Barriers to Entry

Barriers to entry are obstructions that make it difficult for new companies to enter the market. These obstacles vary from industry to industry. Some of the most common barriers include technology challenges, government regulations, patents, start-up costs, or education and licensing requirements. It can also include the high cost for customers switching over to your product. Even though there are barriers to entry they are important to consider when entering a market. (Corporate Finance Institute, 2021; Gershon, 2013)

Some of the industries that have the lowest barriers to entry are professional, scientific, and technical services. Reasons for the low barriers are the low start-up costs and large number of new entrepreneurs in the field. Low barriers to entry are common to almost all companies. (Corporate Finance Institute, 2021; Gulati et al., 2017; ROBBINS RESEARCH INTERNATIONAL, INC., 2019)

It can be quite easy to use low entry barriers to your advantage when trying to enter a market. One reason for this is there will be many entrants, just like you, coming into the market with a minimum budget available and a basic business plan in place. To compete against them, you need to have a complete business plan that will show how your company will be a success. Also, you will need to know your strategy for showing how your product or service offered will have low switching costs for your buyers. Having a carefully crafted advertising and marketing campaign and budget to make sure it reaches your target market appropriately and swiftly will be key in your success. Keep your economies of scale in the forefront making sure that you have strong financial planning including not underpricing your product just to attract customers. (ROBBINS RESEARCH INTERNATIONAL, INC., 2019)

There are ways to get around the barriers to entry even as a start-up company. The biggest way to overcome the challenges are to be prepared and up to date on all regulations and financial costs involved. Even though these are low barriers to enter the market it can still be hard. Don’t give up. You can do this. You’ve got this. Now go out and do it!

Resources

Corporate Finance Institute. (2021, February 9). Barriers to Entry. https://corporatefinanceinstitute.com/resources/knowledge/economics/barriers-to-entry/

Gershon, L. (2013, March 29). Study: Industries with Low Barriers to Entry. CreditDonkey. https://www.creditdonkey.com/barriers-to-entry.html

Gulati, R., Mayo, A., & Nohria, N. (2017). MindTap – Cengage Learning. Cengage.Com. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=557615113112872025758405199&eISBN=9781305643673&nbId=2485825&snapshotId=2485825&dockAppUid=16&

ROBBINS RESEARCHINTERNATIONAL, INC. (2019, December 10). What are Barriers to Entry? A Full Guide & Explanation. Tonyrobbins.Com. https://www.tonyrobbins.com/business/barriers-to-entry/

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