If your company’s organic growth has hit a plateau or is in decline, leaving the current market may be your best option. If the odds against your success are rising steadily, I strongly encourage you to think about divestment.
After seven years, British supermarket chain Tesco is exiting the U.S. market. Tesco is selling its Fresh & Easy stores to Yucaipa, owned by American Ron Burkle. Since entering the U.S. market in 2007, Tesco has unsuccessfully sought to accelerate growth and reach profitability in its stores by changing store interiors and product ranges, and through stronger marketing. Tesco’s investment in the U.S. has cost about $2.85bn in losses.
Some executives find it hard to even consider divesting a business. They may feel the need to stay the course, given the time and effort spent or because they are emotionally attached to the business. It’s important to avoid using these “sunk costs” as a rationale for blindly continuing down a loss-making path. I recommend using measurable criteria to determine if the market is the best place for your business.
Remember, getting out of one market may allow you to enter another market better suited to your core competencies.