63095080 Corporate Restructuring

7/27/2019 63095080 Corporate Restructuring

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Corporate Restructuring - a path breaking strategy for running business successfully1

CORPORATE RESTRUCTURING Re- engineering is new, and it has to be done.

-

Peter F . Dr ucker

INTRODUCTION

The increasing competition, rapid advances in technology, more demanding

shareholders, more challenging work forces and rising complexity of the business

conditions have increased the burden on managers to deliver superior performance and

value for their shar eholders. In this modern winners take all economy, companies have

to take a timely responsive action to save their organisations. This brings us to the

concept of CORPORATE RESTRUCTURING.

Companies pass through different phases in their lifetime. Good times are followed by

bad times, expansion is followed by retraction. Sometimes, companies cannot ensure

their continuity and are partly or entirely liquidated. Through their life cycle, companies


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from time to time need to be restructured, dramatically changing course to restore

profitable operations. At this point of time company executives may ask whether it is

time to restructure the company. But before considering any action, they must first

answer the q uestions: will restructuring work? and when doe s restructuring improve

economic performance?

During the past decade, corporate restructuring has increasingly become a staple of

management life and a common phenomenon around the world. Unprecedented number

of companies across the world have reorganised their divisions, restructured their assets,

streamlined their operations and spun-off their divisions in a bid to spur the company

performance. It has enabled numerous organisations to respond quickly and more

effectively to new opportunities and unexpected pressures so as to re-establish their

competitive advantage. Restructuring is a change in company strategy without which its

continuity could not be ensured. The suppliers, customers and competitors also have an

equally profound impact while working with a restructured company.


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CORPORATE RESTRUCTURING in definite terms:

Restructuring is the corporate management term for the act of partially dismantling

and reorganizing a company for the purpose of making it more efficient and therefore,

more profitable. It generally involves selling off portions of the company and making

severe staff reductions.

In other words, Corporate restructuring is the process of redesigning one or more aspects

of a company. This concept also includes the termed Re -engineering and was

popularized by Michael Hammer and James Champy.


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WHY RESTRUCTURING?

Restructuring has become an essential element in many

companies' attempts to improve their competitive position in the marketplace. The power

of modern information technology must be utilized to radically redesign business to

achieve the major improvements in performance.

Restructuring endeavours to break away from the old rules about how we organize and

conduct business, and in a major hope to break away from the antiquated processes that

threaten to drag businesses down.

For example, Through restructuring, Ford was able to achieve a 75% reduction in head

count of its Accounts Payable Department, previously consisting of 500 employees.

Matching of invoices and check preparation is done automatically.

Another example is that of Mutual Benefit Life which has restructured its process of

insurance applications. The processing of complex insurance applications which had

taken from 5 - 25 days, involving 19 different employees, can now be done by oneindividual with an average turnaround time of 2 - 5 days--eliminating 100 field office

positions. Decisions regarding Restructuring may be done either with a view of

expanding the existing business where it is seen as a positive sign of growth , or with a


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view to reduce the losses of the existing company where it is seen as a negative sign of

growth.

Here are some explanatory of why corporate restructuring should take place and what it

can mean for the company.

The changing times in the ever competitive business world requires restructuring to meet

corporate objectives.

Restructuring a corporate entity is often a necessity when the company has grown

to the point that the original structure can no longer efficiently manage the output

and general interests of the company.

o 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. In

this scenario, the restructuring is seen as a positive sign of growth of the

company and is often welcome by those who wish to see the corporationgain a larger market share.

However, financial restructuring may take place in response to a drop in sales, due

to a sluggish economy or temporary concerns about the economy in general. When

this happens, the corporation may need to reorder finances as a means of keeping

the company operational through this rough time. Costs may be cut by combining

divisions or departments, reassigning responsibilities and eliminating personnel, or scaling back production at various facilities owned by the company. With this type

of corporate restructuring, the focus is on survival in a difficult market rather than

on expanding the company to meet growing consumer demand.


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Corporate restructuring may take place as a result of the acquisition of the

company by new owners. The acquisition may be in the form of a leveraged

buyout, a hostile takeover, or a merger of some type that keeps the company intact

as a subsidiary of the controlling corporation. When the restructuring is due to ahostile takeover, corporate raiders often implement a dismantling of the company,

selling off properties and other assets in order to make a profit from the buyout.

