Barriers to entry are obstacles that make it difficult for new companies to enter a market and compete with established firms.

These barriers are often categorized as follows:

• Structural barriers: Factors like economies of scale (cost advantages for large firms), high capital requirements, control of essential resources, and network effects.
• Legal barriers: Include patents, intellectual property rights, government licenses, and trade regulations like tariffs or quotas.
• Strategic barriers: Actions taken by existing firms, such as predatory pricing, heavy advertising to build brand loyalty, or maintaining excess capacity to keep prices low.

Why they matter: Barriers to entry determine the market structure. When barriers are high, there is less competition, which increases the market power of existing companies and can lead to a monopoly or oligopoly.