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Corporate Restructuring - Turnaround Strategies & Corporate Restructuring
Strategic Management - Strategy Formulation
Corporate Restructuring - Turnaround Strategies & Corporate Restructuring
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Corporate restructuring may involve expansion or contraction of the portfolio or changes in the nature and volume of business.
Corporate Restructuring
Corporate restructuring may involve expansion or contraction of the portfolio or changes in the nature and volume of business. Change in the business conditions may necessitate restructuring of the business.
Restructuring strategies involve divesting some businesses and acquiring other so as to put a whole new face on the company’s business line up. Performing radical surgery on the group of businesses a company is in becomes an appealing strategy alternative when a diversified company’s financial performance is being squeezed or eroded by:
1. Too many businesses in slow-growth, declining, low-margin, or otherwise unattractive industries.
2. Too many competitively weak businesses.
3. Ongoing declines in the market shares of one or more major business units that are falling prey to more market-savvy competitors.
4. An excessive debt burden with interest costs that eat deeply into profitability.
5. Ill-chosen acquisitions that haven’t lived up to expectations.
Over the past decade corporate restructuring has become a popular strategy at many diversified companies, especially those that had diversified broadly into many different industries and lines of business. One struggling diversified company over a two-year period divested four business units, closed down the operations of four others, and added 25 new lines of business units, closed down the operations of four others and added 25 new lines of business to its portfolio (16 through acquisition and 9 through internal start-up).
During Jack Welch’s first four years as CEO of General Electrical (GE), assets: these divestitures, coupled with several important acquisitions, provided GE with 14 major business divisions and led to Welch’s challenges to the managers of GE’s divisions to become number one or number two in their industry. Ten years after Welch became CEO, GE was a different company, having divested operations worth $9 billion, made new acquisitions totaling $ 24 billion, and cut its workforce by 100,00 people. Then, during the 1990-2001 period, GE continued to reshuffle its business lineup, acquiring over 600 new companies including 108 in 1998 and 64 during a 90-day period in 1999. Most of the new acquisitions were in Europe, Asia, and Latin America and were aimed at transforming GE into truly global enterprise.
Corporate restructuring may involve expansion or contraction of the portfolio or changes in the nature and volume of business. Change in the business conditions may necessitate restructuring of the business.
Restructuring strategies involve divesting some businesses and acquiring other so as to put a whole new face on the company’s business line up. Performing radical surgery on the group of businesses a company is in becomes an appealing strategy alternative when a diversified company’s financial performance is being squeezed or eroded by:
1. Too many businesses in slow-growth, declining, low-margin, or otherwise unattractive industries.
2. Too many competitively weak businesses.
3. Ongoing declines in the market shares of one or more major business units that are falling prey to more market-savvy competitors.
4. An excessive debt burden with interest costs that eat deeply into profitability.
5. Ill-chosen acquisitions that haven’t lived up to expectations.
Over the past decade corporate restructuring has become a popular strategy at many diversified companies, especially those that had diversified broadly into many different industries and lines of business. One struggling diversified company over a two-year period divested four business units, closed down the operations of four others, and added 25 new lines of business units, closed down the operations of four others and added 25 new lines of business to its portfolio (16 through acquisition and 9 through internal start-up).
During Jack Welch’s first four years as CEO of General Electrical (GE), assets: these divestitures, coupled with several important acquisitions, provided GE with 14 major business divisions and led to Welch’s challenges to the managers of GE’s divisions to become number one or number two in their industry. Ten years after Welch became CEO, GE was a different company, having divested operations worth $9 billion, made new acquisitions totaling $ 24 billion, and cut its workforce by 100,00 people. Then, during the 1990-2001 period, GE continued to reshuffle its business lineup, acquiring over 600 new companies including 108 in 1998 and 64 during a 90-day period in 1999. Most of the new acquisitions were in Europe, Asia, and Latin America and were aimed at transforming GE into truly global enterprise.
Tags : Strategic Management - Strategy Formulation
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