What is typically a reason for the establishment of entry barriers by first movers?

What is typically a reason for the establishment of entry barriers by first movers?

• A. To limit competition and control market share
• B. To minimize investment for latecomers
• C. To reduce costs of production
• D. To build customer loyalty

Answer: (A)

The establishment of entry barriers by first movers is primarily aimed at limiting competition and controlling market share. When a company enters a market first, it has the opportunity to secure a strong position, often gaining advantages such as brand recognition, customer loyalty, and exclusive contracts or partnerships. These first movers can implement strategies like high investment in product development, aggressive marketing, or leveraging economies of scale, which in turn makes it more challenging for new entrants to compete effectively. By creating obstacles such as proprietary technology, substantial initial investment requirements, or establishing strong customer relationships, first movers can deter potential competitors from entering the market. This control over market share helps sustain their leadership position and profitability in the long run.

The establishment of entry barriers by first movers is primarily aimed at limiting competition and controlling market share. When a company enters a market first, it has the opportunity to secure a strong position, often gaining advantages such as brand recognition, customer loyalty, and exclusive contracts or partnerships. These first movers can implement strategies like high investment in product development, aggressive marketing, or leveraging economies of scale, which in turn makes it more challenging for new entrants to compete effectively.

By creating obstacles such as proprietary technology, substantial initial investment requirements, or establishing strong customer relationships, first movers can deter potential competitors from entering the market. This control over market share helps sustain their leadership position and profitability in the long run.