Costs of entry are low. The Internet has meant that many industries that once required
substantial capital and investment for market entry are now more vulnerable to entry
by lower-resourced competitors. Amazon.com, for example, entered into book retail-
ing online with modest capital but without the need to invest in substantial bricks and
mortar in the way that existing book retailers had.
●
Existing or new distribution channels are open to use. Johnson and Scholes (1988) point
out that entering the market for beer in Germany, the United Kingdom and France is
hindered by the system of financing of bars and pubs by the large brewers. This ‘tied
system’ has guaranteed access to the market for the large brewers but restricted access
to new and small brewers, essentially acting as a barrier to market entry.
●
Little competitive retaliation is anticipated. The expectation of retaliation by existing
incumbents can be one of the most significant deterrents to market entry – for example,
Accor Hotels’ main focus on the markets where they are leaders such as in Europe, rather
than China where their main competitors are strong. Conversely, where incumbents
are considered weak, or lacking in resolve to defend their markets, the likelihood of
new entrance is greater. The financial state of the large airline carriers in the late 1980s
and 1990s meant that they were not in a strong position to see off the low-cost entrants
that undercut their fares significantly. They had little leeway to retaliate, and the new
entrants knew it. This battle is ongoing: recently British Airways has started to charge
for on-board meals.
●
Differentiation is low. When differentiation between the offerings of existing incumbents
is low, there is likely to be more scope for new entrants to offer something unique and
valued in the market.
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