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Chap7 SMBP Kazmi

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STRATEGIC MANAGEMENT

AND BUSINESS POLICY


THIRD EDITION

Chapter 7
Corporate-level strategies:
Stability, retrenchment,
and restructuring

AZHAR KAZMI
Learning objectives
 Describe the three types of stability strategies and
discuss the conditions under which each of them is
used
 Describe the three types of retrenchment strategies
and discuss the conditions under which each of them
is used
 Discuss the evolution of a complex network of
combination strategies to deal with the changing
environment
 Discuss the rationale of restructuring strategies
 Examine the restructuring strategies in the Indian
context

(c) Dr. Azhar Kazmi 2008 2


Stability strategies
 Stability strategies result from
attempts by an organisation at
incremental improvement of
functional performance.
 No-change strategy
 Profit strategy
 Pause / proceed-with-caution strategy

(c) Dr. Azhar Kazmi 2008 3


Retrenchment strategies
 Retrenchment strategy is followed
when an organisation substantially
reduces the scope of its activities
 Turnaround strategies
 Divestment strategies
 Liquidation strategies

(c) Dr. Azhar Kazmi 2008 4


Turnaround strategies
 Turnaround strategies derive their
name from the action involved, i.e.
reversing a negative trend and
turning around the organisation to
profitability.
 Conditions for turnaround
 Managing turnaround
 Approaches to turnaround
 Action plan for turnaround
 Role of external agencies in turnaround

(c) Dr. Azhar Kazmi 2008 5


Divestment strategies
 Divestment strategy involves the sale
or liquidation of a portion of business,
or a major division, profit centre or
SBU.
 Reasons for divestment
 Approaches to divestment
 Decision to divest

(c) Dr. Azhar Kazmi 2008 6


Liquidation strategies
 Liquidation involves closing down an
organisation and selling its assets.
 Why is liquidation difficult or undesirable?
 Planned liquidation
 Legal aspects of liquidation
 Liquidation strategies in Indian context

(c) Dr. Azhar Kazmi 2008 7


Combination strategies
 Combination strategies are a mixture
of stability, expansion or
retrenchment strategies applied
either simultaneously (at the same
time in different businesses) or
sequentially (at different times in the
same business).
 Sequential combination
 Simultaneous combination

(c) Dr. Azhar Kazmi 2008 8


Corporate restructuring
 Corporate- or business-level
restructuring means changes in the
composition of an organisation's set
of businesses in order to create a
more profitable enterprise.
 Rationale for restructuring
 Restructuring in the Indian context

(c) Dr. Azhar Kazmi 2008 9

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