Defensive strategies

Question 1

Types of defensive strategies

Answer 1

-Divestment
-Retrenchment
-Liquidation

Question 2

Divestment

Answer 2

-The business sells some assets that are no longer relevant

-Shareholders withdraw their investment share in the business

-The business decreases the number of shareholders by selling ownership

-Selling off product lines with slow growth potential

Question 3

Retrenchment

Answer 3

-The business terminates the employment contracts of employees for operational reasons

-This is an aggressive strategy where management takes bold decisions by letting go of employees to reduce operational costs

-Decreasing the number of product lines resulting in some workers becoming redundant

-The business can reduce prices for customers

Question 4

Liquidation

Answer 4

-The business sells all its assets to pay creditors due to a lack of capital

-Its an unpleasant process of bringing business activities to an end

-Selling the entire business to pay shareholders a fair price for their shares upon the closure of the business