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My critique on the commandment of entry

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Jeix

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Hello fastlaners, today I would like to discuss something important related to the book that I was thinking about, tell me what you think. This might not be the right section for the topic but I figured it was the best.

My theory: the commandment of entry is superfluous and can just be included in the commandment of need.

My thesis:
The commandment of entry can be referred to as "when there are low entry barriers, it's hard to be successful because everyone can do it".
Some examples of this are becoming a gaming youtuber, becoming a twitch streamer, becoming a singer or rockstar. All of these things anyone can do and thus the marketplace is crowded and it's very hard to stand out.

An example of the commandment of entry that we find in unscripted is opening a restaurant in an imaginary city where it's incredibly easy to do so, and so everyone else has already done it and there's one at every corner.

But let's think about all of these examples and ask ourselves: what do entry barriers have to do with all of this?
I think they have nothing to do with it. The only thing that has to do with why such business ventures are unlikely to be successful is because the market is crowded, supply is abundant and demand is low, so it's not a problem of entry barriers but a problem of need.

Do people need another gaming youtuber or twitch streamer? Do they need new singers or rockstars? Do they need a new restaurant?
The answer is probably not, and it's why only a very small percentage of people who try anyway succeed.

What is easy anyway? If I don't know how to code, is making an app hard and therefore worthwhile? Even if there are millions out there? What if I were a programmer? Would that change things? Would it be a terrible idea just because it's easy? What if you could program apps just as easily as you make wordpress websites, would that change things?
To me, the only metric is the need of the market, no matter how hard or easy something is.

Most hardships come from a lack of money anyway. For a millionaire, opening a restaurant is easy because he has money to spend and can afford to fail a lot of times before they go out of business. Does that make it not worth it to open a restaurant just because it's easy? Again, the two metrics are not related.

No matter how easy or hard something is, if you solve a problem you will be successful.

Starting a hot dog stand is easy, but try and do it where everyone is hungry and you'll sell like a mad man.
It's not even that easy to start one anyway, you'll have to get a license to operate one, get the right suppliers for bread, hot dogs and sauces, handle orders and your stocks of raw materials every day, pay your taxes etc.
What is easy exactly?
Starting a wordpress blog? I suppose so, but what if I knew how to cure cancer? Would that make my blog successful? I'm sure it would even though starting it was easy, because I'm solving a problem in the market, no matter how hard or easy it was for me.

So to wrap things up, the commandment of entry is superfluous and it's not related in any way to the success of a business. The only thing that's related to it is market demand and how many problems you are solving (the commandment of need).

So this concludes my thesis, I'd like to hear your thoughts on it, maybe you have some examples to prove me wrong.
Have a great day my friends!
 

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RazorCut

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So to wrap things up, the commandment of entry is superfluous and it's not related in any way to the success of a business. The only thing that's related to it is market demand and how many problems you are solving (the commandment of need).
Your thinking is too simplistic. Having a business model that is hard to replicate makes a world of sense regardless of the size of the market that need is being fulfilled in.

If you have an easily replicated business then, as soon as people see your success they will jump on the bandwagon and undercut you (as that is what most of these 'me too' competitors use as their USP to capture a part of the market). Then you are soon left splitting your cake into smaller and smaller slices as all these new competitors take a sliver each.

In no time at all no one is making any profits.

Your analogy of a restaurant and the millionaire. For one thing a millionaire is not going to open a restaurant because "he has money to spend and can afford to fail a lot of times before he goes out of business". The more money someone has the more shrewd they tend to be (how the hell do you think they got and held on to a million in the first place?)

You want a real world example?

I opened a pizzeria many years ago. There were 4 other food establishments in my town at the time with no direct competition (Chinese, Indian, Burgers etc..) We had a good business (and I can assure you it is not that easy to open a restaurant). However within a decade that 4+1 had become 14+ with 3 other places servicing pizza (the 'me too's') and the town had hardly grown. The need hadn't reduced but now there was total oversupply.

In that same town today there are a myriad of coffee shops and hairdressers. Everyone is just 'getting by' because the barrier to entry was not high enough and they cannot increase the market as there the population is only so big.

