When new firms enter into the market, the market share for the existing firms drop and this may be translated to decreased sales and less profits.
To stop new firms from entering into the market, the existing firms may put in place barriers of entry, the industry may require heavy capital investment like in the case of Liebherr Group where many firms could not enter into the manufacturing industry due to the high capital requirement. The existence of loyal clients also deterred many new firms not to enter in the industry since they could not easily get new clients. Liebherr Group is the major supplier Airbus plane parts and no any new firm can compete for a tender with Airbus due to the high degree of loyalty. The government policies can also protect the firms within an economy from external competitors.
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