Principles of Management CLEP Practice Exam

Entry barriers in business refer to the obstacles that make it difficult for new competitors to enter a market. These barriers can take various forms, such as high startup costs, strong brand loyalty among existing customers, economies of scale enjoyed by established firms, and regulatory requirements that impose significant compliance costs on newcomers.

When entry barriers are high, it protects established businesses from new competition, allowing them to maintain market share and profitability without facing the pressure from new entrants. In contrast, when entry barriers are low, it is easier for new competitors to join the market, which can lead to increased competition, potentially driving prices down and forcing existing firms to innovate or improve efficiency to retain their market position.

Understanding entry barriers is crucial for strategic planning and competitive analysis within industries, as they can significantly affect a firm's ability to succeed and sustain itself in the market.