BARRIERS TO ENTRY
- Economic term describing the existence of high start-up costs or other obstacles that
Prevent new competitors from easily entering an industry or area of business.
- Barriers to entry benefit existing firms because they protect their revenues and profits.
- Examples :
Special tax benefits to existing firms
High customer switching costs.
DISCOURAGE NEW ENTRANTS
- The threat that new competitors pose to current firms within an industry.
- This threat produces a significant influence on the ability of current companies to generate a profit.
- When new competitors enter into an industry offering the same products or services, a company’s
Competitive position will be at risk.
- Hence, new entrants will be discouraged to enter a new industry.
ECONOMIC OF SCALE
- Cost advantages companies experience when production becomes efficient, as costs can be spread
Over a larger amount of goods.
- A business’s size is related to whether it can achieve an economy of scale, larger companies will
Have more cost savings and higher production levels.
- Economoies of scale can be both internal and external. Internal companies are caused by factors
Within a signle company while external factors affect the entire industry.
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