When is retrenchment strategies appropriate?


Quick Answer

According to BusinessDictionary, a retrenchment strategy is appropriate in situations when a corporation needs to cut expenses with the goal of becoming financially stable. Retrenchment strategies are also used to reduce the size or diversity of the organization.

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Full Answer

Retrenchment strategies are useful when a corporation wants to cut down the overall size of operations. These strategies allow the company to reduce costs by streamlining business functions and product lines. According to MBA Mentor, a retrenchment strategy typically involves withdrawing from certain markets or discontinuing the sales of certain products or services in order to make a beneficial turn around.

Retrenchment strategies are short-term strategies within the organization. They are specifically designed to overcome organizational weaknesses that negatively impact the performance of the company. Retrenchment strategies are particularly useful in instances where an organization wants to regain its competitiveness in the market. According to Management4All, retrenchment strategies call for two primary actions: cost cutting and restructuring. Decisions about the actions needed to implement retrenchment strategies are carried out by executive management and various departments in the company. In addition to using a retrenchment strategy, corporations can also use a turnaround strategy, a survival strategy or liquidation strategy to overcome internal weaknesses.

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