Economics_A-level_Edexcel
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1-1-nature-of-economics6 主题
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1-2-how-markets-work10 主题
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1-3-market-failure4 主题
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1-4-government-intervention2 主题
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2-1-measures-of-economic-performance4 主题
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2-2-aggregate-demand-ad5 主题
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2-3-aggregate-supply-as3 主题
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2-4-national-income4 主题
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2-5-economic-growth4 主题
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2-6-macroeconomic-objectives-policies4 主题
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3-1-business-growth3 主题
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3-2-business-objectives1 主题
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3-3-revenues-costs-and-profits4 主题
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3-4-market-structures7 主题
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3-5-labour-market3 主题
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3-6-government-intervention2 主题
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4-1-international-economics9 主题
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4-2-poverty-inequality2 主题
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4-3-emerging-developing-economies3 主题
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4-4-the-financial-sector3 主题
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4-5-role-of-the-state-in-the-macroeconomy4 主题
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5-1-the-exam-papers3 主题
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5-2-economics-a-level-skills1 主题
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5-3-structuring-your-responses9 主题
demergers
Reasons for Demergers
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A demerger occurs when a firm sells off at least one of the businesses it owns, or splits itself into separate parts to create two or more firms
Reasons For Demergers
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Reducing diseconomies of scale |
Increased business focus |
Cultural differences |
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Decreasing the size of the firm can reduce the diseconomies and lower the cost/unit which increases the profitability |
If efforts and resources are scattered across a large number of firms/ industries it can be hard to maintain focus and profitability. Narrowing the focus can improve profitability |
The most common reason for failures of mergers is cultural differences. Sometimes these differences are irreconcilable and not worth the expense to change |
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Remove loss making divisions |
Increase liquidity and dividend payments |
Comply with the demands of the competition commission |
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It can be more profitable to remove loss-making divisions and replace them with outsourcing |
Demergers generate extra revenue for the firm in the year they occur. This may increase the profit and dividend payments |
Sometimes firms are forced to demerge by the competition regulator due to concerns about the high level of market share they may have, which is considered to be anti-competitive and bad for consumers |
Impacts of Demergers on Stakeholders
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The impacts on the firm conducting the demerger should be mostly positive and include
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Opportunity for a more narrow focus on the core business
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Removing loss-making portions of the business
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Increased efficiency and lower costs/unit
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Increasing the annual profits for the year that the demerger occurred
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Removing some difficult cultural differences
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The impacts on employees include
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Some workers may lose their jobs
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Reduced friction from cultural differences can help build better team dynamics
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A smaller workforce provides more opportunity for promotion
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Less complications in daily tasks due to more narrow focus
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The impacts on consumers include
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If successful, better quality products and customer service
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If successful, lower prices due to the firms new efficiencies
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If unsuccessful, a narrower product range and perhaps worse quality/customer service
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Examiner Tips and Tricks
You should try to remember some real-world examples of demergers. This can help you explain why some firms grow but later decide to reduce their size. Application is a great way to strengthen your answers to extended questions: Whitbread sells Costa Coffee to Coca-Cola (opens in a new tab)
Responses