Barriers to entry Flashcards
(6 cards)
What is a barrier to entry?
-An obstacle that makes it difficult for other firms to set up in the same industry/market
What is a high start up costs barrier to entry?
-This is where the cost of setting up a firm to compete with the existing operators are too high
Eg, Rolls Royce is the only company in the UK to produce jet engines and would be too expensive for other firms to do so
-New competitors may find it difficult to match such financial commitment
What is a t_ch_ol_gy barrier to entry?
-If an established and dominant firm has access to complex, up to date tech and other firms cannot afford to own some for themselves, it could force them to leave the market
What is a l_gal barrier to entry?
-This is where the gov awards a contract to a single firm for a particular service.
-Competition for this good would be illegal.
What is a patent?
-An eg of a legal B.T.E.
-A licence that prevents firms copying the design of a new product or piece of technology.
-That company can be the sole supplier for that service/good for up to 20 years only.
What are marketing budgets BTE’s?
-Monopolists may often have strong brand names so other new firms entering the market may not be trusted due to brand loyalty.
-You can gain trust through advertising or consistency with your product
