Manag., January-2017-Q37
- Option : C
- Explanation : Retrenchment Strategies : Various external and internal developments create the problems to the prospects of business firms. In declining industries, companies face such risks as falling demand, emergence of more attractive substitutes, adverse government policies, and changing customer needs and preferences. In addition to external developments, there are company specific problems such as inefficient management and wrong strategies that lead to company failures. In such circumstances, the industries, markets and companies face the danger of
decline in sales and profit and thereby intend to sub-statically reduce the scope of its activity. For this purpose, the problem areas
are identified and the causes of the problems are diagnosed. Then, steps are taken to solve the problems that result in different types of
retrenchment strategies. The retrenchment strategies can be of the following forms : 1. Turn around strategy; 2. Divestment
strategy; 3. Liquidation strategy
1. Turn around Strategy : Turn around strategy can be referred as converting a loss making unit into a profitable one.
2. Divestment Strategy : Divestment involves the sale of a division or a plant or a unitof one firm to another.
3. Liquidation Strategy : Winding up or liquidation of a company is the complete closing down of the business of a company. Basically, it refers to a proceeding by which a company is permanently dissolved and its assets are then disposed off to pay its debts. Surplus, if any is distributed among the members according to their rights in the company.
