The costs of entry on this industry alone are

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The costs of entry on this industry alone are extremely expensive. Incentives for consumers to shop at the new store must be apparent. The company would be competing with huge reputable companies, and to start from nowhere is very difficult for growth. With these tasks only being a component of one of the five barriers, the ability for a new company to enter is very difficult. If a new firm wanted to enter the non-discount department store industry, there would be many barriers to overcome. It would certainly have to be aware of its competitors. The competitors that have already developed their names evidently have a significant consumer rate if the companies are still in business. Because there are numerous department stores already in business, the new firm may have trouble being recognized, especially with well-established competitors in the market. The new industry would then need to plan how to appeal to customers to influence customer sentiment. If the company can appeal to greater demographics, the company can increase its market share. By creating incentives such as frequent shopper programs, the newcomer would be able to attain loyal customers and ultimately, overcome the interest obstacle. In terms of access to suppliers, the new firms would not struggle with attaining contracts with these distribution channels. Any firm in the non-discount department store industry is most likely going to receive deals from the same suppliers. Since doing so will give suppliers more profit, this is why they do it. Fortunately for this particular industry, the suppliers of these companies manufacture and distribute finished products, not raw materials, making access to these limited materials not a direct issue for the industry. The potential problem in this area is when a supplier will limit its inventory distribution to certain companies. If this is ever the case, the supplier usually has an intention: status. The exclusivity to brands would be the only distribution problem a new firm could face in this industry. When brands make exclusive offerings with a store, it is most likely because of the store’s reputation. If a new entrant wants to become high end, it would have to find fashion-forward suppliers, which may already have contracts made. Since this industry is non-discount, competitive pricing is never a concerning issue. There is already a minimal price range for the industry. If competitive costs were ever the case, a company would be categorized as a discount store. Because there is a price range to even be considered in this market, pricing mostly reflects on however much the supplier chooses to allow, which is always a fair number. Another immense factor with entering such an industry is the entrance costs. Capital that the company would have to face would be extremely high. The new entrant would have major
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start up costs to take into consideration. Location, in which price will fluctuate depending on region, building space or leasing, and fixed costs such as lighting are only several factors that the firm would have to take into account before deciding to enter the business. All these variables
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  • Fall '11
  • FalguniSen
  • Barriers to entry, new entrant

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Christopher Reinemann
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