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 particular sectors. Some businesses are easier than others to get into. The barriers to entry can dictate how easy it to penetrate into a specific commercial sector. In this article, we will detail the specific industries with the highest barriers to entry, and explain the nature of these barriers. This will help you make a more informed decision as to whether it is realistic to start new businesses in these industries.
The Telecommunication industry requires ownership of the spectrum. This occurs in auctions, and the cost can be in the range of billions to compete with the established brands. A&T and Verizon have domination of the market, and challenging this would take a fair amount of investment even to compete.
2. Brick & 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 that would use brick and mortar retail shops as a way to build some wealth. However, the growth of huge chain stores such as Walmart and Costco has massively squeezed out the customer base. This means that barriers to entry have increased since there is a higher focus on supply chains and integration. Furthermore, customers have an increased choice with the availability of online stores. All of these factors have made the barriers to entry for brick & mortar retail very high.
3. Online Casinos
Online Casinos represent a sector that has been quickly growing throughout the world. The popularity in gambling online is increasing as the 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 in opening Online Casinos arise from the costs needed to develop the state of the art games. Consumers have more choice, and therefore they want to see a large collection of the best games. Furthermore, they are many regulatory considerations that have to be made. Many states and countries require specific licenses which can take a few years to obtain. This can act as a significant barrier to those who want to open an online casino quickly.
4. National/International Parcel Delivery
Parcel delivery that stretches across states or borders can also entail some specific barriers. The current market consists of a few companies such as DHL and FedEx. They have built up economies of scales from decades of work. This allows them to operate efficiently both nationally and internationally. Therefore, the barriers to entry are very high for any new entrants, because the current parcel delivery firms are very established on a national scale.
5. Pharmaceutical Manufacturing
Another profitable sector is Pharmaceutical Manufacturing. This can seem appealing due to the potential profits. Additionally, set-up costs can seem reasonable. However, there is a huge level of regulatory framework to consider. This severely delays the process of manufacturing, and it can ultimately be very expensive. The regulation is put in place because these products need to be stringently checked for safety.
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 established brands which dominate it. However, there is room for new entrants. But, we have seen in recent years that many new entrants have failed to establish themselves due to not being able to deal with the full extent of regulations. This adds to the barriers which are already high due to needing a large investment to buy or rent the passenger planes.
Overall, sectors with massive corporations tend to be monopolistic in nature. This makes it extremely difficult for new entrants to enter. However, this should not deter you from entering the industry. You simply need to offer significant differentiation and be focused on an approach that targets consumers effectively. Additionally, you should be aware of the financial investment required to enter the market, and also the resources required to challenge the dominant players in the sector. Furthermore, you should always consider the full factors of licensing and regulations.
By: John Pearson
John is a serial entrepreneur and writer who is passionate about helping small businesses launch and grow. His work has been featured in Huffington Post, Entrepreneur, and Forbes.