What remains after this restructuring may be a smaller entity that can continue to

function, although not at the level possible before the takeover took place.

In general, the idea of corporate restructuring is to allow the company to continue

functioning in some manner. Even when corporate raiders break up the company and

leave behind a shell of the original structure, there is still usually the hope that what

remains can function well enough for a new buyer to purchase the diminished corporation

and return it to profitability.


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CHARACTERISTICS:

The selling of portions of the company, such as a division that is no longer

profitable or which has distracted management from its core business, can greatly

improve the company's balance sheet. Staff reductions are often accomplished partly

through the selling or closing of unprofitable portions of the company and partly by

consolidating or outsourcing parts of the company that perform redundant functions (such

as payroll, human resources, and training) left over from old acquisitions that were never

fully integrated into the parent organization.

Other characteristics of restructuring can include:

Changes in corporate management

Retention of corporate management sometimes "stay bonus" payments or

equity grants

Sale of underutilized assets, such as patents or brands

Outsourcing of operations such as payroll and technical support to a more

efficient third party Moving of operations such as manufacturing to lower-cost locations

Reorganization of functions such as sales, marketing, and distribution

Renegotiation of labor contracts to reduce overhead

Restructuring of corporate debt to reduce interest payments

A major public relations campaign to reposition the company with

consumers Forfeiture of all or part of the ownership share by pre restructuring stock

holders


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WHO WILL UNDERTAKE THE PROCESS OF RESTRUCTURING?

We are now aware of the concept of restructuring but naturally we should

also know who does the restructuring in an organization?

There are five people involved in restructuring of an organization.1. The leader The leader takes the initiative to reengineer as he has the vision to

innovate. HE is the senior executive who authorizes and motivates the overall

restructuring effort.

2. The tar get area/pr ocess owner A manager with responsibility for a specific

area or a specific process and restructuring effort focused on it.

3. The restructur ing team A group of individuals dedicated to restructuring of a

particular process/ area, which diagnose the existing process/area and oversee its

redesign and implementation.

4. Steer ing committee A policy making body of senior managers who developthe organizations overall re structuring strategy and monitor its progress.

5. Restructur ing czar An individual responsible for developing restructuring

techniques and tools within the company and for achieving synergy across the

companys separate re structuring projects.

In an ideal world, the relationship among these is as follows:

The leader appoints the process owner, who convenes a restructuring team to

restructure an area/process, with assistance from the czar and under the backing of

the steering committee.


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GENERAL FRAMEWORK:

The general fr amework for corporate restructuring and reorganisation consists of

the following:1. Reorganisation of assets

a. Acquitions

b. Sell-offs or divestitures

2. Creating new ownership relationships

a. Spin-offs

b. Split ups

c. Equity carveouts

3. Reorganising financial claims

a. Exchange offers

b. Dual class recapitalisations

c. Leverage recapitalisations(bankruptcy)

d. Financial reorganisation

e. Liquidation

4. Other strategies

a. Joint ventures

b. Employee Stock Ownership Plans , Master Limited Partnership

c. Going-private transactions

d. Using international markets

e. Share repurchase programs

When one company purchases another company and clearly establishes itself as

the new owner, the purchase is called an acquisition.


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Divestiture , on the other hand, involves a sale of a unit or a segment of a

company to a third party. The companys assets, product lines, subsidiaries or

divisions are sold for cash or securities or a combination of these.

In spin-offs , a company distributes all its shares in a subsidiary to their shareholders on a pro rata basis. As a result, a new public corporation is formed

with the same ownership patterns as that of parent organisation. There is no money

exchange and revaluation of subsidiarys assets. The transaction is treated as a

stock dividend and a tax-free exchange.

On the other hand, in a split-up , two or more companies are formed in place of

the parent company. The parent company is liquidated after exchanging the stocks

of two or more subsidiary companies for all the parent companys stock. They are

usually a result of spin-offs.

In equity curve-outs , some of the shares of a subsidiary are offered for sale to the

general public as a means to generate cash for the parent organisation without

losing its control.

In split-offs , the parent company issues its subsidiarys shares to the parent

companys shareholders in return for a specified number of parent companys

shares.

