A firm in an also-ran or declining competitive position has four basic strategic options: a. Offensive turnaround strategy – 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 b. 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 c. Fast-exit strategy – Get out of the business either by selling out to another firm or by closing down operations if a buyer cannot be found d. End-game or slow-exit strategy – Keeping reinvestment to a bare bones minimum and taking actions to maximize short-term cash flows in preparation for an orderly market exit CORE CONCEPT: The strategic options for a competitively weak company include waging a modest offensive to improve its position, defending its present position, being acquired by another company, or employing an end-game strategy.

1. Strategies forWeak
&Crisis Ridden
Businesses

2. Afirmin analso
ran ordeclining
competitive
position has four
basic strategic
options.
Turnaround
Strategy
Fortify-
and-defend
Strategy
Fast-Exit
Strategy
End-Game
or Slow-
Exit
Strategy

3. Turnaround
Strategies for
Business in
Crisis
 A turnaround strategy is needed when a business is
going into crisis;
 The objective is to arrest and reverse the sources of
competitive and financial weakness as quickly as
possible.
 For preparing a situation turnaround strategy; the
management must first diagnose what lies at the
root of poor performance.
 Is it because of the weak economy that the sales
are dropping?
 Was the competitive strategy not chosen properly?
 Does operating costs were high?
 Was there a scarcity of important resources?
 Had a workable strategy been poorly executed?
 Was there an overload of debts?

4. Turnaround
Strategies for
Business in
Crisis (Contd..)
● The second task for the management is to decide
whether the business can be served or not.
Some of the root causes of trouble in business are
o low sales growth
o Taking too much of debt
o Inability to use plant capacity due to which there are huge
fixed costs
o Failure of research and development
o Ineffective innovation
o Frequently changing the strategies
o Beaten up by the competitors, etc.

5. Cutting these kinds
of problems and
achieving a
successful business
turnaround can
involve any of the
followingoptions:
 Selling off Assets
 Revising the existing strategy
 Launching efforts to boost revenues
 Pursuing cost reduction
 Combined actions

6. Selling off
Assets
 Asset reduction strategies are essential when
each flow is a critical consideration and when the
most practical ways to generate cash are,
1. Through sale of some of the firm’s assets-
(plant & equipment, land, patents,
inventories, or profitable subsidiaries.
2. Through retrenchment
Sometimes the assets are not sold by a crisi-ridden
firm for unloading the losinng operations but for
raising funds to save and strengthen the
remaining activities of the business.

7. Strategy
Revision
 When weak performance is caused by bad strategy,
the task of strategy overhaul can proceed along any
of several paths:
1. Shifting to new competitive approach to rebuild
the firm’s market position.
2. Overhaul internal operations and functional area
strategies to better support the same overall
business strategy;
3. Merging with another firm in the industry and
forging a new strategy keyed to the newly
merged firm’s strengths.
4. Retrenching into a reduced core of products and
customers more closely matched to the firms’s
strengths.
The best path depends on the existing conditions in the
industry, strengths and weaknesses and competitive
abilities of the firm.

8. Boosting
Revenues
 Increasing of revenues always aim at generating
and increasing sales volume.
 There are a number of revenue-building options:
price cuts, increased promotion, a higher sales
force, added customer services, and quicly
achieved product improvements.
 Attempts to increase revenues and sales
volumes are necessary
1. It is not possible for the operating budget to
maintain a break even and reduce expenses.
2. The key profitability is to make omplete use of
existing capacity.
If the buyers are not price sensitive because of the
variable features of the product then the quickest
way to boost short term revenues may be to raise
prices other than opt for volume building price
cuts.

9. CuttingCost
 Cost-reduction turnarund strategies work the
best when the sick firm’s value chain and cost
structure are so flexible that it can allow it to
recover when the costs of the firm are very high
when the firm is close to its break-even point
when inefficiencies of the firm can be identified
and easily corrected.

10. Combined
actions
 The combination turnaround strategies can be
used in unpleasant situations where it is
essential to quick actions. Similarly, combined
actions are taken when new managers are
brought in and are freely allowed to make the
necessary changes.
 The tougher the problems, the more likely it is
that the solutions will involve multiple strategic
initiatives.

11. Liquidation-
theStrategy
of Last Resort
 Closing a crisis-ridden business down
and liquidating its assets is sometimes
the best and wisest strategy.
 Liquidation can be unpleasant andd
painfull due to hardships of job
elimination.

12. End-game
Strategies
 An end-game, slow-exit or harvesting strategy
steers a middle course between preserving the
status quo and existing as soon as posssible.
 The operating budget is chopped to a rock-
bottom level; reinvestment in the business is
held to a bare minimum.
 Capital expenditures for new equipment are put
on hold or given low financial priority (unless
replacement needs are usually urgent); instead,
efforts are made to stretch the life of existing
eqpment and make do with present facilities as
long as possible.

13. Fortify-and-
Defend
Strategy
 Objectives:
1. Make industry leaders for new firms to enter and for
challenges to gain ground.
2. Hold onto present market share
3. Strengthen current market position
4. Protect competitive advantage
 Strategic options
1.Increase advertising and R&D
2.Provide higher levels of customer service
3.Introduce more brands to match rivals’ attributes.
4.Add personalized services to boost buyer loyalty
5.Keep prices reasonable and quality attractive
6.Build new capacity ahead of market demand
7. Invest enough to remain cost competitive
8.Patent feasible alternative technologies
9.Sign exclusive contracts with best suppliers and distributors.