THREAT OF NEW ENTRANS

The threat of new entrants is one of the factors that affect

the profitability and attractiveness of an industry. It refers to
the possibility and ease of new competitors entering the
market and competing with the existing firms. The threat of
new entrants depends on the barriers to entry, which are the
obstacles or costs that new entrants have to overcome to
enter the industry. Some examples of barriers to entry are:

Brand loyalty: Customers may prefer the products or services

of the established firms and be reluctant to switch to new
entrants.

Cost advantages: Existing firms may have lower costs of

production or operation due to economies of scale, learning
curve effects, or access to cheaper inputs or resources.

Government regulations: New entrants may face legal or

regulatory hurdles that limit their entry or operation in the
industry, such as licenses, permits, patents, tariffs, or quotas.

Capital requirement: New entrants may need a large amount

of capital to start or expand their business, such as for
acquiring land, equipment, technology, or inventory.