Product differentiation is an obstacle to market entry in that potential suppliers must either engage in advertising, which would require large and long-term capital expenditure, or fix their selling prices below those of established suppliers, which would then not be sufficient to cover average costs. Transnationals are in a better position to overcome market entry barriers caused by product differentiation since the exploitation of advantages arising from specific know-how in this field is one of the main reasons for the internationalization of production.