Threat of New Entrants 2 / 10

A new entrant into a market means there will be increased competition, as a new competitor has entered.

The strength of the threat of a new entrant depends on two things:

  1. Strength of the barriers of entry

    These include economies of scale, switching costs, product differentiation, capital  requirements and vertical integration.

  2. The response of existing competitors in the marketplace

Having a LOW threat of new entrants can be because of:

  1. Patents existing on major product lines

  2. Large number of suppliers of materials

Having a HIGH threat of new entrants are:

  1. Low initial set up costs

  2. Training courses for unskilled persons to enter a market are only a few days

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