Skip to content
Solved Assignments

Barriers to Entry

This paper discusses the various barriers to entry that businesses face in competitive markets and the strategies to overcome them.

Preview 2 of 2 pages

See the first 2 pages exactly as they appear in the document.

  1. Page 1
    Read page 1 as text

    Barriers to Entry Analyze the major barriers for entry and exit into the airline industry. Explain how each barrier can foster either monopoly or oligopoly. What barriers, if any, do you feel give rise to monopoly that will allow the government to become involved to protect consumers? In this discussion post we are asked to analyze the major barriers for entry into the airline industry, then relate how these particular barriers could foster either a monopoly or oligopoly market structure. Finally, we must present the barriers that we feel may rise to a monopoly that will allow the government to become involved to protect the consumers. Before we can analyze the airline barriers, we must understand a barrier’s definition. Amacher & Pate tell us, “Barriers to entry are natura l or artificial obstacles that keep new firms from entering an industry.” (Amacher, & Pate, 2013) Oligopolies and monopolies often preserve their position of control in a market by influencing potential rival’s access through costs or additional entry challenges. The incumbents in these market structures may deliberately establish these barriers or they can take advantage of natural barriers to enter the market. In the case of the airline industry, which is known as an oligopoly market structure, the entry - level barriers are many. To begin with, the high cost of developing a fleet of aircraft, repair parts, mechanics, pilots, terminal leases, fuel costs and aircraft repair facilities is astronomical. In an article in the New York Times, titled The Challenge of Starting and Airline , dated 25 May 2012, Jad Mouwad states that a new carrier will require nearly one - hundred million dollars to start - up an airline. (Mouwad, 2012) With these high costs, potential investors must also consider a risky retur n on investment as a barrier to the industry. Airlines have high fixed costs in relation to their expected revenues. Add the fare wars experienced in the past by the incumbent airlines and new entry airlines will soon see decreases in their company revenues, which will then affect their profits. Finally, many airports limit the number of take off and landings allocated for each day. The addition of a new airline will create a sharp demand for these slots at high traffic locations and incumbent airlines will try to monopolize these limited allocations. This is the one barrier that I would see applicable for the government to intervene. It is not in the interest of the government to assist an airline in profits or to alleviate a risky financial endeavor, but it is in their realm of responsibility to ensure fair and equitable allocation of aircraft landings and takes off through the FAA. By allowing

  2. Page 2

More Business Management study materials

See all

Study this document with CramX

Once it is in your library, every tool can work from it.