It is also called as reorganization or turnaround strategy.
Nature Of Stability Strategy A firm following stability strategy maintains its current business and product portfolios; maintains the existing level of effort; and is satisfied with incremental growth. It focuses on fine-tuning its business operations and improving functional efficiencies through better deployment of resources.
It decides to serve the same markets with the same products; It continues to pursue the same objectives with a strategic thrust on incremental improvement of functional performances; and It concentrates its resources in a narrow product-market sphere for developing a meaningful competitive advantage.
Adopting a stability strategy does not mean that a firm lacks concern for business growth. It only means that their growth targets are modest and that they wish to maintain a status quo.
Since products, markets and functions remain unchanged, stability strategy is basically a defensive strategy. A stability strategy is ideal in stable business environments where an organization can devote its efforts to improving its efficiency while not being threatened with external change.
In some cases, organizations are constrained by regulations or the expectations of key stakeholders and hence they have no option except to follow stability strategy. Generally large firms with a sizeable portfolio of businesses do not usually depend on the stability strategy as a main route, though they may use it under certain special circumstances.
They normally use it in combination with the other generic strategies, adopting stability for some businesses while pursuing expansion for the others. However, small firms find this a very useful approach since they can reduce their risk and defend their positions by adopting this strategy.
Niche players also prefer this strategy for the same reasons. Conditions Favouring Stability Strategy Stability strategy does entail changing the way the business is run, however, the range of products offered and the markets served remain unchanged or narrowly focused.
Hence, the stability strategy is perceived as a non-growth strategy. As a matter of fact, stability strategy does provide room for growth, though to a limited extent, in the existing product-market area to achieve current business objectives.
Implementing stability strategy does not imply stagnation since the basic thrust is on maintaining the current level of performance with incremental growth in ensuing periods.
The industry or the economy is in turmoil or the environment is volatile. Uncertain conditions might convince strategists to be conservative until they became more certain. Environmental turbulence is minimal and the firm does not foresee any major threat to itself and the industry concerned as a whole.
The organization just finished a period of rapid growth and needs to consolidate its gains before pursuing more growth. The industry is in a mature stage with few or no growth prospects and the firm is currently in a comfortable position in the industry Rationale for Using Stability Strategy There are a number of circumstances in which the most appropriate growth stance for a company is stability rather than growth.
Stability strategy is normally followed for a brief period to consolidate the gains of its expansion and needs a breathing spell before embarking on the next round of expansion.1. Define and use correctly major terms and concepts associated with consumer affairs; Explanation of the following terms and concepts related to consumer affairs.
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