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Difference between Harvest and Divest
An organization's financial performance depends on its ability to maintain a diverse investment portfolio that allows it to take advantage of opportunities for both immediate and long-term market growth. The following are some of the methods that might be used to achieve this objective −
Hold − In this hypothetical scenario, the corporation decides to keep operating as normal in an effort to maintain the status quo.
Build − Companies may decide to increase investments in order to either maintain the market share of a star performer or turn a question mark into a star performer.
Harvest − This method aims to maximize earnings by maximizing the utilization of cash flow produced by the eventual sale of products.
Divest − This is a strategy with economic, political, and moral implications. Another possible cause is the disposal of an existing business.
After constructing a diversified portfolio, a company may select the most suitable course of action.
What is Harvest?
To maximize profits, it may be necessary to reduce or eliminate some products, services, or business lines. This occurs when a product has exhausted its market potential and cannot generate any further revenue in any meaningful way.
When a product's life cycle is winding down and minimal returns are observed, businesses may opt to stop investing in and promoting the product altogether. It is at this point that one would say the "cash cow stage" is appropriate.
Businesses may maximize their commodity's earning potential with a well-thought-out harvest strategy adopted now. The money made can be re-spent on research and development or advertising for previously existing products.
What is Divest?
The term "divest" refers to the process of reducing assets, with the primary goals being financial, political, and ethical. Additionally, it may be the result of the sale of an existing company.
A company could decide to sell off assets for a variety of reasons, including the following −
The intention is to sell off the firms that are not essential to the main operation.
must find a way to obtain funding
In order to improve the overall steadiness of the company
To remove under-performing divisions
The need to sell off assets to the ruling authority
For a variety of social factors, including climate change,
Differences − Harvest and Divest
Both of these approaches are possible ways for a company to attain a diversified and well-balanced portfolio. The following table shown how Harvest is different from Divest −
| Characteristics | Harvest | Divest |
|---|---|---|
Definition |
"Harvest" means to cut back on or get rid of something in order to get the best results. This might be a product, a service, or an entire enterprise. When a product reaches the end of its life cycle and can no longer be sold to raise profits, this phase begins. |
Divestment refers to the reduction of holdings for the sake of financial, political, or ethical purposes. Another possible cause is the disposal of an existing business. |
Importance |
After a cycle has run its course, the harvest phase seeks to maximize profits via the sale of remaining goods and services. |
The divest strategy aims to raise funds, strengthen the corporation, eliminate poorly performing departments, and deal with social problems like climate change. The divest strategy aims to raise funds, strengthen the corporation, eliminate poorly performing departments, and deal with social problems like climate change. |
Conclusion
The phrase "harvest" is used to describe a method used by businesses to save costs by decreasing spending on a certain product. As a rule, this strategy is employed for date commodities. Divestment, on the other hand, is the sale or transfer of holdings in order to meet certain financial, political, or ethical criteria.
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