Corporate restructuring may involve expansion or contraction of the portfolio or changes in the nature and volume of business.
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
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
2. Too many
competitively weak businesses.
declines in the market shares of one or more major business units that are falling
prey to more market-savvy competitors.
excessive debt burden with interest costs that eat deeply into profitability.
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
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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