Consolidation
What is this?
Consolidation is where organisations focus defensively on their current markets with current products. Formally, this strategy occupies the same box in the Ansoff matrix as market penetration, but is not orientated to growth. Consolidation can take two forms:
Defending market share
When faxing aggressive competitores bent on increasing their market share, organisations have to work hard and often creatively to protect what they already have. Although market share should rarely be an end in itself, it is important to ensure that it is sufficient to subtain that business in the long term.
Downsizing or divestment
Especially when the size of the market as a whole is declining, reducing the size of the business through closing capacity is often uavoidable. An alternative is divesting some activities to other businesses. Sometimes downsizing can be dictated by the needs of shareholders, for instance an entrepreneur wishing to simplify his or hers business on approaching retirement.
Konklusion
The term ‘consolidation’ is sometimes also used to describe strategies of buying up rivals in a fragmented industry, particularly one in decline. By acquiring weaker competitors, and closing capasity, the consolidation company can gain market power and increase overall efficiency.