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Advantages And Disadvantages Of Barriers To Entry

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Entry barriers (or barriers to entry) are obstacles that stop or prevent the entrance of new entrants in a particular market. It is mainly linked with the situation in which a firm wants to enter a market due to high profits or increasing demand but cannot do so because of these barriers. These hindrances may include government regulation and patents, technology challenges, start-up costs, or education and licensing requirements.. Economic theory states that without any barriers to entry, businesses cannot earn sustainable profit beyond their cost of capital, because new entrants will be attracted in will compete those profits down to cost of capital. The stronger the barriers are, the higher the economic profit potential.
Conditions of Entry: The entry of a new firm in an industry or a market mainly depends on the ease with which it can enter a given industry or market. In case there is free entry the number of sellers will be large and if there is restricted entry the number of sellers will be small. In the long run the level of competition depends on the condition of entry. A new entrant could bring with it the following advantages.
• Offer new goods and services,
• Alter the balance between different sectors,
• Approach with new technological and managerial techniques,
• Augment opportunities.
1.10.1Factors determining conditions of entry
The following are some of the key factors that decide the structure of any market. This list is not intended to be comprehensive, but

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