If the entrant does not want to bargain with distributors, it may try to develop a favorable brand image by advertising directly to the final consumer, counting on the consumer to demand the product from distributors. The cost of cultivating a positive brand image will be largely sink: if unsuccessful, the entrant could hardly expect to sell its goodwill, recover its investment in differentiation, and leave the market.
If the entrant comes in on a vertically integrated basis, most of the investment in distribution facilities will be a fixed cost the rental cost of the distribution facilities will have to be paid no matter how much output moves through them. Read More
Merger is an obvious method used to obtain a dominant market position. The formation of dominant firms by merger was an important motive for the passage of the Sherman act, which is after all an antitrust act. As we will see in chapter 10, the antitrust laws now place restrictions on such mergers. But there are strategies that a firm can employ to reach a dominant position through internal growth. Such strategies fall into three broad categories: strategies that act directly to raise rivals’ cost, and strategies that act indirectly to raise rivals costs through some aspect of the technology or marketing. 
