Entry Barriers for New Companies

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BARRIER TO ENTRY FOR NEW FIRMS

Celano and Cornetto have been the two biggest firms in Viet Nam ice cream cone market for a long time. Therefore, it’s very difficult or even impossible for new firms to enter the market. Such barrier can be listed as: -Advertising: Celano and Cornetto spend so heavily on advertising that new firms would find difficult to aford (that is known as the market power theory of advertising). The use of advertising of these two established firms creates a consumer perceived difference in their brands from other brands to a degree that consumers see their brand as a slightly different product. Therefore, products from existing or potential competitors cannot be perfectly substituted in plae of their brand. This makes it hard for new competitors to gain consumer acceptance. -Capital: new firms do not have as much money as these two firms to spend on equipment, building and raw materials. -Cost advantages independent of scale: these 2 firms have the propriertary technology, know-how that others do not. Celano is an example, It owns the most modern factory in Southeast Asian, which is designed according to European standard. With the aim of building the image of KIDO’S cream extensively throughout the country, after receiving entire factory and production technology of WALL’S, KIDO is one of the first buinesses in the food indutry to build the factory according to GMP ( Good Manufacturing Practices). -Customer loyalty: Celano and Cornetto may have existing customers loyal to their established products. Custumers do not want to eat any ice cream cone except Celano, for example -Distributor agreements: There may be exclusive agreements between Celano/Cornetto and key distributors or retailers. This fact make it hard for other manufacturers to enter the industry. -Economy of scale: As a matter of fact, Celano/Cornetto can generally produce goods at lower costs than small, inexperienced firms. Cost advantages can sometimes be quickly...
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