Future Business Leaders of America (FBLA) Business Management Practice Test

What describes a retrenchment strategy for a company?

1. A strategy to expand sales

2. A strategy to reverse negative trends

3. A strategy to maintain existing operations

4. A strategy to streamline costs

The correct answer is: A strategy to reverse negative trends

A retrenchment strategy is primarily focused on reversing negative trends within a company, particularly during challenging times or economic downturns. This approach often involves making significant changes to business operations to improve financial performance, streamline processes, and focus on core competencies. By reversing negative trends, companies aim to stabilize their market position and restore profitability, making it a crucial tactic in times of distress. While other strategies, such as expanding sales or maintaining existing operations, are important aspects of overall business strategy, they do not directly address the need to recover from difficulties or improve unfavorable situations. Streamlining costs can be a component of a retrenchment strategy, but the defining feature is the commitment to reversing negative trends rather than merely maintaining or optimizing operations.