CA Intermediate · Financial Management and Strategic Management · Strategic Choices
Sundaram Textiles, a Coimbatore-based yarn maker, decides to sell its loss-making ready-made garment division and use the proceeds to strengthen its core spinning business, which it understands best. Which grand strategy does this decision illustrate?
The decision is retrenchment through divestment. The firm sells a loss-making division and redirects resources to its core spinning business. It is not growing sales in current markets, integrating along the value chain, or entering unrelated businesses, so the other options do not fit.
- ARetrenchment through divestmentCorrect
- BMarket penetration
- CForward vertical integration
- DConglomerate diversification
Explanation
Selling off a division that is not performing, in order to concentrate on the core business, is divestment, a form of retrenchment strategy. Market penetration would involve selling more of existing products in existing markets, which is not described. No new business is being added, so diversification and integration do not apply.
Did you get it right without looking?
One question tells you little. A timed set on Strategic Choices shows your real accuracy, how long you take and where you lose marks.
More Strategic Choices questions
- A listed Indian conglomerate has a division making consumer batteries. The division has a low relative market share in a market growing slow…
- A diversified Indian conglomerate classifies its business units on a matrix of relative market share and industry growth rate. One unit has …
- Tata Motors-like firm 'Veda Autos' has a vehicle line with low market share in a slow-growing market. Management decides to sell the entire …
- Sundaram Textiles, a Coimbatore-based yarn maker, acquires a cotton-ginning unit that supplies it with raw cotton. Under Porter's classifica…
- Kaveri Textiles has a well-known cotton shirt brand and now launches the same shirts in the Middle East using its existing brand and product…
- A Mumbai pharma company wants to enter the US generics market. It lacks local regulatory expertise, so it signs a contract with a US firm: b…