The Advantages and Disadvantages of Stability Strategy

There are many disadvantages of stability strategy. As a strategic management advisor, I often find myself explaining this to clients who are struggling with their organization’s stability issues. I believe that the primary reason that stability is viewed as a disadvantage is that most people view it as a short-term planning approach that will have a temporary impact on the firm’s bottom line.
The truth, however, is that a stability strategy in strategic management is a sound long-term planning approach that can create a sustainable competitive edge over competitors for a very long time. While a brief downturn may affect quarterly profits temporarily, long-term benefit projections from a stable strategy make the investment more financially worthwhile in my opinion. So, what are some of the practical disadvantages of stability strategy in strategic management?

A stable strategy allows you to plan for the long term. One of the primary reasons that we recommend a long-term planning approach to business strategy is that it increases the potential for profit over the short term. Another disadvantages of stability strategy in strategic management is that it enables you to only address the day-to-day fluctuations that occur both within your industry and in international markets. For example, if you are an oil and gas company that is experiencing high growth rates but the market fluctuates dramatically daily, your short-term planning strategy might include putting a lot of cash toward the production of more gas but you might not be generating enough cash to absorb your increased production.
On the flip side, a retrenchment strategy eliminates any long-term flexibility built into your strategic management plan. A retrenchment strategy in strategic management cannot provide a benefit if the market conditions change abruptly. For example, if your oil and gas sector is experiencing high growth rates, but the market begins to contract, you might have to retrench your workforce as part of your overall stability plan. Also, a retrenchment strategy might not be effective if your overall sector growth is being driven primarily by organic growth, rather than by increases in the number of jobs. As an example, if the economy is suffering from a low number of jobs, there is likely going to be a strong demand for skilled workers, but when the number of jobs decreases, so does the amount of money being generated by the sector.
In addition to a lack of flexibility, the advantages of stability planning and a strategic management plan far outweigh a retrenchment approach in several industries. For example, in our economic stability strategy, we recommend that you avoid any expansion during recessionary times or periods when market conditions are unfavourable. For example, if your sector is experiencing a net loss of jobs, you should not expand during a time when employment growth is low. Also, we recommend avoiding expansion during times when overall market conditions are bullish, especially if your sector is not growing profitably.
Despite its many benefits, there are some disadvantages of a stable stability strategy in strategic management. One of these disadvantages is related to a lack of flexibility. Although some strategies may work well in equilibrium, it is difficult to determine which strategy is the best when an industry is operating in a state of dynamic change. As a result, it can be difficult to make good long-term decisions regarding investment because you cannot plan for changes in your portfolio until the situation develops.

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