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Retrenchment strategies corporate level strategies - Strategic management - Manu Melwin Joy

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Retrenchment strategies corporate level strategies - Strategic management - Manu Melwin Joy

  1. 1. Retrenchment Strategies Corporate Level Strategies
  2. 2. Prepared By Kindly restrict the use of slides for personal purpose. Please seek permission to reproduce the same in public forms and presentations. Manu Melwin Joy Assistant Professor Ilahia School of Management Studies Kerala, India. Phone – 9744551114 Mail – manu_melwinjoy@yahoo.com
  3. 3. Retrenchment Strategies
  4. 4. Retrenchment strategy • A retrenchment grand strategy is followed when an organization aims at a contraction of its activities through substantial reduction or the elimination of the scope of one or more of its businesses in terms of their respective customer groups, customer functions, or alternative technologies either singly or jointly in order to improve its overall performance.
  5. 5. Examples of Retrenchment strategy • General Motors of the United States stopped producing a number of "makes" of automobile. GM decided that it needed to retrench by concentrating on just a few "makes." It hoped this would help it return to profitability.
  6. 6. Turnaround strategies • Turn around strategies derives their name from the action involved that is reversing a negative trend. There are certain conditions or indicators which point out that a turnaround is needed for an organization to survive. An organization which faces one or more of these issues is referred to as a ‘sick’ company.
  7. 7. Turnaround strategies • There are three ways in which turnarounds can be managed – The existing chief executive and management team handles the entire turnaround strategy with the advisory support of a external consultant. – In another case the existing team withdraws temporarily and an executive consultant or turnaround specialist is employed to do the job. – The last method involves the replacement of the existing team specially the chief executive, or merging the sick organization with a healthy one.
  8. 8. Examples of Turnaround strategies • Xerox revealed a Turnaround Programme in December 2000, which included cutting $1 billion in costs, and raising up to $4 billion through the sale of assets, exiting non-core businesses and lay-offs. Subsequently, in August 2001, Mulcahy was made CEO. Xerox continued to report losses in 2001, but it returned to profit in 2002 and continued to report profits in 2003.
  9. 9. Divestment strategy • A divestment strategy involves the sale or liquidation of a portion of business, or a major division.
  10. 10. Divestment strategy • TATA group is a highly diversified entity with a range of businesses under its fold. They identified their non – core businesses for divestment. TOMCO was divested and sold to Hindustan Levers as soaps and a detergent was not considered a core business for the Tatas.
  11. 11. Liquidation Strategy • A retrenchment strategy which is considered the most extreme and unattractive is the liquidation strategy, which involves closing down a firm and selling its assets. It is considered as the last resort because it leads to serious consequences such as loss of employment for workers and other employees, termination of opportunities where a firm could pursue any future activities and the stigma of failure.
  12. 12. Examples of Liquidation Strategy • JC Penney recently sold its Eckerd chain of drugstores to focus on the corporation’s core business of department stores and Internet and catalog sales. Studies show that between 33 per cent and 50 per cent of all acquisitions are later divested.

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