Capital structure and leverage decisions represent potentials for value

enhancement, for acquiring other firms or to defend against being acquired by

others. Leverage recapitalisation involves a relatively large issue of debt that is

used for the payment of a relatively large cash dividend to non-management

shareholders or for the repurchase of common shares, or a combination of both,thereby increasing the ownership share of the management.

On the other hand, in a dual-class stock recapitalisation , firms establishes a

second class of common stock that has limited voting rights but usually with a

preferential claim to the firms cash flows.


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An exchange offer provides one or more classes of securities, the right or

option to exchange part or their entire holding for a different class of securities of

the firm. Financial reengineering is used by the firms to limit their financial

exposure and also to facilitate merger transactions . If the firm is worth more deadthan alive, creditors will force the firm to liquidate.

In liquidation , the firm can be sold in parts or as a whole for an amount that

exceeds the pre- liquidation market values of the firms securities. Voluntary

liquidations are used when there is a threat of a bust -up takeover .

Joint ventures are used to acquire complementary technological or management

resources at lower cost, or to benefit from economies of scale, critical mass and

learning curve effect. They are often used to provide countervailing power among

rivals in a product market and among rivals for a scarce resource.

Employee Stock Ownership Plan (ESOP) is a type of stock bonus plan that

invests primarily in the securities of the sponsoring employer firm. They are

designed to promote employee stock ownership and to facilitate raising of capital

by employers. On the other hand, Master Limited Partnership (MLP) is a type of

limited partnership whose shares are traded publicly. The limited partnership

interests are divided into units that trade as shares of common stock. MLPs offer

investors liquidity via an organised secondary market for trading of partnership

interests. Both ESOPs and MLPs have tax advantage and both have been involved

in takeover and takeover defence activities.

Going private refers to the transformation of a public corporation into a privately

held firmA Leverage Buyout (LBO) is a general form of restructuring wherein the

managers, with the help of some outside agencies, replace the public stockholdings

with closely held equity. Sometimes, the stocks and assets are purchased by a small

group of investors especially buyout specialists or investment bankers or


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commercial bankers. Usually, the present management is included in the buying

group. The buyout process varies with few managers preferring the acquisition of

the entire company, while few preferring the acquisition of a division or subsidiary.

When the companys key executives are involved in the buyout process, it is termedmanagement buyouts (MBOs).

Share repurchase program generally deals with the cash offers for outstanding

shares of common stock thereby helping in changing the capital structure of the

firm. It also helps in reducing the common stock so that the debt/equity ratio or

leverage ratio is increased.

The selection of the restructuring initiative varies with the type of organisation, the

Management and the challenges faced by the organisation. However, generally,

specialists distinguish four modes of restructuring

Portfolio Restructuring, Financial Restructuring ,Organisational Restructuring and

Business process re-engineering.

Portfol io Restru cturi ng:

It involves changes in the asset mix of the organisation, i.e. addition or disposal of

assets from the organisations business. It includes acquisitions, asset sales, divestitures,

liquidations, spin-offs or a combination thereof. It is cited that spin-offs generate higher

performance gains than sell-offs and acquisitions and divestitures, Better strategic focus,

strong control of multiple business units and superior economies of scope can be the

intermediate effects of portfolio restructuring.


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F inancial Restructuri ng:

It involves changes in the capital and debt structure of an organisation which

includes leveraged buyouts, leveraged recapitalisation and debt for equity swaps. Thelargest returns in financial restructuring come from leveraged and management buyouts

increased emphasis on cash flows and changes in managerial incentives can be the

intermediate effects of financial restructuring.

Organisational Restru cturi ng:

It involves changes in the organisational structure which include divisional

redesign, reducing the hierarchical level, reduction in product diversification,

compensation revision, improving governance and workforce reductions. However, it is

more dependent upon the circumstances in which it is initiated and has the least impact on

performance. An increase in operating efficiencies, greater employee satisfaction, reduced

turnovers and better communications can be the intermediate effects of an organisational

restructuring. These intermediate effects, directly or indirectly, influence the financial

performance of the organisation. However, this ultimate effect might be visible within a

few years or might take a longer time period.

To measure the impact of restructuring, the organisation can study the impact on

market performance through the movement in the organisations stock prices after the

announcement of the restructuring or through the impact on accounting performance by

analysing the changes in earnings (like return on equity and return on investment) beforeand after the restructuring Studies reveal that generally, there is a statistically significant

improvement in the organisational performance after a restructuring event. However, it

may not be the case always. It is cited that the average percentage change in performance

is positive for financial and portfolio restructuring, while it is negligible or sometimes


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negative in case of organisational restructuring (Table I).

