Structural Barrier of Entry: Amway

The barriers a Business must deal with, such as competitors, substitutes, customers, supplier, etc are often referred to as:

The threat of entry of the supermarket industry in US is low, which base on the analysis of the three major sources that related to the entry barriers. The first barrier is the economies of scale of the existing large supermarkets. When these incumbents achieved larger volume sales, they can have lower unit costs than new entrants, and it will very difficult for those new entrants to compete with them (Johnson, Whittington, &Scholes 2011). For example, Wal-Mart had invested in innovative procurement, automated distribution centre and bar coding to increase its economies of scale, and these investments created a great barriers for new small retailers to enter into the supermarket industry (Porter 2008). The second barrier is the incumbency advantages, which mean the incumbents established their own strengths that cannot be used by competitors (Porter 2008). For example, the top ten supermarkets in US have accumulated extensive experiences on how to run their businesses more efficiently than new entrants (Johnson, Whittington, &Scholes 2011). The subtle differentiation between the products that sold in supermarkets is the third barrier for new entrants. Because most of the product assortment is same or similar between each supermarket,

Both potential and existing competitors influence average industry profitability. The threat of new entrants is usually based on the market entry barriers. They can take diverse forms and are used to prevent an influx of firms into an industry whenever profits, adjusted for the cost of capital, rise above zero. In contrast, entry barriers exist whenever it is difficult or not economically feasible for an outsider to replicate the incumbents’ position (Porter, 1980b; Sanderson, 1998) The most common forms of entry barriers, except intrinsic physical or legal obstacles, are as follows:

Businesses are not only faced with competition within the industry they operate in. They also face competition from businesses in other industries.

Factors that can limit the threat of new entrants are known as barriers to entry. In this case barriers to entry are low because: there is no government intervention to prevent businesses from entering the industry, resources are abundant, and customers’ switching costs are low as well as fixed costs to start this type of business.

Threat to new entrants: There is no barrier to entry in this industry but it might be difficult for newcomers to compete against existing well establishing companies.

Competition being one of the major issues that often must be addressed in the business world, it is important for a firm to learn on ways to reduce the impact of the competition. Competition is definitely an important factor in helping a business

Barriers to Entry: The entry barriers in the market are relatively low, making it easy to access. However, as the market is saturated it could be unlikely for new companies to decide to start new enterprises in this field.

Entrants erode the market and rarely grow it enough to the incumbent’s advantage. New entrants have an impact on the industry business but at a moderate level. This is mainly because new firms will find it difficult to compete against the incumbents’ strong brand, like Starbucks and McDonalds, and because the market is saturated. However, the costs of entry are relatively low. Most of the raw materials are cheap and the distribution chain is not complicated. This makes it easy for new companies to enter the market. Also, established companies might leverage their brands as they enter the industry to compete against the incumbents.

Barriers to Entry. In general, a monopoly by one company possesses the power to create barriers to entry for competing companies in a

Another quality of perfect competition that may be overlooked, but is vital to this industry is the ease of entry into the market. Start-up franchises within this market structure can begin operating with relatively low initial investments (compared to other industries). This is not the case where monopolies are concerned. There are numerous barriers to entry into monopolistic market structures, capital being one of the most prominent barriers.

However, if there are not barriers to entry, companies will not be able to raise prices and realize profits.

Barriers to entry- there can either be high barriers to entry which makes the market unattractive and hard for new entrants or there can be low barriers to enter which make it easy for new entrants in the market.

Amway in China (A): A New Business ModelAssignment Questions1.What are Amway's core competencies?Amway has been a successfully growing business since 1959 due to its unique adaptation of direct marketing. The company has now expanded into over 80 countries and has been to some, an example of the American dream. This was what caused the tremendous growth and is what gave Amway its most valuable asset; its distributors. Amway's distributors are all Independent Business Owners (IBOs) because they have no legal ties to Amway other than they buy the products directly and sign a brief code of conduct agreement. This however does not mean that IBOs are not extremely loyal to Amway.

So when barriers for entry and exits are high, it means that companies have a higher potential to make more profit and the opposite occurs when barriers are low.