RETRENCHMENT STRATEGY

PREPARED BY :- ANKUR KUKRETI

MBA/4521/13

RETRENCHMENT STRATEGY

A strategy used by corporations to reduce the diversity or the overall size of the operations of the company.

This strategy is often used in order to cut expenses with the goal of becoming a more financial stable business.

Typically the strategy involves withdrawing from certain markets or the discontinuation of selling certain products or service in order to make a beneficial turnaround.

TYPES OF RETRENCHMENT STRATEGY

• TURNAROUND STRATEGY

Turnaround strategy means backing out, withdrawing or retreating from a decision wrongly taken earlier in order to reverse the process of decline.

• DISVESTMENT STRATEGY

Divestment strategy involves the sale or liquidation of a portion of business, or a major division, profit Centre or SBU. 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.

• LIQUIDATION STRATEGY

Liquidation strategy means closing down the entire firm and selling its assets. It is considered the most extreme and the last resort because it

leads to serious consequences such as loss of employment for employees, termination of opportunities where a firm could pursue any future activities, and the stigma of failure.

EXAMPLES OF RETRENCHMENT STRATEGY

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