It is sometimes the case that companies have expanded in the past and now find that they have excess capacity. Alternatively, they find that the demand for a particular product has fallen, in both cases, the company may need to disinvest.
Disinvestment is the process of reducing the capital stock. It may be viewed as a type of investment in reverse, although that may sound like a comical way of expressing it. It is certainly the case that good management needs to be aware of the ideal amount of capital that a business possesses in order to meet its corporate objectives and satisfy customer requirements.
Once an organisation is aware of the optimum amount of capital required to meet long run demand in that case it may engage in further investment , if that is what is required, or disinvestment, in other words reducing the amount of capital because demand does not justify that requirement.
Disinvestment Strategy in Business
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