The Stability Strategy in Project Management
Stability strategy implies continuing the current activities of the firm without any significant
change in direction. If the environment is unstable and the firm is doing well, then it may believe
that it is better to make no changes. A firm is said to be following a stability strategy if it is
satisfied with the same consumer groups and maintaining the same market share, satisfied with
incremental improvements of functional performance and the management does not want to take
any risks that might be associated with expansion or growth.
Stability strategy is most likely to be pursued by small businesses or firms in a mature stage of
development.
Stability strategies are implemented by ‘steady as it goes’ approaches to decisions. No major
functional changes are made in the product line, markets or functions.
However, stability strategy is not a ‘do nothing’ approach nor does it mean that goals such as
profit growth are abandoned. The stability strategy can be designed to increase profits through
such approaches as improving efficiency in current operations.
Nature of Stability Strategy
A firm following stability strategy maintains its current business and product portfolios; maintains
the existing level of effort; and is satisfied with incremental growth. It focuses on fine-tuning its
business operations and improving functional efficiencies through better deployment of resources.
In other words, a firm is said to follow stability/ consolidation strategy if:
• It decides to serve the same markets with the same products;
• It continues to pursue the same objectives with a strategic thrust on incremental
improvement of functional performances; and
• It concentrates its resources in a narrow product-market sphere for developing a
meaningful competitive advantage.
Adopting a stability strategy does not mean that a firm lacks concern for business growth. It only
means that their growth targets are modest and that they wish to maintain a status quo. Since
products, markets and functions remain unchanged, stability strategy is basically a defensive
strategy. A stability strategy is ideal in stable business environments where an organization can
devote its efforts to improving its efficiency while not being threatened with external change. In
some cases, organizations are constrained by regulations or the expectations of key stakeholders
and hence they have no option except to follow stability strategy.
Generally large firms with a sizeable portfolio of businesses do not usually depend on the stability
strategy as a main route, though they may use it under certain special circumstances. They
normally use it in combination with the other generic strategies, adopting stability for some
businesses while pursuing expansion for the others. However, small firms find this a very useful
approach since they can reduce their risk and defend their positions by adopting this
strategy. Niche players also prefer this strategy for the same reasons.
Conditions Favoring Stability Strategy
Stability strategy does entail changing the way the business is run, however, the range of products
offered and the markets served remain unchanged or narrowly focused. Hence, the stability
strategy is perceived as a non-growth strategy. As a matter of fact, stability strategy does provide
room for growth, though to a limited extent, in the existing product-market area to achieve current
business objectives. Implementing stability strategy does not imply stagnation since the basic
thrust is on maintaining the current level of performance with incremental growth in ensuing
periods. An organization’s strategists might choose stability when:
• The industry or the economy is in turmoil or the environment is volatile. Uncertain
conditions might convince strategists to be conservative until they became more certain.
• Environmental turbulence is minimal and the firm does not foresee any major threat to
itself and the industry concerned as a whole.
• The organization just finished a period of rapid growth and needs to consolidate its gains
before pursuing more growth.
• The firm’s growth ambitions are very modest and it is content with incremental growth.
• The industry is in a mature stage with few or no growth prospects and the firm is currently
in a comfortable position in the industry.
Rationale for Using Stability Strategy
There are a number of circumstances in which the most appropriate growth stance for a company
is stability rather than growth. Stability strategy is normally followed for a brief period to
consolidate the gains of its expansion and needs a breathing spell before embarking on the next
round of expansion. Organizations need to ‘cool off’ for a while after an aggressive phase of
expansion and must stabilize for a while or they will become inefficient and unmanageable.
Managers pursue stability strategy when they feel that the enterprise has been performing well and
wish to maintain the same trend in subsequent years. They would prefer to adopt the existing
product-market posture and avoid departing from it. Sometimes, the management is content with
the status quo because the company enjoys a distinct competitive advantage and hence does not
perceive an immediate threat.
Stability strategy is also adopted in a number of organizations because the management is not
interested in taking risks by venturing into unknown terrain. In fact they do not consider any other
option as long as the pursuit of existing business activity produces the desired results. Conservative
managers believe product development, market development or new ways of doing business entail
great risk and therefore, avoid taking decisions, which can endanger the company. A number of
managers also pursue consolidation strategy involuntarily. In fact, they do not react to
environmental changes and avoid drastic changes in the current strategy unless warranted by
extraordinary circumstances.
Sometimes environmental forces compel an organization to follow the strategy of status quo. This
is particularly true for bigger organizations, which have acquired dominant market share. Such
organizations are usually not permitted by the government to expand because it may lead to
monopolistic and restrictive trade practices detrimental to public interest.
Types of Stability Strategies
1. Pause/Process with caution strategy — Some organizations pursue stability strategy for
a temporary period of time until the particular environmental situation changes, especially
if they have been growing too fast in the previous period. Stability strategies enable a
company to consolidate its resources after prolonged rapid growth. Sometimes, firms that
wish to test the ground before moving ahead with a full-fledged grand strategy employ
stability strategy first.
2. No change strategy — No change strategy is a decision to do nothing new i.e continue
current operations and policies for the foreseeable future. If there are no significant
opportunities or threats operating in the environment, or if there are no major new strengths
and weaknesses within the organization or if there are no new competitors or threat of
substitutes, the firm may decide not to do anything new.
3. Profit strategy — Profit strategy is an attempt to artificially maintain profits by reducing
investments and short-term expenditures. Rather than announcing the company’s poor
position to shareholders and other investors at large, top management may be tempted to
follow this strategy. Obviously, the profit strategy is useful to get over a temporary
difficulty, but if continued for long, it will lead to a serious deterioration in the company’s
position. The profit strategy is thus usually the top management’s short term and often self
serving response to the situation.
In general, stability strategies can be very useful in the short run, but they can be dangerous if
followed for too long.
Some organizations successfully employ stability strategy, but most do not get the press that
companies using other strategies get. One reason might be that no change means no news. Another
might be that the company itself wants to keep a low profile; stakeholders may consider the status
quo to be inappropriate, or the strategy may be indication of rigidity of the planning process.
