The threat of new entrants is a measure of the degree to which barriers to entry make it easy or difficult for new companies to get started in an industry. If new companies can easily enter the industry ,then competition will increase and prices and profits will fall. On the other hand,if there are sufficient barriers to entry, such as large capital requirements to buy expensive equipment or plant facilities or the need for specialized knowledge,than competition will be weaker and prices and profits will generally be higher.