What does the term "barriers to entering an industry" mean?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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This term is used to talk about how hard or easy it is for a firm to enter a particular market.  This is one way of differentiating between the different market structures.  

Barriers to entering an industry are factors that make it difficult for new firms to enter a market.  There can be many types of barriers.  

  • For example, there can be legal barriers such as laws in a given city that only allow one cable TV company to serve that market.  
  • There can be barriers having to do with economies of scale.  In this case, larger companies can produce a good or service more cheaply, making it harder for small new firms to enter the market.  
  • There can be barriers having to do with the tastes of consumers.  Consumers might only trust certain brands that have long-standing reputations.  This can make it difficult for new firms to enter the market.

For a full listing of types of barriers to entry, please follow the link below.

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