barrier to entry
- noun a factor that makes it impossible or unprofitable for a company to try to start selling its products in a particular market
- noun something which makes it difficult for a firm to enter a market and compete with firms already in that market. Barriers to entry are mainly government legislation, the cost of starting up a new business, the current ownership of resources and patents, and the strength of companies already in the market. Barriers to entry may be created, as when companies already in a market have patents that prevent their goods from being copied, when the cost of the advertising needed to gain a market share is too high, or when an existing product commands very strong brand loyalty.
- (written as Barrier to Entry)An impediment to the flow of resources (such as the entry of a new firm) into an industry or segment of a market. It usually refers to human-made impediments (laws, regulations, professional practices, etc.) though many also occur naturally, for example, from economies of scale, which might make it very costly for a potential new entrant to achieve a large enough scale that would enable competition on similar terms with extant organizations. Barriers include such arrangements as patents and licences. Many barriers arise through the operation of regulatory agencies. The existence of barriers ought not to lead automatically to the inference that they are invariably undesirable and ought to be removed. Such an inference is best reached (or rejected) after a careful analysis of the costs and benefits of reducing or removing them. Similar considerations apply to the setting up of new barriers or increasing the height of existing ones. Enormous resources are sometimes devoted to their surmounting by those disadvantaged by barriers, particularly the barriers deliberately created by society to illegal activities like the production and distribution of narcotics.