Question

DWK Foods has developed a line of cookies and candies sweetened exclusively with organic honey. Although DWK is selling some of the products over the Internet, in order to gain economies of scale, the products must be sold in retail outlets. The main barrier to entry DWK is likely to encounter here is
A. government licensing and permits.
B. access to distribution channels.
C. consumers’ switching costs.
D. cost disadvantages independent of scale.

Answer 1

Answer:

D. cost disadvantages independent of scale.

Explanation:

If DWK wants to start selling some of its products in retail outlets, the main barrier to entry that DWK is likely to encounter will be cost disadvantages independent of scale.

Although there are costs in online business, it cannot be compared to retail storefront costs.

Unlike online retail, there are many expenses attached to a storefront including:

1. Rent to pay for the storefront

2. Utility bills directly related to the store,

3. Decoration of the inside of the shop

4.Outside signage or display units.

5. Hire a Storekeeper in your absence to manage the shop

All these costs will be a barrier to entry