Strategy
Barriers to entry
What makes it hard for new competitors to enter a market.
Facts checked against sources onWhat does Barriers to entry mean?
Barriers to entry are things that make it hard for a new firm to enter: economies of scale, high upfront investment, licences and regulation, strong brands, patents, control of distribution, and switching costs. High barriers protect existing firms' profits. They are one of Porter's five forces (the threat of new entrants).
Where does it come up in case interview prep?
- Value chains and profit poolsLesson in How industries work: the toolkit
- Industry primers: airlines, pharma, software, energyLesson in Business basics for non-business learners
- What competitive advantage really isLesson in Why some businesses win: competitive advantage and the economics of strategy
- Scale and scope: when being bigger lowers costLesson in Why some businesses win: competitive advantage and the economics of strategy
- Network effects: when each user makes it betterLesson in Why some businesses win: competitive advantage and the economics of strategy
- Switching costs, lock-in and habitsLesson in Why some businesses win: competitive advantage and the economics of strategy
- Moats that erode: technology, rules and new rivalsLesson in Why some businesses win: competitive advantage and the economics of strategy
- Competition law: mergers, cartels and abuse of dominanceLesson in People, rules and responsibility: organisation, regulation and sustainability
Related terms
- Porter's Five ForcesFive pressures on how profitable an industry is; vocabulary, not a case structure.
- Switching costsThe cost or effort for a customer to change supplier.
- Economies of scaleCost per unit falls as volume rises.
- Economies of scopeCost falls when related products share resources.
- Network effectsA product becomes more valuable as more people use it.
- Competitive advantageWhat lets a firm earn more than its rivals over time.
- Vertical integrationOwning more stages of your own supply chain.
- Horizontal integrationCombining with firms at the same stage, often competitors.
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