Industries With High Barriers to Entry

Many of us have at one point had a dream or an idea to enter a new industry. We may not have the full details of it, but many of us hope to start businesses someday in a particular sector.

But the unfortunate reality is that some businesses are easier to get into than others. Certain barriers to entry can dictate how easy it to penetrate into a specific commercial sector.

In this guide, we’ll talk through what barriers to entry are, some of the industries that are hardest to break into, and what to do if you are considering these businesses. This knowledge will help you make a more informed decision as to whether it is realistic to start new companies in these industries with high barriers.

Hard to Break Into Industries

1. Telecommunications
2. Brick-and-Mortar Retail
3. Online Casinos
4. National and International Parcel Delivery
5. Pharmaceutical Manufacturing
6. Passenger Air Transportation

What are barriers to entry?

Barriers to entry refer to the obstacles that prevent new companies from entering a particular industry or market. These barriers can be natural or artificial and can significantly impact the level of competition within a particular industry.

Understanding barriers to entry is crucial for new entrants, as it can help them prepare for the challenges they could face when they attempt to enter a new market. Existing firms also benefit from barriers to entry, as they can limit competition and protect market share. Next, we’ll explore the different types of barriers to entry and their effects on industries.

Types of Barriers to Entry

In the business sector, there are several types of barriers to entry, including economic barriers, regulatory hurdles, and intellectual property protection. Economic barriers, such as high fixed operating costs and set-up costs, can make it difficult for new companies to enter an industry. Regulatory hurdles from licensing requirements and environmental regulations can also create barriers to entry.

Meanwhile, intellectual property protection, such as patents and trademarks, can prevent new companies from using certain technologies or brand names. Other barriers, like high switching costs and network effects, can also make it difficult for new companies to enter an industry.

Let’s walk through these different types of barriers in a little more detail.

Economic Factors

Economic barriers to entry include high set-up costs and overhead costs, which can create significant challenges to starting a business. New companies may struggle to raise the necessary capital to cover these startup costs, making it difficult for them to enter the market.

Additionally, established companies may have scale economies that allow them to produce goods or services at a lower cost, making it difficult for new companies to compete. High resource ownership, such as ownership of raw materials or specialized equipment, can also create barriers to entry. Companies trying to enter an industry with high resource ownership may struggle to access the necessary resources. If that happens, they’ll struggle to compete in the market.

To make things even tougher, companies in high-barrier industries tend to take years to see meaningful profit. Even when they do, the profit margins can be pretty thin. Entrepreneurs expecting a big profit from the get-go would find themselves disappointed.

Intellectual Property Protection

Intellectual property protection can create a huge barrier to entering a specific industry. Patents and trademarks often make it difficult for newcomers to use certain technologies or even brand names. New companies have to develop their own proprietary technology just to get started (which in turn can cause another economic barrier).

For example, think about pharmaceutical companies. These businesses often have patents on their products, which prevents competitors from producing similar medicines. This can create a significant barrier to entry for new companies attempting to enter the pharmaceutical industry.

Other industries, such as the technology industry, also rely heavily on intellectual property protection, making it difficult for new companies to enter the market. For example, Google has a huge collection of patents protecting its search engine technologies, navigation systems, and more. If someone wanted to develop a rival search engine, they’d have to build a platform that didn’t infringe on those patents.

Raw Materials and Supply Chain

Access to raw materials and a reliable supply chain can create significant barriers to entry. New companies may struggle to access the necessary raw materials or establish a reliable supply chain, making it difficult for them to enter the market.

In contrast, established companies may have existing relationships with suppliers or own their own supply chain. These business relationships make it easier for them to operate in the market. The gas industry, for example, has a complex supply chain that can create barriers to entry for new companies. Understanding the supply chain and accessing raw materials is crucial for new companies entering the industry.

Regulatory Hurdles

Certain industries have a laundry list of required licenses, permits, and ongoing compliance requirements to uphold. Aviation, for example, is heavily regulated by the Federal Aviation Administration. Even if an entrepreneur wanted to start a small private airline, they’d need to meet all federal and state requirements before running a single flight.

The medical industry is another sector that (understandably) has a lot of regulations to adhere to. Hospitals, for example, need more than just licensed doctors and nurses; they also need a facility license from their state health department (or similar office), Medicare and Medicaid reimbursement certifications, registrations for administering controlled substances, and much more. A newcomer to the industry would need to spend months (if not years) researching and meeting these requirements. Even smaller ventures like general family medicine practices need to meet a lot of regulatory requirements.

6 Industries with High Barriers to Entry

There are quite a few industries that are difficult to break into. Of course, this isn’t to say that newcomers can’t break into these industries. But it’s crucial to start these types of companies from an informed vantage point so you can set yourself up for the best possible outcome. Let’s discuss some of the industries that often prove difficult.

1. Telecommunications

The telecommunications industry has quite a few barriers to entry. Most importantly, starting a telecommunications company requires your business to own part of the spectrum (the range of frequency waves that enable cellular communications). Even though ownership of the spectrum is regulated by the Federal Communications Commission and the National Telecommunications and Information Administration, buying licensed access to it is very expensive. Plus, parcels of the spectrum are often sold at auction, so the price is never guaranteed (and it’s usually high).

