Divestment and Liquidation Strategy

On many occasions, both the divestment strategy and the liquidation strategy are taken as negative movements from the business point of view. The truth is that both strategies are simply business movements that are adopted in based on needs or a specific purpose, always under planning and objectives concrete.

First of all we are going to talk about the divestment strategy. It is a strategy consisting fundamentally in the sale of a part of the company or of the cessation of a series of activities of the same, reduction of investments or withdrawal from a market concrete. The purpose of the divestment strategy is to get more resources. These new resources obtained through divestment will be destined to economic activities with a greater expectation of business.

A classic example of divestment is when a part or subsidiary of the company does not adapt to the standards of the rest of the organization, this may be due to action or omission of employees, managers or simply questions of market.

In practice, the divestment strategy involves reducing the size of a given business organization in order to enable a relaunch with greater force. It involves a clear restructuring of it.

Regarding the liquidation strategy. It clearly and simply supposes the cessation of the activity of the company because it is not possible to carry out the economic activity. In this sense, the non-viability of the company is considered, and therefore, it is required that it be closed, since if it continues to operate, the losses experienced would be greater.

It is a complicated decision from a management point of view, first of all because of the entire process that opens to continuation in which the possession of all the assets of the company and its future destination after the cessation of the herself. But it is also complicated in the aspect of the labor relations that the company has with its workers, which will have to be terminated.

Beyond these circumstances that make it difficult or may hinder the taking of these strategies, it is worth mentioning that they are very common strategies and reiterate that in the first Of the cases, the purpose is none other than to redirect the efforts of the company towards another sector, while in the second it is to avoid losses greater than those already being having.