Entry barriers of Underground construction industry in Russia - Essay Example

Market structures that are likely to be found within an industry include perfect competition, monopolistic competition, monopoly and oligopoly (Etro, 2009, p.273). While these are the most common, others like oligopsony, monopsony and price discrimination (Etro, 2009, p.275) also exist. The defining variables to each of the listed market structure acts as the source of barriers to entry in the markets. These barriers, however, vary across the markets, with some markets having substantial barriers than others.

Barriers to entry are simply defined as hindrances or factors that prevent firms from entering specific markets (Edgerton, 2008, p.107). Barrier levels as already mentioned vary from one market to another, with some markets being characterized by easy access, while others remain hard to enter. For instance, pure competitive markets are characterized by free entry and exit, while monopoly markets are substantially hard to enter (Spulber, 2006, p.135-152). Sources of these barriers are diverse and dynamic over time.

They are spread across cost of operation, brand loyalty by consumers, number of buyers and sellers, reaction of incumbent firms, government regulation and licencing (OECD, 2008, p.141-142). The Russian construction industry is one of the many industries in the economy that faces market entry barriers, prior to the different market structures evident in the industry. Amid the aforementioned sources of entry barriers, Porter’s five forces are critical to account for. They include rivalry, threat of substitutes, buyer power, supplier power and entry barriers (Etro, 2009, p.303). These forces account for the markets trends and business undertakings that make one market hard to enter compared to other markets.

Markets that are hard to enter enjoy market powers that allow the firms operating in it set prices that are in most cases higher than competitive prices. The evaluation of entry barriers of Russian underground