What is retrenchment?

  • To cut down or reduce something
  • Use resources more carefully

Examples of Retrenchment

  • Reduce output & capacity
  • Job losses
  • Product/market withdrawal
  • Disposal of business unit
  • Scaling back investment

Driving factors of Retrenchment

  • Costs too high

  • Low ROCE

  • High gearing

  • Loss of market share

  • Failed takeover

  • Economic downturn

  • Change of ownership

  • All of the above indicate a need for strategic change

Implications for Change Management

  • Much depends on the scale and scope of the retrenchment
  • Small-scale, incremental retrenchment has only limited impact
  • Significant retrenchment is often associated with a fundamental reappraisal of the business