Professional Documents
Culture Documents
a. The threat of entry: New entrants are firms that have either recently begun
operations in an industry or that threaten to begin operations in an industry soon.
The Pharmaceutical Industry had not seen many new entrants. Barriers to entry
are significant given the emphasis on research and development. Costs are very
high in this area. With significant barriers to entry in place, potential entrants will
not enter into an industry even though incumbent firms are earning competitive
advantages. There are four important barriers to entry that students could use to
discuss the relative height of barriers to entry. These include: (1) economies of
scale; (2) product differentiation; (3) cost advantages independent of scale; and
(4) government regulation of entry.