barriers to exit
For many businesses there are also barriers to exit which increase the intensity of competition in an industry because existing firms have little choice but to “stay and fight” when market conditions have deteriorated. There are several costs associated with exiting an industry.
(1) Asset-write-offs – e.g. the expense associated with writing-off items of plant and machinery, stocks and the goodwill of a brand
(2) Closure costs including redundancy costs, contract contingencies with suppliers and the penalty costs from ending leasing arrangements for property
(3) The loss of business reputation and consumer goodwill - a decision to leave a market can seriously affect goodwill among previous customers, not least those who have bought a product which is then withdrawn and for which replacement parts become difficult or impossible to obtain.
(4) A market downturn may be perceived as temporary and could be overcome when the economic or business cycle turns and conditions become more favourable
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