The competitive threat that outsiders will enter a market is weaker when?

The competitive threat of new entrants into a market diminishes significantly when strong industry members indicate their readiness to combat new entries. This signaling can take various forms, such as aggressive marketing, price competition, or strategic partnerships. When established players demonstrate that they have the resources and willingness to fight back against potential new entrants, it creates a psychological barrier that discourages outsiders from entering the market. This threat can also enhance the perceived risks and potential costs to newcomers, making them think twice before investing in a competitive landscape where they may face staunch opposition.

On the contrary, substantial economies of scale, rapid industry growth, and nonexistent entry barriers may encourage new entrants rather than deter them. High economies of scale can entrench existing players but don't inherently signal aggression against newcomers. Rapid growth can attract new players who see opportunities for profit, and nonexistent entry barriers make it easier for outsiders to enter without substantial hindrance. Thus, the presence of strong, proactive measures from current industry members is a critical factor in maintaining market stability against the threat of new entrants.