Strategic Exit Barriers Framework
Barriers to exit
The Strategic Exit Barriers Framework identifies the barriers that prevent companies from exiting a declining industry. These barriers can be economic, strategic, informational, managerial, or emotional. The framework helps companies understand the challenges they face when trying to exit a declining industry and develop strategies to overcome them.
- Companies face various barriers when trying to exit a declining industry
- These barriers can be economic, strategic, informational, managerial, or emotional
- Understanding these barriers is crucial for developing effective exit strategies
- Identify the type of exit barrierDetermine whether the barrier is economic, strategic, informational, managerial, or emotional. This will help companies understand the root cause of the barrier and develop targeted strategies to overcome it.Pro tipConsider the company's overall strategy and goals when identifying the type of exit barrierWarningFailing to identify the correct type of barrier can lead to ineffective exit strategies
- Assess the impact of the barrierEvaluate the impact of the barrier on the company's ability to exit the industry. Consider the potential costs and benefits of overcoming the barrier, as well as the potential consequences of failing to do so.Pro tipUse data and analysis to assess the impact of the barrierWarningUnderestimating the impact of the barrier can lead to poor strategic decisions
- Develop a strategy to overcome the barrierBased on the type and impact of the barrier, develop a strategy to overcome it. This may involve investing in new technologies, divesting assets, or developing new business models.Pro tipConsider multiple scenarios and contingency plans when developing a strategyWarningFailing to develop a effective strategy can lead to failure to exit the industry
General Mills divested its commodity flour business due to declining demand and high exit barriers. The company developed a strategy to overcome the barriers and successfully exited the industry.
The Canadian dissolving pulp industry faced high exit barriers due to government subsidies and social concerns. Companies in the industry developed strategies to overcome the barriers, including selling assets to employees at a discount.
The framework was developed by Michael E. Porter as part of his work on competitive strategy. It is based on the idea that companies face various barriers when trying to exit a declining industry, and that these barriers can have significant implications for their strategic decisions.