Defensive Strategies 2019
Summary
TLDRThis video explores three defensive strategies for companies to protect their competitive position: retrenchment, divestiture, and bankruptcy. Retrenchment involves asset reduction, exemplified by Walgreens' 2018 restructuring plan. Divestiture is the sale of company parts, as seen with Bayer's decision to sell off its animal health business and other brands. Bankruptcy has two forms: Chapter 11, which allows for reorganization, like Sears' 2018 filing, and Chapter 7, leading to total liquidation and the company's dissolution.
Takeaways
- 🔒 Defensive strategies are employed by companies to protect their current competitive position rather than to grow or enhance it.
- 📉 Retrenchment involves asset reduction, which can include layoffs, warehouse consolidations, and store closures, as seen with Walgreens in 2018.
- 💡 The goal of retrenchment is to create a leaner operating model, which can help companies counteract margin pressure and invest in future growth.
- 💸 Divestiture is the act of selling a part of a company or a division to regain investor trust, as demonstrated by Bayer's decision to sell off parts of its business in 2018.
- 📉 Bankruptcy is a defensive strategy used when a company is unable to pay off its debts, with Sears filing for Chapter 11 in late 2018 as an example.
- 🏬 Chapter 11 bankruptcy allows a company to reorganize under court protection, while Chapter 7 leads to total liquidation and the end of the company.
- 🛒 The rise of online retail was a significant factor in Sears' financial struggles, highlighting the impact of digital competition on traditional retail.
- 🏠 Asset reduction can also involve selling real estate, which Sears attempted as part of its efforts to stay afloat.
- 🏢 Companies may close unprofitable stores to maintain profitability, as Sears planned to close 188 more stores by the end of 2018.
- 🌐 The script illustrates how companies use defensive strategies to adapt to market changes and financial challenges.
Q & A
What is a defensive strategy in the context of business?
-A defensive strategy is a business approach where a company aims to protect its current competitive position rather than enhance or strengthen it. It is the opposite of a growth strategy.
What are the three types of defensive strategies mentioned in the video?
-The three types of defensive strategies mentioned are retrenchment, divestiture, and bankruptcy.
What is retrenchment and how did Walgreens implement it?
-Retrenchment is a defensive strategy that involves asset reduction or restructuring. Walgreens implemented it by announcing a $1 billion restructuring plan in December 2018, which included layoffs, warehouse consolidations, and store closures.
Why did Walgreens undertake the retrenchment strategy?
-Walgreens undertook the retrenchment strategy to counteract margin pressure and create a leaner operating model to facilitate future investments and move the company forward.
What is divestiture and how did Bayer demonstrate it?
-Divestiture is a defensive strategy where a company sells a part of its business or a division. Bayer demonstrated this by announcing the sale of its animal health business, Coppertone sunscreen, and doctor Scholl's footwear products in December 2018.
What was the reason behind Bayer's divestiture strategy?
-Bayer's divestiture strategy was an effort to win back investors' trust after a series of setbacks, including a significant drop in their share price.
What are the two forms of bankruptcy discussed in the video?
-The two forms of bankruptcy discussed are Chapter 11 bankruptcy, which involves court protection and a reorganization plan, and Chapter 7 bankruptcy, which involves total liquidation of the company's assets and cessation of its existence.
How did Sears Holdings respond to its financial challenges?
-Sears Holdings responded to its financial challenges by filing for Chapter 11 bankruptcy in late 2018, due to competition from online retail and their inability to pay off a significant amount of debt.
What is the difference between Chapter 11 and Chapter 7 bankruptcy?
-Chapter 11 bankruptcy allows a company to reorganize and create a plan to steer the company forward, while Chapter 7 bankruptcy involves the total liquidation of the company's assets and its eventual cessation of existence.
What steps did Sears Holdings take after filing for bankruptcy?
-After filing for bankruptcy, Sears Holdings planned to keep profitable stores running but announced the closure of at least 188 stores by the end of 2018, teetering on the edge of Chapter 7 bankruptcy.
Why are defensive strategies important for a company?
-Defensive strategies are important for a company as they help protect its current competitive position, especially during times of financial distress or when facing significant market challenges.
Outlines
🛡️ Defensive Strategies in Business
This video discusses three types of defensive strategies that companies may employ to protect their competitive position without aiming to enhance it. These strategies are in contrast to growth strategies like mergers, acquisitions, and strategic alliances. The video provides contemporary examples of each defensive strategy: retrenchment, which involves asset reduction and restructuring, as seen with Walgreens' 2018 announcement of a $1 billion restructuring plan; divestiture, the selling off of parts of a company, exemplified by Bayer's decision to sell its animal health business, Coppertone sunscreen, and Dr. Scholl's footwear products in 2018; and bankruptcy, which includes filing for court protection to reorganize, as Sears did in late 2018, and total liquidation, which could have been Sears' fate had they not managed to keep some profitable stores open.
