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148 PART 2 • STRATEGY FORMULATION

TABLE 5-5 Companies That Recently Declared Chapter 11 Bankruptcy
Tribune Company—This media conglomerate that owns the Chicago Tribune, the Los Angeles Times, the Chicago Cubs, and
Wrigley Field recently declared bankruptcy.
Advantage—This car rental company filed for bankruptcy in December 2008 as cash-strapped consumers do less traveling during
a slumping economy. Advantage is closing about 40 percent of its U.S. retail locations.
Bally Total Fitness—For the second time in two years, this gym operator filed for bankruptcy protection in December 2008.
The company operates nearly 350 facilities nationwide.
Pilgrim’s Pride—U.S. meat makers’ profits have shrunk in the wake of high feed prices and excessive debt. In December 2008,
Pilgrim’s Pride, the largest U.S. chicken producer, filed for Chapter 11 bankruptcy protection.
Hawaiian Telcom Communications Inc.—The largest telephone company on the Hawaiian Islands, this firm filed for Chapter 11
bankruptcy protection in December 2008. The company cited increased competition, economic volatility, and its failure to meet
capital expenditure needs.
Circuit City—This electronics retailer recently closed 155 of its more than 700 stores and declared Chapter 11 bankruptcy.
Mattress Discounters—Following $2.9 million in losses in 2008 in the New England market, the firm closed 48 stores and filed
for Chapter 11 protection.
Washington Mutual—This huge firm recently filed for bankruptcy protection after selling its banking operations to JPMorgan Chase.
It was the biggest bank failure in U.S. history at the time.
Mrs. Fields Famous Brands LLC—The company was founded by housewife Debbi Fields in the late 1970s. Her famous homemade
cookies quickly grew in popularity. The company filed for bankruptcy protection.
Tropicana Entertainment—The casino company declared Chapter 11 recently when its New Jersey casino license was revoked.
The company has operated in the hotel/hospitality industry for more than 35 years.
Polaroid—Founded in 1937 by Edwin Land, the Massachusetts-based company was most famous for its instant film cameras.
Polaroid ceased making cameras in 2007 and announced it will stop selling film in 2009. In December 2008, Polaroid filed
for Chapter 11 bankruptcy protection.

• When an organization has failed to capitalize on external opportunities, minimize
external threats, take advantage of internal strengths, and overcome internal
weaknesses over time; that is, when the organization’s strategic managers have failed
(and possibly will be replaced by more competent individuals).
• When an organization has grown so large so quickly that major internal reorganization
is needed.
Divestiture
Selling a division or part of an organization is called divestiture. Divestiture often is used to
raise capital for further strategic acquisitions or investments. Divestiture can be part of an
overall retrenchment strategy to rid an organization of businesses that are unprofitable, that
require too much capital, or that do not fit well with the firm’s other activities. Divestiture
has also become a popular strategy for firms to focus on their core businesses and become
less diversified. For example, to raise cash, Motorola in 2009 divested its Good Technology
mobile e-mail division to Visto Corporation. Both Good Technology and Visto Corp. lag
behind market leader Research in Motion Ltd. maker of BlackBerry devices. Motorola has
fallen from being the number two maker of cell phones to number 5.
Ailing Lehman Brothers Holdings divested its venture-capital division in 2009 as the
firm shed assets to raise cash and pay creditors. The acquiring firm, HarbourVEst Partners
LLC, changed the name of the Lehman division to Tenaya Capital.
Cadbury PLC recently sold its Australian drinks business to Asahi Breweries Ltd. of
Japan for $811.9 million. Asahi is Japan’s largest beer brewer by market share. Just prior
to this divestiture, Cadbury had divested its Dr Pepper Snapple business to a private-equity
consortium. Table 5-6 gives a few more recent divestitures.
Historically firms have divested their unwanted or poorly performing divisions, but
the global recession has witnessed firms simply closing such operations. For example,
Home Depot is shutting down its Expo home-design stores; defense and aerospace manu-
facturer Textron Corp is closing groups that financed real estate deals; Pioneer Corp. will