Threat of Entry

Characteristics

Current situation

Future trend

Importance of reputation and brand loyalty in purchase decision

This is one of the main factors, indeed. Because like the majority of high-end product business, reputation and brand loyalty are almost the only factors that determine whether a business profits or not.

It will very like to be the same in the future.

Entrants' access to distribution channels

Talking about distribution channels it is 50% about the eating establishment’s reputation and friends who made your restaurant “luxurious” and another 50% is curiosity to try something new. So, if you have no “cool” authoritative friends it will be hard to attract attention of the public.

Probably with the advancement of the Internet and other channels of information distribution it will be much easier to build a strong brand of your own and to make money even without “cool” friends. May be curiosity of particular influential glamorous people alone will make your business a dreamlike success.

Entrants' access to raw materials

Suppliers are very accessible. Sometimes the suppliers even come to you and not the other way round.

Since the business of supplying raw materials to high-end eating establishments is pretty easy and competitive then in the future there would be even more access to the raw materials.

Entrants' access to technology and know-how

When you open a true high-end restaurant you have to be ready to satisfy even the most demanding tastes of your customers (remember about the reputation and the word of mouth). This is why it is extremely crucial to find a good chief-cook for your business. But as mentioned in the “Competition and competitors” section it is hard to find highly qualified people in Russia at the moment of this writing.

The situation in the future is poised to change and more highly qualified professionals, including cooks, would be available.

Entrants' access to favorable locations

The answer to this question is even simpler - almost all best locations in town are occupied.

The same situation is likely to remain in the future.

Experience-based advantage of incumbents

When you have been in this business for a particular period of time it provides you with a huge advantage – just think about all the thing mentioned above – reputation, loyal customers, the word of mouth, access to professional, access to raw materials, access to top-spots in the town etc.

The more you do the business the more advantageous it is for you.

Network externalities

Probably the more people eat at a particular high-end restaurant the more it is more popular, but it should be noticed that the customers have to be also high-end, i,e, high-net worth individuals. Otherwise the restaurants risk being relegated as mid-class eating establishments.

The same situation is very likely in the future.

Government protection of incumbents

There are no laws or any other legal measures that protect the incumbents.

Because high-end restaurants are not social benefactors and their existence is not that crucial for that society it is not likely that new laws would be established to protect them.

Perception of entrants about expected retaliation of incumbents

Well, it is hard to tell but at least there are no wars between the restaurants. But there are some intelligence actions…The restaurants spy on each other periodically. Some restaurants try to attract clients by making some events with the stars and so on, but in reality it doesn’t work well.

Retaliation is not consistent with the reputation of a high-end restaurant. Therefor it is unlikely that the incumbents would punish new entrants, at least directly. Probably the incumbents would attempt to make the business of the new entrants not that smooth – blocking supply of raw materials, spreading bad words of mouth etc.