Retrenchment

• What is the definition of retrenchment?

  Reduction of workforce size or resources
• Why is retrenchment considered a way for businesses to adapt?

  It helps save costs and adjust to changes
• What is retrenchment primarily about?

  Reducing costs
• What is one method of retrenchment?

  Reducing output
• How does reducing output affect raw materials?

  It decreases the need for raw materials
• What is a consequence of reducing staff size?

  Lower labor costs
• Why might a company reduce its product portfolio?

  To eliminate unprofitable products
• What does reducing the number of countries of operation achieve?

  Reduces losses from unprofitable countries
• Why would a company want to retrench?

  To leave unprofitable markets
• What is diseconomies of scale?

  Higher average cost per unit
• What issues can cause diseconomies of scale?

  Coordination, communication, and management issues
• What is a potential problem with retrenchment?

  Loss of economies of scale
• What is one reason a business might retrench to improve efficiency?

  To remove dis economies of scale
• What does focusing on core competencies involve?

  Outsourcing everything else but core activities
• How can retrenchment protect a company's share price?

  By signaling confidence to shareholders
• What impact can retrenchment have on employee morale?

  It can lead to low employee morale
• How might a business reduce its labor costs through retrenchment?

  By reducing the size of its workforce
• Why is it important to identify the root cause of a business's failure before retrenching?

  To determine if retrenchment is the right solution
• What alternative strategies could a business consider instead of retrenchment?

  Changing marketing segments or distribution channels
• How might customer perception be affected by retrenchment?

  Customers may become dissatisfied with fewer options
• What could happen to a business's market position after retrenchment?

  It could lead to a diminished market position
• In what scenario might retrenchment make sense for a retailer?

  When there are excess physical stores and costs
• Why might retrenchment not make sense for a business struggling with innovation?

  It could hinder the ability to innovate further
• How can HR strategies help a failing business without retrenchment?

  By motivating staff through non-financial methods
• What can happen if a company loses economies of scale?

  Average cost per unit may increase
• What are the potential benefits of retrenchment for a failing business?

  • Cost reduction
  • Improved efficiency
  • Focus on core competencies
  • Protection of share price
  • Increased confidence among stakeholders
• What are the potential drawbacks of retrenchment for a failing business?

  • Low employee morale
  • Customer dissatisfaction
  • Diminished market position
  • Potential loss of innovation
• What factors determine whether retrenchment is essential for a failing business?

  • Root cause of the business's failure
  • Market conditions and competition
  • Financial health and operational efficiency
• What is the experience curve?

  Cost reduction through increased experience
• How can retrenchment affect employee motivation?

  It may reduce motivation among remaining staff
• What impact can retrenchment have on stakeholders?

  It may create uncertainty for suppliers and customers
• What are the functional areas impacted by retrenchment?

  • Marketing
  • Operations
  • Human Resources (HR)
  • Finance
• What financial aspect should be considered during retrenchment?

  Impact on cash flow
• How can retrenchment improve cash flow?

  By reducing costs
• What happens to gearing if debts are paid off during retrenchment?

  Gearing is reduced
• How does retrenchment affect economies of scale?

  It can lead to diseconomies of scale
• What is the minimum efficient scale (MES)?

  Lowest cost per unit of output
• What happens if a company retrenches from a position of diseconomies of scale?

  Cost per unit may decrease
• What is capacity utilization?

  Efficiency of production capacity used
• How can closing low-capacity sites affect a business?

  It can improve overall capacity utilization