You are the CFO of a multinational corporation that has been facing declining profitability in one of its business units for the past three years.…

As CFO, the appropriate step would be to adopt a Divestment Strategy for the business unit. Divestment strategy involves the sale or liquidation of a portion of business, a major division, profit centre or SBU . It is usually adopted when a turnaround has been attempted but has proved unsuccessful or when it is obvious that divestment is the only answer. The decision is further justified because: Persistent negative cash flows from this unit are creating financial strain. Intensity of competition makes survival difficult. Technological up gradation is not feasible for the company at this stage.A better alternative investment opportunity is available elsewhere making it preferable to release resources from the loss-making unit. Thus, adopting Divestment Strategy will allow the company to stop financial losses, free resources and reallocate them to more promising opportunities, thereby ensuring long-term value creation.