Assessing Business Value: Barriers to Entry

There are many different barriers to entering a business, industry or market that can present challenges for new or existing companies to effectively compete.  Here are a few of the most common.

Patents and intellectual property:   It is important to point out that it is not uncommon for much larger companies to infringe on patents held by smaller companies knowing that the legal cost to defend the patent may be prohibitive.

Upfront capital costs:   Consider how expensive it would be to construct the manufacturing facility required to build a single commercial airplane.  Conversely, consider how inexpensive it could be for an independent interior designer to get started working out of a home office.

Innovative products or technology:   Sometimes it is as much more important to make every effort to stay ahead of the competition through innovation as it is patenting what has been developed.  The complexity of the innovation process alone can create barriers.

While operating as a monopoly is very uncommon, companies that can effectively build significant barriers around their businesses will be financially rewarded.

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