Strategies for Weak Businesses

A firm in an also-ran or declining competitive position has four basic strategic options. If it can come up with the financial resources, it can launch an offensive turnaround strategy keyed either to low-cost or “new” differentiation themes, pouring enough money and talent into the effort to move up a notch or two in the industry rankings and become a respectable market contender within five years or so. It can employ a fortify-and defend strategy, using variations of its present strategy and fighting hard to keep sales, market share, profitability, and competitive position at current levels. It can opt for an immediate abandonment strategy and get out of the business, either by selling out to another firm or by closing down operations if a buyer cannot be found. Or it can employ a harvest strategy, keeping reinvestment to a bare-bones minimum and taking actions to maximize short-term cash flows in preparation for an orderly market exit. The gist of the first three options is self-explanatory. The fourth merits more discussion.

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