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CA Intermediate · Financial Management and Strategic Management · Strategic Choices

Arjun Motors is a diversified group. Its management decides to sell its loss-making hotel division to another company so that it can concentrate on its core vehicle business and raise funds. Which grand strategy does this represent?

This is retrenchment through divestment. The firm is selling a loss-making division to raise funds and refocus on its core vehicle business, which reduces the scope of its activities. A stability strategy would leave businesses unchanged, while mergers and integration expand the scope.

  1. ARetrenchment through divestmentCorrect
  2. BStability strategy
  3. CExpansion through merger
  4. DBackward integration

Explanation

Selling a business division to raise funds and refocus on the core is divestment, a retrenchment strategy. A stability strategy would keep current businesses unchanged. Merger and backward integration are expansion moves, but the firm is shrinking its scope here.

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