Causes of decline and generic strategies
t divestment involving the external sale of part of the organisation or the internal closure of
units, as part of a rationalisation programme.
t liquidation of the business by selling it to one or more buyers; this entails an admission of
failure by the senior managers, and the fear of loss of face may mean this alternative is not
considered seriously until there are no others available.
All four strategies (retrenchment, turnaround, divestment and liquidation) associated with decline
require managers to make difcult decisions, which may have adverse efects on all of the organisation’s
stakeholders Ð particularly on its employees. Tese issues will be considered later in the context of
‘business ethics and social responsibility’.
Large-scale redundancy programmes do not assist this process, but managers sometimes have to balance
the negative efects on staf against economic realities. Tis requires them to take into account the relative
importance of factors such as efectiveness, efort, loyalty, experience and efciency.