Discontinuing a profitable segment results in – Discontinuing a profitable segment can be a strategic decision with far-reaching consequences. This article delves into the multifaceted impacts of discontinuing profitable segments, examining their financial, customer, employee, market, and strategic implications.
Understanding the potential outcomes of such a decision is crucial for businesses seeking to optimize their operations and navigate market dynamics effectively.
Financial Impact: Discontinuing A Profitable Segment Results In
Discontinuing a profitable segment can have significant financial implications for a company. The most immediate impact is the loss of revenue and profit from that segment. This can have a negative impact on overall financial performance, including cash flow and profitability.
For example, in 2018, General Electric discontinued its appliance business, which had been a profitable segment for the company. This decision resulted in a loss of $6 billion in revenue and $1 billion in profit.
Customer Impact
Discontinuing a profitable segment can also have a significant impact on customers. Loyal customers may be disappointed or even angry, and this can lead to a loss of market share and brand reputation.
For example, in 2016, McDonald’s discontinued its breakfast menu in some markets. This decision was met with backlash from customers, and the company’s stock price fell by 3%.
Employee Impact
Discontinuing a profitable segment can also have a significant impact on employees. Employees may be laid off or reassigned, and this can lead to a loss of morale and productivity.
For example, in 2017, Sears Holdings discontinued its appliance business, which resulted in the loss of 4,000 jobs.
Market Impact, Discontinuing a profitable segment results in
Discontinuing a profitable segment can also have a significant impact on the market. This can lead to a change in industry competition and market dynamics, and it can create opportunities for new entrants or competitors.
For example, in 2019, Amazon discontinued its Kindle Fire tablet business. This decision opened up the market for other tablet manufacturers, such as Apple and Samsung.
Strategic Implications
There are a number of reasons why a company might decide to discontinue a profitable segment. These reasons can include:
- The segment is no longer profitable.
- The segment is no longer aligned with the company’s strategic goals.
- The company wants to focus on more profitable segments.
Discontinuing a profitable segment can be a difficult decision, but it can be the right decision for a company if it is done for the right reasons.
Commonly Asked Questions
What are the key financial implications of discontinuing a profitable segment?
Discontinuing a profitable segment can lead to a loss of revenue and profit, reduced cash flow, and a decline in overall profitability.
How can discontinuing a profitable segment impact customer loyalty?
Discontinuing a profitable segment can damage customer loyalty and satisfaction, leading to a loss of market share and a negative impact on brand reputation.
What are the potential employee impacts of discontinuing a profitable segment?
Discontinuing a profitable segment can affect employee morale and productivity, requiring retraining and redeployment efforts to support employees during the transition.