Starting a hot dog stand is easy, but try and do it where everyone is hungry and you'll sell like a mad man. It's not even that easy to start one anyway
Umm a hot dog stand is not that easy to create but a restaurant is? Anyway unless there are regs to stop direct competition this hypothetical hog dog stand is operating in then he will have competition coming out of his ears within months (weeks even).

If there ARE regs (such as an operators licence for the pitch to protect his business) then he has a solid barrier to entry.

so it's not a problem of entry barriers but a problem of need.
I think you are missing the point. A barrier to entry is extremely important to the well being and success of a business. Supply and demand are key elements. You can only continue to supply a market whilst the demand exists. If the demand (need) drops (due to competition because of the low barrier to entry) then your business can quickly become unsustainable.
 
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Jeix

Jeix

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Your analogy of a restaurant and the millionaire. For one thing a millionaire is not going to open a restaurant because "he has money to spend and can afford to fail a lot of times before he goes out of business". The more money someone has the more shrewd they tend to be (how the hell do you think they got and held on to a million in the first place?)
I didn't say that a millionaire opens a restaurant because he has money to spend. I said he can easily open one because he has money. The fact that it's easy for him to open one has no relation to how successful he's going to be, because that's going to depend on the demand of the market.
That's why I'm saying that entry has nothing to do with success.
If my pizzas cure cancer I can succeed even if there are a million other pizzerias in the town. Why? Because I'm offering unique value. Nobody cares how easy or hard it was to open it and it has no relation to the success of the business.

I think you are missing the point. A barrier to entry is extremely important to the well being and success of a business. Supply and demand are key elements. You can only continue to supply a market whilst the demand exists. If the demand (need) drops (due to competition because of the low barrier to entry) then your business can quickly become unsustainable.
Usually demand gets diluted and distributed among people who can satisfy it. Like you said, more people compete for fewer shares.
But what does this have to do with how easy or hard it is to start a business?
I repeat my example: if my blog cures cancer, does anyone care that it was easy to set up?
On the contrary, if an industry is hard to get in, does that mean that there are bigger profits to be had? No, that's totally unrelated to entry barriers. The search engine market is hard to get in because google has all of it, does that mean that there's lots of money there? Absolutely not because the entire demand for that service is already being supplied. But there could be money there if you were to offer something different compared to google, again entry barriers have nothing to do with what you bring to the table.

The only judges on business success are the market and its supply and demand.

Nobody cares how hard you fought to earn your market share or how much trouble you went through to get your licenses, they only care about what you offer.
A millionaire can easily start a business because he has money to invest. Does that make his idea better or worse? Neither, because its success depends on the market, not on how hard it was to get in. Does that mean he'll do it? No, because that depends on whether he thinks there is a market for what he's doing.
But if I have no money, any business is hard to get into. Does that mean that everything I try is a good industry? Or does that mean that everything that I can afford to try is a terrible industry? It means neither, it all depends on what I'm bringing to the table compared to competitors.

Entry barriers have nothing to do with all of this. Value is the master of the game and nobody cares about the trouble that you went (or not went) through to create it. A blog that cures cancer is a millionaire blog, regardless of how much time it took to set up. You could argue that finding a cure for cancer is not easy, but again this has nothing to do with the success of a business involving curing cancer, it all ties back to supply and demand and the value you offer, this is the point I'm trying to make.
 

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If my pizzas cure cancer I can succeed even if there are a million other pizzerias in the town. Why? Because I'm offering unique value. Nobody cares how easy or hard it was to open it and it has no relation to the success of the business.
No, your unique value is stemmed from barrier to entry. You are offering something no one else is offering because they dont have a cure for cancer. That is the whole point of a barrier to entry, being able to offer something that others can't (or very few at most).

If you don't have a cancer cure in your product how are you going to compete with the other million pizzerias out there? You can't unless you have something they cannot compete with A BARRIER TO ENTRY.
 

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@Jeix I see your point. Need is influenced by availability, and low barriers typically lead to high availability and price competition. This is classic economics.

How about this then, as a test. What if we had a business that is easy to start, but nobody has one at the moment? Road-side windshield cleaning, perhaps. It's Spring, the bugs are out in force, and people can't see well through the windshields.

If we assume that business passes the "need" test, can we also say it fails the "entry" test? In other words, I think almost anyone can copy it in an afternoon with a bottle of spray and a rag. So it will come down to location or price competition, or some secret sauce in the execution, if anything.
 

