120 The Financial Times Guide to Corporate Valuation
its shareholders. If the company had the same relative market share but
enjoyed higher industry barriers to entry (in the figure, if the company
were higher on the vertical axis), the company would, all other things
being equal, have more stable cash flows and thus a higher value. From an
investor’s perspective, the current candidate might be an interesting com-
pany to buy, if one could increase the barriers to entry or if one believes
someone else will increase them. Means for increasing barriers to entry
include achieving economies of scale, building brand loyalty or binding
the important suppliers and distributors closer to you.
Consider now a company in the upper-left corner
of