Market barriers can prevent new businesses from succeeding.
Starting a new business can be very difficult because established competitors and government regulations can make businesses more expensive to start. However, new businesses with enough resources can remain in the market long enough to establish a brand reputation. Also, markets can change, creating new opportunities for market penetration. Still, businesses must understand market barriers to overcome them.
Government Barriers
Governments sometimes place restrictions on trade, preventing entry into the marketplace. Sometimes, governments make the importing of certain goods unprofitable by placing tariffs on the imports. Other times, governments do not let products into the country at all. Tariffs are used by governments to protect developing industries that cannot yet compete with other industries overseas. Products are banned for a variety of political reasons. Sometimes the products are seen as harmful to the consumers. Other political barriers are in retaliation to barriers set by other countries.
Financial Barriers
Some barriers are financial. Different businesses require different amounts of capital to get up and running. For example, businesses might need to purchase facilities, buy the materials needed to manufacture products and pay various fees associated with licensing and regulations. Only those within certain income brackets can usually start businesses, unless they manage to acquire a loan or sell off shares of the business. Also, in established markets, even if a business owner can accumulate the capital needed to start the business, he might not have the funds to effectively compete with established businesses. The more products a business can produce, the cheaper those products become to produce, allowing the business to compete more effectively.
Customer Barriers
Sometimes, switching from one product or service to another can cost a lot of money. For example, if the majority of homeowners already have a furnace from a particular company, few customers could afford to switch to a different furnace. Therefore, new furnace manufacturers are unlikely to initially draw in customers.
Distribution Barriers
To sell products, businesses need channels of distribution, such as retailers willing to sell products. Retailers that already have shelves stocked with products that are selling well will be less willing to sell new and unreliable products from young businesses, since the products might not appeal to consumers and since the company might not remain in business.
Copyright Barriers
Intellectual property laws and patents can serve as market barriers. Businesses often cannot create creative products that are similar to trademarked products for fear of copyright infringement lawsuits. Also, when products are patented, businesses interested in releasing similar products must wait until the patents expire before releasing similar products.
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