Final answer:
A start-up establishing a strong brand name can create a formidable nontraditional barrier to entry, making competitiveness in a market challenging for new firms. Other examples of such barriers include government-enforced regulations, trademarks, and predatory pricing strategies.
Step-by-step explanation:
Barriers to Entry in Marketplaces
When a start-up pioneers an industry or a new concept within an industry, the name recognition the start-up establishes may create a formidable nontraditional barrier to entry referred to as a brand name. Barriers to entry are factors that make it difficult for new firms to enter a market. These can be in the form of legal requirements, technological challenges, or strategic behaviors by existing companies that discourage new competitors.
Here's how to classify various scenarios:
- Government-enforced barrier: A city limiting the number of taxicab licenses.
- Barrier not enforced by government: A restaurant recipe that's popular but can be easily copied.
- Situation not involving a barrier: An industry where economies of scale are small compared to market size.
Predatory pricing and trademarks are other examples of barriers that can deter new entrants into the market. A trademark, for instance, is an identifying symbol or name that can only be used by the firm that registered it and offers protection against others using the same mark. Similarly, predatory pricing can be used as a temporary measure by incumbent firms to slash prices and discourage competition.