Retrenchment Flashcards
(5 cards)
How to retrench
Reduce output
Reduce staff size
Reduce product portfolio (get rid of a particular product)
Reduce countries to operate in (sell to less consumers)
Why retrench
Leave unprofitable markets with low ROCE
Leave market due to economic downturn
Reduce diseconomies of scale to become more efficient
Focus on core competencies due to loss of market share
New leadership
Problems
May lose economies of scale (managerial or purchasing)
May lose economies of scope if product portfolio is reduced
Lose gains from the experience curve if using redundancies - increases unit costs
Reduce employee motivation if retrenchment meant redundancies
Resistance to change
Benefits
Recover market loss
Improve profitability
Increase economies of scale if currently suffering from diseconomies
Businesses
Barclays’ - reduced investment in banking and focused on core retail/commercial banking services to improve profitability
