Final answer:
Divestiture involves selling off parts of a business for strategic reasons, including influencing political change as in the case of apartheid-era South Africa. It also includes privatization, like the transition of Sallie Mae from a government agency to a private entity. Additionally, sustained financial losses can lead firms to divest and exit markets.
Step-by-step explanation:
Divestiture is a strategic business decision where a company decides to sell off a subsidiary, business unit, or interest in a company to refocus its resources and perhaps influence political change. An example of divestment for political change can be seen in the historical context of the apartheid era in South Africa. US college students and African Americans pressured educational institutions and governments to divest from companies engaged in business with the apartheid regime, leading to significant political impacts and contributing to the dismantling of apartheid.
Additionally, divestiture can also refer to the privatization of government services. An example of this form of privatization would be the Student Loan Marketing Association (Sallie Mae), which transitioned from a governmental agency to a private organization servicing private student loans. At state levels, the privatization of public utilities and services such as roads and prisons reflects divestiture from a governmentally-controlled context to a market-oriented framework.
Finally, the decision to divest can come as a natural response to financial losses. Firms may choose to exit markets altogether if the losses are sustained over time, indicating that it makes more economic sense to cease operations rather than continue with unprofitable activities.