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.