Essay: Barriers to entry and exit into the industry

Essay: Barriers to entry and exit into the industry
May 23, 2011 Comments Off on Essay: Barriers to entry and exit into the industry Academic Papers on Business Studies,Sample Academic Papers admin

Sample Essay

Any such issues that can obstruct the ability of a company to enter the market or industry are known as barriers to entry. Similarly, any issues that limit the company’s exit from the market are called as barrier to exit.

The company at its own behalf does not have any barriers for a new competitor to enter the market however there are certain barriers that may hinder a newcomer on the platform to overtake these giants. The barriers are not kept by Costco but the market in which Costco is involved too.

The first barrier that comes is the requirement of huge volumes of production or product line in this sector. The sales to breakeven the cost level per unit for profits is a barrier. Secondly a hefty amount of money is required as the capital investment which is used to initiate the business, hence proving the condition to be another barrier to entry. The affinity for buyers of a specific company to switch to a new comer is quite unforthcoming which in turn limits the entry of a new competitor in the market. The leading giants of the market are already dominating the market with recognized product line and brands from around the world. Making a competent branded product involves a lot of time and money, consequently It is considered to be a barrier. Industries like discount and variety stores industry tend to have a limited amount of newcomers since it requires permissions and licenses from the governmental authorities making it quite difficult for a starter. The standards of a market also confines a competitor to enter since it has to meet the standards of quality as well as manpower, allotted manufacturing land area etc.

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