculations; group-based, due in Moodle before class)

Hint 1: Focus on the fixed costs of entry--plant, introductory marketing, shelf space, R&D, etc.
Hint 2: Competitive market share in this setting is defined by the concept of Minimum Efficient Scale--the minimum scale necessary to not be at a cost disadvantage. The basic idea behind Minimum Efficient Scale here is that you’ll need to buy a cereal production plant. If that plant isn’t running at full capacity, that’s capacity wasted. The case says that a plant will cost $XX and produce YY lbs/year. Convert this production level to market share (YY lbs/yr = ZZ% of the market)
Hint 3: Notice from Exhibits 5 & 6 that one brand of cereal is very unlikely to get ZZ% of the market by itself. So you’ll have to use data to figure out how many brands you’ll need to bring to market to get ZZ% of the market.

Note also, I’m not asking you to do a full 5-forces analysis for this assignment; I’m just asking you to turn in calculations of the fixed costs of entry.

Answer rating: 100% (QA)

The size of the barriers to entry into the branded segment of the cereal industry is estimated to be 12 billion This includes the cost of a cereal pro... View the full answer