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Brand Building to Deter Entry and Its Impact on Brand Value

Author

Listed:
  • Ron N. Bar

    (Formerly Ron N. Borkovsky, unaffiliated for research purposes)

  • Avery Haviv

    (Simon Business School, University of Rochester, Rochester, New York 14627)

Abstract

Brand valuation methods traditionally focus on the value a brand generates via its ability to enhance demand and, accordingly, profitability. However, this paper explores how a brand can generate value for a firm through the ability to deter entry of new competitors. In this respect, we distinguish between a brand’s direct effect on demand and its strategic effect on the behavior of rival firms. We investigate this within the context of the U.S. stacked chips category using a dynamic model that endogenizes brand building and entry decisions. We find that up to 63% of a brand’s value can be derived from its ability to deter entry. Furthermore, we find that a brand is most valuable when the cost of entry that potential entrants face is moderate: neither too high nor too low.

Suggested Citation

  • Ron N. Bar & Avery Haviv, 2023. "Brand Building to Deter Entry and Its Impact on Brand Value," Management Science, INFORMS, vol. 69(9), pages 5418-5438, September.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:9:p:5418-5438
    DOI: 10.1287/mnsc.2022.4608
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