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CS Professional · Strategic Management and Corporate Finance · Strategic Analysis and Planning

A diversified Indian group sells its loss-making textile division to a buyer and uses the proceeds to reduce debt and strengthen its core engineering business. Which type of strategy is this?

This is retrenchment through divestment. The group is selling a loss-making division and using the proceeds to cut debt and focus on its core business, which reduces the scope of operations instead of expanding or maintaining them.

  1. AStability strategy of no-change
  2. BExpansion through joint venture
  3. CRetrenchment through divestmentCorrect
  4. DVertical integration

Explanation

Selling off a division to reduce losses and refocus on the core business is divestment, a form of retrenchment strategy. A stability strategy would leave the portfolio unchanged. A joint venture and vertical integration are expansion routes, not exits.

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