Liquidation Strategy - Retrenchment Strategies

Corporate Level Strategies

Prepared By

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Manu Melwin JoyAssistant Professor

Ilahia School of Management Studies

Kerala, India.Phone – 9744551114

Mail – manu_melwinjoy@yahoo.com

Retrenchment Strategies

Retrenchment strategy• A retrenchment grand strategy is

followed when an organization

aims at a contraction of its activities

through substantial reduction or

the elimination of the scope of one

or more of its businesses in terms

of their respective customer

groups, customer functions, or

alternative technologies either

singly or jointly in order to improve

its overall performance.

Examples of Retrenchment strategy• General Motors of the

United States stopped

producing a number of

"makes" of automobile. GM

decided that it needed to

retrench by concentrating on

just a few "makes." It hoped

this would help it return to

profitability.

Liquidation Strategy• A retrenchment strategy which

is considered the most extreme and unattractive is the liquidation strategy, which involves closing down a firm and selling its assets. It is considered as the last resort because it leads to serious consequences such as loss of employment for workers and other employees, termination of opportunities where a firm could pursue any future activities and the stigma of failure.

Examples of Liquidation Strategy

• JC Penney recently sold its

Eckerd chain of drugstores to

focus on the corporation’s core

business of department stores

and Internet and catalog sales.

Studies show that between 33

per cent and 50 per cent of all

acquisitions are later divested.