Assignment no.3

First,the definition of downsizing:
DOWNSIZING
In a business enterprise, downsizing is reducing the number of employees on the operating payroll. Some users distinguish downsizing from a layoff , with downsizing intended to be a permanent downscaling and a layoff intended to be a temporary downscaling in which employees may later be rehired. Businesses use several techniques in downsizing, including providing incentives to take early retirement and transfer to subsidiary companies, but the most common technique is to simply terminate the employment of a certain number of people.

Why do Firms Downsize?
Downsizings began as the strategy of sickly corporations shedding workers in the face of weak demand, but soon, strong firms looking to boost shareholder value even further adopted the policy. Downsizing will be examined as a strategic option that management can exercise in order to boost equity value. Downsizing will be presented as a macro-economic phenomenon, having an impact on inflation, and therefore the rate at which stock prices are discounted and valued.

Here is an article that contains a company that has undergone downsizing:

"In recent news, Ameriquest Mortgage had closed 229 branch offices, and laid 3,800 employees off in Arizona and in other states (Business Journal, May 3rd, 2006). The California based company has operated in the mortgage lending business since 1980. It offers home loans and home equity loans to customers with less-than-perfect credit. The main reason for downsizing was the company's decision to shift toward a business model that emphasizes Internet and phone service over sales associates. The managers believe that this will help them to cope better with the rising interest rates and decreases in mortgage lending. Aseem Mital, the chief executive of the Ameriquest, announced that the company was moving strategically and decisively to remain a leader in an industry that was undergoing fundamental changes."





http://www.geocities.com/WallStreet/Exchange/4280/ch2.htm

http://whatis.techtarget.com/definition/0,,sid9_gci759501,00.html

http://searchwarp.com/swa68772.htm