What is retrenchment with suitable example?
Retrenchment is defined as cutting back or a reduction. An example of retrenchment is a company laying off employees to get back within budget.
What are the retrenchment strategies?
Retrenchment strategy is a corporate level strategy that aims to reduce the size or diversity of organizational operations. In simple terms, a retrenchment strategy involves the abandonment of those products or services, which are no longer profitable for the organization.
Which company use retrenchment strategy?
In the year 2019, Ford made an announcement. The Ford motor decided to retrench from India and transfer operations to Mahindra & Mahindra along with its assets. It’s not exactly a liquidation strategy as it still holds 49% of the business along with voting rights.
What are three types of retrenchment strategies?
There are three types of retrenchment strategies – Turnaround Strategies, Divestment Strategies and Liquidation strategies.
What is retrenchment in business?
Retrenchment is one of the ways companies use to terminate employment when the company is forced to downsize its number of employees. Retrenchment means terminating an employee due to the surplus of labor or incapacity of employees to match the performance standards of the company.
What is retrenchment and turnaround strategy?
Definition of Turnaround Strategy is a retrenchment strategy followed by an organization when it feels that the decision made earlier is wrong and needs to be undone before it damages the profitability of the company. It is the act of making a company profitable again.
How can a business retrench?
What Are the Causes of Retrenchment?
- New leadership (usually a new CEO)
- Excessively-high costs and low profitability (or unsustainable losses)
- Low ROCE.
- Excessively high gearing (leading to cash flow problems)
- Loss of market share.
- A failed takeover or merger.
- Economic downturn.
- Change of ownership.
What is considered retrenchment?
Retrenchment is the termination of permanent or term contract employees (of at least 6 months) because of redundancy or reorganisation of the employer’s profession, business, trade or work. This process, when carried out, is known as a retrenchment exercise.
Why would a business retrench?
Retrenchment normally arises from decisions to change strategic direction, which in turn usually happens because of one or more of the following: New leadership (usually a new CEO) Excessively-high costs and low profitability (or unsustainable losses) Low ROCE.
What are the advantages of retrenchment?
Advantages and Disadvantages of Retrenchment Strategy:
- Cost-effective strategy: Despite many things that can be said against retrenchment, it does handle the immediate problems very effectively.
- Improves performance:
- Loss of good employees:
- Critical response:
What is a growth strategy?
A growth strategy is an organization’s plan for overcoming current and future challenges to realize its goals for expansion. Examples of growth strategy goals include increasing market share and revenue, acquiring assets, and improving the organization’s products or services.
How does retrenchment affect business?
Retrenchment can have a traumatic and emotional impact on the still-employed as well as those who have been laid off. The remaining employees may feel demotivated and insecure which can result in lower productivity within the organisation – especially if the retrenchment process hasn’t been handled appropriately.
Which is an example of a Retrenchment strategy?
For example, an IT company that suddenly sells its data centers and outsources to the company that purchases the data centers to generate cash in a crisis. The term retrenchment is originally a military term where it refers to a line of defence behind your frontline.
What does liquidation mean in a Retrenchment strategy?
Liquidation strategy is the extreme level in the retrenchment strategy where you permanently shut down the business and sell all of your assets. Liquidation is the final option of the problems of any business because it has serious outcomes.
Why is cost efficiency important in a Retrenchment strategy?
The cost efficiency allows them not to take debt from the financial institutions. When the company is going through the retrenchment phase, then all the employees would start behaving better. Their performance would continue to improve because they don’t want to give the employer any reason for firing them.
Which is an example of a divestment strategy?
Businesses and companies follow the divestment strategy for many reasons like merger plans, creating resources, availability of alternative investment plans, tech up-gradation, persistent issues, negative cash flows, and mismatched assets. For instance, TATA Group of Companies has got a lot of businesses working under its umbrella.