Final answer:
In business, the 'risk of entry by potential entrants' refers to the likelihood of new competitors entering a market. Barriers to entry, such as high startup costs or government regulations, can discourage or prevent potential competitors from entering a market. The risk of entry may vary depending on the attractiveness and profitability of the market.
Step-by-step explanation:
Risk of entry by potential entrants refers to the likelihood or possibility that new competitors will enter a market. It is influenced by barriers to entry, which are legal, technological, or market forces that discourage or prevent potential competitors from entering a market. Barriers to entry can include factors such as high startup costs, proprietary technology or patents, government regulations, and limited availability of key resources.
For example, if there is a small town with only one grocery store, the risk of entry by potential entrants would be low because there are barriers to entry such as high startup costs and limited demand. However, if the market becomes more attractive and profitable, the risk of entry may increase as new competitors are incentivized to enter the market.