The figures are sobering: More than six out of ten companies don't survive the first five years, and three out of four new products fail in their first year. The reason is rarely product quality; rather, it's invisible barriers to market entry that cause even promising market entrants to fail. Why do market entries fail despite good products?
Current studies show that only 10-20% of new businesses in Germany manage to establish themselves in their market long-term and remain successful after initial market entry. The situation is similar for new product launches by established companies: here, too, the proportion of successful launches is estimated at only 10-30%, depending on the sector, with many failing due to significant market entry barriers.
There are no reliable figures for the B2B market, but it can be assumed that a high proportion of innovations fail to survive in the long term and cannot overcome market entry barriers. Given the often substantial investments made by B2B suppliers in research and development, marketing, brand building, and product production—investments frequently reaching six to seven figures in euros—this represents a considerable risk.
This article therefore provides an overview of the most important types of market entry barriers, how to systematically identify visible and invisible market entry barriers, and which strategies can be helpful in overcoming them, especially in the B2B market.
What are barriers to market entry?
Market entry barriers (also known as market barriers, market restrictions, or market access barriers) are obstacles that make it difficult or impossible for new entrants to enter a market. These barriers can be both visible and invisible and affect startups as well as established companies seeking to expand into new markets.
A distinction is made between natural and artificial market barriers by definition: Natural barriers to market entry arise from the characteristics of the market itself – for example, high capital requirements in mechanical engineering or strict approval regulations in medical technology. Artificial barriers to market entry, on the other hand, are deliberately created by established market participants, for example, through proprietary technology standards or exclusive distribution agreements.
Market barriers like these generally act as a brake on competitive dynamics, as they make market entry more difficult for new competitors and thus reduce competitive pressure on existing suppliers. Existing suppliers can achieve higher margins in a market with strong barriers, while new competitors find it correspondingly difficult to gain a foothold due to these obstacles.
in strategic market analysis, therefore defines barriers to market entry as an essential factor in assessing the nature and intensity of competition in an industry.
The most important types of market entry barriers
Three main categories of market entry barriers determine the success or failure of B2B market entry: high investment costs, regulatory requirements, and access to distribution channels. These barriers rarely occur in isolation. Rather, several factors usually interact and reinforce each other. While some barriers, such as high investment costs or regulatory requirements, are readily apparent and calculable for new market entrants, other obstacles, such as established business relationships or informal industry networks, often remain invisible until actual market entry. Understanding these market entry barriers is the first step toward systematically analyzing them and developing suitable strategies to overcome them.
High costs as an entry barrier for companies
A particularly high need for initial investment represents one of the most frequent and visible barriers to market entry. This type of barrier is often found in capital-intensive industries such as mechanical and plant engineering, the chemical industry, and the automotive industry. Product development, product certification (patents), and service launches require substantial initial budgets and long lead times, which limits access, especially for younger or smaller players, even if they possess innovative products and solutions. Existing suppliers in such markets benefit from economies of scale, which new entrants can only realize in the very long term and therefore require significant upfront investments (e.g., from strong investors).
Regulatory and technical requirements
Regulatory and technical requirements – both visible and invisible – can make market entry extremely difficult for new companies. A classic example of market entry barriers are high-risk products such as implants (or their components) in the medical technology sector, whose manufacturing process, materials, machinery, and finished product are subject to extensive regulations. The manufacturer and, in some cases, its suppliers must undergo costly certification processes, which pose a significant hurdle, especially for new entrants.
The know-how to achieve (sometimes artificially inflated by established companies) “quasi-standards” must first be developed by the new market entrant. Due to established “standards,” which are often heavily influenced by the strengths of established competitors, customers have limited options for switching to new players who cannot meet the standards set by incumbents, or can only do so at very high costs (“lock-in effect”).