The latest concept to be introduced under the strategy of Restructuring is that of Business

Process Re- engineering (BPR)

Business process re-engineer ing -

The ever changing and dynamic technology calls in for the BPR. Every company needs

to be up to date with its technology and when such new technology is introduced it

becomes essential to call in BPR to bring in efficiency in the business.

BPR focuses on redesigning work processes to enhance productivity and

competitiveness. The demand for a new approach to company restructuring has beenfuelled by the awareness, that many of the existing business logic is built on

premises of considerable age. Due to the global changes in economy, markets are

globalized, customer requirements change and competition is intensified, new

approaches had to be developed for coping with environmental dynamics and the

required flexible organizational change. In 1991, Michael Hammer, a former MIT

professor in computer science published an article in the Harvard Business Review,

emphasizing the need for fundamental organizational change and for the first time

using the term Business Process Reengineering.


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METHODOLOGY/ PROCESS FOR ENTERPRISE RESTRUCTURING:

The methodology of enterprise restructuring is based on a strategic plan ni ng process .

This consists of three phases:

1 Diagnostic phase

Diagnosis of the company through strategic appraisal ( four months)

2 Planning phase

Preparation of the strategic improvement plan (business plan, two months)

3 Implementation phase

Restructuring, including monitoring of progress and revisions of the previous

phases ( eighteen months)

The process and methodology of diagnostic review and strategic planning is summarised

in the figure below.


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Internal analysis of marketing, production, orga nisation and fi nan ce func-

tions. Ana lysis of bu siness units

External analysis mar ket, com pe ti ti ve, econo mic and

legal envi ron - ment Diagnostic

SWO at the stra te- gic level Identify the competitive ad- van ta ges

Strategic planning : de fi nition of corporate ob ectives, mission sta tement, and corpo rate (business unit) strategy

Planning

Tactical planning : mar ke ting, pro du c- tion, orga nisation and fi nan ce objectives and strategies

Implemen- tation

Action plan , to put actions in a time frame, assign res-

pon sibilities, and mo nitor progress


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The diagnostic phase analyses the internal and external environment of the

company, its relative position on the market, and its position relative to the competition.

Thus, in-depth studies are conducted into the operations of the company, in particular its

marketing, production, organisation and finance functions, problems encountered, their causes and possible solutions. The local and export market is extensively investigated, as

is the competition. Based on this information, the SWOT analysis is completed: the

relative strengths & weaknesses in the internal environment, and the opportunities &

threats in the external environment. Through this analy sis, the companys compe titive

advantages on the market can be determined.

With a thorough and detailed diagnostic, the development of the restructuring plan

is not very difficult. Based on the SWOT, the corporate objectives, mission statement and

subsequently corporate and business unit strategies are developed - strategic planning.

Having completed this important step, the corresponding objectives and actions at the

functional level (marketing, production, organisation, and finance) logically follow.

Accordingly, financial projections are developed, as is an action plan clearly outlining

what is to be done to implement the restructuring plan, when and by whom.

II The Company Diagnostic

The company diagnostic, or the strategic appraisal of the enterprise, consists of

five consecutive steps. This leads to a diagnostic report by the fourth month of project

implementation. Apart from technical studies, the diagnostic phase includes a number of

participatory planning sessions with middle and higher management staff, aiming to

uncover strategic bottlenecks for the companys development, assessing the options, and

defining new strategic directions.


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1. Identification of stakeholders in the company - who will be affected. These are

the management, shareholders, workers (some of whom may be shareholders as

well), clients, suppliers, distributors, creditors, banks, government, and others. Are

they willing to collaborate in the restructuring exercise? Are there any conflictinginterests among the stakeholders?

2. Pr e-assessment of the current situation . What are the present product / market

combinations. How has the company performed in recent years? What would be the

outcome of a strategy continue business as usual? Would the company be able to

secure its continuity without restructuring?

