Retrenchment strategy

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

6. CASE STUDY

7. TYPES OF RETRENCHMENT 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: Firms may pursue a dis -investment strategy by spinning of a part of a business as an independent entity, growth finally and managerially. By simply closing down a portion of the organization. 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 - At the insistence of members, 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=ZMurWMujL9aSvATLy6aYBw#q=meaning+corporate+level+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.

22. THANK YOU