NMdad

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If we assume that business passes the "need" test, can we also say it fails the "entry" test? In other words, I think almost anyone can copy it in an afternoon with a bottle of spray and a rag.
Exactly. If there's a need but no barrier to entry, you might have customers initially, but then competitors can flood into the market; unless you can skew more value, that flood of competitors will erode or eliminate your market share.
 
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Jeix

Jeix

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No, your unique value is stemmed from barrier to entry. You are offering something no one else is offering because they dont have a cure for cancer. That is the whole point of a barrier to entry, being able to offer something that others can't (or very few at most).

If you don't have a cancer cure in your product how are you going to compete with the other million pizzerias out there? You can't unless you have something they cannot compete with A BARRIER TO ENTRY.
This has nothing to do with entering the pizzeria business. This is all about value and what need I'm satisfying.
I easily entered in a business, what's my main concern? The value I offer.
I fought long and hard to enter in a business, what's my main concern? The value I offer.

How I entered the business doesn't change the fact that the main point is bringing value to people and satisfy their needs. If an industry is overcrowded because it was easy to enter in it doesn't change the fact that I can still succeed in it if I bring something to the table that satisfies needs in a better way than my competitors, no matter how easy or hard it was to enter in that industry (think of the extreme example of the blog that cures cancer).
That's why I'm saying that it all revolves around value.
"Easy" or "hard" is subjective. Easy is usually something that you know how to do. Would that compromise your idea because it's easy for you? No, your success is completely unrelated to that because it lies in value.

@Jeix I see your point. Need is influenced by availability, and low barriers typically lead to high availability and price competition. This is classic economics.

How about this then, as a test. What if we had a business that is easy to start, but nobody has one at the moment? Road-side windshield cleaning, perhaps. It's Spring, the bugs are out in force, and people can't see well through the windshields.

If we assume that business passes the "need" test, can we also say it fails the "entry" test? In other words, I think almost anyone can copy it in an afternoon with a bottle of spray and a rag. So it will come down to location or price competition, or some secret sauce in the execution, if anything.
Yes, this is my point. Anyone can copy you and it will come down to perceived value as it always ends up in any market. But this is no different from a "hard to get into" industry.
Think of the videogame Fortnite. Is it easy to make a game like that? I don't think it is, it requires multiple devs working on it full time.
PUBG was actually the first one in that field but it eventually lost out to fortnite because they offered a better game.
Ever since fortnite took over there have been multiple copies running around (realm royale, apex legends etc.) trying to get their market share. Just like there will be people with bottles trying to clean windshields. Competition floods in no matter how easy or hard it is to get in.

As you can see we are analyzing two industries, one supposedly easy to get into and the other supposedly hard, yet we see the same events unfolding in both.
A pioneer blazes the trail, people follow and copy, then fight for market share. The fight can take years but eventually the one who offers the best value survives.

Let's get back to our windshield example. My way of skewing value could be to set up a network of windshield cleaners all across town that can even sell you cold drinks. How about that? I know this example is dumb but it's the same as fortnite offering cute anime skins in their lootboxes.

In the end, the only thing that matters is value, not how easy or hard it was to get in.

After I have my monopoly of windshield cleaners across the entire country that can offer amazing services as you wait in traffic, would you suddenly call that industry "hard to get into" because I took over it?
You probably would because there is less unanswered demand around but that doesn't mean that there's more money to be had compared to an equally easy to enter into industry, these two things are not related in any way.

Value is always king and a better service will not stay in the second place for long. PUBG did hold his number one spot against fortnite for a while, eventually people switched because the other game was just better. Fortnite overthrew PUBG in the industry that he had created and monopolized. Was it easy because there was little competition? Or was it hard because making a game of those proportions takes a lot of money? Or was it easy because I was a billionaire and put half a billion in the project so I could afford the best of the best and get everything done swiftly? Or maybe it was hard because I had to scrap together the money from a hundred investors and could barely cover my expenses?
Again, this has nothing to do with easy or hard. I just described you a windshield cleaner monopolizing a country but there are probably even crazier true stories out there.
You should focus on what you bring to the table of your customers. If you believe it's better than everything else and they believe it too, you won't stay number two for long.
 

