Rationalisation

• What is the definition of rationalisation?

  A strategic decision to improve efficiency
• Why might a business implement rationalisation?

  To reorganise for increased efficiency
• What does rationalisation involve in a business context?

  Removal of unnecessary activities or resources
• What might rationalisation include regarding operations?

  Closing some operations and expanding others
• What are the key reasons to consider rationalisation?

  • Poor capacity utilisation
  • To improve financial position
  • Reduce gearing levels
  • Cut overhead costs
  • Economic factors like recession
• What action might a firm take if capacity utilisation is poor?

  Reduce maximum capacity through rationalisation
• What is one way to implement rationalisation?

  Closing down or selling off a factory
• What is a benefit of leasing factory space?

  Increases income for unused space
• How can a firm respond to increased demand after leasing space?

  Take back the leased space if needed
• How much did Tesco raise by selling properties?

  £308 million
• What does streamlining staff involve?

  Implementing redundancies to improve efficiency
• What are potential problems of redundancies?

  High initial costs and demotivated staff
• What are the impacts of rationalisation on stakeholders?

  • Job losses for employees
  • Reduced services for customers
  • Financial gains for shareholders
• What are reasons a firm may consider rationalisation?

  • Improve efficiency
  • Respond to economic changes
  • Reduce costs
  • Increase profitability
• What patterns can be identified in rationalisation outcomes?

  • Successful examples of rationalisation
  • Unsuccessful rationalisation attempts
  • Firms succeeding without rationalisation