According to Porter, what are the different barriers that new entrants to an industry face?

Question

What will be an ideal response?

Answer 1

Porter describes eight major sources of barriers to entry, the presence or absence of which determines the extent of the threat of new industry entrants. The first barrier, economies of scale, refers to the decline in per unit product costs as the absolute volume of production per period increases. When existing firms in an industry achieve significant economies of scale, it becomes difficult for potential new entrants to be competitive. Product differentiation, the second major entry barrier, is the extent of a product's perceived uniqueness. High levels of product differentiation and brand loyalty, whether the result of physical product attributes or effective marketing communication, "raise the bar" for would-be industry entrants. A third entry barrier relates to capital requirements. The enormous capital requirements in such industries as pharmaceuticals, mainframe computers, chemicals, and mineral extraction present formidable entry barriers. A fourth barrier to entry is one-time switching costs caused by the need to change suppliers and products. A fifth barrier to entry is access to distribution channels. To the extent that channels are full, expensive to enter, or unavailable, the cost of entry is substantially increased because a new entrant must create and establish new channels. Government policy is frequently a major entry barrier. Established firms may also enjoy cost advantages independent of the scale economies that present barriers to entry. Finally, expected competitor response can be a major entry barrier. If new entrants expect existing competitors to respond strongly to entry, their expectations about the rewards of entry will certainly be affected.