Question

The threat of new entrants in Porter's Five Forces analysis is often the most important force affecting an industry. In the food truck industry, for example, it is easy for new firms to enter and compete. The food truck industry would benefit if there were ________, such as required and restricted licenses.

Answer 1

Answer:

Barrier to entry

Explanation:

Barrier to entry is defined as an economic barrier or obstacle set in place to deter new competitors from entering a market easily. It can also be said to be a fixed cost or set of conditions put in place for any new entrant into a market.

These barrier to entry include restriction of licenses, high cost of starting up the business among other things.

The sole reason for creating a barrier to entry is for existing firms in the market to make profits and protect their revenues as well.

Barrier to entry can either be zero barrier, medium barrier, high barrier or very high barrier. All of these depends on the type of market that the entrant is trying to break into.

I hope this helps.