Renewal strategy

Definition (1):

When a corporate strategy is designed to address declining performance, then this type of strategy is called a renewal strategy. This type of strategy helps an organization stabilize operations, revitalize organizational resources and capabilities, and prepare to compete once again.

Definition (2):

“A renewal approach to strategy refreshes the vitality and competitiveness of a firm when it is operating in a harsh environment.” Two different phases characterize the renewal strategy: survival and focusing on growth. When circumstances become too difficult to continue with the present way of performing business, altering course to free up and preserve resources and later on redirecting toward growth- are the only ways to not just survive but to ultimately compete again.

Harsh circumstances can be a threat to a firm’s survival. These circumstances can result from a prolonged mismatch between the firm’s strategy and the environment or by an internal or external shock. The firm may not be able to notice these signals of threat immediately, but prolonged competitive underperformance in respect of sales growth or margin, sharp downfalls in free cash flows, and decreases in available capital are the main indicating factors that the firm’s long-term survival can be at risk. When a firm faces one or more of these factors, it should follow the renewal strategy.

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