## Divestment Strategy vs. Liquidation Strategy
### Overview of Liquidation Strategy
Liquidation is the most extreme and unattractive retrenchment strategy. It involves closing down the entire firm and selling its assets. It is treated as the last resort when no other option is viable.
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### Side-by-Side Comparison
| Dimension | Divestment Strategy | Liquidation Strategy |
|---|---|---|
| Meaning | Sale or liquidation of a portion of the business (division, SBU, profit centre) | Closing down the entire firm and selling all its assets |
| Policy option / trigger | Part of a rehabilitation or restructuring plan; adopted when turnaround has failed. Turnaround may be bypassed if divestment is clearly the only answer | Adopted only in severe/critical conditions where both turnaround and divestment have failed or are not a viable solution |
| Purpose | Survival of the organisation (by removing the loss-making part) | Not a survival strategy — it is the last resort; organisation ceases to exist |
| Consequences for people | Some employment is retained (rest of organisation continues) | Complete loss of employment; stigma of failure |
| Scale | Partial — only the troubled unit is removed | Total — the entire enterprise is wound up |
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### The Retrenchment Escalation Ladder
```
[1] Turnaround → [2] Divestment → [3] Liquidation
(internal fix) (sell the part) (close entirely)
Try first If [1] fails Only if [1] & [2] fail
```
Each step is more drastic and harder to reverse than the previous. Liquidation is irreversible — the firm ceases to exist once assets are sold off.
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### Exam Tip: How to Distinguish in a Case
- Company continues → Turnaround or Divestment
- Only part of the business is being removed → Divestment
- The entire firm is being wound up → Liquidation
- Employees retained (at least some) → Divestment
- Loss of all employment → Liquidation