Stability Strategy

Stability strategy is most commonly used by an organization. An organization will continue in similar business as it currently pursues similar objectives and resource base. Discuss six situations when it is good/best to pursue stability strategy. Give some Indian examples.

Meaning: In an effective stability strategy, companies will concentrate their resources where the company presently has or can rapidly develop a meaningful competitive advantage in the narrowest possible product market scope consistent with the firm’s resources and market requirements.

Good parenting can help SBUs to follow any strategy effectively including stability strategies. And there are some identified specific situations when the Stability Strategy is best to pursue:

• Perception of Management about Performance: If the management is satisfied with present performance and, is not willing to take market risks, they may like to adopt stability strategy and continue with it. The management may consider change of strategy only if results are not forthcoming.
• Slowness to Change: Some organizations are slow to change or resistant to change. This is particularly true of public sector companies. Many such companies are not organizationally equipped for fast or sudden change and lack the ability to cope with risk and uncertainty inherent in such change.
• Frequent Past Changes: If a company had made frequent strategic changes in the past, it should follow stability strategy for some period for more efficient management. In fact, it is always recommended that, after a period of internal change and restructuring or expansions, stability strategy should be pursued as a pause or rehabilitation. Otherwise, the organization may show signs of destabilization.
• Strategic Advantage: If an organization’s strategic advantage lies in the present business and market, it should pursue stability strategy. If, for example, an organization has high market share, it can continue in the same business and defend its position through incremental strategic changes.
• Profit Objective/Maximization: Every company has some profit objective which is commensurate with the level of investment, output level, market structure, willingness to take risk, etc. If the stability strategy helps the company achieve its profit objective, the company should stick to this. Sometimes, stability strategy may even help in profit maximization.
• Stable Environment: Given the organizational resources and capabilities, the nature of environment determines, to a large extent, the kind of strategy to be followed by a company.

If the environment is generally stable in terms of macroeconomic situation, government policy regulations and competition, stability strategy may be the best. The particular strategy to be followed depends on the precise nature of the environmental impact. If the environment is hostile or volatile, stability strategy is not recommended.