Research On The Impact Of Entry Regulation On Business Selection

Entry regulation is a wide-spread phenomenon in almost all industry or service sectors, although the intensity and scope of the entry regulation may differ from each other. As a government function, it has very evident enforceability, making it an entry barrier for those who want to be engaged in the business operation. Actually, every sector has an intrinsic structure and a profitability level which makes it stabilized. When a market entry regulation is levied upon the outside enterprises, a new stabilized structure and profitability level is born. What the outside enterprises should do is to take into account the gap between the real structure and profitability level and the intrinsic one and analyze the possible chance of winning profit from investment in the sector. Some sectors are highly concentrated and have very high profit levels, but it doesn't necessarily mean a high chance of winning profit. On the contrary, some sectors are highly dispersed and have very low profit levels, thus there is seemingly no chance of winning profit, but the case is just the opposite due to lack of regulations.Besides, entry regulation has direct influence on the outside enterprises'entry cost, strategic decision and relationship with competitors. The enterprise should figure out the business scope, extent and cost bounded with the regulation and make sensible choices after comparing them with the future income. For example, a strict entry regulation and a profit chance simultaneously exist within a sector, the outside enterprise may choose a substitutive sector for the new business. Taking another example, if a sector is overly saturated before the government's taking restriction actions, meanwhile the outside enterprise has a very distinct low-cost advantage, it may enter into the new business through mergers and acquisitions with the high-cost insiders instead of establishing new enterprises.All entry regulations have very deep implications and government's attempts that outsiders must be aware of before determining the entry method. Also, outside enterprises should try to figure out the possible changes in the entry regulations and wait for the appropriate entry opportunity. For example, the trend of decrease of state-owned capital and increase of private capital in most sectors implies a lot of investment opportunities and at the same time, some sectors are unlikely to get loose entry regulations, which should be in the mind of the enterprise's decision-maker when he is considering entering a new business or not.