CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.1% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

What are barriers to entry?

Barriers to Entry

The obstacles that can get in the way of a new business entering a particular market sector. Some barriers to entry exist naturally, but others are put there deliberately by rival firms.

Where have you heard about barriers to entry?

Brand identity and loyalty schemes are examples of barriers to entry. Well-established companies already have a strong brand and wealth of loyal customers, which makes it hard for competitors to win a share of the market.

A new firm would have to spend loads on advertising to quickly create its own brand following.

What you need to know about barriers to entry.

Barriers to entry are of benefit to companies already operating in an industry because they protect revenues and profits from being driven down by new competitors.

But such obstacles make an industry less competitive, so you can end up with monopolies dominating the market.

Common barriers to entry include:

  • High start-up costs. Expenditure such as marketing and specialised technology can deter initial market entry.
  • Economies of scale. As firms produce more, their average costs drop. This makes it difficult for start-ups to be competitive.
  • Patents. These are legal barriers that prevent others from using the same technology without permission.

Latest video

Latest Articles

View all articles

Still looking for a broker you can trust?

Join the 610,000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading