A company produces a particular cell phone that requires accessories (such as chargers, cases, and ear plugs) that are specific to that phone and cannot be used with phones manufactured by other companies. The company that produces this cell phone is using what strategy to create a barrier to entry?
A)Creating cost advantages.
B)Controlling the markets for key inputs needed by all firms in the product market.
C)Intimidating rivals.
D)Increasing switching costs to ensure demand for its product.

Question

Quizplus · Accepted Answer

By making accessories specific to their own cell phone, the company is increasing switching costs for their customers. This creates a barrier to entry for potential competitors as customers would need to invest in new accessories if they were to switch to a different brand of cell phone, making it less likely for them to do so.

A Company Produces a Particular Cell Phone That Requires Accessories