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Hi sir, for the porter’s 5 forces framework, regarding the threat of new entrants.
How is economies of scale ( low cost due to volume) considered a barrier to entry ? Could you explain ?
If existing businesses are very large they will enjoy economies of scale which small, new entrants will find hard to match.
okay sir. But why is a low threat of new entrants considered a attractive industry ?
It isn’t. If you join that industry you will then be continually plagued by newcomers trying their chances. A low threat from new entrants (ie barriers to entrance) makes that industry attractive to existing industry members.
This is all explained in the lectures. If you haven’t listened to those, you should.
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