Final answer:
Effective business strategies can indeed mitigate the exit barriers of an industry by allowing firms to manage the associated costs and risks more efficiently, enabling easier market exit or transition.
Step-by-step explanation:
The student's question explores whether effective use of business strategies allows a firm to mitigate the exit barriers of the industry. The answer to this question is A. True.
Exit barriers in an industry are factors that prevent a firm from leaving the market easily and include costs like asset write-offs and employee redundancies. Effective business strategies can help a company navigate these exit barriers more efficiently. For instance, diversification can spread risks and potential losses across different markets or products, making it less financially damaging if the firm needs to exit a particular industry. Moreover, strategic alliances or mergers can provide a way out through consolidation rather than outright market exit.
In some cases, exit barriers are related to the same factors that create entry barriers, like high initial investment or specialized assets, which can also deter new competitors. In markets with significant barriers to entry, new firms are not necessarily attracted by abnormally high profits, as the same factors that prevent easy entry also make it difficult to exit. Therefore, by managing these aspects effectively through strategic planning, a firm can reduce the financial and operational impact of exit barriers.