If a firm manufactures a undoubtedly distinguished good, where the customers associates the good with the brand name, it will become very difficult for the new firm to come into the market and take the customers away from the old firm because here the problem is not to produce at a low cost but to produce a significantly attractive product so as to distract the loyal customers from a familiar brand. Lower Cost for an Established FirmA monopoly is probable to have maintained expert production and marketing abilities. It is more likely to be conscious of the most proficient methods and the most trustworthy and cheapest providers. It is likely to encompass access to cheaper funding. It is therefore working at lower cost curve. New firms would consequently find it difficult to compete and would be likely to lose any price war. Ownership of, or Control over, Key Factors of ProductionIf a firm is the only owner of a particular raw material or good then it can deny supply of that particular good to its competent firm.Ownership of, or Control over, Whole Sale or Retail OutletsIn the same way if the firms owns and controls the outlets through which the good may be sold. It can stop it rivals from gaining access to customers.This creates a barrier to entry as it protects the existing firms by patents on necessary processes, by copy rights and also by different type’s licensing( for example a license which only allows one firm to operate in a particular region) and tariffs and also by other trade restrictions. Like many Fishing companies have got license to fish in a particular region and are also given a particular quota.
Mergers and takeovers
The monopolist firms takeovers new firms by putting bid on them. This increases discouragement for new firms.
A monopolist who is business for quite a long time can sustain losses for a long time but a new entrant cannot and hence it would start a price cutting war, start big advertising campaigns and introduce new brands and drive the new entrants out.
In order to drive the new entrants out the existing firm May way out to different forms of harassment and which may be legal or illegal.
Semiconductor Rivalry in USA: A Current Example
Here we can cite the example of USA where first and second generation chip organizations like Fairchild, General Electric and RCA paved a path for the third generation companies as the