Describe the Role of Business in the Economy Including the Factors of Production and the Key Dimensions of the Business Environment

Topics: Economics, Barriers to entry, Retailing Pages: 3 (907 words) Published: August 23, 2010
What three barriers might a new entrant have to overcome when entering the retail apparel industry? Explain why they could be barriers. Three barriers that a new entrant might have to over come when entering the retail apparel industry are resource ownership, government restrictions, and start-up cost. Identifying new entrants is important because they can threaten the market share of existing competitors. One reason new entrants pose such a threat is that they bring additional production capacity. Unless the demand for a good service is increasing, additional capacity holds consumers’ cost down, resulting in less revenue and lower returns for competing firms. (Hitt, Ireland, Hoskisson, 2007) One of the most fundamental barriers to entry is resource ownership, the ownership and control over a critical input used in the production of a good. Limiting ownership of this input effectively limits entry into the corresponding. To enter this industry, the owner must acquire ownership over apparel resources. It could purchase existing resources from any business currently in the industry. While this is an easy option, if the companies are unwilling to sell, then the business faces a sizeable entry barrier. Next you have government restrictions. The government is the entity that establishes the rules of the game. It literally has the power to determine who can or cannot participate in a given market. The government frequently erects barriers to entry by legally limiting the number of participants in a market. Other legal restrictions, such as licenses or charters, are generally intended to pursue other goals, but create barriers to entry nonetheless. Only governments ultimately have the power to prevent free competition. The last barrier for the retail industry would be start-up cost. Three types of start-up cost comprise another important class of barriers. One is the cost of acquiring productive capital. Many industries use a large amount of expensive capital, such as...
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