Barriers to entry for young entrepreneurs

By Nikita

Thanks to this technological era, becoming an entrepreneur is not a big task these days. The Internet and social media gives the much needed initial level of survival period to them. But is it really a bed of roses? Well, becoming an entrepreneur might sound fun and easy, becoming a successful one in the face of intense competition is a mountainous task. In fields where there are little barriers to entry, one might seek an opportunity but of course the problem is that everyone starts seeking an opportunity then. So it becomes the “survival of the fittest”

Relying on Porter’s five forces model, there have been studies regarding the   relationship of industry structure to industry entrance by and success of new growth-oriented firms. It found that the rates of new venture formation and entrance are negatively related to various forms of entry barriers .In addition, the success of new ventures is also related to the traits of the industry structure and the policies of the market. Looking at the barriers from a micro economic view, barriers to entry exist in a monopoly form of market. In perfect competition form of market, hypothetically there are no barriers to entry. Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless this entry can be blocked in a certain way, the abnormal profits will fade away. Trying Hence there is no incentive for young entrepreneurs to enter such markets. Trying to enter an industry with high degree of barriers might put the entrepreneur at a disadvantage since the very beginning. Also if they decide to enter a market which has a low degree of barrier, they will have to face intense competition there. So the first protective measure that these start ups must take up is that they should protect their position by building barriers for others. Tackling intense competition is the biggest obstacle for the start ups. The biggest tool that the startups have is to beat competition with innovation. Beside the restrictions imposed by the government, other micro economic concepts also form a barrier. The start ups in order to earn profits must practice economies of scale which is difficult to guarantee for a start up. The startups should be ready to incur the switching cost which is the money that has to be spent to move away the target customers from the existing supplier to the new start up.Non accessibility to distribution channels hinders  low cost publicity of the start up. There are numerous hurdles in an entrepreneur’s way ranging from legal and government regulations to self confidence. Keeping up with innovation and managing cash flows are also tough tasks. Here one realizes the importance of the basic management functions “PODSCORB” which includesplanning, organizing, directing, staffing, coordination, reporting and budgeting. More than anything else, earning peoples’ trust is very important. “82 percent of those surveyed don’t believe business leaders tell the public the truth. In other words, your prospects are already looking at you with skepticism and doubt. Yet, buying decisions are biased to businesses you know, like and trust. The new job of marketing is to position yourself as a trusted authority” says the founder of   Predictable Profits. Thus with cut throat competition and limited opportunities, a budding entrepreneur should take precautionary and safe steps with calculated risk as without the “risk” element, an entrepreneur is just like any other businessman.

LEAVE A REPLY

Please enter your comment!
Please enter your name here