• List two common barriers that prevent firms
from entering a market.

Special tax benefits to existing firms

Customer loyalty

Explanation:

When a firm wants to enter a new market it is not a simple process, in fact it is very hard and complicated. This is due to multiple factors, or rather barriers that prevent them from being an equal competitor on the market. Such barriers are the special tax benefits to existing firms and the customer loyalty.

If an already existing firm has the advantage of special tax benefits, then the new firm is in a bad situation because it will have higher costs but it will need to outcompete the already existing firm in order to make some profit, and that more often than not is too hard to accomplish. Another major problem is the customer loyalty. Lots of people tend to be loyal to certain brands, especially if they have used them for most of their lives. When a new brand enters the market there is always a big chance that the people will look at it with skepticism and not even try the new brand, or even if they try it they will tend to be subjective and dismiss it as not as good as the one they are loyal to.

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