What type of strategy involves reducing the operational scale of a business?

The retrenchment strategy is focused on reducing the operational scale of a business, which can be necessary when a company is facing financial difficulties, declining markets, or overextension of resources. This strategy involves making significant cuts, which might include downsizing workforce, closing unprofitable divisions, selling off assets, or reducing product lines to regain financial stability and focus on core operations.

Implementing a retrenchment strategy allows organizations to strengthen their financial position by cutting unnecessary costs and reallocating resources more effectively. It often aims to concentrate on areas of the business that are performing well, thus allowing for a more sustainable and strategic approach to recovery and future growth. This type of strategy can ultimately lead to a more streamlined operation that is better positioned to compete in the long run.