A stability strategy is characterized by an absence of significant change. Examples of stability strategy include continuing to serve the same clients by offering the same product or service, maintaining market share, and sustaining that organization’s past return-on-investment record. When should management pursue stability? When it views the organization’s performance as satisfactory and the environment appears stable and unchanging.
It’s not easy to identify organizations that are pursuing a stability strategy, if for no other reason than that few top executives are willing to admit it. In US, growth tends to have universal appeal, and retrenchment is often accepted as a necessary evil. Moreover, the active pursuit of stability can result in management is being considered complacent or even smug.
A stability strategy involves maintaining the status quo or growing in a methodical, but slow, manner. Organizations might choose a stability strategy for a number of reasons. For instance, if a company is doing reasonably well, managers may not want the risks or hassles associated with more aggressive growth. This is often the case in small, privately owned businesses, which constitute the largest group likely to adopt a strategy of stability. For example, Bob Sidell started California Cosmetics after formulating special cosmetics to cope with the skin problems of teenage actors appearing in the TV show The Waltons. Within 3 years, Sidell and his partner, Paula Levey, had developed their mail order operation into a company with annual sales of $10 million. Such fast growth, though, brought botched orders, rising complaints, and returns and non deliveries in the 17 percent range. After some initial cutbacks to gain stability, the company plans to grow much more slowly. “We’ll probably never be the richest folks on the block,” says Levey. “But we’re going to be around years from now.” Another major reason for choosing stability is that it provides a chance to recover. An organization that stretched its resources during a period of accelerated growth’ may need to attain stability before it attempts further accelerated growth. On the other hand, if managers believe that growth prospects are low, they may choose a stability strategy in an attempt to hold on to current market share. (Worsening situations, however, may call for defensive strategies.) Finally, a stability strategy may even occur through default if managers are unconcerned with their strategic direction.
Credit: Advanced Strategic Management-MGU