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CHAPTER 5 • STRATEGIES IN ACTION 149

TABLE 5-6 Recent Divestitures
Parent Company Part Being Divested Acquiring Company
Volkswagen AG Brazilian truck and bus operations MAN AG
Toni & Guy TIGI Hair-care schools and products Unilever
Reliant Energy Electricity sales NRG Energy
E-Bay Skype (upcoming)
CV Anheuser-Busch InBev Beer operations in Romania, Serbia, CVC Capital Partners
Bulgaria, Czech Republic, and Hungary

soon stop making televisions; Praxair Inc. is closing some of its service-related businesses
outside the United States; even Google recently halted efforts to sell advertising on radio
stations and in newspapers. Saks, the luxury clothing chain, recently closed 16 of its 18
bridal salons, leaving open only its departments in Manhattan and Beverly Hills.
Six guidelines for when divestiture may be an especially effective strategy to pursue
follow: 19
• When an organization has pursued a retrenchment strategy and failed to accomplish
needed improvements.
• When a division needs more resources to be competitive than the company can
provide.
• When a division is responsible for an organization’s overall poor performance.
• When a division is a misfit with the rest of an organization; this can result from
radically different markets, customers, managers, employees, values, or needs.
• When a large amount of cash is needed quickly and cannot be obtained reasonably
from other sources.
• When government antitrust action threatens an organization.

Liquidation
Selling all of a company’s assets, in parts, for their tangible worth is called liquidation.
Liquidation is a recognition of defeat and consequently can be an emotionally difficult
strategy. However, it may be better to cease operating than to continue losing large sums of
money. For example, despite four years in development and two years in construction, the
Hard Rock Park in Myrtle Beach, South Carolina, liquidated in 2009 just nine months after
it opened. The park had been called the world’s first rock ’n’ roll theme park and the sin-
gle-largest tourism investment in South Carolina history. From its opening in April 2008 to
its closing six months later, the park generated only $20 million in ticket sales, way below
its $24 million in annual interest payments due. The park drew far fewer than the projected
30,000 people a day. Bad planning and being too highly leveraged crushed this business
very quickly.
In contrast, Disney’s Shanghai, China–based Disneyland Park is still on schedule to
open in 2010 as Disney downplays global economic distress and pitches the park as creat-
ing 50,000 new jobs amid a cooling Chinese economy. The Hong Kong Disneyland Park
has struggled for the three years it has been in existence, and many analysts criticize
Disney’s overall strategy in China.
Based in Knoxville, Tennessee, Goody’s Family Clothing liquidated all its 282 stores
in 2009 and all 10,000 of its employees lost their jobs. The moderately priced clothing
retailer had been operating under Chapter 11 bankruptcy during 2008 but was unable to
restructure terms with its creditors. Intense price competition among rival firms coupled
with falling consumer demand and being highly leveraged combined to crush this well-
known firm in the Southeast.
Woolworths Group PLC recently launched a liquidation sale at all its stores that
virtually ended its 99-year-old British retail icon. This British company is not related to the
U.S. and Australian companies with similar names. Woolworths Group PLC has 815 stores
and about 30,000 employees. Woolies, as the British call this company, began in Britain in
1909 when Frank Woolworth opened the first store in Liverpool, England.