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7 stability, retrenchemnt restructuring
This document discusses strategies that companies use during periods of stability, retrenchment, and restructuring. During stable times with predictable environments, companies may pursue a no-change strategy by continuing their current business or a profit strategy to sustain profits temporarily. When facing declining sales, profits, or market share, companies use retrenchment strategies like turnaround to reverse declines, divestiture by selling divisions, or liquidation by selling all assets. Restructuring changes a company's legal or operational structure to make it more profitable or adapted to current needs.
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7 stability, retrenchemnt restructuring
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- 2. Stability • When theenvironment is certain is predictable. • -NO- Change Strategy • -Profit Strategy • -Pause/Proceed-with-caution Strategy
- 3. NO CHANGE STRATEGY •TO DO NOTHING NEW . CONTINUE WITH PRESENT BUSINESS DEFINITION. • THERE ARE NO SIGNIFICANT OPPS AND THREATS • THERE ARE NO NEW COMPETITORS • THERE IS NO THREAT OF SUBSTITUTES • COMPANIES WHO SERVE NICHE FOLLOW THIS STRATEGY MORE OFTEN
- 4. PROFIT STRATEGY • NO-CHANGEstrategy is impossible to pursue for ever. (PESTEL) • The firm believes that the problems are short lived • This strategy aims at SUSTAINING PROFITS till the time environmental conditions are good. • The firm needs temporary QUICK FIX solution • The firm tries to maintains its profitability by artificial measures. • Sell of some good location property • Outsourcing facilities
- 5. PAUSE/PROCEED WITH CAUTION STRATEGY •The firm do something and rest and again move ahead, then rest, then again move……. • IT IS ALWAYS good to rest a while before moving ahead. • YOU can know future also (HUL) • WHY SOME DELAY IS GOOD? • Time to absorb the new strategy in the firm • New Structural changes • New culture
- 6. RETRENCHMENT STRATEGIES • CONDITIONSFOR RETRENCHMENT • Falling Sales • Falling market share • Increase in Debt • Falling Profitability
- 7. RETRENCHMENT STRATEGIES Turnaround Regrouping throughcost and asset reduction to reverse declining sales and profit Divestiture Selling a division or part of an organization Liquidation Selling all of a company’s assets, in parts, for their tangible worth
- 8. TURNAROUND • TURNING AROUND!! •Turnaround is Reversing the process of decline • TURNAROUND IS A CRISIS MANAGEMENT ACTIVITY. • When TURNAROUND IS good:- • Persistent Negative Cash Flow • Poor Quality products • Mismanagement • Poor Market Share
- 9. TURNAROUND • It isa process dedicated to corporate renewal. It uses analysis and planning to save troubled companies and returns them to solvency. • Once analysis is completed, a long term strategic plan and restructuring plan are created.
- 10. TURNAROUND • Turnaround isReversing the process of decline • A company do the TURNAROUND in the following condition: • -Persistent Negative Cash Flow • -Poor Quality products • -Mismanagement • --Poor Market Share
- 11. DIVESTMENT • REASONS FORDIVESTMENT • Failed at Turnaround • When a division needs more resources • When that division becomes virus • Quick money needed • A better alternative for Investment may be available
- 12. When to doLiquidation • Both retrenchment and divestiture fails • When no alternative is left (except bankruptcy)
- 13. COMBINATION STRATEGIES • MIXTUREOF • Expansion • Stability • Retrenchment
- 14. RESTRUCTURING • Changing STRUCTURE •It is act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. • Other reasons for restructuring include a change of ownership or ownership structure.
- 15. BENEFITS OF RESTRUCTURING •Positioning the company to be more competitive • Survive a currently adverse economic climate. • Lead the company move in an entirely new direction. • GOOD companies always keep on doing
- 16. RESTRUCTURING • For example •A corporate restructuring may call for spinning off some departments into subsidiaries as a means of creating a more effective management model as well as taking advantage of tax breaks that would allow the corporation to divert more revenue to the production process.
- 17. RESTRUCTURING • LPU (changingOS ) • GE (earlier north/south…now consumer/industrial/defence) • Trident restructuring ( Towels earlier Product.. NOW geographical)
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