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CMA Intermediate · Operations Management and Strategic Management · Formulation and Implementation of Strategy

A Nagpur steel producer, whose profits are falling, cuts costs, closes unviable plants and sheds surplus staff, intending to restore profitability and then resume growth in the same business. Which statement best classifies this strategy?

The strategy is retrenchment through a turnaround approach. The firm reduces operations and costs to restore profitability while continuing in the same business, and it intends to grow again later. It is not liquidation, which ends the business, nor a pause strategy, which holds scale steady without cuts.

  1. ARetrenchment through a turnaround approach, since the aim is to recover while staying in the businessCorrect
  2. BStability through a pause strategy, since scale is deliberately held constant
  3. CLiquidation, since plants are being closed and staff are being shed
  4. DVertical integration, since operations are being restructured internally

Explanation

Cost cutting, closures and staff reduction aimed at restoring profitability while remaining in the same business is a turnaround form of retrenchment. Pause strategy holds scale constant without reducing it. Liquidation ends the whole business, which is not intended here. Vertical integration relates to the supply chain stages, not cost cutting.

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