In addition, established brands like AT&T, Verizon, and T-Mobile all dominate the bulk of this market, meaning they can offer services to a huge range of customers at competitive prices. Even competing with them would take a significant investment.

2. Brick-and-Mortar Retail

A shop or small retail store used to be one of the easiest ways to start a business. There are many success stories of immigrants who used brick-and-mortar retail shops as a way to build some wealth. However, the growth of huge chain stores like Walmart and Costco has massively squeezed out the once-loyal customer base of smaller shops. This means that barriers to entry have increased since there is a higher focus on supply chains and integration.

Furthermore, customers have more choices thanks to the availability of online stores. All of these factors have made the barriers to entry for brick-and-mortar retail very high, making it difficult for new competitors to enter the market.

Brick-and-mortar stores tend to be most successful when they’re dedicated to a specific niche or hobby, such as model building or tabletop gaming. Shoppers in these niches often prefer to shop in person, get advice from the shop owner, and even attend events that the shop hosts. Thrift stores are also a bit easier to start and manage since the average costs of inventory are so much lower than those of the typical retail shop.

3. Online Casinos

Online Casinos represent a sector that has been quickly growing throughout the world. The popularity of gambling online is increasing as technology has allowed for ultra-realistic games to be developed. An example of a top online casino is Bovada casino. This casino has a large selection of the top casino games. Additionally, they have a focus on the customer experience, which is highlighted by their friendly customer support and a variety of payment methods.

The barriers to opening online casinos arise from the cost of developing state-of-the-art games. Consumers have more choices, and they want to see a large collection of the best games. Furthermore, many regulatory considerations have to be made. Many states and countries require specific licenses for casinos, which can take a few years to obtain. This can pose a significant barrier to those who want to open an online casino quickly as a new entrant.

4. National and International Parcel Delivery

Parcel delivery that stretches across states or international borders can also entail some specific barriers. Currently, the market is already dominated by other firms, such as DHL, FedEx, UPS, and even the government-run USPS. These brands have built up huge economies of scale after decades of work. This scale lets them operate efficiently, both domestically and internationally. It would be very difficult for new entrants to entice customers to use their services over one of these established brands.

Plus, parcel delivery can have high startup costs and overhead costs, especially to build a wide enough network to compete with the established companies. These entry barriers can make breaking in very tricky.

5. Pharmaceutical Manufacturing

Another profitable sector is pharmaceutical manufacturing; near-astronomical amounts of cash are spent on pharmaceuticals each year. For example, according to Statista, the global pharmaceutical industry generated $1.6 trillion in revenue during 2023 alone. That number could easily have an entrepreneur eager to snag a piece of that pie.

But pharmaceuticals can be tough to break into. The inherent scarcity of essential resources, such as raw materials and specialized equipment, can also create significant barriers to entry. Hiring talented professionals to develop and manufacture medicines can also be another challenge.

Last but not least, the pharmaceutical industry is heavily regulated at both the domestic and international levels. Adhering to regulations can slow down manufacturing a great deal, costing time and money. Of course, these regulations need to exist; drugs need to be stringently checked for safety. But for the entrepreneur eager to generate profit, this is another entry barrier.

6. Passenger Air Transportation

Another sector that has a high level of regulations is passenger air transportation. In this sector, there are a number of existing companies that already dominate a large market share, such as giants like Delta, American Airlines, United, Southwest, and more. That said, potential entrants do have opportunities to break in and differentiate themselves as long as they’re prepared for the challenges of starting an airline.

Understandably, there are many common barriers to entry in this sector. Planes — and the fuel needed to fly them — cost a lot. Even parking them when they’re not in use is expensive. Hiring flight attendants, pilots, and other support staff also comes with a hefty price tag.

But the primary barrier is simply navigating federal regulations. Whether you’re flying as a large commercial airline or just handling private flights, you’ll have to answer to the FAA. Meeting these requirements demands a lot of time, effort, and investment. And compliance is an ongoing responsibility.

What to Do If You Want to Enter a High-Barrier Industry

Breaking into a high-barrier industry isn’t easy, but it’s possible with the right strategy. Start by conducting thorough research to understand the major players, market gaps, and regulatory landscape. Look for niche opportunities or underserved customer segments where you can differentiate your business. In many cases, starting small — whether geographically or within a specialized market sector — can help you build traction without taking on massive upfront costs. Strategic partnerships, such as licensing an existing technology or outsourcing production, can also reduce the burden of infrastructure or compliance hurdles.

Equally important is building a long-term mindset. Many high-barrier industries require substantial capital, patience, and persistence before becoming profitable. Be realistic about the investment needed — financially and in time — and prepare for delays or setbacks. Focus on what you can offer that bigger companies can’t, whether that’s flexibility, customer service, or innovation. If you’re willing to take a smart, steady approach, high-barrier industries can still offer rewarding opportunities for newcomers.

Conclusion

Overall, sectors with massive corporations tend to be monopolistic in nature. This makes it extremely difficult for new entrants to enter. But don’t let this deter you if you know you’re meant to start one of these businesses. You just need to find a way to set yourself apart and target your consumers effectively. If you start your business strategically (and with the right knowledge and licensure), you can lay a solid business foundation and build from there.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.