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- Report n°2: An integrated approach to economic and social contestability in business
Report n°2: An integrated approach to economic and social contestability in business
Internal economic contestation
The entry and exit barriers identified do not affect only a potential new operator who seeks to compete with a historic operator: they also determine the degree of exposure to internal economic contestation. Such contestation could come from an existing operator looking to vertically integrate (upwards or downwards). In contrast to a new entrant, an operator already installed upstream or downstream in the recycling business can use the assets he already invested in. A steel manufacturer considering the advantages of upstream integration already has the location assets necessary to develop a recycling business: for instance, he is connected to the transport networks. An upstream integration strategy would allow him to control the costs and problems associated withtransactions on materials of uncertain quality. A collection operator may have easy access to the input markets and transport networks required to make the supply, and could envisage extending his activity downstream. However, both types of operator would have to pay a non-negligible entry cost to acquire the assets they would need to play the recycler's role as a bridge between the upstream and the downstream markets. In particular, they would need the intangible assets without which the recycling operator sees his economic profitability reduced and stands exposed to industrial or environmental risks for which he may be held responsible.