Barriers To Entry And Exit Essay

3296 words - 13 pages

Untitled

Barriers to Entry and Exit

Entry and exit barriers limit the number of firms competing in a product market or industry. Entry barriers lessen the degree of competition by imposing hurdles that decrease the ability of new entrants to operate profitably. One result is that firms operating in an industry protected by strong entry barriers tend to benefit from higher prices, and thus profits, than do firms operating in an industry without strong entry barriers. In contrast, exit barriers increase the degree of competition within a product market or industry by imposing obstacles that make exit difficult or costly. The rivalry between firms in an industry with strong exit barriers tends to be more intense than the rivalry between firms operating in an industry where exit is easy or relatively costless. One result is that firms in an industry with strong exit barriers tend to suffer lower prices and, thus, profits.

What entry and exit barriers have in common is their strong impact on the nature of competition: In the case of entry barriers, competition is lessened, while in the case of exit barriers, competition is magnified. This relationship between competition and entry and exit barriers has important ethical implications associated with erecting and maintaining various forms of entry and exit barriers. Competition benefits consumers; it ensures that firms operate efficiently and share the resulting gains by lowering prices, boosting innovation, improving quality, and/or further increasing profitability. Firms can also benefit from competition; consider the case of Pepsi and Coke, whose rivalry has significantly increased cola consumption. However, all else being equal, firms prefer to erect and maintain barriers to entry that furnish them some level of protection from highly competitive forces. Different barriers will benefit consumers versus firms in different ways. Some forms of barriers to entry and exit are more likely to engender a sense of commutative justice, where both consumers and firms benefit equally. Other types of barriers may justly favor one over the other, creating an undercurrent of distributive justice. Finally, some barriers may unjustly benefit one group at the expense of the other. Understanding how barriers to entry and exit affect the distribution of benefits between consumers and firms is crucial to comprehending their ethical implications.

Entry Barriers

Entry barriers can be broadly classified according to whether they are internally based or externally based. Internally based barriers to entry appear when managers make investments that give their firm a competitive advantage, thus allowing them to charge above-average prices, capture high market share, and/or benefit from an extraordinary cost position. Such investments develop into entry barriers when they become costly enough to discourage potential new firm entrants. Externally based barriers to entry appear when managers successfully...

Find Another Essay On Barriers to Entry and Exit

Colmate: A market entry assessment. Students were to select a locally owned consumer godd and conduct an international market entry study.

8256 words - 33 pages , distribution, raw material and other supplies. In South Korea the chaebol are prestigious and influential, and their behaviour determines the competitive environment. Therefore, LG and Amore have created large barriers to entry that future competitors would find hard to overcome.Colmate would have to compete against both large and small firms that are well established in the local toothpaste industry. These competitors have established brands

Market-Entry and Competition A Discussion of Strategies available to Entrepreneurs

1585 words - 6 pages Market-Entry and CompetitionA Discussion of Strategies available to Entrepreneursby Kai F. Mahnert, DBMKConducted for Ivan Mc Phillips, Lecturer in Enterprise Development, GMITMarket-Entry StrategyMarket-entry strategy is the way the entrepreneur proposes to enter the market s/he has chosen for the new venture, be it an existing market or a completely new one (i.e. a new market for an existing product or a new product in the general market

Assess the likely barriers to competition in the industries supplying leisure goods and services.

1661 words - 7 pages compared to new entrant products, and this may in essence erect some barriers to entry. Product differentiation was first emphasized as such in academic literature by Chamberlin in his Theory of Monopolistic Competition in 1933, although of course it has been an important phenomenon since then and has existed as long as commerce and business. It refers to buyers' preferences for one or some of a variety of similar substitute products, such as

Helping Homeless Families and Individuals With Multiple Barriers to Self-Sufficiency

1281 words - 5 pages With my project Todos Tenemos Esperanza (TTE) I propose to help homeless families and individuals with multiple barriers to self-sufficiency. Working through a network of housing and service programs in San Juan, Puerto Rico and the communities in it. The organization is led by a community is led by me, Jonathan Ponce, and a four managers each bringing expertise in the four strategies of housing, health, economic development, and social justice

What are the barriers to implementing a marketing plan and what can be done to overcome them?

