rationalization

Rationalization

The process of reorganizing and overhauling a company's operations, policies, and anything else needed to make the company more efficient. Rationalization is thought to be more widespread than a reorganization; it may involve closing some operations while expanding others. It usually involves a shift in investment or other policy. Rationalization is intended to improve a company's profitability.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

rationalization

the restructuring of a firm or industry to enable it to become more efficient or to reduce OVERCAPACITY. In some cases this may involve the firm in closing high-cost plant and concentrating production in larger, more modern plants; or it may involve the streamlining of a firm's organizational structure and reducing overhead costs. In the context of an industry rationalization may require firms to merge, or inefficient firms to leave the industry leading to higher levels of MARKET CONCENTRATION. See PRODUCT RATIONALIZATION. DIVESTMENT.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

rationalization

the reorganization of an industry (or firm) in order to enable it to use its resources more efficiently Rationalization usually involves the closure of high-cost plants (either through the merging of firms or their exit from the industry), which then allows output to be concentrated in plants of MINIMUM EFFICIENT SCALE and enables a better ‘balance’ to be achieved between industry supply and demand by eliminating EXCESS CAPACITY. Within a firm, rationalization may involve streamlining its organizational structure in order to reduce overhead costs. See also PRODUCTIVE EFFICIENCY, ORGANIZATIONAL SLACK.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005