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ABSTRACT
This article examines market exit, barriers to exit, modes and strategies of exit, reasons for exit, and the consequences of exit through a literature review of the academic literature and the popular press. There is very little empirical research in this area. The article attempts to analyze the applications of market exit and barriers to exit theories, and consequences of exit with recent examples taken from newspapers and popular business magazines. Despite the fact that there are strong barriers to exit, companies are sometimes forced to exit markets. Market-exit or productelimination decisions influence employees, distributors, suppliers, and customers. This influence is usually negative and is in the form of cognitive dissonance. (C) 2000 John Wiley & Sons, Inc.
Firms sometimes decide to remain in business even though they earn a subnormal rate of return. There are a variety of reasons for not exiting the market or for not divesting the product or the strategic business unit that is earning low profits or even incurring a loss. Barriers to exit are the major factors that influence these firms to remain operating at low profit or at loss. Indeed, the business press provides ample anecdotal evidence. Porter (1976), who examined businesses in the PIMS database, concluded that exit barriers result in expensive and ineffective attempts in turnaround strategies. Companies attempting to exit markets evaluate the alternatives and the consequences of the alternatives. Ansic and Pugh (1999) indicate that the expected present value of remaining in the market influences a firm's market-exit decision and that the firm will exit only when current losses exceed the present value of expected profits.
There are a variety of market-exit situations, some of which are more serious than others. Companies exit markets in order to improve their financial situations or to survive by avoiding further losses. Companies sometimes exit markets partially by eliminating a single product or a full product line or closing down a branch or a division. Sometimes, the market exit is in the form of closing down a whole business. No matter what the exit situation is, all market-exit conditions have some common characteristics and common effects on company employees, customers, distributors, and suppliers. Thus, this article treats market exit and barriers to exit in general.
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