Demergers Flashcards
1
Q
Define demerger
A
A demerger is when a business is split up into separate components
2
Q
What is a spin off?
A
When a business creates a separate company from part of its existing one, but retains some form of ownership
3
Q
Why do demergers occur?
A
- To achieve economies of scale
- To realise capital
- To specialise in different fields
- Different characteristics of two components within an organisation might restrict profit maximisation
4
Q
What are the impacts of demergers on businesses?
A
- Disposal of unwanted elements of the organisation
- Reduction in costs
- Diseconomies of scale might be reduced
- Horizontal demerger can create competition in an industry
5
Q
What are the impacts of demergers on workers?
A
- The workforce might feel threatened
- Demergers could create new opportunities for employees to take on new roles
6
Q
What are the impacts of demergers on consumers?
A
- Disruption of services
- Increased choice and competition
- Contractual changes