2732 words - 11 pages , however it is beyond this essay to clarify all possible barriers in implementing a marketing plan. After the potential barriers are of implementation are specified the essay will try and give possible solutions. The essay will first look at organizational constraints and then progress onto operational barriers.Organizational barriersIt is not uncommon for marketing planners to experience difficulties in gaining wholehearted executive commitment

Henrik Ibsen's "A Doll's House" How Isben wanted the reader to interpret Nora's exit from her marriage and the life she knew.

1514 words - 6 pages Henrik Ibsen wrote the play A Doll's House in a time when women were amidst a social struggle in order to stop the oppression society placed on them concerning their roles. The main character in Ibsen's play is Nora Helmer, the beautiful wife of Torvald Helmer. She struggles with her need to escape Torvald's power, and be able to learn things about the real world, which she has never experienced. Ibsen wants Nora's exit to be interpreted as an

Critically analyze the role of senior managers as barriers to organizational change and explore how this can be addressed

2948 words - 12 pages Critically analyze the role of senior managers as barriers to organizational change and explore how this can be addressed.The purpose of this essay is to critically address the role of senior managers as barriers to organizational change and explore how this can be deal with. In the first part of the essay the organizational change, organizational behavior and organizational culture will be defined and then the responsibilities of senior

"Journeys, irrespective of their form, usually present challenges and barriers that have to be met before a final goal is reached." Do you agree?

1148 words - 5 pages Most journeys regardless of their physical, emotional or even psychological nature present challenges and barriers which must be overcome before the goal or purpose behind the journey is reached. These challenges and barriers are both obstacles which we must surpass and signposts which mark the progress of our travels. They can take any form from physical tests of courage to psychological disorders that impede the journeyers from their paths

A literary analysis of James Joyce's "Araby" using references to borders, barriers and boundaries, both actual and psychological.

745 words - 3 pages encompass it. Using references of physiological and solid boundaries through contrast of light and dark, adoration, and fear, Joyce describes his embarrassing transformation into adolescence.In "Araby," Joyce uses the contrast of light and darkness to show an internal and external boundary that is apparent in his life. The author describes his home with morose words and morbid references back to a priest that had died in one of the rooms. He also

Discuss the methods that the government uses to communicate its monetary and fiscal policy and the barriers it may face.

1046 words - 5 pages Communication is very important in all spheres of the life. It helps avoid misunderstanding, errors and frustration and is important in developing the relationships and it is a key to success in the life and the work. It is about exchanging the messages and information between a sender ‘‘The individual who initiates a message in the communication process‘‘ and a receiver ’‘The listener, reader, or observer in the communication process

What is monopolistic competition?

634 words - 3 pages little bit of control over its small corner of the market. The large number of small firms, all producing nearly identical products, means that a very large number of close substitutes exists for the output produced by any given firm.Freedom of entry into and exit out of the industry means that capital and other resources are highly changeable and that any barriers to entry that might exist are few. These entry barriers allow real world firms to get

Similar Essays

The Internal And External Barriers To Exporting Faced By Sm Es

1517 words - 6 pages The Internal and External Barriers to Exporting Faced by SMEs After many countries enter into World Trade Organization in the world, the multitudinous small and medium-sized enterprise will obtain the import and export operating right. This means they will have the bigger development space. But the small and medium-sized enterprises face some risks when they are doing their business. They reason could cause this problem is that small and medium

Overcoming Barriers And Resistance To Change At Starbucks

1482 words - 6 pages to develop effective strategies for coping with the resistance to change, which created unexpected costs in company resources and stakeholder goodwill. This paper highlights key cultural and environmental resistance barriers to implementation of the Transformation Agenda and formulates integrated strategies that would have aided in overcoming the barriers to change. Cultural and Environmental Resistance Barriers Underpinned by an updated

Understanding Of Social And Psychological Barriers To Educational Attainment

3871 words - 15 pages undertaken here aims to draw out the salient features of the past learning, that is, educational experiences of young adult males and the cause of present barriers for obtaining qualifications leading to employment, including a view to determine what might improve this attainment.To do this, the study consists partly a quantitative analysis of Wolverhampton's profile, such as, educational qualifications, socio-economic grades by wards and employment

Racism And Poverty: Barriers To Achieving The American Dream

1361 words - 5 pages staggering example of the income inequality in America. The American Dream is that if you work hard and have the ability you will succeed, but that has become an impossibility for millions of disadvantaged Americans because the income inequality has been steadily increasing since the 1970s and racism and poverty are constant barriers to their success and financial security. Bell hooks knows about the challenges of race and class, and why