10 Questions
What is another term for the replacement of an existing team?
Merging
What is the intention of disinvestment?
To sell or liquidate a portion of business
When is disinvestment usually adopted?
When a turnaround strategy has failed
What is the most severe consequence of liquidation?
Loss of employment for workers
What type of strategy involves a mix of turnaround, disinvestment, and liquidation strategies?
Combination strategy
What is essential for making a combination strategy effective?
Right people making decisions
What might a company that has adopted a stability strategy for long like to use?
Expansion strategy
What is the primary goal of a turnaround strategy?
To replace the existing team or merge with a healthy organization
What is the consequence of adopting a liquidation strategy?
The stigma of failure will be attached
Why is liquidation considered the last resort?
Because it leads to serious consequences
Study Notes
Turnaround Strategies
- Replacement of existing team or merging with a healthy organization is a turnaround strategy approach
- Disinvestment strategies involve selling or liquidating a portion of the business or major division
- Liquidation strategies involve closing down the firm and selling its assets, considered as the last resort
- Combination strategy is a mix of the above strategies, requiring objective and intelligent decision-making
Strategy Formulation
- It is an analytical process of selecting the best course of action to meet organizational objectives and vision
- A strategic plan examines resources, provides a financial plan, and establishes an action plan for increasing profits
- The strategic plan should be informed to all employees, providing direction and focus
Levels of Strategy Formulation
- Corporate level strategy outlines what the organization wants to achieve, focusing on growth, stability, acquisition, or retrenchment
- Business level strategy answers how the organization will compete and focuses on each strategic business unit (SBU)
- Functional level strategy concentrates on how the organization will grow and defines daily actions, including allocation of resources
Strategic Alternatives
- Stability strategy is adopted when an enterprise is satisfied with its present position and does not want to change
- Stability strategy is successful in a stable environment and is less risky
- Growth/expansion strategies are adopted when the management is not satisfied with the present status, and favorable opportunities are available
Types of Stability Strategies
- No-change strategy: a conscious decision to do nothing new and continue with the present work
- Growth/expansion strategies: through concentration, integration, operation, internationalization, and diversification
Growth Strategies
- Growth through concentration: focusing on existing markets with present products, increasing market share and sales
- Growth through integration: increasing the scope of business definition, taking up more activities than before
Learn about the importance of strategy formulation in the strategic management process. Understand how to select the best course of action to achieve organizational objectives and vision, while increasing profits and utilizing resources effectively.
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