Objectives: Show
Defensive Strategies In addition to integrative, intensive, and diversification strategies, organizations also could pursue retrenchment, divestiture, or liquidation. Divestiture Guidelines for Divestiture Five guidelines when divestiture may be an especially effective strategy to pursue are listed below: . When firm has pursued retrenchment but failed to attain needed improvements . When a division needs more resources than the firm can provide . When a division is responsible for the firm’s overall poor performance . When a division is a misfit with the organization . When a large amount of cash is needed and cannot be obtained from other sources. Divestiture has become a very popular strategy as firms try to focus on their core strengths, lessening their level of diversification. For example, retailer Venator Group, formerly Woolworth, in 1999 divested eight divisions in order to become solely an athletic footwear and apparel company. The eight divisions were Music Box, Randy River, Foot Locker Outlets, Colorado U.S., Team Edition, Going to the Game, Weekend Edition, and Burger King. Venator several years ago was a $4.6 billion conglomerate before CEO Farah divested thirty-five of Venator's forty-two divisions, including all Woolworth and Kinney Shoe stores. A few divestitures consummated in 2000 are given in Table. Recent Divestitures Microsoft Sidewalk Entertainment AlliedSignal Laminate-Systems Monsanto NutraSweet Compaq Computer Corp. AltaVista Dupont Conoco Mead Corp. Northwood, Inc. IBM Networking Technology Kohlberg Kravis Roberts Gillette 95 Liquidation Guidelines for Liquidation Three guidelines when liquidation may be an especially effective strategy to pursue are: . When both retrenchment and divestiture have been pursued unsuccessfully . If the only alternative is bankruptcy, liquidation is an orderly alternative . When stockholders can minimize their losses by selling the firm’s assets Means of achieving strategies: Joint Venture and Combination Strategies Two or more companies form a temporary partnership or consortium for purpose of capitalizing on some opportunity. Joint venture is a popular strategy that occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity. Often, the two or more sponsoring firms form a separate organization and have shared equity ownership in the new entity. Other types of cooperative arrangements include research and development partnerships, cross-distribution agreements, cross-licensing agreements, cross-manufacturing agreements, and joint-bidding consortia. 96 Cooperative Arrangements . Research and development partnerships . Cross-distribution agreements . Cross-licensing agreements . Cross-manufacturing agreements . Joint-bidding consortia Joint ventures and cooperative arrangements are being used increasingly because they allow companies to improve communications and networking, to globalize operations, and to minimize risk. Nestl� and Pillsbury recently formed a joint venture named Ice Cream Partners USA based in northern California. The new company primarily sells super premium ice cream that is high in fat—and price. Super premium ice cream sales were up nearly 13 percent in 1998. When a privately owned
organization is forming a joint venture with a publicly owned organization; there Guidelines for Joint Ventures Six guidelines when joint venture may be an especially effective strategy to purse are: . Combination of privately held and publicly held can be synergistically combined . Domestic forms joint venture with foreign firm, can obtain local management to reduce certain risks . Distinctive competencies of two or more firms are complementary . Overwhelming resources and risks where project is potentially very profitable (e.g., Alaska pipeline) . Two or more smaller firms have trouble competing with larger firm . A need exists to introduce a new technology quickly Some Recent Example Joint Ventures AOL Bertelsmann AG AOL Europe Walt Disney Infoseek Go Network Nestl� Pillsbury Ice Cream Partners USA Dow Jones Pearson Vedomosti Volkswagen AG Porsche Sport Utility Vehicle Pacific Century Group DaimlerChrysler Aerospace AG Pacific Century Matrix Microsoft Ford Motor Company CarPoint EBay Microsoft Fair Market Excite At Home Tele Columbus Gmblt At Home Deutschland Which strategy would be effective when the stockholders of a firm can minimize their losses by selling the organization's asset?The correct option is: E) Liquidation
Explanation: In business terms, liquidation is defined as a strategy where the company sells its closures and assets to generate cash and distributed among the claimants. This strategy will help the company to minimize its loss by selling the assets.
Which strategy should be implemented when a division is responsible for an organizations overall poor performance?The right answer option is B: divestiture. Divestiture should be implemented when a division is responsible for an organization's overall poor performance.
Which strategy should an organization use when its products are currently in the declining stage of the product's life cycle?Retrenchment. This strategy can be used by an organization when its products are currently in the declining stage of the product's life cycle.
Which strategy offers products or services to a niche group of customers at the lowest price available on the market?Type one is a low-cost focus strategy that offers products or services to a small range (niche group) of customers at the lowest price available on the market.
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