Final answer:
Established channels with high operational costs create barriers to entry, discouraging new competitors and potentially leading to monopolies or oligopolies. Examples like Coca-Cola and Pepsi Cola demonstrate how established brand names can prevent new firms from entering, despite high-profit opportunities.
Step-by-step explanation:
When multinational firms use established channels that are costly, it can indeed create barriers to entry for competitors. This is due to the high costs associated with competing in such well-established channels, which may include extensive advertising budgets and strong brand positioning. Companies like Coca-Cola and Pepsi Cola exemplify this by spending vast amounts on promotions, thus setting a threshold that is financially prohibitive for many potential entrants. Not only does a firmly established brand name offer a competitive advantage, but it also presents a significant obstacle for new market entrants to overcome.
In markets with significant barriers to entry, it's possible that even lucrative profit margins won't necessarily attract new competition. These barriers, which may be legal, technological, or market-based, can effectively restrict market entry, potentially leading to monopoly situations or markets dominated by a few firms. Barriers can prevent new firms from entering even if the current market participants are reaping substantial profits.