New Entrants Model
2.1 Threat of New Entrants
Threat of new entrants refers to the ability other competitors to enter the market. Whether there are strong and durable barriers to entry, the existing players can preserve a favourable position and take advantage of it.
One can recognize that the threat of new entrants is considerably higher due to diverse factors. The profitability does not require economies of scale; the initial capital investment is low; the access to distribution channels is easy, since these products do not need to be transported or delivered physically.
The location of the product and the company itself is not an issue, nor the proprietary technology; the governmental policy and the expected retaliation of existing firms are irrelevant factors.
2.2
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In Porter’s model, the threat of new entrants represents the possibility that new firms may enter the sector and affect the competition. That is the main risk the company might face. In other words, the sector is highly attractive due to its growth, low level of investment and flexible exit barriers.
It is expected that more companies enter the market soon and explore new markets and niches, e.g. children under 12 year-old in Asia. In this context, time and the selection of the right market niche are the key factors for the success of the endeavour.
Furthermore, the rivalry among existing competitors in this sector is characterized by an almost insignificant brand loyalty. For this reason, competitors tend to diversify their offer of products and reach every time more specialized niches. However, the sector of GBL is very decentralized and atomized, to say the concentration of buyers and the purchase volume are not a condition to determine or limit the profitability of the
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