Example of barriers to entry

• Capital costs: In industries such as water suppliers or electricity suppliers, the upfront capital costs for equipment needed to supply the good are very high. This means that it is not easy for new firms to enter the market.
• Internal economies of scale: In large scale industries, existing firms already enjoy considerable economies of scale which allows them to price their products competitively. New entrants will be unable to compete on price and are discouraged from entering the market as they will not survive.
• Sunk costs: These are unrecoverable costs if a firm leaves the market. Firms such as mobile telephone networks will have spent lots of money on assets that are worthless to other industries such as telephone lines . These high 'sunk costs' discourage a new firm from entering the market.
• Marketing barriers: Successful product differentiation requires considerable marketing expenditure in order to create a brand that customers perceive to be unique.