Barriers to entry:
- Legal barriers preventing firms from growing. These may be permits or licences from the government.
- Overt barriers to prevent small businesses from growing. These are imposed by current firms that work in the industry, e.g. lowering prices to just above average cost.
- High sunk costs: costs which firms will not be able to recover on exit. e.g. advertising and R&D.
Niche market businesses: Little scope for growth, little demand for example cricket bats in the UK.
Lack of expertise: Owner of the firm may lack the knowledge or expetise to expand and may lack funds.
Low optimum efficiency: The minimum efficient scale of production is low in many industries - no significant economies of scale for such firms. Once a firm has reached optimum efficiency any further increase could result in inefficiencies and increased costs.
Lack of motivation
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