What industries are highly competitive? Can you identify any barriers to entry in those industries?
Highly competitive industries generally have very low barriers to entry. This means that competition within these industries is relentlessly high. So, how do companies within these industries press their advantage? By utilizing certain barriers to entry. I will address two types of industries below.
1) Computer industry
Just about everyone has a computer today; whether it is a Kindle, tablet, computer or personal lap-top, technology is here to stay. Even toddlers are using tablets. Although the computer industry is highly competitive, there are some barriers to entry that companies can rely on in order to keep up with the competition.
a) bigger companies have bigger funding budgets for research and development; this leads to better and more innovative products for loyal customers.
Highly competitive companies invent powerful niches; for example, some of these companies corner the market on youth technology by developing creative applications combined with powerful security software.
Isabella Products' Fable tablet is exclusively for children ages 3-10. Fable allows both parents and teachers to have full control over content and the learning experience. Isabella's Fable can be used within the school system as well as within home-schooling environments; educators can design custom content and modify selected applications to support an enriched curriculum. You will find that as this part of the industry becomes more and more competitive, new companies will try to outdo each other with better, more innovative, and price conscious products. Again, the barrier to entry here is funding. The higher the funding budget, the more likely extensive research can be conducted to develop innovative products that aim to fulfill customer expectations.
b) Food industry
Economies of scale allow bigger companies to produce products at lower prices. Big companies like Coca Cola, Nestle, General Mills, Kellogg Co, Mars, and Unilever are responsible for most of the products on supermarket shelves. The incredible funding budgets for these companies also fuel the necessary research and development to stay competitive. General Mills recently removed all artificial colorings and flavors from their Yoplait yogurt products; the company then instituted an across the board 25% sugar reduction in their yogurt products. The result? General Mills is now the fastest growing yogurt producer in the United States.
General Mills also has the funding budget to manufacture and package all their products in inspected facilities. So, you can see that economies of scale and adequate funding budgets can be intimidating barriers to entry to the food industry. The restaurant industry is also much the same; larger restaurants can negotiate prices with suppliers. They can then produce more at lower prices. Smaller start-ups don't have that advantage, so this means that their average costs will be much higher. This makes it hard to stay in business in a very competitive industry.
Read about the barriers to entry for the restaurant industry here.
Airline companies, cell-phone companies, supermarkets are all highly competitive. There are some barriers to entry to those industries such as technology, infrastructure, employees and finances.
The cell phone industry uses technology as a barrier to entry. It is almost impossible for a new phone company to access the infrastructure of the cell phone industry (the lines). In addition, most companies can not easily develop the technology of the phones. Cell companies purposely update phone sophistication to stay ahead of the competition.
Airline companies also have barriers to entry. Again, the infrastructure such as the planes or the trained pilots and employees make it almost impossible to have new competition. Other barriers are the ability to get rights to land at airports and gate ownership. Lastly the overall cost of the planes keep competitors at bay.