barriers to entry

Obstacles deterring a company from entering a new market. These obstacles include: technological advantages held by existing companies in the market and secured with patents; high marketing expenditure by existing companies making it difficult for new entrants to build public awareness; and difficulties securing contracts with other companies in the supply chain because many may have exclusive contracts with other companies operating in the same market. A market dominated by a few large corporations, such as the oil refining market, can be particularly difficult for small companies to enter. This is because the larger companies benefit from the economy of scale and may operate such a competitive pricing policy that it is impossible for a new entrant to make a profit.