CMA Intermediate · Operations Management and Strategic Management · Strategic Analysis and Strategic Planning
A diversified Indian group sells off a loss-making textile division to a buyer and uses the proceeds to strengthen its core engineering business. Which retrenchment strategy is this?
This is divestment. The firm sells one of its business units, the loss-making textile division, to another party and carries on with its remaining business. Liquidation would instead mean winding up the entire company and selling off its assets.
- ADivestmentCorrect
- BLiquidation
- CTurnaround through cost cutting
- DCaptive company strategy
Explanation
Selling a division or business unit to another party while the firm continues operating is divestment. Liquidation would mean closing down the whole firm and selling its assets piecemeal. Turnaround focuses on improving the existing unit's efficiency rather than selling it.
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