Question

What are the types of retrenchment strategy?

Answer 1

hope it was helpfull for you

Answer 2

There are four types of retrenchment strategy

1) Turnaround Strategy

2) Divestment Strategy

3) Liquidation Strategy

4) Captive Company Strategy

• Retrenchment is a corporate strategy intended to reduce the size of the company's operations. The company's expenses may also need to be reduced in order for it to become profitable.
• As the term implies, a turnaround entails reversing a negative trend. The main objective of a turnaround is to transform an underperforming, loss-making business into one that operates with acceptable levels of profitability, liquidity, and cash flow. A turnaround plan entails managing a company that isn't operating well in terms of management, funding, etc. and making it profitable.
• A business that holds a very weak position in its industry and is unable to improve its performance without losing its independence and becoming hostage to another business must shut down. It may choose to sell its business to another firm. In this way, the company's stockholders will receive a good return on their investment. The divestiture plan entails the selling of a significant portion or part of the business.
• A liquidation is preferable to bankruptcy since in the former, management retains some control whereas in the latter, the courts have total authority.
• When a company depends on another company to survive, it is the definition of a captive company strategy. When the industry prospects are not promising enough to justify the work needed to turn the firm around, a company with a weak competitive position may choose not to pursue a turnaround strategy.

Hence, these four types of strategies are very essential in any company and a manager should know when to apply which strategy.

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