How can high R&D costs affect a company's entry into a new market?

Understanding entry and exit barriers is crucial for a solid business strategy as it helps in assessing the competitive landscape of the market. Entry barriers determine the ease or difficulty for new competitors to enter the market. If entry barriers are high, it can deter new entrants, thus reducing competition. On the other hand, exit barriers determine the ability of a company to leave the market. High exit barriers may result in a company continuing in an unprofitable market because the cost of leaving may be higher than staying. Therefore, understanding these barriers can help a business in strategic planning, decision making, and risk management.

Entry barriers for Alibaba include high set-up costs, predatory pricing, and network effects. Alibaba has a well-established network and customer base which makes it difficult for new competitors to enter the market. Additionally, Alibaba's pricing strategy can be aggressive, making it hard for competitors to match their prices. Exit barriers include highly specialized assets and high exit costs. Alibaba has invested heavily in its infrastructure and technology, which would be difficult to sell or repurpose for other uses. Exiting the market would also result in significant financial losses due to asset write-offs and closure costs.

Some potential barriers to exit when closing a business include highly specialized assets that may not be easily liquidated or transferred, high exit costs such as asset write-offs, closure costs, and potential penalties or fees associated with breaking contracts or leases. Additionally, there can be a significant loss of customer goodwill, which can impact the business's reputation and future endeavors.