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CIPS L5M6 Exam - Topic 2 Question 14 Discussion

High exit barriers in a marketplace mean that rivalry between suppliers is low. Is this statement TRUE?
C) No -- rivalry between existing suppliers is high
A) Yes -- rivalry is low as buyer power is strong
B) Yes -- rivalry is low as supplier power is strong
D) No -- high exit barriers mean no new suppliers will enter the marketplace

CIPS L5M6 Exam - Topic 2 Question 14 Discussion

Actual exam question for CIPS's L5M6 exam
Question #: 14
Topic #: 2
[All L5M6 Questions]

High exit barriers in a marketplace mean that rivalry between suppliers is low. Is this statement TRUE?

Show Suggested Answer Hide Answer
Suggested Answer: C

The correct response is No -- rivalry between existing suppliers is high. Exit barriers refer to the difficulty suppliers face when attempting to leave a market or industry. These barriers may include high investment in specialised assets, contractual obligations, redundancy costs, or reputational damage. When suppliers are unable or unwilling to exit, they remain within the industry regardless of declining profitability. This forces them to compete aggressively to retain market share, which increases rivalry among existing firms.

Options A and B are incorrect because the question relates to rivalry, not directly to buyer or supplier power. Option D is also incorrect because exit barriers do not influence new suppliers entering; they affect current suppliers trying to leave.

A practical example is the oil and energy industry, where huge capital investments make it very costly to exit. Companies stay even during downturns, resulting in fierce rivalry.

[Ref: CIPS L5M6 Study Guide, p.114 -- Porter's Five Forces: Exit Barriers and Rivalry]


Contribute your Thoughts:

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Kathrine
8 hours ago
I think C is right, rivalry is definitely high.
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Lindy
6 days ago
I thought high exit barriers would deter new suppliers, but I’m not clear on how that affects rivalry among existing ones.
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Carylon
11 days ago
I feel like this question is similar to one we practiced about market dynamics. I think the answer is C, but I’m a bit confused.
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Leonie
16 days ago
I’m not sure, but I think high exit barriers mean suppliers are stuck in the market, which could increase competition among them.
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Adria
2 months ago
I remember discussing exit barriers in class, and I think they actually lead to higher rivalry, not lower.
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