3. I nternal analysis aims at identification of strengths and weaknesses in the

companys structure, culture, and resources. The internal analysis includes a revi ew

of sales, costs, profits, organisational structure, management style, technology,

financial results, and other factors. For the main functional areas of marketing,

production, organisation and finance diagnostic tables are made, demonstrating the

problems found, their consequences, and possible solutions. The internal analysis

also identifies Strategic Business Units (SBUs) that could be operated independently

from the rest of the enterprise. Core businesses and core competencies are identified,

that i s SBUs that are considered crucial to the companys existence and survi val.

Determine the competitive strengths and weaknesses of SBUs, starting with the

core businesses.

4. Ex ternal analysis of the economic environment, markets and competition. This

implies a critical analysis of elements / developments outside the company that are

(potentially) relevant to the performance of the company, and most of which can

not be directly influenced by the company. This includes an assessment of macro


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economic, legal and political developments in the country, market analysis

(prospective product / market combinations), customers, competitors, distribution

channels, logistics, and the environment.

5. SWOT-analysis at the strategic level : relative strengths & weaknesses,

opportunities & threats. This helps the enterprise identify its competitive

advantages on the market. Competitive advantages may be found at the level of

manufacturing (enabling a company to produce a product cheaper), product design

and / or quality (enabling a company to reach higher levels of customer

satisfaction), marketing (enabling the company to exploit market opportunities),

distribution (aiming to better reach the client), and many others.

The SWOT summarises the findings from the diagnostic, and places this infor-

mation in a strategic framework for company improvement. Through the SWOT

we match strengths with opportunities (take advantage), aim to convert weaknesses

into strengths(improve), and determine how threats can be avoided by specific

actions (upgrade). Thus, the SWOT helps determine what the company already

does well, how it can use these skills to grab opportunities, and where it needs to

make improvements to counter threats and overcome weaknesses. The SWOT,

which is the outcome of the diagnostic study, is an extremely important step in

establishing the priorities for the restructuring plan.

III The Restructuring Plan

The strategic planning process consists of another four steps (step six to nine), during

which concrete restructuring actions are formulated. Step ten aims to put in place a


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framework to monitor to what extent the restructuring plan is being implemented and its

goals are being realised (strategy implementation).

6. Strategic planning - define gl obal objectives. Based on the SWOT, the enterprisesobjectives, its strategic vision and business philosophy is formulated. What do we

want to achieve in terms of profit, market penetration, client satisfaction, and other

objectives at the corporate level. Which business are we in, or do we want to be in,

and in which we no longer operate. Define a new mission statement, showing what

the company is, what it stands for, and what it does for others. Strategic planning

aims to lay down the strategic directions that the company will follow in the medium

and long term. This is not very detailed. Strategic planning deals with trends rather

than details.

7. Corporate planning - making the strategic choices (long-term), affirming the

commitment to undertake corporate restructuring. It includes a decision which of

the current SBUs to drop (divest), which ones to develop further, and which new

ones to start with. These decisions are obviously based on the internal strengths,

external opportunities, and corporate objectives identified before. They include an

assessment of the attractiveness of the market on the one hand and the ability of

the company to compete successfully on that market on the other hand. The

strategic choices to be made set priorities for possible investment decisions at the

corporate and SBU levels, and require an analysis of their financial and operational

feasibility.

8. Tactical planning (medium term) for each of the selected SBUs. Whether to produce

sausages or bread is a strategic decision, based on the SWOT and conclusions of

the diagnostic. How to market them is a tactical decision: in marketing planning we


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work out in detail how the strategic objectives that are related to the

commercialisation of the products will be reached. This plan indicates specific

actions to be undertaken. Likewise, production, organisation / HRM, and financial

management plans are developed.

9. Financial implications : revenue projections / cash flow planning, projected profit &

loss statements and projected balance sheets of the restructuring plan. If so needed,

several scenarios may be developed reflecting variations in uncertain and difficult

to predict factors.

10. Monitoring & control : mile stone path. In order to concretise the restructuring effort,

an action plan is developed, indicating who will be responsible for the respective

actions to be undertaken in the implementation of the strategic plan, and when these

actions will be undertaken.

The restructuring plan should probably be approved and adopted by the board of

directors or meeting of shareholders. In case of liquidation or bankruptcy, the plan is

approved by the bankruptcy court. To facilitate the process, the restructuring plan should

be written in a logical and easy accessible manner. The table of contents of the

restructuring plan is graphically shown in annex E. In annex F a model to summarise the

restructuring plan is shown. Using this template, the entire restructuring plan can be

presented in no more than three pages.

