What are the obstacles of entry?
Input barriers are obstacles that limit individuals or entities in entering a particular market. These obstacles can be experienced by individuals, businesses or regions that try to penetrate the established industry, trade or field. The entry barrier also limits competition and can endanger new business. In business, obstacles to the entry price of an introduced entity, also known as the acting. Although obstacles allow the most qualified and most conventional members to be successful, which is a function of capitalism, these roadblocks can also serve as an obstacle and create a business environment where consumers are forced to pay high prices for products or services due to lack of possibilities. Savings from the extent often allow existing businesses to buy large amounts of the product at a low rate simply because they have a long history or buy in bulk. Existing businesses are better able to reduce prices and still make profits because of this economy of scope.The new market participant may not be able to buy as much as the company begins to create a cash flow, and therefore pays more for the same product that a newcomer builds on a cost disadvantage compared to its bigger opponent.
Another obstacle to the entry includes patents and is predominant in the pharmaceutical industry. Once the company develops a drug and acquires exclusive rights to this medicine, a competitive pharmaceutical company cannot develop a cheaper, general form of this drug before the patent expires. Patents have often been introduced for many years, which for some drug manufacturers create obstacles to entry. However, as soon as the patent is lifted, generic drug manufacturers can enter and replicate drugs, providing consumers.
Other areas where barrier entry is where the monopoly company works. Business monopolies become the only product or service provider and face no competition in the area. Ifthe entity becomes so big that new participants are forbidden to enter and compete, consumers have few price possibilities. The monopoly gains the ability to control not only the price but also the amount on the market, which disadvantages to consumers.
In developed economies, regional governments have introduced anti -monopolous laws to reduce monopoly practices created by obstacles. These rules support market competition and regulatory bodies are often awarded the final word before the company is authorized to be dangerously large. For example, in the United States and Europe, regulatory bodies may prevent the merger between two large companies if the combination threatens to create a monopoly in the industry.