Letters: Shedding businesses

Apropos Shailesh Dobhal's column "Spring-cleaning at India Inc" (Across the Board, April 14), some principles come to mind that should decide the need for shedding a part of business. The loss of competitive advantage or the inability to match the growth of the competitor in the same business is one - the emergence of two or three big companies have dwarfed some others to sell off their units.

The opportunity cost of investing the returns from the sale of an existing entity in a more productive field is also a key point that needs to be factored in. So, when a running business is disposed of to repay debt or divert the sum to less useful purposes, it goes against the principle - the sale of public sector undertakings to cover fiscal deficit, for example.

Besides, when a business reaches maturity, leaving little scope for innovation, a strategic decision might be necessary to enter another groundbreaking industry.

Then, too much of diversification could result in diminishing results from prevalent units. In this case, the relevance of the units for one another's purpose, need for market presence and future prospects could decide the matter.

Lastly, the size of the organisation, in terms of the topline and human resources might induce the company to sell off or hive off a part of it as size breeds bureaucratic practices and deters innovation. Similarly, a small firm could consume more resources, yet yield much less.

Y G Chouksey Pune

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