Financial performances of a company being eroded or squeezed

Question

When are the financial performances of a company being eroded or squeezed?

Answer 1

Performing fundamental operation on the set of businesses a company is in becomes an appealing strategy choice when a diversified company’s financial performance is being eroded or squeezed by:

i. Too many businesses in declining, sluggish-growth, low-margin, or otherwise unattractive industries.

ii. Too many competitively feeble businesses.

iii. Ongoing declines in the market share of one or more main business units that are declining victim to more market-savvy competitors.

iv. An extreme debt load with interest costs that eat intensely into profitability.

v. Offensive acquisitions which have not lived up to expectations.

Key Concept:

Reorganizing includes striping some businesses and acquiring others so as to put a complete newface on the company’s business schedule.