Access to sales channels and customers
In the B2B market, brand loyalty and the trust built up through long-standing business relationships play a crucial role. Access to established sales channels and customers thus becomes a decisive barrier. Switching to a new, unknown supplier can involve significant risks and disadvantages for the customer, for example, if the end customer's accuracy requirements are not met as expected when using a new machine, or if processes need to be recertified. Here, too, the medical technology sector, as well as the aerospace industry, can be cited as classic examples of market entry barriers. These sectors often rely heavily on long-established partners and brands when implementing their manufacturing technologies. The costs and risks of switching to new technologies or new suppliers are analyzed very carefully.
Access to customers, which in the B2B sector often occurs through dealer networks or differentiated distribution channels, also partially limits market access for new companies: Dealer contracts contain contractual exclusivity clauses, and even if these are not formally included in the contract, the inclusion of a competitor in the distribution program could still have detrimental effects for the dealer. Therefore, especially in the B2B market with niche characteristics or highly specialized solutions, access to the right distribution channels is a crucial barrier, as the number of potential partners is limited given the manageable market size.
Further market entry barriers in practice
In addition to these three main categories, other market entry barriers may become relevant depending on the industry:
- Network effects: For industry-specific software or B2B platforms, switching becomes unattractive for customers as long as the critical mass remains with established providers.
- Access to suppliers: Market leaders in competition control access to specialized suppliers and critical raw materials through long-term exclusive contracts or vertical integration.
- Lack of references: Without reference projects and established industry networks, customer acquisition in the B2B business remains extremely difficult – an often underestimated but crucial market entry barrier for newcomers to succeed in the market.
Market exit barriers: the underestimated downside
Market exit barriers are factors that make it difficult for established companies to withdraw from a market, even if it is no longer profitable. High fixed costs due to specialized production facilities, long-term supply contracts with customers, or labor law obligations can force companies to remain in unprofitable markets and engage in intense price competition. Paradoxically, high market exit barriers also indirectly act as market entry barriers: Potential new entrants factor in that established suppliers must remain in the market despite declining margins – a risk that makes market entry even less attractive.
How do you correctly identify market entry barriers?
Why is superficial research not enough?
B2B markets are characterized by a complexity that extends far beyond publicly available information. While desk research provides basic market data, industry reports, and regulatory frameworks, crucial barriers often remain hidden: Informal business networks, unwritten industry standards, actual purchasing criteria, and real decision-making processes within companies cannot be uncovered through Google searches.
Systematically identify hidden barriers: The most critical market entry barriers are often the invisible ones. Exclusive supplier relationships are rarely communicated publicly, technical dependencies between systems only become apparent upon closer inspection, and the actual switching costs for customers are not mentioned in product brochures. These costs range from employee training and process adjustments to compatibility issues. Added to this are psychological factors: risk aversion among purchasing decision-makers, a preference for established brands, and the fear of having to justify poor decisions. These soft factors often determine success or failure, but they don't appear in any statistics.
Without systematic primary research into these market entry barriers through expert interviews, customer analyses, and competitor deep dives, these business-critical insights remain hidden and increase the risk of entering a market.
The role of professional market analysis for companies
Competitive analysis: Without a professional competitive analysis, market analysis will always remain a matter of intuition. Only a professional competitive analysis can guarantee the necessary objectivity, which forms the basis for a valid and reliable assessment of the competition. Especially when entering a new market, it is difficult to realistically assess the situation without a professional market analysis.
It's not uncommon to only be aware of a selection of large, established players in the market and overlook other, lesser-known competitors, including startups. These companies only become visible through a professional competitive analysis . A complete understanding of the competition and the competitive landscape is essential to uncovering all obstacles and barriers. Only this foundation allows for an objective and valid assessment of the challenge of entering the market.
Customer analysis: In B2B customer analysis, the decision-making structures, processes, and economic logic of customers are examined, and an attempt is made to understand which companies/industry constitute the target group, how these companies make decisions and purchasing decisions, and also to keep an eye on the development of the target industry. Especially when new industries or markets are to be developed, an external partner and a professionally conducted analysis make sense. This is partly because one cannot rely on data from one's own CRM system or one's own experience.