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This has nothing to do with entering the pizzeria business. This is all about value and what need I'm satisfying.
I get where you are coming from but if you cannot protect that value you have created then your business will be short lived unless the market is huge and there is room for many, many competitors.This is not the case with a bricks and mortar business that relies on footfall from a given location (your restaurant analogy). And lets talk about real everyday businesses not Unicorns like Fortnite.

I fought long and hard to enter in a business, what's my main concern? The value I offer.
I agree value is extremely important but what if that value is easily replicated? What then? It soon no longer is a value but becomes the norm.

When I used to sell on eBay and Amazon part of our value, our USP, was order by 3pm and we would ship the same day (in fact if they ordered by 4pm we would ship same day most of the time - under-promise, over-deliver). Within a couple of years that was no longer of value nor unique, that was the standard everyone had to measure up to.

Value - 30 day no quibble money back guarantee (now the norm)
Value - Free shipping (now the norm)
Value - Next Day Delivery (now the norm)

What businesses do/have you owned where there was little to no barriers to entry and yet you thrived without any competition providing a value that was easily replicated?
 
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Jeix

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What businesses do/have you owned where there was little to no barriers to entry and yet you thrived without any competition providing a value that was easily replicated?
None, I'm just theorycrafting from a philosophical standpoint.

Fortnite may be a unicorn but its competitors are normal businesses and they showed up quickly after its success.
If we agree that pc gaming is a hard industry to get in yet we see value being easily replicated in that industry too, we can come to the conclusion that no matter how easy or hard it is to get into a field, the only thing that matters is value, as it will be easily replicated nonetheless, generating a fight for market shares where only the best survives.

In your ebay example, the only way for you to survive was to keep offering a better service. But as we observed in the PUBG vs Fortnite example, extraordinary quickly becomes the norm and only the best survive, no matter how hard it was to get in or how many competitors there actually are.
How many competitors have there been in the mobile industry? Three or four at most ever since the smart era (android, ios and windows mostly)? This doesn't mean that anybody who gets in finds a richer opportunity compared to an easier field; in fact, I say those fields are impenetrable unless you truly have something game-breaking, whereas easier fields (like a restaurant) allow you to gain small incremental gains over time and eventually take over if you play well.
This is an example of an easier field being richer with opportunity compared to a harder field.

If you claim that every field where value is easily replicated is also easy to get into then you assume that industries such as extracting oil and selling it are easy, while we know that they are not.
So we need another definition for "low entry barriers" and especially with the way they correlate to low margins.

If we assume that an easy industry has oversupply and there is little unanswered demand we also face the fact that there are hard industries where there is also little unanswered demand, such as search engine on mobile devices. How does this automatically equate to a field ripe with opportunity just because it's hard to get into?

Unless we are speaking of complex technology such as satellites or nuclear power (btw this doesn't imply a market for either), what else can be regarded as hard? Is opening a restaurant hard? You claim it is but what you really mean is that it's hard to convey value to your customers when there are other restaurants in the area. Yet cooking the same kind of food is also something that is easily replicated, does this make opening a restaurant easy?

As you can see, there is a missing link somewhere in this reasoning that can connect entry barriers to success in a field without resorting to the value you bring to the market, which inevitably correlates to Need, and not to Entry.
Finding this missing link, which the book claims as real, is my goal for this topic. With your help, I hope to succeed but if I fail, I will regard the commandment of Entry as superfluous.

We should start by asking ourselves these questions:
-what is an easy field? what is a hard field? provide examples.
-is an easy field one with low opportunity and is the opposite true for a hard field?
-do the examples contradict one another?
-are there other real examples that can prove these definitions wrong?
-if there are, can we adjust them so that what the book claims is still accurate?
If we cannot, the book is wrong.
Personally, I can't even answer the first question, but I'm here for help.
 

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I'm sure there is competition in every genre, niche, social group, and fortunately, it's not always finding the answer by staring at the trends. Go back to the Art of War principles. Many people are playing chess, you go where they're not going and find your barrier to entry.
 

RazorCut

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Personally, I can't even answer the first question, but I'm here for help.
Help for what? A lot of this hypothesis is irrelevant. We are talking about real world situations on an entrepreneurial sized playing field. Not billion dollar businesses in Oil or Gaming.

