Learning by Doing: as a firm gains experience making a product, they learn how to streamline their operations, making them more efficient. If you’re the incumbent, this process of learning by doing can yield a pretty robust advantage over newcomers whose inexperience means that they’re stuck with higher costs. This insight also has strategic implications. It says to aggressively seek market leadership in order to gain a self-reinforcing advantage: If you’re the market leader, you produce the most, which gives you the most opportunities for learning by doing, which will lower your costs the most, further reinforcing your position as a market leader.   

The benefits of mass production can keep small firms from being competitive entrants.
Mass production is often more efficient than producing in small batches, although it often involves big fixed costs on machinery. These big upfront costs can make it difficult for new entrants to compete. In particular, if small businesses lack the funding to make these investments, they’ll operate at a substantial cost disadvantage relative to the large incumbent firms.

The benefits of mass production can keep small firms from being competitive entrants.
Developing cheaper ways to make existing products can be at least as valuable as developing new products because it’ll give you a lasting cost advantage over potential entrants.

Relationships with suppliers can get you cheaper inputs
As you develop close relationships with your suppliers, you’ll become a valued business partner. As you grow, your business will become even more important to their success, making them invested in your success. You’ll be able to use your buying power to demand discounts on your raw materials, wholesale goods, and other inputs.

Access to key inputs can freeze your competitors out.
By tying up key inputs—often through long-term contracts—incumbents can make it difficult for new entrants to succeed. In some cases, these contracts run afoul of regulators. But in others, the effects are less direct. For instance, tech giants like Google and Facebook are able to tie up key programming talent, making it difficult for start-ups to compete.

Government regulations can make it difficult to start a new business. For example, in some countries, it can take more than three months to step through the dozen or so separate procedures required to register a new business, and the associated fees can easily add up to more than a year’s income. In the United States, the barriers aren’t so high, as there are only half-a-dozen steps, and they can be completed within a week. That said, there are some sectors of the U.S. economy that the government regulates closely—often for good reason.

Compulsory licenses can limit competition.
The government directly regulates entry in some markets, and you’ll need a government-issued license to be allowed to do business. For instance, you can’t operate a radio or TV station without a license from the Federal Communications Commission. These licenses are both scarce and a hassle to obtain, which serves as a barrier to entry.

Lobbying can create new regulatory barriers.
Many big businesses spend millions of dollars lobbying governments. Sometimes, they do this in ways that serve the common good. But often it’s because they hope to convince the government to implement rules that will interfere with the plans of potential new entrants. You might be surprised to sometimes see incumbent firms arguing for more government regulations in their industry. The incumbents are hoping that more intense regulation—while costly—will insulate them from competition.

A company with a fierce enough reputation will scare potential competitors away.