Competitive Advantage: Creating and Sustaining Superior Performance by Michael E. Porter

Author:Michael E. Porter
Language: eng
Format: mobi
Publisher: Free Press
Published: 2008-06-29T16:00:00+00:00

Switching Costs

Substitution always involves some costs of switching to the substitute for the buyer, which are weighed against RVP. The higher the switching cost relatively, the more difficult substitution will be. Switching costs in substitution are analogous to those of changing from one supplier to another in an industry.4 Switching costs are usually higher in substitution than in switching suppliers, however, because substitution may require switching to a new supplier plus switching to a new way of performing a function.

Switching costs potentially arise from all the impacts a substitute has on the buyer’s value chain. Both the value activity in which the substitute is employed as well as other value activities it indirectly affects may require one-time costs of changeover. Switching costs most common in substitution are the following:

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