Research Guides: Porter's Five Forces Analysis: Threat of Entry

Threat of Entry. What is it?

Threat of Entry

Companies depend on barriers to entry like customer loyalty, product differentiation, market share, and cost advantage to defend against the threat of new competitors.

Questions to Ask

How easy is it for new companies to enter the market?

Do incumbents have advantages? in price? brand loyalty? materials? location? experience?

Are there technological barriers to entry?

Are size and economies of scale important?

How do capital requirements and switching costs influence market entry?

Does government policy play a role?

Are distribution channels open or closed?

Financial and Capital Requirements

Damodaran Online Data
Aswath Damodaran, a Professor of Finance at the Stern School of Business at New York University and author of several books on valuation, offers averages, for US and global companies, on both corporate finance and valuation metrics. He also provides estimates of equity risk premiums and costs of capital. Updated annually.

Research Industry Operating Conditions

IBISWorld
Search for industry by name or NAICS code. Open your industry report and then use the tab for "Operating Conditions" to find analysis of capital intensity, technology changes, and regulation and policy.
Use the tab for "Competitive Landscape" to find discussion of industry cost structure, barriers to entry and globalization issues.
S&P NetAdvantage
The Industry Surveys in S&P's NetAdvantage offer analysis of "How the Industry Operates." In this section of the Survey they discuss costs, capital requirements, regulations and other barriers to entry. For more detail on the regulatory and legislative environment read their analysis of "Industry Trends."

Research Government Policy

Researching the regulatory environment of an industry involves looking at both the regulators and the positions of those affected by the regulations. Look for news from these actors:

Government executive departments like the Department of Transportation and regulatory agencies like FERC, the FDA, and the FCC, set regulations for industries in the United States. Search the A-Z Index of U.S. Government Departments and Agencies.for the agency website.
Committees of the United States House and Senate regularly hold hearings on proposed legislation.
Trade associations represent the interests of their members in position papers and testimony before Congress. Find associations by searching Google or use Industry References list in S&P NetAdvantage's Industry Survey.

Fitch Solutions BMI (formerly FitchConnect)
Choose your Sector/industry and Geography first, then open the Industry Forecast reports. These lengthy survey reports include a market overview, analysis of the competitive landscape and comments on regulatory developments.

USA.gov
USA.gov searches across all federal, state, and local government websites. Use it to identify regulatory agencies or to research specific industry regulations
Regulations.gov
Search Regulations.gov for active or proposed government rules, regulations and related documents.

Research Technology Barriers

A company's intellectual property is often protected by patents on products or production methods. Companies often discuss their patents in their 10-K report. Read Item 1 - Business and Item 1a - Risk Factors or search the 10-K report with the terms patents or intellectual property. If you need to read the actual patent document use one of the websites listed below:

USPTO Patent Full-Text and Image Database
Full-text of U.S. patents from 1976.
Google Patents
U.S. patents back to 1790. Also patents from the WIPO, Europe, Canada, Germany and China.
Espacenet
From the European Patent Office.