market exit


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market exit

the exit from a MARKET of an established supplier. Market exit constitutes a major BUSINESS STRATEGY decision, reflecting a strategic initiative on the part of a firm to reshape its product/market positioning. Such exit occurs largely in response to a sustained LOSS-making situation or poor PROFIT rate or low perceived growth potential. Successful exit requires the firm to overcome any BARRIERS TO EXIT. See DIVESTMENT.

market exit

or

exit

the withdrawal from a MARKET of a firm or firms. In the THEORY OF MARKETS, a firm will leave a market if it is unable to earn a NORMAL PROFIT in the long run. Firm exit plays an important role in removing EXCESS CAPACITY and reducing total market supply.

Because of various BARRIERS TO EXIT, however, firms may be slow to leave a market even when faced by persistently adversetrading conditions. See alsoLOSS, AVERAGE COST ( SHORT RUN), CONTRIBUTION.