What is Stability Strategy? Types: Small Exploration, No Change, Profit Strategy

What is Stability Strategy?

Stability strategy refers to a set of actions that a business can take to maintain its current position in the market, without significantly changing its overall operations or objectives. Stability strategies are often used by businesses that have achieved a certain level of success and are content with their current market share, revenue, and profitability. The primary goal of a stability strategy is to maintain a stable and consistent level of business operations.

Stability strategies are followed by an organisation in situations where the organisation does not venture into new markets or launch new products. It is a position where the organisation stops the expenditure on expansion.

Sometimes, an organisation attempts to maintain its current position and focuses only on a marginal or incremental improvement in its performance by changing one or more of its business operations. These changes could be in terms of customer groups, customer functions, technology alternatives, etc. Thus, the strategy that an organisation follows in such conditions to consolidate its position in the industry (where it operates), is known as stability strategy.

The focus of stability strategy is to move carefully and slowly to help an organisation in retaining its present position in the market. In the stability strategy, organisations serve the same market with present products using the existing technology.

In other words, the stability strategy sustains the moderate growth of the organisation, in line with the existing trends. An organisation can adopt a stability strategy either when the market condition is volatile or highly competitive. Stability is also adopted in situations when there is a lack of resources and expansion may be risky in nature.

For example, Steel Authority of India Limited (SAIL) opted for the stability strategy because of overcapacity in the steel sector. SAIL concentrated on increasing its operational efficiency, rather than going for expansion.

Types of Stability Strategy

• Small Exploration Strategy
  
• No Change Strategy
  
• Profit Strategy

Small Exploration Strategy

A small exploration strategy is also known as a pause/proceed with the caution strategy. It is a tactic employed by organisations to test the grounds before moving ahead with a full-fledged corporate strategy.

It involves gauging new products/services and markets, exploring small test markets and judging the reaction of customers. The main purpose is to seep down the strategic changes at the organisational levels and adapt the systems to new strategies.

Pause/proceed with the caution strategy is a temporary but a deliberate and conscious attempt to delay major strategic changes to a time, when the organisation is ready to move with rapid pace again.

In India, the shoe market is dominated by shoe brands, such as Liberty and Bata, with an increasing presence of international brands, such as Nike, Adidas or Reebok. Not many of you might be aware that Hindustan Unilever Limited (HUL), better known for manufacturing fast moving consumer goods (FMCG), produces a fair quantity of shoes as well. These shoes are generally exported.

HUL followed the pause/ proceed with the caution strategy before deciding to focus on the export market. In the late 2000, HUL sold a few thousand pairs in the Indian cities. This was done to ascertain the market reaction, before venturing into a sector (exports) having a huge potential.

No Change Strategy

A no change strategy is followed by organisations to continue with the present position of growth. It involves maintaining the existing strategies without doing anything new. In other words, a no change strategy can be characterised by an absence of strategy, since the organisation does not find it worthwhile to alter the present strategy.

The reason behind the no change strategy could be the absence of opportunities or threats in the external and internal environment. In addition, there may be no major strengths or weakness of an organisation for which it needs to form any strategy.

The no change strategy is generally followed by organisations, which are small. These organisations prefer to operate in the niche market, and offer products and services based on time-tested techniques.

Profit Strategy

An organisation cannot survive for long by following the ‘no change strategy’. A profit strategy is usually followed when a few changes in the current strategy become necessary. When the problems faced by the organisation are estimated to last only for a short while, it tries to sustain profitability by adopting the profit strategy.

In the profit strategy, an organisation, in order to sustain its profitability, takes measures, such as reducing investment, raising prices and increasing productivity. Profit strategy is followed when an organisation is unsure of external markets and looks for the right time to practice another strategy.

The profit strategy is also adopted when an organisation perceives that the problems are short-lived and can be eliminated anytime. These problems may relate to government attitude, competitive pressures or industry downturn.

The measures that an organisation adopts are basically artificial measures that lead to profitable situations. Thus, it can be said that such strategy can work only if problems are shortterm in nature.