Question

Why would management adopt a stability strategy? Can stability strategies be viable over a lengthy period of time? Why or why not?

Answer 1

Answer: The stability strategy refers to the strategy adopted by the companies in which they stop making expenditures on the further expansion of the firm. There may be a number of reasons for doing so. One reason is consolidation. After the organizations have expanded and created new infrastructure or entered a new market and so on it takes a breathing time so that the consolidation can be achieved.   This helps in the better management of the organization. Another reason why a company opts for a stability strategy is for achieving optimization. Here the company attempts to take out optimal output from the existing expansion by focusing on it rather than further expanding. The bad financial situation may also be a reason for such strategy because expansion requires investment. Over a lengthy period of time, the stability strategy may not prove to be viable as it may create stagnancy in the organization and may render it non competitive at the marketplace. Therefore stability strategies should only be short term or midterm in nature.