Organizational Downsizing and Firm Performance: The Role of Asset Reduction and Firm Competitiveness

Abstract

The study on "Organizational Downsizing and Firm Performance: The Role of Asset Reduction and Firm Competitiveness" reveals nuanced insights into how asset reduction impacts firm competitiveness. Through a quantitative analysis of two firms in Benin City, Edo State, the study utilized a sample of 118 respondents and employed Pearson correlation and regression analysis to examine the relationship between asset reduction and firm performance. The average asset reduction among firms was 20%, while firm competitiveness scored an average of 75%. The analysis indicated a moderate positive correlation between asset reduction and firm competitiveness, suggesting that while asset reduction can enhance operational efficiency and financial stability, it must be carefully managed to avoid diminishing critical resources. Findings revealed that firms that strategically aligned asset reduction with core business areas experienced improved competitiveness, whereas those with poorly planned reductions faced declines in operational capabilities and market responsiveness. The study concludes that asset reduction can be beneficial for firm performance if implemented with strategic foresight. Recommendations include conducting thorough asset evaluations before divestiture, ensuring alignment with long-term strategic goals, and focusing on reinvesting in core activities to sustain competitive advantage.