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Economics

Study Notes

Ways of Overcoming Entry Barriers in Markets

Level:
A Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

In contestable markets the entry and exit barriers are low creating a situation where both actual and potential competitive pressures are high. How can a business overcome some of the traditional entry barriers?

Here are some suggestions:

  1. Start with a minimum viable product and then iterate - responding to consumer feedback
  2. Use a disruptive pricing model / have different objectives
  3. Produce outstanding content/products – this makes a product less price sensitive
  4. Leveraging an existing brand to enter a new market - an economy of scope!
  5. Viral marketing to cut the marketing costs of attracting new sales
  6. Acquisition of a business that is already well-established in a market
  7. Leasing rather than buying equipment / retail space to reduce fixed costs
  8. Out-innovate existing firms (using high research intensity)
  9. Use of open-source rather than proprietary software to cut costs
  10. Lean and flexible manufacturing / supply on demand
  11. Free-ride on scaled channels e.g. using Amazon market place / You Tube as a sales platform
  12. Play the long game – accept that losses will be made initially - but can shareholders tolerate these losses?
Most affected industries by disruptions from digital technologies in the United Kingdom (UK) in 2015

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