This is usually done either because of intense competition or operational difficulties or inefficiencies in a particular sector or market. This strategy is usually associated with retreat and regroup so that the company can fight sometime in the future. It is also known as Contraction strategy.
The primary objective of Strategic withdrawal is to increase ability of the company to attract customers in a few high growth segments by focusing on offerings in that segment and strategically withdrawing from the other smaller segments where profitability is low so as to conserve resources for the more profitable segments.
Strategic Withdrawal is usually associated with markets which are heterogeneous with respect to customer needs and product uses and service attributes in the market.
Companies usually have to go in for Strategic Withdrawal because the competitors of the company in question have better and greater resources and competencies and thus pose huge challenges before the company.
Companies whose products are associated with limited product awareness or customer loyalty may have to resort to Strategic Withdrawal.