What is a major risk associated with a contraction strategy?

The major risk associated with a contraction strategy is the loss of market share. When a company decides to implement a contraction strategy, it typically means that they are reducing their operations, scaling back on product offerings, or exiting specific markets. While this can lead to short-term cost savings, a significant downside is that the company may alienate existing customers and deter potential new customers, which can ultimately result in losing ground to competitors. As the company narrows its focus, it may inadvertently create gaps in the market that competitors can easily exploit, leading to a reduction in overall market presence and profitability in the long run.

On the other hand, the other options highlight potential positive outcomes which are generally not associated with contraction strategies. For instance, improved profit margins and greater customer loyalty are often results of careful business management and expansion rather than contraction, as reducing offerings can reduce customer engagement and satisfaction. Increased brand strength typically arises from positive marketing efforts or expanded reach rather than cutting back on resources.