Better understanding of retrenchment strategy with case study.

1. RETRENCHMENT
STRATEGY
BY RUCHITA. SANGARE.
SYBMS.
ROLL NO. 47.
SNDT COLLEGE.

2. CORPORATE LEVEL STRATEGY
• Corporate level strategy is concerned with
the strategic decisions a business makes that
affect the entire organization.
• Financial performance, mergers and
acquisitions, human resource management
and the allocation of resources are
considered part of corporate level strategy.

3. RETRENCHMENT STRATEGY
• The Retrenchment Strategy is adopted when an
organization aims at reducing its one or more business
operations with the view to cut expenses and reach to a
more stable financial position.
• In other words, the strategy followed, when a firm
decides to eliminate its activities through a considerable
reduction in its business operations, in the perspective of
customer groups, customer functions and technology
alternatives, either individually or collectively is called as
Retrenchment Strategy.
• The firm can either restructure its business operations
or discontinue it, so as to revitalize its financial position.

4.  REASONS:
• LESS PROFIT.
• TO CONCENTRATE ON ITS MARKETING
EFFORTS.
• OBSOLETE PRODUCT.
• UNPRODUCTIVE ACTIVITIES.

5.  IMPLEMENTATION PROCESS:
1. Cut down its expenses.
2. Reduce production output, manpower.
3. Withdrawal of less profitable products and
markets.
4. Sell out product/facilities, that affect the
firm’s profits.
5. Finally, he firm may liquidate or may offer
for take-over by some other firm.

6. CASE STUDY

7. TYPES OF RETRENCHMENT
STRATEGY
TURNAROUND STRATEGY.
DIS-INVESTMENT STRATEGY.
LIQUIDATION STRATEGY.

8.  TURNAROUND STRATEGY
• Turnaround strategy can be referred as-
converting a loss-making unit into a
profitability one.
• According to dictionary of marketing (by P.
H. Collin) “Turnaround means making the
company profitable again.”

9.  REASONS:
• UNDER UTILIZATION
OF PLANT CAPACITY.
• HIGH INVENTORY.
• PERSISTENT
NEGATIVE CASH
FLOW.
• CONTINUOUS
LOSSES.
• DECLINING MARKET
SHARE.
• DETERIORATION IN
PHYSICAL
FACILITIES.
• OVER-MANPOWER,
HIGH TURNOVER OF
EMPLOYEES, AND
LOW MORALE.
• UNCOMPETITIVE
PRODUCTS OR
SERVICES.
• MISMANAGEMENT.

10. CASE STUDY

11.  DIS-INVESTMENT STRATRGY
• Dis-investment is a form of retrenchment
strategy. Here, the company sells one of its
business units. This strategy is adopted when
the company is performing very poorly or
when it no longer fits the company’s
strategic profile.
• Divestment is usually a restructuring plan
and is adopted when a turnaround has been
attempted but has proved to be unsuccessful
or it was ignored.

12.  REASONS
• Need for increasing investment.
• Divest parts viz. not in the original business.
• To allow the remaining business to survive.
• Unprofitable units are dis-invested.
• Provisions of the law.
• Persistent negative cash flows from a particular business
create financial problems for the whole company.
• Firm is unable to face competition.
• Technological up gradation is required if the business is to
survive which company cannot afford.
• A better alternative may be available for investment.

13.  APPROACH
• There are 3 approaches of dis-investment:
1. Firms may pursue a dis-investment strategy by
spinning of a part of a business as an independent
entity, growth finally and managerially.
2. By simply closing down a portion of the organization.
3. By selling the business units to another similar firm.
The firm should take the decision of dis-investment
the right time. So that it can get a better value for
the dis-investment position. The delay in adopting this
strategy can result into financial losses. Adopting dis-
investment strategy always is not due to business
failure.

14. CASE STUDY

15.  LIQUIDATION STRATEGY
• Liquidation is the extreme case of divestment
strategy. In this case, the organization takes a
decision to sell its entire business and the funds so
realized can be invested in some other business.
• Liquidation is common in case of small businesses,
where the owners sell their entire business units
and then invest in some other areas.
• The decision to close down or liquidate the firm is
taken, when the firm is continuously suffering
from losses, and all efforts to make it profitable
again have failed.

16.  REASONS
• When a firm has accumulated losses and some other
firms offer prices to take benefits of tax advantages,
then it makes sense to sell the unit.
• Some firms may offer a better price to a firm as
they may like to consolidate entities, and therefore,
a firm which is offered a better deal, may offer to
divest.
• When a business is in peak form but its future is not
certain, a firm may decide to divest its business and
obtain a good price.
• Business becoming unprofitable.

17. • Obsolescence of product/process.
• High competition.
• Industry overcapacity.
• Failure of strategy.

18.  LEGAL ASPECTS
A Company can be wound up under the provision
of the Indian Companies Act, 1956. Section 425
of the act provides three kinds of winding up:
• Compulsory winding up under the order of the
court.
• Voluntary winding up -
a) At the insistence of members,
b) At the insistence of creditors.
• Voluntary winding up under the supervision of the
court.

19. CASE STUDY

20. BIBLIOGRAPHY
• http://www.publishyourarticles.net/knowledge-
hub/business-studies/what-are-the-different-
types-of-retrenchment-strategies-of-
business/5535/
• http://businessjargons.com/retrenchment-
strategy.html#ixzz4ZJ8kwy4U
• https://www.google.co.in/?gfe_rd=cr&ei=ZMurW
MujL9aSvATLy6aYBw#q=meaning+corporate+lev
el+strategy
• http://businessjargons.com/retrenchment-
strategy.html#ixzz4ZJ8kwy4U

21. ACKNOWLEDGEMENT
• I would like to express my special thanks of
gratitude to my teacher VIJAY SIR who gave
me the golden opportunity to do this
wonderful project on the topic
RETRENCHMENT STRATEGY, which also
helped me in doing a lot of Research and i
came to know about so many new things I
am really thankful to them.
Secondly i would also like to thank my
parents who helped me a lot in finalizing this
project within the limited time frame.