Well, lets see...
I'm Philip Morris,
and I just got the closest thing to a product approval from the FDA that I'm going to get. I won't have to stop making cigarettes for a very long time. I have established distribution channels, legislation backing and supporting my enterprise, and I even have local law enforcement going after smugglers crossing borders, because the states have become reliant on unethical sin taxes they've placed on my product, and instead of using that money for "stop smoking programs" like they promised, they are using the money for everything else. So the states don't want me to stop.
*That's political pressure. Heavy political pressure. States are as addicted to that unethical sin tax money they are collecting as smokers are addicted to marlboros.
I'm a publicly traded company. That means I get my best profit from investors when my income and quarterly statements follow a very predictable trend. I can introduce new products in small quantities to give the aire of innovation, but I can't have any one huge product offering be too much of a success (unless carefully forecasted) or be a massive failure or my numbers won't match the outlook, and investor confidence will fall, or I'll become over valued and suffer later. I already have a product that WILL sell because my users are addicted. I have a very loyal customer base. There's no reason to switch games now.
*Investor confidence, stable profit forecast.
*There's no reason to switch games now. This one is playing out so well.
I do not have the machinery in place to convert tobacco into pure nicotine, and rapidly make massive amounts of e-liquid. Even worse, I CAN NOT AFFORD to make liquid as cheaply as DeKang, and DeKang ALREADY can make it an order of magnitude cheaper than I can. On top of that, there's no legal framework in place to guarantee I maintain my artificial monopoly. So on top of retooling costs, and retraining costs, and how that would effect investor confidence, I'd be walking right into a market as NUMBER TWO with a competitor I simply can not compete with on price. My only outlet would be to make statements (truth not mattering) about the quality of my product offering, and quite frankly, that's nowhere close to a safe bet. The barriers to entry are WAY too high.
*Retooling Costs
*Massive Monster of a competitor, DeKang
That last point being the big one. One of the most important sections of a business plan (I've written many) is the "competitive analysis" section in your "Barriers to Entry". The fact that a strong competitor is immediately considered a barrier to entry is in an of itself an idea why 99/100 business plans are complete ...., and not even considered.
That's why Big tobacco isn't even bothering. Why fight a losing game?
Hope This Helps
Zofryer---Very well stated.
Sun
