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Discuss THREE types of defensive strategies.

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Divestiture

  • The business disposes/sells some assets/divisions that are no longer profitable/ productive.
  • Businesses may sell off divisions/product lines with slow growth potential.
  • Unproductive assets are sold to pay off debts/reduce operational costs.
  • Process used to withdraw its investment in another business.
  • Aims at acquiring additional capital

Retrenchment

  • Terminating the employment contracts of employees for operational reasons.
  • Decreasing the number of product lines/Closing certain departments may result in some workers becoming redundant.

Liquidation

  • All assets are sold to pay creditors due to a lack of capital/cash flow.
  • Selling the entire business in order to pay all liabilities/close down the business.
  • Creditors may apply for forced liquidation in order to have their claims settled.
  • Companies in financial difficulty may apply for business rescue to avoid liquidation.
answered by Master (629k points)
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