IV Implementation

During the implementation of the restructuring plan, the action plan plays a key role. As

this plan indicates what is to be done, when and by whom, it guides day-to-day actions of


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management. The plan is adapted regularly as the market conditions change. However,

the global objectives and strategies should not normally be changed, unless there is really

a significant shift in the companys external and internal environment. Changes in

company strategy probably require a decision of the board of directors or shareholders.

It is noted that apart from the above mentioned strategic and tactical planning, the

company will also engage in some micro planning at the department and even personnel

level. The action plan forms the basis for the subsequent development of department

plans, and eventually personal performance and development plans.

Annex A - Overview of the Restructuring Process

Internal analysis

of marketing,

production, orga-

nisation and fi-

nance functions.

Analysis of bu-

siness units

External ana-

lysis market,

competitive,

economic and

legal environ-

ment

Diagnostic


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SWOT at the strate-

gic level Identify

the competitive ad-

vantages

Strategic planning :

definition of corpo-

rate objectives,

mission statement,and corporate

(business unit)

strategy

Planning

Tactical planning :

marketing, produc-

tion, organisation

and finance objec-

tives and strategies

Implemen-

tation

Action plan , to put

actions in a time

frame, assign res-

ponsibilities, and


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monitor progress


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Annex B - Ten steps in Diagnostic and Planning

Diagnostic pathway

1 I dentification of stakeholders in the company shareholders, workers, clients, suppliers, distributors, banks, government, and others. Are they willing to collaborate in the restructuring exercise? Are there any conflicting interests?

2 Pre-assessment of the current situation. What will be the outcome of a strategy continuing business as usual.

3 Internal analysis aimed at identification of strengths and weaknesses in the companys marketing, production, organisation and finance functions. Identification of Strategic Business Units. Determine the competitive advantages and weaknesses of SBUs, starting with the

core businesses.

4 External analysis of economic environment, markets and competition. Analysis of elements / developments outside the com pany that are (potentially) relevant to the performance of the company, and most of which can not be directly influenced by the company.

5 SWOT-analysis at the strategic level: relative strengths & weaknesses, opportunities & threats. Identify the competitive advantages on the market.


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Strategic planning pathway

6 Strategic planning corporate objectives. Define a newmission statement. Strategic planning defines the gene-ral course that the company will follow in the near future.

7 Corporate planning: making the strategic choices (long-term). It includes a decision on which of the currentSBUs to drop (divest), which ones to develop further,and which new ones to start with.

8 Tactical planning: the marketing plan (medium term) for each of the selected SBUs. Linked to this, theproduction, organisation and finance plans aredeveloped.

9 Financial implications: revenue projections / cash flowplanning, projected profit & loss statements andprojected balance sheets.

10 Monitoring & control: mile stone path. An action plan isdeveloped, indicating who will be responsible for therespective actions to be undertaken in theimplementation of the strategic plan.


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Annex C - Diagnostic tables, example

Problems observed Consequences Solutions

Marketing Clients do not trust local

products, prefer imported

ones

No sales, loss of

market to imports

Produce foreign

products under license

.

Production

All installations and buildings are greatly

over-dimensioned to

current and expected

needs

High energy,maintenance and

depreciation ex-

penses

Down-scaling of existing facilities. If

replacement is consi-

dered, lower but more

flexible capacities

.

Organisation / HRM

Company structure is

production and

technology orientated,

with excessive vertical

integration (all support

functions in house)

Company is not

market orientated /

organised. Many

support units not

feasible to keep

in-house. The

same for by-

products

Profit centre approach,

lease out or sell

unprofitable support

units, buy outside

support if cheaper,

divest some by-

product units

.


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Finance

No provision of accurate

and timely financial

information tomanagement

Management can

not make well-

informed decisions

Monthly management

accounts

.


