Satchels Corp. has been in the retail bag business for 10 years. It has created unique value and attained brand loyalty from its customers. Recently, a new bag company started up in the same area as Satchels. In order to retain the reputation that it has established and avoid competition with the new company, Satchels introduced a new line of fashion bags, conducted a sale, and also increased its advertising. This made it difficult for the new company to gain profits. This scenario best illustrates ________.
A)forward integration
B)barriers to exit
C)barriers to entry
D)backward integration

Question

Quizplus · Accepted Answer

The scenario best illustrates barriers to entry, as Satchels introduced new products, conducted a sale, and increased advertising to make it difficult for the new bag company to enter the market and gain profits. Barriers to entry refer to obstacles that make it difficult for new companies to enter a market and compete with existing businesses, which can include factors such as brand recognition, economies of scale, legal regulations, and others.