Due to economic regression in Freedonia, the profitability of the large corporation Happiness Products Inc. (HPI) was poor. An analysis of the company's business showed that the company could become profitable if it divested a few strategic business units under its banner. From which of the following businesses would HPI find it most easy to exit?
A) the automobile industry, where the company has contractual obligations with suppliers
B) the airline business, where the company's strategic commitments are long-term
C) the e-commerce retail business, where investments on assets are low
D) the pharmaceutical business, where the company has a large number of fixed costs

Question

Quizplus · Accepted Answer

HPI would find it most easy to exit the e-commerce retail business where investments on assets are low. Exit barriers are comprised of both economic and social factors. They include fixed costs that must be paid regardless of whether the company is operating in the industry or not. A company exiting an industry may still have contractual obligations to suppliers, such as employee health care and retirement benefits, as well as severance pay. Social factors include elements like emotional attachments to certain geographic locations.

Due to Economic Regression in Freedonia, the Profitability of the Large