Nothing beats the freedom of being your own boss.

You get the flexibility to make your own

schedule and not have to answer to anyone. It also includes the satisfaction of making your own
choices. It can be appealing to new entrepreneurs to be able to start from the ground up and
build something larger than they could as salaried employees. However, along with the rewards
of starting one’s own business, come the inherent risks that must be taken into account. One
challenge that starting entrepreneurs may face when attempting to enter a market is barriers to
entry. These are the factors that obstruct newcomers from entering a market or industry sector,
thereby restricting competition. These can include high startup costs, regulatory hurdles, or other
barriers that make it difficult for new competitors to enter (Hayes, 2021). Additionally, one more
key aspect to consider when entering a market is the level of competition it has. The business
world can be quite fierce. There are markets with soaring levels of competition among firms; and
there are also those where competition is nonexistent – because one or two firms have become
so dominant that others cannot stand against them. It is necessary for aspiring entrepreneurs to
be cautious of these conditions when attempting to enter a market.
Among the different forms of market structure, one where monopolistic competition prevails
might be among the more favorable routes for startup businesses. In this type of market,
numerous firms offer products and services that are similar, but not perfect substitutes. Barriers
to entry and exit are low, and the decisions of any one firm do not directly affect those of its
competitors. Examples include restaurants, hair salons, clothing, and consumer electronics
(Boyle, 2020). Because each competitor has something unique to offer, they can set prices
without adhering to industry norms – contrary to the case in perfectly competitive markets
where demand is highly sensitive to changes in price. In monopolistic competition, firms are left
to compete and differentiate themselves from one another based on factors other than price.
Variations in packaging, delivery methods, marketing, and physical appearance, such as product
shape, size, or color, are some of the ways to achieve this. In order that consumers become aware
of these differences, the firms advertise. However, it must be ensured that such advertisements
are worth the added costs. For instance, spending money on advertising for a product that does
not have differentiating qualities would be ineffective and wasteful, because customers still have
the incentive to opt for other similar options.
On the other hand, starting entrepreneurs might have greater difficulty entering a chosen market
if oligopoly is present among the existing firms in that market. An oligopoly characterizes a
market where a few large firms dominate. Similar to monopolistic competition, competitors in
this market sell relatively similar products, but are not perfect substitutes of one another.
However, contrary to the former, oligopolies have much higher barriers to entry. High entry costs
in capital expenditures, legal and political privilege, and a platform that gains value with more
customers, such as social media, are some of the conditions that allow oligopolies to exist
(Anderson, 2021). In stable oligopolies, firms recognize the benefits of collaboration over the
costs of economic competition, and they band together for their mutual benefit. As a result, it
becomes their goal is to keep potential disruptors of that stability out of the industry at any cost.
Also, since those companies have significant control over their market, they may control prices
by colluding with each other, ultimately resulting to uncompetitive pricing. This is likely to be
observed in the oil industry, railroad companies, wireless carriers, and big technology companies.
However, regulations have already been set in place by most countries all over the world to
prevent these kinds of practices.
Meanwhile, on the more extreme end of the market spectrum lies monopoly. In here, a single
dominant firm faces no competition as it is the sole producer of a good or provider of a service
with no close substitutes. This can develop due to either of the following: high fixed or start-up
costs so not everyone is able to enter the market, specialized industry requirements where only
one company can meet the needs, exclusive rights to production or patents, and government
policies for the provision of essential goods and services such as electricity (Kenton, 2021).
Successful monopolistic firms often incur substantially low average production costs. This is
because they have top-of-the-line resources allowing for more cost-effective production. As
these companies continue to grow, they acquire more modern tools and develop more efficient
methods which results in lower per-unit cost. Economists refer to this as ‘economies of scale.’ As
a result, they can charge lower prices to customers – at levels in which competitors will not be
able to sustain, effectively forcing them out of the competition. Thus, to be a player in this type
of market, an aspiring entrepreneur must either be larger than the existing one or create his/her
own monopoly, both of which entail significant amounts of resources.
If a startup company successfully enters its target market, it will immediately be confronted by a
new set of challenges, one of which is ensuring that it becomes profitable. Maintaining low costs
of production and producing in the appropriate quantities are two major concerns in profit
maximization. Economists point out two types of cost; variable and fixed. Unlike the former, the
latter comprises expenses that cannot be avoided regardless of the amount produced. The two
makes up total cost, and the level of production determines how much of each goes into each
unit produced. Companies use mass-production to mitigate the burden of fixed costs. Fixed costs
are spread out over a large number of units, and the amount that goes into each one is reduced.
Low average cost allows businesses to lower their prices and attract more customers. However,
mass-production would be pointless if for whatever reason demand becomes low. Hence,
determining appropriate levels of production is also critical. After all, the ultimate goal is to
maximize profit rather than simply produce more and lower production costs. To produce the
right amount, a business must follow the profit maximizing rule – continue to produce as long as
the marginal revenue of the last unit produced is greater or equal to its marginal cost.
There are numerous compelling reasons to build your own business. However, despite all
the benefits, doing so is not without difficulties. These problems can appear larger than they are,
and they can prevent us from fully pursuing our goals. It is, therefore, crucial to identify them
and set a plan for how to deal with them every step of the way. The concepts outlined above may
be extremely beneficial to those who are unfamiliar with the various types of market structure.
It could aid them in determining the viability of the venture they have in mind. Understanding
how different industries are classified and differentiated based on their degree and nature of
competition will allow aspiring businessmen to better predict specific outcomes and plan ahead.
In addition, it may provide them with insights on how to ensure their company's survival by
maintaining profitability. Choosing the right price, input, and output levels are all critical
components of achieving desired profit levels. Blindly entering difficult environments is not the
way to go when starting a business. If you are not cautious, you might find yourself losing money.
And the battle does not end with overcoming barriers to entry. Once you are already at your
destination, you must continually prove yourself worthy of staying in the game.