Which of the following is NOT a factor that contributes to high exit barriers?

Prepare for the CIPS Defining Business Need (L4M2) Test with multiple choice questions and insightful explanations. Enhance your understanding and ensure success!

The correct answer is that company market share is not a factor that contributes to high exit barriers. High exit barriers are typically associated with costs and commitments that a company incurs in relation to its business operations.

Factors that contribute to high exit barriers often include high investment in specialized assets, which makes it difficult to liquidate or reallocate those assets for other uses, thus tying up capital in the business. Emotional ties to the business can also create reluctance to exit, as business owners and stakeholders may feel personally invested in their company's success. Mandatory contracts with suppliers impose legal or financial obligations that can complicate or prevent a smooth exit.

In contrast, while company market share might reflect a firm's competitive position and profitability, it does not inherently create barriers to leaving the market. A firm could have a significant market share and still decide to exit if strategic conditions, profitability, or investor focus change. Therefore, market share is more about the current competitive landscape rather than a barrier that keeps a firm from exiting the industry.

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