Created Entry Barriers
Many entry barriers are created by conscious government action. Patent
laws, for instance, prevent entry by conferring on the patent holder the
sole legal right to produce a particular product for a specific period of
time. A firm may also be granted a charter or a franchise that prohibits
competition by law. Canada Post, for example, has a government-
service, but the advantage of eBay’s established brand and
network represents a formidable obstacle.
Each user of Microsoft Word and Excel benefits in the
knowledge that these products have become the industry
standards; within 10 years of their introduction in the late
1980s, both products had come to significantly dominate their
respective markets. This widespread popularity greatly eases
the ability of users to send and share documents with each
other for reading and editing. Other software programs, even
those offering technical advantages over Word or Excel, face
extreme difficulty in getting significant market share because
of the incumbents’ established user networks.
The established global user networks for Twitter, Facebook,
eBay, Word, and Excel represent significant entry barriers to
any outside firms contemplating entering these industries. The
high entry barriers help to sustain the high profits of the
incumbent firms.