CA Intermediate · Financial Management and Strategic Management · Strategic Choices
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 business unit to a competitor and use the cash to strengthen its core electric vehicle line. Which grand strategy is Veda Autos following for this unit?
Veda Autos is following a divestment strategy, which is a type of retrenchment. It sells a weak unit with low market share in a slow-growth market and redeploys the cash to its core electric vehicle line, rather than expanding, integrating or diversifying.
- ADivestment (retrenchment)Correct
- BConcentric diversification
- CBackward integration
- DMarket penetration
Explanation
Selling a business unit that has low share in a slow-growing market is divestment, a form of retrenchment strategy. The proceeds are redeployed to the core line. Market penetration and integration involve expanding, not selling out, and concentric diversification means adding related businesses.
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