July 26, 2024
Strategic Management

Stability strategy

by noteswa

Stability Strategy

 Introduction

When an organization attempts to gain only a marginal or incremental improvement in its performance by changing one or more of its businesses, it is known as stability strategy. The focus of stability strategy is to move carefully and slowly to help an organization in retaining its present position in the market. In the stability strategy, organizations serve the same market with present products using the existing technology.

In other words, the stability strategy sustains the moderate growth of the organization, in line with the existing trends. An organization can adopt a stability strategy either when the market condition is very volatile or highly competitive. Stability is also adopted in situations when there is a lack of resources and expansion may be risky in nature.

When to choose stability strategy

An organization’s strategists might choose stability when:

  1. The industry or the economy is in turmoil or the environment is volatile. Uncertain conditions might convince strategists to be conservative until they became more certain.
  2. Environmental turbulence is minimal and the firm does not foresee any major threat to itself and the industry concerned as a whole.
  3. The organization just finished a period of rapid growth and needs to consolidate its gains before pursuing more growth.
  4. The firm’s growth ambitions are very modest, continues to pursue the same objectives and it is content with incremental growth.
  5. The industry is in a mature stage with few or no growth prospects and the firm is currently in a comfortable position in the industry

Types of Stability strategies

Stability strategies are of three types; namely, no change strategy, profit strategy, and small exploration strategy.

1 No Change Strategy:

A no change strategy involves a strategy followed by organizations to continue with the present position of growth. It involves maintaining the existing strategies without doing anything new. In other words, a no change strategy can be characterized by an absence of strategy, since the organization does not find it worthwhile to alter the present strategy.

The reason behind the no change strategy could be the absence of opportunities or threats in the external and internal environment. In addition, there may be no major strengths or weakness of an organization for which it needs to form any strategy.

This approach suits a firm, which does not have requisite resources to pursue increased growth for a longer period of time. At times, environmental changes prohibit a continuation in growth.

2 Profit Strategy

In the profit strategy, an organization tries to sustain its profitability by undertaking measures, such as reducing investment, raising prices, and increasing productivity. Profit strategy is followed when an organization is unsure of external markets and looks for the right time to practice another strategy.

The profit strategy is adopted when the organization perceives that the problems are short-lived and can be eliminated  anytime.

The problems can be government attitude, competitive pressures, and industry downturn. The measures that the  organization adopts are basically artificial measures that lead to profitable situations. Thus, it can be said that such a strategy can only work if problems are short-term in nature.

3 Small Exploration Strategy

A small exploration strategy, also known as pause/proceed with the caution strategy is a tactic employed by organizations to test the grounds before moving ahead with a full-fledged corporate strategy.

It involves gauging new products and markets, exploring small test markets, and judging the reaction of customers. The main purpose is to seep down the strategic changes at the organizational levels and adapt the systems to new strategies. This strategy is normally practiced before the expansion strategy.

noteswa

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