Barriers to Entry in Business

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Barriers to Entry in Business

A barrier to entry is a factor, which dependant on the magnitude of

its effect upon a start-up business makes it difficult or impossible

to enter a marketplace. These factors could be things such as high

start up costs, economies of scale or monopolisation. For example,

high start up costs is a barrier to entry as it prevents anyone with

low capital from entering that market.

2) Barrier to exit should be considered just as much when entering a

market because if the company is anchored down to an unsuccessful

marketplace, it will sink day by day, and if a barrier to exit is

preventing them from leaving they couldn't cut their losses and escape

while they can. These factors are often overlooked, as they are less

obvious than barriers to entry. An example is employee commitments; if

you take on a workforce and you then decide to shut up shop you will

have to pay redundancy to these people. This is a factor, which makes

it less desirable to leave a market.

3) James Dyson had a tough challenge when he was attempting to bring

his product into this busy and populated marketplace. He had to

overcome several barriers to entry and exit. The first of which is the

problem of economies of scale of production and marketing. He

attempted to quash this problem by approaching several of the larger

companies who dominate this market, effectively making it an

oligopoly. By doing this he could launch his product into this market

but help ensure its success by nullifying the problem of economies of

scale. But unfortunately the companies rejected his idea. Dyson could

still launch his product but he would have to go it...

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...r here as one

company has made a great success of it for this reason alone. Due to

its size, is completely automated. From visiting the site,

to processing the transaction, to packing and shipping the goods,

Amazon's retail process is totally automated and usually requires no

intervention. But this level of high efficiency comes from having

large investment and the higher the investment the harder a break-even

point to reach, but the more likely you are to reach it. This is why

small companies on the net take ages to break even, the middle sized

ones invest in an effort to become efficient, but often perish in

doing so, and only the cream make it here. So no direct barriers

preventing entry or exit, but in between is a rocky road, which in

itself is something to watch for when considering a start-up.

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