Question

How do highly specialized assets and high exit costs act as barriers to exit?

Highly specialized assets and high exit costs act as barriers to exit in several ways. Highly specialized assets, such as custom-built machinery or specialized software, may have little to no resale value or alternative use, making it costly for a firm to leave the market. High exit costs, such as contractual obligations, severance pay, and asset write-offs, can also deter a firm from exiting. Additionally, the potential loss of customer goodwill and reputation can be a significant barrier to exit.

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Use this slide to list all artificial (strategic) and natural entry barriers. These include high set-up and high R&D costs, predatory pricing, network effects, ownership or control and other barriers. With this slide, share your knowledge and data about barriers to exit. These barriers include highly specialized assets and high exit costs: asset write-offs and closure costs and the loss of customer goodwill. Populate this slide with examples of entry and exit barriers backed up by quantitative data to support your findings. We included analysis of entry and exit barriers for Amazon's rival, Alibaba, below.

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