Why new entrants can be a threat?

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Why new entrants can be a threat?

The threat of new entrants: the existence of barriers to entry, economies of product differences, brand equity, capital requirements, access to distribution, absolute cost advantages, learning curve advantages, government policies.

Q. How do you overcome threats of new entrants?

Highly differentiated products or well-known brand names are both barriers to entry that can lower the threat of new entrants. Significant upfront capital investments required to start a business can lower the threat of new entrants. Whereas, high consumer switching costs are a barrier to entry.

Q. How would you determine the level of competitive intensity in an industry?

What Determines the Level of Competitive Intensity?

  1. Costs. Porter pointed out that there are specific costs that affect how intense the competition in an industry gets.
  2. Concentration in the Industry.
  3. Rate of Market Growth.
  4. Differentiation.
  5. Switching Costs.
  6. Innovation.
  7. Decrease in Prices.
  8. Economic Growth.

Q. How new entrants affect the industry?

A high threat of new entrants makes an industry less attractive – there are low barriers to entry. Therefore, new competitors are able to easily enter into the industry, compete with existing firms, and take market share. There is a reduced profit potential as more competitors are in the industry.

Q. What is the level of competition?

There are four types of competition in a free market system: perfect competition, monopolistic competition, oligopoly, and monopoly. Under monopolistic competition, many sellers offer differentiated products—products that differ slightly but serve similar purposes.

Q. What are the threat of new entrants?

Q. What are threats of new entrants?

Q. What are threat of substitutes?

The threat of substitution is high when rivals, or companies outside the industry, offer more attractive and/or lower cost products. Buyers then have the opportunity to make a performance/price trade-off. The cost of switching is also a factor. If it is high, the threat of substitution is low.

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