Individuals building a business. A business where most won't get much above $1m a year in turnover. Do you think they give a rats arse about Fortnite competitors? They want advice that is relevant to them. And your advice is that "the commandment of entry is superfluous"

My theory: the commandment of entry is superfluous and can just be included in the commandment of need.
You are welcome to ignore barriers to entry but I don't see any compelling argument for others to do the same. That's me done.
 

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I'd like to hear your thoughts on it, maybe you have some examples to prove me wrong.
The only example needed is your very own sentence below.

The only thing that has to do with why such business ventures are unlikely to be successful is because the market is crowded, supply is abundant and demand is low
According to you a crowded market and abundant supply are causes of business failure. Under the CENTS framework these both fall under....(drumroll please) Entry.

A market is crowded when the barrier to entry is low. When there is an abundance of supply it is because of a low barrier to entry.

Demand is in a different category and is relative. If we use the pizzeria example, there are only so many people in a given town who frequent pizzerias, so the more pizzerias, the less demand per establishment.

Yes, you can skew value but not to the extent of your excessively exaggerated “cancer cure” examples. A pizzeria or blog cannot exponentially skew value the way a high barrier to entry can.

Since you asked for an example though, look at it this way: Would you rather have the best pizzeria in town or be the only option in town for a dozen pizzerias to lease their buildings from?
 
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After I have my monopoly of windshield cleaners across the entire country that can offer amazing services as you wait in traffic, would you suddenly call that industry "hard to get into" because I took over it?
You probably would because there is less unanswered demand around but that doesn't mean that there's more money to be had compared to an equally easy to enter into industry, these two things are not related in any way.
Probably nobody would advise you to enter that market... more than being "high barrier" I would tend to call it "saturated." It's still easy to get into - all you need is a rag and a spray bottle.

Not sure how much I can help with the rest of your questioning at the moment. I tend to agree that value is fundamental to everything, but anyone else here would say the same, I think. With industries where IP law applies (e.g.: games), maybe you can look at the sub-market, once established, as being protected by copyright, trademark, patent, etc. That erects barriers for others trying to pull the market away from you, I guess. Nobody can directly copy Fortnight - they have to make something new to try to tempt the same market. This is an incomplete analysis though, so forgive my mental laziness please. ;)
 

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You are somewhat right, ultimately if there are unfulfilled needs out there anyone who effectively solves them and communicates their solution properly will make money.

In scenario A, you have a patented bandaid that wont rip off people's hair when removed. That took three engineers, a witch, a cat, and Elon Musk to create. In this scenario you will enjoy stable income because whoever chooses to compete has to replicate something of comparable quality, which would require the engineers, the witch, the cat, and Elon, or comparable competencies. That is barrier to entry upheld by intellectual capital requirements. There are many barriers to entry, that is just one form.

In scenario B, you create a blog that supplies information on effective artificial intelligence scripting. Needed? Hell yes, much more than the bandaid. So you introduce it and enjoy early blue competitive waters. Well, anyone with fingers can make a blog. So the surplus of American, Indian, and Chinese data scientists catch wind of this niche and flood it overnight. You wake up two weeks later to see your site traffic is down 50%. Despite the continuous churn of premium content, you've gone from a guy with a the plane-drawn banner to a guy with a megaphone, from a market visibility perspective.
 

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Jeix your example is not coming from a bad place... but it's pretty much only applicable to Needs which are everyday essentials like food where there's always gonna be a Need & Variety. And keep in mind their Super Huge marketing budgets will increase their likelihood of success (Pepsi & Coke are keeping track of eachother... but neither's worried about kicking the bucket thanks to these marketing dollars).

Small time Brick & Mortar businesses simply don't have this luxury... and therefore it's better for their sanity to ensure the Need's there & the Entry level ain't that Easy to rake in some money until a competitor comes along to ride your coattails... which will always happen I'm starting to realize!
 

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Misinterpreting True Barriers to Entry

You are reducing the value of Barriers to Entry by only looking at particular situations/examples where barriers to entry are not in play. In most businesses, TRUE barriers to entry are hard to create, if possible at all (due to economic forces needed for barriers to entry or other form of probably governmental protection like regulation, intellectual property rights, and a few others).

Thus, when there are no true barriers to entry in an industry, then operational effectiveness (efficiency) is the utmost priority for the business to survive and keep its share. This is the case with the examples you have cited.. no true barriers to entry exist, therefore they have to execute flawlessly in providing the best value/offer for their market while keeping costs controlled and having an efficient operation to remain profitable with the competitive landscape.

