The Retrenchment Strategy is adopted when an organization aims at reducing one or more business operations with the view to cut expenses and reach 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 Retrenchment Strategy.
The firm can either restructure its business operations or discontinue them, to revitalize its financial position. There are three types of Retrenchment Strategies:
Turnaround
Divestment
Liquidation
To further comprehend the meaning of Retrenchment Strategy, go through the following examples in terms of customer groups, customer functions and technology alternatives.
The book publication house may pull out of the customer sales through market intermediaries and may focus on direct institutional sales. This may be done to slash the sales force and increase marketing efficiency.
The hotel may focus on the room facilities which are more profitable and may shut down the less profitable services given in the banquet halls during occasions.
The institute may offer a distance learning programme for a particular subject, despite teaching the students in the classrooms. This may be done to cut expenses or to use the facility more efficiently, for some other purpose.
In all the above examples, the firms have made significant changes either in their customer groups, functions and technology/process, to cut expenses and maintain their financial stability.
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