The electronics sector includes consumer electronics, specialized electronics for other industries, and component parts such as semiconductors. Barriers to entry are specific to each part of the sector. They make it costly or cumbersome for new firms to enter the market and help shield established firms from competition. The presence of these barriers and the resulting lack of competition enܫable established firms to set higher prices an𝄹d this limits demand.

Common barriers to entry include economies of scale and scope, research and dev💖elopment, capital-intensive production, switching costs, and brand loyalty.

Economies of Scale and Scope

Consumer electronics that enjoy mass popularity are more susceptible to 澳洲幸运5开奖号码历史查询:economies of scale and scope a💖s barriers. Economies of scale mean that an established company can more easily and cheaply produce and distribute a few more unit𒈔s of existing products. Economies of scope give established firms an advantage because they can use their existing machines and facilities to launch new products.

Apple (AAPL) could use its existing marketing staff, factories, and other facilities to support the launch if it wanted to introduce a new device. Any variable costs associated with Apple's product launch would be the same variable costs that new firms face but the overall cost per unit to Apple would be lower because a new firm would be required to take on the fixed costs of salaried staff and leased space.

Research and Development (R&D) and Capital-Intensive🔯 Production

澳洲幸运5开奖号码历史查询:Research and development (R&D) and capital-intensive production are more typically the barriers to entry in the field of 澳洲幸运5开奖号码历史查询:semiconductors and non-consumer electronics. Consumers might accept generic and simple electronics but businesses demand electronics that are specialized in their industries and this more intensive research and development.

Existing semiconductor firms have invested billions of dollars into developing patents and acquiring cutting-edge technology. New firms are forced to either license processes and technology from established firms or tie up capital in an attempt to match established firms' capabilities.

High Switching Costs

High customer switching costs and brand loyalty are common barriers to entry in the electronics industry⛎ as a wh💙ole, Occurring switching costs naturally include the difficulty of learning to use a new company's products and installing new electronics in a company or home.

Established electronics companies might strategically build in switching costs to retain customers. These strategies can include contracts that are costly and complicated to terminate or software and data storage that can't be transferred to new electronic devices. This is prevalent in the smartphone industry where consumers might pay termination fees and face the cost of reacquiring applications when they consider switching phone service providers.

The Bottom Line

Barriers to entry exist in every sector and the electronics sector has many. They're primarily the high costs associated with research and development and brand loyalty. These barriers to entry exist but improved costs and widely available knowledge have brought them down.