will accumulate, so the newcomer must stay alert and make sure that the return on investment is greater than the investment itself.Because there is no competitive edge that a company has when starting up a company, it must create one itself. With price reductions not being a factor, quality is more likely the component that the business should focus. Improved customer value would be a huge barrier a new entrant would have to be cautious of when entering a market. For instance, Macy’s is very customer-centric operation, so the company created a new feature in which the stores customize to the region the store is located, calling it “My Macy’s.” This certainly customized shopping regionally, which created an increase in sales and more loyal customers.Economies of scale are indeed an effective entry barrier as well. Larger companies have lower costs than smaller ones. An incoming industry would be in far worse financial trouble in comparison to bigger companies. Since larger companies such as Macy’s and Nordstrom are only focusing on expansion, investing in expensive infrastructure in order to decrease costs would be possible as the established companies have the means to afford it. Greater production can be achieved by information technology. IT creates efficiency, new products and services, and customer-supplier intimacy. With these devices, output would be much larger as average costs are reduced. Being extremely costly, these tools would not be affordable to emerging entrants until the newcomer is established in the industry after a while and creating profitable revenue.If a new entrant actually does enter the market and achieves success at the competitive level, the other companies should take immediate action. Depending on the technique the company is following or the competitive advantage it possesses, the competing stores should retaliate by either improving the new entrant’s competitive advantage, become more innovative, or work to improve customer value, which is key in attaining loyal customers. The ability to react and respond quickly is essential in a company, because every dollar lost holds great value to the affected competitors. In this industry, I feel that entry barriers scale fairly high in preventing entry. While it may prevent entry from small and medium players, if there is a player with a competitive advantage, financial support, and a high enticement factor, there is a potential for threat. An entrant must be aware of the recognizable competitors. Major players have already established a loyal customer base. With consumers’ interest preoccupied with certain companies, incentives for shopping at the new store are essential. It is extremely difficult to get loyal customers willing or at least interested in shopping for the new industry. Government restrictions can also become a barrier to face when entering the market. This particular business must be mindful of the law and restrictions that it has. In conclusion, with the rapidly developing industry, to enter this market would be an immense challenge to undertake.
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