Assessment of Performance Measurement in - St Clements University

usinesses are hard to harvest because there are few options for
incremental expense reduction; an extreme example is one in which the
plant will quickly fail to operate if not maintained.
4. Quick divestment: This strategy rests on the premise that the firm
can maximize its net investment recovery from the business by selling it
early in decline, rather than by harvesting and selling it later or by
following one of the other strategies. Selling the business early usually
maximizes the value the firm can realize from the sale of the business,
because the earlier the business is sold, the greater is the uncertainty
about whether demand will indeed subsequently decline and the more
likely other markets for the assets, like foreign countries, are not
glutted.
In some situations it may be desirable to divest the business before
decline, or in the maturity phase. Once decline is clear, buyers for the
assets inside and outside the industry will be in a stronger bargaining
position. On the other hand, selling early also entails the risk that the
firm’s forecast of the future will prove incorrect.
Divesting quickly may force the firm to confront exit barriers like image
and interrelationships, although being early usually mitigates these
factors to some extent. The firm can use a private label strategy or sell
product lines to competitors to help ease some of these problems.
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