This is how easy (or not) it is for new companies to enter the industry, which affects the benefit of the industries and the competitive position of the firm. If an industry is profitable and there are few barriers to entry, then competition will soon intensify.
When more organisations compete for the same market share, benefits begin to fall. However, the existing organisations must create high barriers to entry for new participants.The automotive industry has high level of barriers to entry. It requires specific machinery, facilities, HR, technical equipment, distribution channels and so on.
Due to market saturation, the threat of new entrants in Perodua’s home market is extremely unlikely and the capital required to build new manufacturing facilities for automotive are relatively high. Other than that, the current distribution channels in Malaysia mainly serve two national brands and it is not easier for foreign brands to enter these distribution channels. As the Malaysian government’s protection of its National Car Projects, the National Automotive Policy (NAP) keeps on making an unlevelled competitive environment for foreign-branded automakers to penetrate the same market segment of Perodua automakers. In view of these factors, it expected that the barrier to entry into the Malaysian auto maker are very high, or that the threat of new entrants is low.
