Barriers To Exit

AAA

DEFINITION of 'Barriers To Exit'

Obstacles or impediments that prevent a company from exiting a market. Typical barriers to exit include highly specialized assets, which may be difficult to sell or relocate, huge exit costs, such as asset write-offs and closure costs, and inter-related businesses, making it infeasible to sell a part of it. Another common barrier to exit is loss of customer goodwill.

INVESTOPEDIA EXPLAINS 'Barriers To Exit'

A company may decide to exit a market because it is unable to capture market share or turn a profit or for some other reason altogether. High barriers to exit might force it to continue competing in the market, which would intensify competition. Specialized manufacturing is an example of an industry with high barriers to exit, because it requires large up-front investment in equipment that can only do one task.

RELATED TERMS
  1. Porter Diamond

    A model that attempts to explain the competitive advantage some ...
  2. Porter's 5 Forces

    Named after Michael E. Porter, this model identifies and analyzes ...
  3. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it ...
  4. Product Differentiation

    A marketing process that showcases the differences between products. ...
  5. Economic Moat

    The competitive advantage that one company has over other companies ...
  6. Freelancer

    A freelancer is an individual who earns money on a per-job or ...
RELATED FAQS
  1. Does perfect competition exist in the real world?

    First, let's review what economic factors must be present in an industry with perfect competition: 1. All firms sell an ... Read Full Answer >>
  2. Which of these is not one of Porter's 5 competitive forces?

    Which of these is not one of Porter's 5 competitive forces? a) Threat if new entrantsb) Threat of subsitute goodsc) Rivalry ... Read Full Answer >>
  3. What are the key differences between marketing and advertising?

    The key differences between marketing and advertising are based on how each term defines a separate function in the process ... Read Full Answer >>
  4. Are all fixed costs considered sunk costs?

    In accounting, finance and economics, all sunk costs are fixed costs. However, not all fixed costs are considered to be sunk. ... Read Full Answer >>
  5. What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?

    The parametric method, also known as the variance-covariance method, is a risk management technique for calculating the value ... Read Full Answer >>
  6. What is backtesting in Value at Risk (VaR)?

    The value at risk is a statistical risk management technique that monitors and quantifies the risk level associated with ... Read Full Answer >>
Related Articles
  1. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
  2. Fundamental Analysis

    Explaining the Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.
  3. Entrepreneurship

    The Story Behind Shake Shack's Success

    A humble Madison Square Park hot dog stand grew to become a gourmet casual food powerhouse in a classic American success story.
  4. Entrepreneurship

    How Americans Can Apply For European MBA Programs

    Studying for an MBA in Europe is a great idea for Americans looking for a career boost.
  5. Entrepreneurship

    The Top 5 YouTube Millionaires

    Enterprising content creators have been able to use YouTube to rake in millions each year.
  6. Economics

    Where To Search For Yield Today

    It’s hard to miss that there has been a pronounced slowdown in the U.S. economy this year.
  7. Entrepreneurship

    How Many Startups Fail And Why?

    Why do so many businesses fail? And for that matter, how many of them actually do fail?
  8. Entrepreneurship

    10 Most Successful Women Entrepreneurs of the Decade

    Women entrepreneurs have been able to withstand economic and business pressures to rise to the top in a number of industries from pharma to fashion.
  9. Economics

    What is the Private Sector?

    The private sector encompasses all for-profit businesses that are not owned or operated by the government.
  10. Entrepreneurship

    Serial Entrepreneurs Venture And Venture Again

    Serial entrepreneurs start up a venture, sell it, and start another one, and they often benefit from their previous experiences.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center