What is retrenchment?
- To cut down or reduce something
- Use resources more carefully
Examples of Retrenchment
- Reduce output & capacity
- Job losses
- Product/market withdrawal
- Disposal of business unit
- Scaling back investment
Driving factors of Retrenchment
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Costs too high
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Low ROCE
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High gearing
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Loss of market share
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Failed takeover
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Economic downturn
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Change of ownership
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All of the above indicate a need for strategic change
Implications for Change Management
- Much depends on the scale and scope of the retrenchment
- Small-scale, incremental retrenchment has only limited impact
- Significant retrenchment is often associated with a fundamental reappraisal of the business