No. 171 · Strategy · Economics
Barriers to Entry
The harder a market is to enter, the longer those already inside can keep their profits.
In the Almanac
“Bell’s patents run out”, 1894–1913 · “Stripe”, 2011
Both stories in full, three ways to use it and where it misleads.
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Questions
What is Barriers to Entry?
Barriers to entry are the obstacles that make it difficult for new competitors to enter a market, such as high costs, regulation, patents, scale or network effects. They explain why some businesses stay protected for decades and why some markets are so hard to break into.
How do you use Barriers to Entry?
Before starting something new, map the barriers you will face, from financial to technical to social, and plan how to overcome each. In your own career or business, build barriers others would find hard to copy, such as rare skills, strong relationships and proprietary know-how.
When does Barriers to Entry matter?
Barriers to Entry is one of the 56 mental models for strategy, the situations where you ask: How do I win when others want the same thing? Within that, it belongs to “Finding your advantage”, alongside Center of Gravity, Economies of Scale and Moats.
What is an example of Barriers to Entry?
Two stories show it at work: Bell’s patents run out (1894–1913) and Stripe (2011). Both are told in full in The Mental Models Daily Almanac, which has two stories for each of its 365 models.
Which mental models are related to Barriers to Entry?
Switching Costs, Regulatory Capture and Network Effects. Barriers to Entry itself comes from economics.