8 Examples of barriers to entry and their definition according to Porter

The term barriers to entry is part of the so-called 5 competitive forces by Michael Porter, used for strategic business planning.

According to this view, the most competitive companies are those that have the greatest ability to make a profit. And you can achieve or protect profitability through these five competitive forces:

1. Customers or buyers
2. Suppliers
3. Substitute products or services
4. Current competitors
5. New entrants

In this post, we will better understand how each of these forces work. We’ll pay special attention to new entrants. We’ll analyze some examples of entry barriers to defend new entrants from them, or that should be overcome by those who wish to enter a new market.

Entry Barriers and the Other 4 Porter Competitive Forces

1- Customers or buyers

The bargaining power of buyers will determine the degree of competitiveness of an industry. By nature, buyers want to receive the maximum benefits possible by paying the lowest price.

Thus, the greater the bargaining power of buyers, the lower the competitiveness of a company competing in that market.

2- Suppliers

Conversely, suppliers expect to charge as much as possible and deliver as little as they can. In situations of monopoly or oligopoly, for example, when there is only one supplier or few of them, their bargaining power is very high, reducing the competitiveness of companies in this sector.

3- Substitute products or services

This is more important than it was in the past when it comes to strategic planning for a business.

Substitute products are those that supply the same need that your company provides to the market, but belong to another segment.

Thus, it’s easy to see that theatrical shows are a substitute service to the cinema, but it’s fundamental to stick to other entertainment not so obvious, after all, a company that offers TV series’ or movies via stream doesn’t stop offering a service substitute to the cinema.

Services such as AirBnB, for example, are substitute products for traditional hospitality, and it is precisely through the use of new technologies and the digital transformation that substitute products and services are entering new markets in a surprising way.

4- Current competitors

The level of rivalry between the current competitors of a market, when very high, diminishes the competitiveness of the companies that operate in this sector.

Those who work in the beverage or banking sectors are subject to a strong rivalry, which diminishes the profitability of competitors who are constantly reacting to or anticipating the actions of others.

5- New entrants

New entrants are competitors who want to establish themselves in a market to which they did not previously belong. They’re not substitute products or services, but from other companies wishing to provide the same products or services of the brands which are already established in the market.

Of course this will not be easy, especially if there are so-called entry barriers.

Entry barriers are characteristics of a market that make it hard to be new competitors.

In order for you to better understand this concept, let’s look at a number of examples of entry barriers.

But before that, check out this video from Harvard Business Review which explains in a very didactic way the five competitive forces of Michael Porter:

The Explainer-Porter’s Five Forces from Ray Jimenez on Vimeo.

8 examples of entry barriers

1. 🏆 Strong and Established Brands (Trademarks)

Competing with brands that are already well-known and trusted by consumers is one of the toughest barriers to entry. Established brands benefit from years of marketing, customer loyalty, and market presence.

New entrants must invest heavily to gain visibility and credibility. A clear example is the challenge faced by Chinese automakers trying to enter mature international markets dominated by traditional brands like Toyota, Volkswagen, and Ford.

2. 🧠 Patents and Intellectual Property Protection

Patents grant exclusive rights to inventors and companies, legally preventing others from producing or commercializing similar products for a certain period. This barrier protects innovation but limits market entry.

Only after patents expire can new players offer equivalent products or services, as seen in the pharmaceutical industry with generic drugs.

3. 🏛️ Government Regulations and Licensing

In some industries, regulatory compliance is so demanding that it becomes a significant barrier to entry.

Sectors like banking, insurance, and healthcare require extensive licensing, legal approvals, and continuous oversight to ensure public safety and market stability.

Unlike opening a restaurant or retail store, these industries face strict governmental controls, discouraging new entrants.

4. ⚙️ Technological Expertise and Know-How

Mastering advanced technologies is another typical barrier. Industries such as aerospace, automotive, and semiconductors demand specialized knowledge, high-precision manufacturing, and significant R&D investments.

For instance, developing an aircraft is far more complex and resource-intensive than producing simple consumer goods like lawn mowers.

5. 📊 Economies of Scale

Established companies can produce goods or services at much lower unit costs due to large-scale operations.

New entrants, starting with smaller production volumes, face higher costs per unit, making it difficult to compete on price. This cost disadvantage often prevents newcomers from gaining a foothold in the market.

👉 Understand the role of Business Process Management Systems (BPMS) in achieving economies of scale and efficiency.

6. 🎓 Learning Curve and Specialized Skills

Certain industries require years of experience and skill development before a company or individual can compete effectively.

In high-end gastronomy or luxury fashion, for example, new competitors often emerge when experienced chefs or designers leave established brands to start their own ventures, after mastering the craft.

7. 💰 High Capital Investment Requirements

Some markets are capital-intensive by nature. The energy sector is a prime example—building infrastructure like nuclear power plants, oil rigs, or large-scale renewable energy facilities demands massive upfront investments. Such high capital requirements act as a natural filter against new entrants.

8. 🚚 Limited Access to Distribution Channels

Control over distribution networks can also block new competitors. Established brands often secure exclusive agreements with distributors or maintain long-standing partnerships that provide favorable terms.

Distributors, satisfied with existing relationships, are often reluctant to take risks with new and unknown brands, making market entry even harder.

Conclusion: Turning Barriers to Entry into Opportunities

Barriers to entry are often perceived as obstacles, but for strategic and well-prepared companies, they can become a source of competitive advantage. Understanding these barriers—whether they are related to scale, technology, regulations, or brand strength—is essential for defining how your business will position itself in the market.

More importantly, companies that invest in process optimization, automation, and strategic planning are better equipped to navigate these challenges and even turn them into entry barriers for future competitors.

For organizations aiming to improve their competitiveness and break into new markets, it is crucial to rethink internal processes, leverage digital technologies, and align business operations with strategic goals.

To explore how you can apply these concepts in practice, we recommend the following articles:

• Business Process Management (BPM): Definition and Benefits
  Understand how BPM helps structure and optimize processes, improving efficiency and competitiveness in challenging markets.
• Process Automation: Benefits, Challenges, and Real-World Examples
  Discover how automation can help overcome operational barriers, reduce costs, and increase scalability.
• Strategic Planning Process Model: Examples and Best Practices
  Learn how a structured strategic planning approach can guide your company in navigating competitive forces and entering new markets effectively.

By combining strategic insight with operational excellence, your company will be better positioned not only to enter new markets but also to defend its space with confidence.