Barriers To Entry
- Created by: AnnieFH
- Created on: 13-12-15 14:04
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- Barriers To Entry
- Innocent/ Natural Barriers to Entry
- HIGH START UP COSTS = Firms may have to pay a large capital sum in order to enter the industry
- SUNK COSTS = Costs that cannot be recovered with leaving an industry e.g. Machinery
- SCALE ECONOMIES = In some industries, economies of scale are very large therefore if they enter the market and cannot produce at its minimum efficiency scale, it will be at a cost disadvantage
- Legal Barriers to entry
- LICENSES = The government may require firms to have a license in order to operate in a certain industry
- PATENTS = The government may give exclusive rights of production to certain firms e.g Post Office forbids any other private firm posting mail valued under 50p
- Strategic Barriers To Entry
- MARKETING BARRIERS = High levels of advertising in some industries can deter new firms from entering due to high levels of competition and costs
- LIMIT PRICING = A firm may decide to prevent competition from entering the market by setting their prices below that of their potential rivals
- RESTRICTIVE PRACTICES = An example of a restrictive practice would be a firm refusing to sell goods to a retailer if they stock their competators goods also
- Innocent/ Natural Barriers to Entry
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