BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Potential new entrants are firms that do not currently compete in an industry but might join the industry in the future. (Figure 3.17 “New Entrants”). New entrants tend to reduce the profit potential of an industry by increasing its competitiveness.

Detailed explanation-2: -A high threat of new entrants makes an industry less attractive – there are low barriers to entry. Therefore, new competitors are able to easily enter into the industry, compete with existing firms, and take market share. There is a reduced profit potential as more competitors are in the industry.

Detailed explanation-3: -Potential of New Entrants Into an Industry A company’s power is also affected by the force of new entrants into its market. The less time and money it costs for a competitor to enter a company’s market and be an effective competitor, the more an established company’s position could be significantly weakened.

Detailed explanation-4: -New entrants in an industry can change the competitive environment and can significantly impact the profit of current companies. As more companies enter the marketplace, the price for products becomes lower in order to compete for consumers. Companies also face high costs to raise their entry barriers.