Edexcel A-Level Economics A2 3.3.1 2g Demergers Reasons for Demergers Impact of Demergers on Businesses Workers and Questions

Practise explaining why firms demerge and evaluating the effects on businesses, workers and consumers using focused real-world company examples.

Exam points

define a demerger as separating a firm and identify core-business focus as a reason
draw LRAC effects when a smaller firm reduces diseconomies or falls below minimum efficient scale
analyse gains from managerial focus, specialisation, faster decisions and lower X-inefficiency
evaluate legal, IT or redundancy costs and effects on workers, consumers and shareholders

[Maximum number: 1]

In 2022 the pharmaceutical company GlaxoSmithKline (GSK) demerged from the consumer health business Haleon. GSK's shareholders believed that the businesses would be able to work more successfully as separate companies.

Which one of the following is the most likely reason why GSK decided to demerge from Haleon?

To benefit from external economies of scale

To diversify the business

To achieve diseconomies of scale

To focus on its core business

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Edexcel A-Level Economics A2 3.3.1 2g Demergers Reasons for Demergers Impact of Demergers on Businesses Workers and Questions question 1