Barriers to Entry and Competitive Moats
Identify barriers to entry that protect online businesses from new competitors.
Barriers to entry are factors that prevent new firms from easily entering a market and competing with incumbents. High barriers protect existing businesses, allowing them to maintain pricing power and profits. Common barriers include economies of scale (achieving lower per-unit costs through large volume), network effects (products become more valuable as more users adopt them), switching costs (making it expensive for customers to change providers), brand loyalty, exclusive technology or patents, and regulatory requirements. Online markets often feature strong network effects—a social network or payment platform becomes more valuable as it gains users, making it difficult for competitors to grow…
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