The way you are viewing at what Barriers to Entry means, is only a very small piece of the entire puzzle. You are looking at it only through the lens of asking, "How easy was it for me to get up and running?"

On some occasions, you are also mistaking what your product/offer/solution is for the medium through which you deliver your solution, as in the example below:
What is easy exactly?
Starting a wordpress blog? I suppose so, but what if I knew how to cure cancer? Would that make my blog successful? I'm sure it would even though starting it was easy, because I'm solving a problem in the market, no matter how hard or easy it was for me.
Your solution is the CURE for cancer. Your blog is only the medium through which you are delivering the solution. You cannot view barriers to entry to that solution solely on how easy it was for you to set up the blog.

The solution is your proprietary, intellectual property, which no one else has access to. The true barrier to entry lies in seeing how you are probably a genius and have spent your entire life trying to find the cure, and for anyone else compete with you, they'd have to be just as smart and dedicate just as much effort. You are not competing with other blogs, you are competing with other 100% cures to cancer, which at the time is null.


What Are True Barriers to Entry?
Barriers to entry make it difficult for new firms to enter a market or for existing companies to expand (basically the same thing). Either the firm is protected by barriers or it is not. If there is none, fall back to operational effectiveness.

The essence of barriers to entry is that other companies are literally unable to do what you do that makes your solution so valuable

True barriers to entry are almost always grounded in "local" circumstances, either geographically or in product space. Why? Because the sources for true barriers to entry tend to be local and specific, not general or diffuse (hence the famous saying, "think local").

So, what are the sources for true barriers to entry? There are Three Kinds:
1) Supply-side: you have cost advantages allowing you to produce and deliver your solution more cheaply than others (priviledged access to crucial inputs, but more commonly to proprietary technology or IP that is protected by patents or other IP laws).

2) Demand-side: you have access to customer captivity that competitors cannot match (can come from Habit Formation, thinking coca-cola, cigarretes, etc, from Switching Costs, or Difficulty in Searching for other providers)

3) Economies of Scale: fixed costs make up a large share of total costs (naturally the firm with higher market share has lower costs per unit than competitors because they spread their fixed costs amongst more units; from having a higher market share they sell more units so the costs spread)

Apart from these, in some countries or markets you can find government protection (authorized monopolies, direct subsidies, regulation, corruption, cartels, etc) or superior access to information that create barriers to entry but these mostly do not apply.


Which Sources of Barriers to Entry Are "Better"?
If you measure the 3 sources above by potency and durability, Supply-side are the weakest, and Economies of Scale (combined with some Demand-side) are the strongest.

Why? Because if you go back to the definitions of these sources, you can see that Supply-side barriers rely mostly on you having cheaper access to inputs, but with today's competition, it can last for a while, but unlikely to be very durable.

Demand-side barriers are a bit stronger than supply-side. You have some forces helping you to KEEP customers (captivity) and make it very hard for others to lure them.

When you combine Economies of Scale with customer captivity, you get a self-reinforcing feedback loop that raises your barriers tremendously. You enjoy lower costs per unit sold, solifyding your market share, and then your customer captivity and network effects retains those customers and brings in more, highering your market share, spreading your fixed costs even more.


Why Are Barriers to Entry So Important Then?
Identifying barriers to entry, if they exist, in your industry is crucial for your strategy. You want to identify which sources are present or you can genuinely create and then think of how you want to defend them.

By definition, if true barriers to entry exist for your situation, competitors or potential entrants cannot match you no matter how much money they spend or how effectively they emulate your practices.


The Commandment of Need is, in my opinion, the most powerful of the commandments, because without it, your business literally cannot exist.

However, once you are addressing a real need with a real market, if you do not want to operate on cut-throat competitiveness and operational effectiveness, the Commandment of Barriers to Entry is the next most important commandment you need to think about.
 

MJ DeMarco

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All the Commandments bleed into each other so your interpretation is not without merit.

Likewise, both entry and control have commonalities, mainly, if something violates control, it probably violates entry. If a need exists, but can only serve a few folks, then scale is effected. They all have some overlap.

So I understand your point and agree with some it, but not to the extent that I'd call entry superfluous.

but I'm here for help.
How so? By rewriting my work based on your interpretation?
 

