If a company thinks all its effort and resource to be deployed to maintain better the existing level of performance, is known as stability strategy. The company adopts this strategy in a relatively stable and predictable environment. It focuses on the company's existing product line. A stable strategy arises out of a basic perception by the management that the firm should concentrate on using its present resources for developing its competitive strength in particular market areas. In simple words, stability strategy refers to the company’s policy of continuing the same business and with the same objective.
Generally a company pursues the stability strategy when,
⦁ It continues to serve the customers in the same product or service, market and functional sectors as defined in its business definition, or in very small sectors.
⦁ Its main strategic decisions focus on incremental improvement of functional performance.
Why do organizations follow Stability Strategy?
⦁ When management perception about performance in the present business is satisfactory, they tend to follow stability strategy because they are not always sure of a set of factors attributing to success. Thus they decide to continue the same business.
⦁ This strategy involves low risk unless there is a major change in the environment. So it provides safe business.
⦁ Slow or resistant to change organizations follow this strategy. As they become larger and more successful, they develop such tendency and prefer stability.
⦁ Organization's past history may be full of changes so to reap the advantages of such past, stability is preferred for some time, usually after growth strategy.
⦁ A company lacking in sufficient resources to effect major changes in business have to adopt stability strategy.
⦁ The environmental factors such as government norms, prohibition & restriction of certain product and process, licensing etc. prevent other strategy & a company has to adopt stability strategy.
There are following three types of stability strategies;
⦁ No-change strategy: It is a conscious decision not to do anything new. Stable environments encourage the companies to adopt such strategy. If the company management views the current business is safe and less risky then it prefers stability. This strategy is common and natural with large and dominant companies in mature industries where the important challenge is to maintain the current position. This strategy may also adopt in a family dominated or private company, which may not like to expand its business if effective supervision is not possible by the family members.
⦁ Pause/proceed with caution strategy: Before adopting full-fledged strategy, a company wants to test it or pilot exercise. For this purpose the company proceeds with caution in its strategy thinking. When a company is expecting major changes in its environment, it will wait and watch before initiating of any action. In such situation, the company deliberately and consciously attempt to postpone any strategic move and wait for getting clear view of the future possibility.
⦁ Profit strategy: When a firm going through a stable environment, it may not want to invest for the growth purpose but wants to make profit as it is. The firm emphasizes the strategy to do the same thing better to earn profit even in irregular condition.