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38. Industry Barriers
Market Entry Barriers - any factors and circumstances of a legal, organizational, technological, economic, financial nature that prevent new economic entities from entering this commodity market and competing on an equal footing with economic entities already operating on it.
Market entry barriers are divided into structural (sectoral) and behavioral.
Structural (sectoral) due to the characteristics of the industry and the market.
Types of structural barriers and ways to identify them.
1. Economic and organizational constraints. When they are identified, the significance of the following economic factors for entering the market is analyzed:
1) state policy in the field of investments, loans, taxes, prices, tariff and non-tariff regulation of foreign economic activity and the consequences of this policy for specific commodity markets;
2) industry average rate of return;
3) payback period for capital investments;
4) non-payments;
5) the presence (lack) of effective support for entrepreneurship.
2. Scale barriers. A high minimum effective scale of activity in this market leads to an increase in the costs of potential competitors entering the market, reaching this level, in comparison with existing economic entities, i.e., reduces their competitiveness.
3. Underdeveloped market infrastructure. The expediency of additional transportation costs for entering the market is correlated with the cost of a particular product, and the distance of transportation is related to the quality and technical characteristics of the product that allow this transportation to be carried out.
4. Barriers based on absolute cost superiority. They arise when there is a difference in costs per unit of production in favor of existing sellers relative to newly entering ones.
5. Environmental restrictions. The facts of the prohibition by environmental security services, etc., of expanding the scope of activities in this product market, the construction of new production and storage facilities, etc., are revealed.
6. Demand limits. The source of information is the data of a survey of the main buyers of the goods used.
7. Capital cost barriers or the amount of initial investment required to enter the commodity market. Expert evaluation of the capital costs associated with the development of the release of the studied product by potential competitors. Sources of relevant information can be survey data from existing sellers and potential competitors, industry experts, etc.
Author: Ilyina V.N.
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