What strategy involves downsizing parts of a business?

The strategy that involves downsizing parts of a business is divestiture. This strategy entails the process of selling off a subsidiary, division, or a portion of the business to streamline operations, improve cash flow, or focus on core activities. By divesting, a company can eliminate underperforming assets or those that do not align with its main objectives, allowing for more efficient allocation of resources.

Divestiture can be a crucial part of a broader turnaround strategy when a company is looking to recover from financial difficulties or to enhance competitiveness by focusing on its strongest business segments. This approach can lead to improved operational efficiency and profitability, as the company can concentrate its efforts on the most promising areas while shedding parts that are not contributing positively. Additionally, the funds generated from a divestiture can be reinvested into core business activities or used to pay down debt, supporting overall business health.