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Annex E - Strategic Planning Framework Contents of the restructuring plan

Analysis of external, customer,

and internal environments

(company diagnostic) (Annex A)

SWOT analysis at the strategic

level: analysis of internal

strengths and weaknesses, andexternal opportunities and threats

(Chapter two)

Development of mission

statement and corporate objectives

(Chapter three)

Formulation of Corporate or

Business Unit Strategy (Chapter

four)

Marketing Production Organisation Financial


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- Objectives

- Strategy

-

Implementation and

resources

needed

(Chapter

five)

- Objectives

- Strategy

-

Implementation and

resources

needed

(Chapter

six)

/ Human

resources

- Objectives

- Strategy-

Implementat

ion and

resources

needed

(Chapter

seven)

managemen

t

- Objectives

- Strategy-

Implementa

tion and

resources

needed

(Chapter

eight)

Financial Projections (chapter

nine)

Action Plan 2000 (and annual

updates)

(Chapter ten)


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Annex F Strategic Planning Matrix Summary of the restructuring plan

Mission statement:

Restructuring Goal (medium and long-term):

Corporate Objectives (short and

medium term):

1

2

3

Corporate Strategy:

Marketing

objectives:1

2

3

Production

objectives:1

2

3

Organisation / HRM

objectives:1

2

3

Finance

objectives:1

2

3

Marketing

strategy:

1.1

1.2

1.3

2.1

Production

strategy:

1.1

1.2

1.3

2.1

Organisation / HRM

strategy:

1.1

1.2

1.3

2.1

Finance

strategy:

1.1

1.2

1.3

2.1


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2.2

2.3

3.1

3.2

2.2

2.3

3.1

3.2

2.2

2.3

3.1

3.2

2.2

2.3

3.1

3.2

Resources

needed:

1

2 3

Resources

needed:

1

2 3

Resources needed:

1

2

3

Resources

needed:

1

2 3


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HOW QUICK SHOULD BE RESTRUCTURING?

Every Restructuring project must have a set time frame. They must be performed

quickly. Change should begin to happen in a period of months, not years. In about one

year, major change should happen. Speed is needed because it is difficult to build support

for change and easy to lose support.

Priorities change. People move. Markets fluctuate. Stakeholders demand results.

In 1992-93, a survey conducted said that a sample of more than 800 senior executives

how soon they needed to see results from improvement programs like reengineering.Below pie-chart explains it the same: -

Technology is a key enabler of restructuring, but by itself it is not reengineering.

Every company can use information technology to enable change, and many industries

can use other technologies as well. But technology change cannot drive reengineering.

First we must determine how the business processes should be performed. Only then

Less than 6 months

Less than 1year

2 years and less


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should we decide where and how to apply technology. Otherwise, we run the risk of

being able to do the wrong things faster.

This is not to say that we ignore the capabilities of technology when we redesign a

process. Our vision of the new process should be informed by our knowledge of whattechnology is available and what it costs. Just as our vision should be informed by our

knowledge of human potential and our knowledge of the value of readily available,

timely and accurate information.

So the first balance that must be struck is between allowing technology (or human

potential, or information) to drive the reengineered design, and allowing it to enable the

design.

Second balance that must be struck is between analysis and creativity. On the one hand,

reengineering projects can spend too much time and effort analyzing and documenting

the current processes. This gives comfort to some team members, for it is a familiar

activity, but it detracts from the final result. That is why our methodology calls for

understanding the current process, not analyzing it.


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IMPORTANT FACTORS TO BE KEPT IN MIND WHILE RESTRUCTURING:

The quality of the reengineering team is the single most important factor in the

success of the project. If the people are selected because they are available, they are

probably the wrong people.

Second, a structured methodology is absolutely essential to keep a reengineering

project on course while moving people onto and off the team. It also gives novice

team members a much higher level of confidence.

Third, the team must manage , rather than be managed by, the methodology. If the

team members execute each task in the methodology simply because it is there, rather

than because it contributes to their understanding of the business, they will soon find

themselves in a sterile intellectual exercise.

Fourth, the team leader and/or facilitator must continually monitor the

reengineering team for frustration and burnout, and take remedial action when either

is imminent. The pace and intensity of a reengineering project are high.

Fifth, the reengineering team must validate emerging recommendations with the

sponsors and other important stakeholders if their ideas are to gain support. It helps to

present these ideas as tentative and preliminary and open to discussion, rather than

forcing the stakeholders to accept or reject a finalized recommendation.


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Sixth, there is a big difference between buy-in and commitment . Buy-in simply

means allowing the project to proceed. Commitment means making the changes the

project calls for.

