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CA Intermediate · Financial Management and Strategic Management · Strategic Choices

A Bengaluru firm earns most of its revenue from a mature business with a low market share in a slow-growing industry. It decides to sell part of this business's assets to raise cash and focus resources on a more promising unit. According to the typology of retrenchment strategies, this is best described as:

This is a divestment strategy. Divestment means selling a part of the business or its assets to raise cash and refocus on better opportunities. Turnaround would try to fix the unit's performance, and liquidation would wind up and sell the entire business, which the firm is not doing.

  1. ATurnaround strategy
  2. BDivestment strategyCorrect
  3. CLiquidation strategy
  4. DCaptive company strategy

Explanation

Selling a part of a business or its assets to raise funds and refocus is divestment. Turnaround aims to improve the performance of the weak unit through efficiency measures. Liquidation involves closing down the whole business and selling all assets, which is not happening here because the firm only sells part and continues operating.

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