Five Forces Framework - Threat of Entry - Type of Entry Barriers

8 important questions on Five Forces Framework - Threat of Entry - Type of Entry Barriers

One barrier is, Supply-side economies of scale, what does this entail?

Firms that produce at larger volumes enjoy lower costs per unit because they can spread fixed costs over more units, employ more efficient technology or command better terms from suppliers.

One barrier is, Demand-side benefits of scale, what does this entail?

Also known as network effects, arise in industries where a buyer's willingness to pay for a company's product increases with the number of other buyers who also do business with the company.

One barrier is, Customer Switching Costs, what does this entail?

Switching costs are fixed costs that buyers face when they change supplier (high costs for software products).
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One barrier is, Capital Requirements, what does this entail?

The need to invest large financial resources in order to compete can deter new entrants.

One barrier is, Incumbency Advantages Independent of Size, what does this entail?

Despite their size, incumbents may have cost or quality advantages not available to potential rivals.

One barrier is, Unequal Access to Distribution Channels, what does this entail?

The new entrant must secure distribution of its product or service.

One barrier is, Restrictive Government Policy, what does this entail?

Government policy can hinder or aid new entry directly, as well as amplify the other entry barriers (licensing requirements and restrictions - subsidies)

Lastly, expected retaliation, can also play a role in terms of whether a new entrant decides to enter an industry, what does this entail?

How potential entrants believe incumbents may react.

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