ZCP

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You have to be licensed to compete against one of my businesses. Not an easy license to get.
Barrier of Entry.
 

Dramolion

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But let's think about all of these examples and ask ourselves: what do entry barriers have to do with all of this?
I think they have nothing to do with it. The only thing that has to do with why such business ventures are unlikely to be successful is because the market is crowded, supply is abundant and demand is low, so it's not a problem of entry barriers but a problem of need.

Do people need another gaming youtuber or twitch streamer?
I'm pretty sure there has been a higher "need"(or more like mild interest in this example) then supply only years ago, off course nobody who applied CENTS joined in, because they knew supply would only increase due to the low barrier-of-entry.
 

Charnell

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You have to be licensed to compete against one of my businesses. Not an easy license to get.
Barrier of Entry.
Did you have the license before you decided to start the business or did you get the license to start the business?
 

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Rabby

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You have to be licensed to compete against one of my businesses. Not an easy license to get.
Barrier of Entry.
One of mine too... you have to have someone with 10 years in one license, in order to get another license that's needed for the business. LOL. Keeps out some of the riff-raff.

In my newer ventures I'm going for things where the requirement for broad knowledge and experience are a barrier, and/or where a deep understanding of the audience/market is a barrier. Not sure if those qualify by everyone's rules (I should re-read that chapter, I think), but they seem to erect the same kind of force field. You can't even supply valid information about some things if you haven't dug into a particular industry for a few years. You can't even guess well. Nobody knows how things work except the people turning the cranks. Those are things I like... specialized knowledge and process. Experience barriers ;)
 

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Duane

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Did you have the license before you decided to start the business or did you get the license to start the business?
My business has a license you have to get in order to compete with me as well.

This license requires you to work under another company's license as an employee and as a manager for multiple years before you can even take the course to get the license. The only way to bypass this experience and to be able to take the course to get the license is with a bachelor's degree in engineering.

At the end of the course you have to take two 7 hour long tests without breaks and pass. To get this license and the stuff to run the operation is a pretty heavy cash investment as well. If the industry is booming, people will have a lot of hoops to jump through in order to compete with us, and even if they bypass all the experience they have to get with a degree, learning to do the job will be impossible without knowing people on the inside that can mentor them.

I got into the business and had to finish my engineering degree before I could take the course to get the license. If it wasn't for that degree, I would of had to go work for another company until I met all the requirements.

Most people get the licenses as they are starting the business, it wouldn't make sense to get a license for something you aren't getting into.
 

TreyAllDay

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If you have an easily replicated business then, as soon as people see your success they will jump on the bandwagon and undercut you (as that is what most of these 'me too' competitors use as their USP to capture a part of the market). Then you are soon left splitting your cake into smaller and smaller slices as all these new competitors take a sliver each.
This is key. In fact this is why I love "The Lean Startup" by Eric Reis.

He talks about how people are afraid of their ideas being stolen when they first start out. He challenges you to take your BEST idea or business model, send it to your biggest competitor, and watch as they ignore you. The benefit of being a growing business is you have the flexibility to learn, experiment and better optimize your business processes before the bigger companies can catch up. If you show that your business model is a success, and the only challenge was "is there a need for another" or "barriers to entry", any large competitor will squash you.
 

Charnell

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Lol. Ask better questions. :)
What are you asking?
That was worded poorly, my mistake.

What I meant was you said someone needs a license to compete with your business. For the sake of the question, let's say it's civil engineering building bridges.

Did you decide to start your bridge building business after you were already licensed, or did you notice that bridges sucked in your town and wanted to change that by getting licensed, then starting the business? Or a third option, did you pivot a prior business into what you do now that requires licensure?

I guess another way to ask is was this an industry you were already in or "new" when you started?
 

Kevin88660

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Commandmant of entry is SUPER important.

I am in the financial sector.

How is Warren Buffett doing now? Since 2008 he has been underperforming S&P!

All the top performing funds have PHDs running quantative models and super computers executing trades.

Find out undervalued companies from motley fool and then buy and hold? If it is so simple then the profits will be quickedly crowded out.
 

ShamanKing

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None, I'm just theorycrafting from a philosophical standpoint.
So you are arguing your standpoint from reading and researching against those that have experience?
 

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