Regulatory and cost analysis: When entering a market, not only know-how, capital, and patents often represent significant barriers to entry. Necessary certifications or regulations can also pose a barrier. This must be considered when quantifying investment requirements. Underestimating regulatory hurdles in the targeted market is one of the most common mistakes made when entering a market.
Strategies for overcoming barriers
Building trust and reputation
Trust is a key prerequisite for business relationships in the B2B sector. Established competitors benefit from long-standing customer relationships. New market entrants represent an unknown factor and therefore a higher risk. To overcome this barrier to market entry, the targeted development of references, the implementation of pilot projects, and transparent communication of performance promises are crucial. Certifications, quality assurance, and case studies can further contribute to building credibility and reducing customer uncertainty.
Utilizing market niches as a strategic entry point
Focusing on clearly defined market niches can be an effective strategy for overcoming market entry barriers in B2B markets. Established competitors often concentrate on large, standardized customer segments, thereby failing to adequately address the specific needs of individual target groups. New market entrants can exploit these gaps by developing highly specialized solutions for narrowly defined use cases or industries. By strategically targeting niche markets and prioritizing resources, competitive pressure decreases. Simultaneously, the chances of gradually building references, know-how, and market knowledge increase, which can later serve as a foundation for expansion into adjacent market segments. Furthermore, these newly occupied niches then present barriers to entry for other providers, as a high degree of specialization is required.
Cooperations and partnerships as a gateway to a new market
Cooperations or joint ventures with established market players offer an effective way to circumvent existing market entry barriers. Distribution partnerships, strategic alliances, or collaborations with system integrators enable faster access to existing customer structures. Furthermore, new providers benefit from the trust their partners have built and their market knowledge. Active participation in industry networks, associations, and trade fairs can also increase visibility and facilitate access to decision-makers (and thus overcome market entry barriers). In this context, the possibility of acquisition as a market entry option should also be mentioned.
Conclusion: Strategies for overcoming barriers to entry
Successfully overcoming market entry barriers in B2B markets requires a systematic and long-term approach. Trust, risk reduction, cooperation, and potentially the use of market niches as a strategic entry point are key success factors.
Typical mistakes when entering the market
Common mistakes when entering B2B markets include insufficient analysis of the target market and its decision-making structures. Companies often underestimate the competition and existing regulatory hurdles, thus overlooking barriers to market entry. Further obstacles that reduce the chances of a successful market entry and are often underestimated include a lack of trust among potential customers in the "new" company and its products or services, as well as the often-existing long-term supplier relationships. Another mistake is focusing the business model solely on price without clearly communicating the economic value of the offering or considering regional or country-specific conditions. Finally, market entries frequently fail due to unrealistic expectations regarding market penetration and revenue growth in the early stages.
Conclusion: When is a professional market analysis worthwhile?
A professional market analysis is always worthwhile when market entry decisions involve high strategic and financial risks. Especially in capital-intensive markets, highly regulated industries, or complex distribution structures, superficial research and internal assessments are insufficient to realistically evaluate the actual market entry barriers. Commissioning a professional market analysis creates transparency, competitive advantages, reduces uncertainty, and enables a well-founded assessment of whether market entry is strategically sound, economically viable, and organizationally feasible. And, not least, it potential market entry strategies . Therefore, it should be understood less as a cost factor and more as a risk minimization tool – particularly given the significant investments required in research and development, certifications, market launch, and brand building. The higher the market entry barriers and the less prior market experience in the target market, the greater the added value of a professionally conducted market analysis.
Against this background, it is worthwhile for both founders and innovative companies that have been active in the market for some time to take a closer look at market entry barriers and to examine the associated special features in detail, especially in the B2B sector, when entering the market or starting a business.
Sources:
https://spirit.uni-trier.de/fileadmin/images/03_FLT_OnlineLab/SPIRIT_Toolbox_Porter.pdf
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