Stability Strategy Essay

Stability Strategy:
A stability strategy is a strategy that any company follows when-
a. It serves the public in its existing products and services and does not venture into new products or services.
b. Its focuses on increasing its efficiency in its existing products and services and thus improving its financial performance
Stability strategy is basically known as ‘steady as it goes’ approach. Very small or no functional changes are made in the product or services. In an effective stability strategy the company will focus its resources in areas that it already has or in areas where it can gain a competitive advantage over other companies by improving its existing products and services. Stability strategy involves using defensive moves such

It wants to focus on improvement in its activities and functions by reducing its activities.
Growth strategies and the stability strategy are implemented by companies when they are in satisfactory competitive positions. But when they are not doing very well then the companies will adopt a retrenchment strategy. Retrenchment generally takes up one of the following forms-
a. Turnaround strategy- The main objective of a turnaround is to transform a company into a leaner organisation. It helps the company to be more effective by eliminating or removing the products or services that are not profitable, cutting the distribution costs, reducing the size of the workforce. Turnarounds are often preceded by changes in the microenvironment, industry structure or competitive behavior. Broadly speaking a turnaround is not a drastic a move as restructuring although the two can work together.
b. Divestment- If it is believed that one or more of the firm’s business units may function more effectively as part of another firm, a divestment strategy may be pursued. Divestment may be necessary when the industry is in decline or when a business unit drains the resources from more profitable units, is not performing well, or is not synergistic with other corporate

Liquidation- It is the strategy of last resort, and terminates the business unit by selling its assets. Liquidation is nothing but the divestment of all the company’s business units. Shareholders and creditors experience financial losses, some of the managers and employees lose their jobs, suppliers lose a customer, and the community suffers an increase in unemployment and a decrease in tax revenues. For this reason, liquidation should be pursued only when other forms of retrenchment are not viable
A retrenchment strategy is most often followed by the reorganization process is called as corporate restructuring. Corporate restructuring involves realigning divisions of the company, reducing the amount of cash under the authority of senior executives and acquiring or divesting business units. Companies that restructure voluntarily ordinarily do not have to be concerned about hostile takeover bids or even eternally forced restructuring, a process that is more costly.
Retrenchment strategy is a strategy that is most commonly used at the decline stage of business. Or if prospects appear bleak, controlled disinvestment can be used. Firms may abandon market share, reduce expenses and assets and pursue maximum positive cash