Quick Divestment Strategy
Sell the business early in decline
The quick divestment strategy involves selling the business early in decline to maximize the value of the sale.
- A firm must have a clear understanding of its cash flow and residual strengths to implement a quick divestment strategy successfully.
- The quick divestment strategy requires a focus on maximizing the value of the sale.
- A quick divestment strategy can provide a firm with a superior position to divest its business.
- Assess the industry structure and competitive advantageAssess the industry structure and competitive advantage to determine the best time to sell the business.Pro tipFocus on maximizing the value of the sale.WarningThis strategy may not be suitable for firms with high exit barriers or a strong competitive advantage.
- Evaluate the firm's exit barriers and competitive positionEvaluate the firm's exit barriers and competitive position to determine the best time to sell the business.Pro tipFocus on maximizing the value of the sale.WarningThis strategy may not be suitable for firms with high exit barriers or a strong competitive advantage.
- Develop a strategy to maximize the value of the saleDevelop a strategy to maximize the value of the sale, such as by investing in marketing or reducing costs.Pro tipFocus on maximizing the value of the sale.WarningThis strategy may not be suitable for firms with high exit barriers or a strong competitive advantage.
General Electric
General Electric successfully implemented a quick divestment strategy in a declining industry by selling its business early in decline.
OutcomeGeneral Electric was able to maximize the value of the sale and divest its business profitably.
Mead Corporation
Mead Corporation also successfully implemented a quick divestment strategy in a declining industry by developing a strategy to maximize the value of the sale.
OutcomeMead Corporation was able to maximize the value of the sale and divest its business profitably.
Failure to recognize decline
Firms that fail to recognize decline may not take timely action to adapt their strategy, leading to a loss of competitive advantage.
Engaging in a war of attrition
Firms that engage in a war of attrition with competitors having high exit barriers may lead to disaster, as these competitors will not yield position without a significant investment.
Harvesting without clear strengths
Firms that harvest without clear strengths may collapse, as customers quickly take their business elsewhere once marketing or service deteriorates or prices are raised.
The quick divestment strategy is based on the idea that a firm can maximize its net investment recovery from a declining business by selling it early in decline.
Source · BOOK
Competitive Strategy