Barriers to Market Entry

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What are Barriers to Market Entry?

A barrier to market entry is an obstacle (usually high costs) which prevents a product from gaining traction in a new market. Such obstacles can be natural (i.e., due to the nature of the product and the characteristics of its target market) or artificial (i.e., imposed by existing dominant players or governments to prevent newcomers and competition).

The difficulty in entering a market rests somewhere in between a monopoly (where entry is almost impossible) and a zero-cost market (where everyone can enter without facing any obstacles). While monopolies are not unheard of, in reality there is no such thing as a zero-cost market. Entering a market usually demands making an investment (even if only in time). Sometimes, this investment is significant due to the nature of the product or the market it tries to enter (e.g., high R&D costs, owning or controlling a resource, the size of the network of existing users)—these are considered to be natural barriers to entering a market. Those who do make such investments, however, then have a natural interest in preventing others from obtaining a foothold in a market—in order to limit competition and therefore maximize profit. As such, they may erect artificial barriers, through aggressive pricing strategies, advertising and image-making, predatory acquisitions, litigation, loyalty schemes, high customer-switching costs, or lobbying for government support. Regarding government support, special tax benefits for existing organizations can act as another barrier for newcomer entities.

Barriers to entry (both natural and artificial) can lead to monopolistic or oligopolistic situations in a given market. In a free society such as a liberal democracy, these then require state intervention in order to keep competition alive in that area. While such extreme circumstances are rare, designers should nevertheless be mindful of the extent of the range of barriers to entry.

Literature on Barriers to Market Entry

Here’s the entire UX literature on Barriers to Market Entry by the Interaction Design Foundation, collated in one place:

Learn more about Barriers to Market Entry

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