Barriers of entry and exit

For many businesses there are also barriers to exit which increase the intensity of competition in an industry because existing firms have little choice but to “stay and fight” when market conditions have deteriorated. There are several costs associated with exiting an industry

Barriers to entry are designed to block potential entrants from entering a market profitably. They seek to protect the monopoly power of existing (incumbent) firms in an industry and therefore maintain supernormal (monopoly) profits in the long run. Barriers to entry have the effect of making a market less contestable

eg. barriers of exit

contracts suppliers customers

unwanted stock

redundancy payments

debts

legal obligations

eg. barriers of entry:

legal transactions

licences

lack of funds/ investments

competition

copyright

lack of ideas

advertising too expensive