BRIEFLY EXPLAIN THE RETRENCHMENT STRATEGY TOPIC.

Type # 3. Retrenchment Strategy: Retrenchment strategy may require a firm to redefine its business and may involve divestment of a major product line or an SBU, abandon some markets or reduce its functions. Retrenchment in pace may necessitate a firm to use layoffs, reduce R&D or marketing or other outlays, increase the collection of receivables etc. The efforts aimed at redefining the business and reducing the pace of activities can improve performance of a firm. Retrenchment in combination with expansion is not uncommon. "Retrenchment alone is probably the least frequently used generic strategy" Retrenchment strategy involves a partial or total withdrawal either from products, markets, or functions in one or more of a firm's businesses. Retrenchment strategy is generally followed during the period of decline of a business when it is thought possible to bring profitability back to the firm. If the prospects of restoring profitability are not good, abandoning market share, reducing expenses and assets can use controlled divestment.Reasons for following retrenchment strategy: 1. The firm is doing poorly. 2. If there is pressure from various groups of stakeholders to improve performance. 3. If better opportunities for doing business are available elsewhere a firm can better utilize its strengths. The retrenchment strategy is particularly followed for dealing with crises. For minor crises pace retrenchment will be suitable, for moderate crises, divestiture of some division or units may be inevitable whereas, for serious crises, a liquidation strategy will be imperative