Question

Write a complete essay about the Barriers of Entry and Exit that determines the attractiveness of industry. Explain, which industries are more attractive regarding Barriers of Entry and Exit and why

Answer 1

Answer) When someone looks to enter into an industry they look at attractiveness of the industry,costs and profits associated with it,entry and exit barriers are one of the major criteria as high entry barriers can be detrimental for someone looking to enter into an industry while high entry barriers are great for incumbents as it reduces competition while high exit barriers are barriers which forces company to stay in industry despite making less or no profits,these high exit barriers again make an industry unattractive for someone looking to enter.Having discussed what these barriers are let us look at some of the types of these barriers.When we talk about entry barriers,we look at high capital requirement and commitment ,we see learning curve or economies of scale which makes it difficult for new entrants to compete against old players owing to old players'experience and learning in the industry,another entry barrier is legal barrier where certain conditions are to be fulfilled before being eligible for entry in industry,when we look at exit barriers we see substantial fixed cost or investment which will be wasted on exit,legal barriers which does not allow company to exit,other businesses of same corporation reliable on this venture making it impossible to exit this venture without hurting other businesses,then cost of exiting such as severance costs,costs on forfeiting long term agreements are huge at times and forces companies to continue.Having looked at type of barriers both in entry and exit,when we see which industry is attractive according to these barriers,we find two things ;first no industry is completely free of barriers else everyone will enter in it and then profit making will be difficult,second is each company may find one industry comparitively less barrier free than other industry,consider this a company with high capital can enter into telecom business and can compete with low cost packages,so for it capital is not a barrier,now keeping these 2 things in mind different industries will be attractive based on strengths of companies as it will face lower and lower barriers,when we talk in general though,mostly industries with low capital requirements,low fixed costs in entry and low exit costs are attractive as other barriers can allow for quick exit but once too much capital is on stake or fixed costs are too high,it becomes difficult for leadership to exit and start again in other industry.

Answer is complete.Thank you!