Question

The existence of high exit barriers such as ownership of specialized assets (e.g., large aircraft) in the airline industry indicates that

a. customers are relatively weak because of the high switching costs created by frequent flyer programs.
b. the industry is moving toward differentiation of services.
c. the competitive rivalry in the industry is severe.
d. the economic segment of the external environment has shifted, but airline strategies have not changed.

Answer 1

The existence of high exit barriers in the airline industry indicates that the economic segment of the external environment has shifted, but airline strategies have not changed.

Step-by-step explanation:

The existence of high exit barriers such as ownership of specialized assets (e.g., large aircraft) in the airline industry indicates that the economic segment of the external environment has shifted, but airline strategies have not changed. High exit barriers make it difficult for airlines to leave the industry or switch to another industry, even when faced with financial difficulties. This suggests that the airlines are still operating under the same strategies, despite changes in the external environment.

In contrast, if the industry were moving toward differentiation of services, we would expect to see airlines implementing new strategies and capturing different market segments. Similarly, if customers were relatively weak due to high switching costs created by frequent flyer programs, we would expect to see airlines offering incentives to attract and retain customers.

Therefore, option d. the economic segment of the external environment has shifted, but airline strategies have not changed accurately describes the situation in the airline industry with high exit barriers.