Question

Question Why might management use a poison pill strategy?

Short answer

Answer

The management utilizes the poison pill strategy to safeguard the organization from takeover attempts by providing additional shares to existing shareholders at a low price.

Step-by-step solution

Step 1:Meaning of management strategy

The management strategy refers to the activities undertaken by the management to ensure that the organization is moving in the desired direction. The management applies various strategies based on the business environment and the organizational goals.

Step 2:The reason for utilizing the poison pill strategy

The poison pill strategy is used by the management to protect the organization against a takeover attempt.In this strategy, the existing shareholders have the option to acquire additional shares at a low price and prevent the other company from acquiring the organization.