Mindmap
Keywords
💡Defensive Strategy
💡Retrenchment
💡Divestiture
💡Bankruptcy
💡Growth Strategy
💡Competitive Position
💡Margin Pressure
💡Restructuring
💡Liquidation
💡Strategic Alliances
💡Joint Ventures
Highlights
Defensive strategies are defined as actions taken by a company not to enhance but to defend its current competitive position.
Growth strategies, which are the opposite of defensive strategies, include mergers, acquisitions, strategic alliances, and joint ventures.
Retrenchment is a defensive strategy involving asset reduction and restructuring.
Walgreens announced a $1 billion restructuring plan in December 2018 to counteract margin pressure and streamline operations.
Divestiture is a defensive strategy where a company sells a part of itself or a division.
Bayer exemplified divestiture by announcing the sale of its animal health business, Coppertone sunscreen, and Dr. Scholl's footwear products in December 2018.
Bankruptcy is another form of defensive strategy, with two forms: reorganization and total liquidation.
Sears filed for Chapter 11 bankruptcy in late 2018, seeking court protection and a reorganization plan.
Chapter 7 bankruptcy involves a firm filing for total liquidation, selling all assets, and ceasing to exist.
Sears Holdings, parent company of Sears and Kmart, planned to keep profitable stores open while closing 188 more by the end of 2018.
The video provides current examples of defensive strategies, emphasizing their importance in business today.
Retrenchment aims to create a leaner operating model, allowing for future investments and growth.
Divestiture is used by companies to regain investor trust after setbacks, such as a drop in share price.
The transcript highlights the difference between growth and defensive strategies in business.
Bankruptcy as a defensive strategy is a last resort for companies unable to pay off significant debt.
The video discusses the impact of online retail on traditional retailers like Sears, leading to bankruptcy.
The transcript provides a working definition of defensive strategies and their types in the context of business.
Walgreens' restructuring plan includes layoffs, warehouse consolidations, and store closures to streamline operations.
Bayer's divestiture decision was part of a broader effort to focus on core business areas and improve financial performance.
Sears' bankruptcy filing was a response to competition from online retailers and a significant debt burden.
The transcript outlines the steps companies take when considering bankruptcy, including reorganization and total liquidation.
Transcripts
this video details three defensive
strategies and provides current examples
of each retrenchment divestiture and
bankruptcy a working definition of a
defensive strategy is one where the
company does not intend to enhance their
competitive position or strengthen it in
fact it's the opposite of a growth
strategy growth strategies are most
everything you've studied in this course
today and include mergers acquisitions
strategic alliances joint ventures and
the like these strategies are used to
help defend a firm's current competitive
position now there's three types of
defensive strategies the first ones
called retrenchment and a definition of
retrench meant is simply caused an asset
reduction also known sometimes as
restructuring in December of 2018
Walgreens announced a 1 billion dollar a
structuring plan that's going to include
layoffs from warehouse consolidations
and store closures the program is hoped
to allow the company to counteract
margin pressure and create a leaner
operating model to feel investments to
move the company forward the second type
of defensive strategy is called
divestiture the vestige sure is where
you sell a part of your company or a
division on your company a recent
example of divestiture is seen with bear
in December 2018 they announced they
would sell its animal health business
the Coppertone sunscreen x' and their
doctor Scholl's footwear products in an
effort to win back investors trust after
a string of setbacks that include a
shortfall in their share price the final
form of defensive strategy is that of
bankruptcy and there's two forms of
bankruptcy the first is a program
whereby you apply for court protection
from creditors and they set a
reorganization plan to help you steer
the company forward for example in late
2018 Sears filed for chapter 11
bankruptcy in part due to online retail
and how they were getting beat in that
realm despite reducing assets and
selling real estate over the years Sears
has been unable to pay off a one hundred
thirty four million dollar amount of
debt and Sears Holding as a parent
company of Sears and Kmart says they
plan to keep profitable stores running
but by the end of 2018
looking to close at least 188 more and
after that and there were 700 they're
teetering on the edge of what we call
chapter 7 bankruptcy and that is a
program whereby a firm files for total
liquidation and total liquidation would
include selling all stores all inventory
and then the company ceases to exist
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