STABILITY, RETRENCHMENT AND RESTRUCTURING

Stability

• When the environment is certain is predictable.

• -NO- Change Strategy

• -Profit Strategy

• -Pause/Proceed-with-caution Strategy

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

PROFIT STRATEGY• NO-CHANGE strategy 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

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

RETRENCHMENT STRATEGIES

• CONDITIONS FOR RETRENCHMENT

• Falling Sales

• Falling market share

• Increase in Debt

• Falling Profitability

RETRENCHMENT STRATEGIES

TurnaroundRegrouping through cost and asset

reduction to reverse declining sales

and profit

Divestiture Selling a division or part of an

organization

LiquidationSelling all of a company’s assets, in

parts, for their tangible worth

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

TURNAROUND• It is a 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.

TURNAROUND

• Turnaround is Reversing the process of decline

• A company do the TURNAROUND in the following condition:

• -Persistent Negative Cash Flow

• -Poor Quality products

• -Mismanagement

• --Poor Market Share

DIVESTMENT

• REASONS FOR DIVESTMENT

• 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

When to do Liquidation

• Both retrenchment and divestiture fails

• When no alternative is left (except bankruptcy)

COMBINATION STRATEGIES

• MIXTURE OF

• Expansion

• Stability

• Retrenchment

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.

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

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.

RESTRUCTURING

• LPU (changing OS )

• GE (earlier north/south…now consumer/industrial/defence)

• Trident restructuring ( Towels earlier Product.. NOW geographical)

THANKS