Entry barriers exist in different markets in different forms. In some markets, entry barriers are created by a dominating business in the industry, which to the point could be called as one business, one industry. Entry barriers in the form of high tariffs are necessary for a market. They will ensure that the local producers, manufactures etc. are not affected.
The oligopoly or the monopoly dominance in a market will result in entry barriers. Entry barriers are usually of many types, classified under two main categories which are that of the natural or structural entry barrier and the artificial or the strategic barrier. Some of the natural entry barriers or the structural entry barriers are that of economies of large scale production, network effects, the ownership or control of scarce resource, high set up costs, high R&D etc (Nelson, 2004). In the case of artificial or strategic barriers, some of them are predatory pricing, limit pricing, predatory acquisition, switching costs, advertising, strong branding, loyalty schemes etc.
Economies of scale will happen when production and unit cost values are so tied up that unit cost of product goes down in value when production volume increases. In any market where the competitors in the market have caused economies of scale in the market, then it is a barrier to entry as new entrants will have to strive to compete with these competitors in order to achieve a similar level of competitiveness. On the other hand, if they were to reduce their prices, then they might not get a profit. Economies of scale on an overall are helpful in reducing the price differential for the consumer. Where a country is able to specialize in the production of one good only, then it will be able to practice economies of scale and this helps in the controlling of prices.
According to the theory of market structure in the real world, there are many forms of market structures available which are that of perfect competitor where different producers come together to make a single unique good, monopoly structures where there is a single producer creating a unique good, monopolistic competition with different producers working on goods that are only slightly differentiated, and then, there is the oligopoly where few producers with single or slightly differentiated goods are produced (Vadén & Suoranta, 2004). The monopoly structure is usually targeted by Governments in order to help reduce costs for customers.