Seventh, an organization does not have a choice between communication and non-

communication about a reengineering project , only between managed and non-

managed communication. When an organization does not answer stakeholders'

legitimate questions, it invites them to make up their own answers, and these are

usually more negative than the truth.

Eighth, it is far easier to design an optimal process than it is to get the human

beings in the organization to make the changes necessary to implement that design


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TOP SEVEN REASONS FOR THE FAILURE OF RESTRUCTURING

EFFORTS?

1. Lack of bullet-proof strategy the organization unintentionally adopts a flawed or

incomplete restructuring strategy. For example, there could be a flawed transition

strategy, a flawed environmental strategy or strategic processes.

2. Rely on experts to help us the organization makes inappropriate use of outside

consultants and outside contractors.

3. Known for our on-the-job-training the work force is tied down to the old

technology with inadequate training programs

4. Our needs are simple & straightforward the organization has too little elicitation

and validation of requirements.

5. Inadequate Planning When the restructuring deals with software, it tends to deal

with day-to-day problems but forgets to take into account the high-level problems it

could face.

6. Management lacks long-term commitments the organization feels that tomorrow

is another day. The management forgets or mis-interprets the long term need for theorganization structure to remain stable. The better the long-term commitments taken

by management will lead to greater growth and prosperity of the organization. For

example, managing to your expected lifetime in that position


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CRITICISMS OF RE-STRUCTURING:

Restructuring has earned a bad reputation because such projects have often resulted

in massive layoffs. This reputation is not all together warranted. Companies would

downsize and call it restructuring. Further, restructuring has not always lived up to its

expectations.

The main reasons seem to be that:

Restructuring assumes that the factor that limits organization's performance is the

ineffectiveness of its processes (which may or may not be true) and offers nomeans of validating that assumption

Restructuring assumes the need to start the process of performance improvement

with a "clean slate", i.e. totally disregard the status quo

according to Eliyahu M. Goldratt and his theory of constraints) restructuring does

not provide an effective way to focus improvement efforts on the organization's

constraint .
http://en.wikipedia.org/wiki/Eliyahu_M._Goldratthttp://en.wikipedia.org/wiki/Theory_of_constraintshttp://en.wikipedia.org/wiki/Constrainthttp://en.wikipedia.org/wiki/Constrainthttp://en.wikipedia.org/wiki/Theory_of_constraintshttp://en.wikipedia.org/wiki/Eliyahu_M._Goldratt


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CASE STUDY I

Case details:

Period : 2000-2003

Organisation : Unilever

Industry : FMCG

The case discusses a five-year long organisational restructuring exercise undertaken by

Unilever, a leading global fast moving consumer goods (FMCG) company. It examines

in detail the important elements of the restructuring programme named the 'Path

to Growth Strategy'.


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The case focuses on the changes made with respect to the organisational structure,

various Unilever businesses, branding strategies, operational processes and the supply

chain management practices. Finally, it discusses the results of the restructuring exercise

and examines the company's future prospects in the light of its falling share price and thesluggish growth of many of its leading brands.

A Troubled Giant

In September 1999, Unilever, one of the largest consumer goods companies in the

world, announced plans to restructure its brand portfolio by end of 2004.

The plan involved cutting down on its unwieldy portfolio of 1,600 brands and focusing

on the top 400 brands. This move was read by the market as an indication that the

company was unable to manage its brands and so was scaling back growth plans. This

development, coupled with the fact that the growing popularity of Internet and telecom

stocks was luring investors away from old economy stocks, resulted in Unilever finding

itself in deep trouble - its stock price plummeted rapidly during 1999. According toreports, Unilever's market capitalization of about 51 billion ($82 billion) in June 1999

shrank by almost 20 billion by January 2000. As a result, the company lagged far behind

its competitors like Nestle and Procter & Gamble (P&G) in market capitalization.

The fact that Unilever had failed to meet its performance expectations for 1999

added to its problems. Analysts attributed this failure to the sluggish growth of its top line

brands. They said that the company's existing brand strategy framework had lost its

focus. They also criticized Unilever for investing less in strengthening its leading brands

during the 1990s (as a majority of its investments went into business restructuring and

acquisitions).


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Meanwhile , the competitors had begun eating into Unilevers market share in a major

way. Unilever realised that it had to restructure its brand portfolio and operations to meet

the challenges brought about by the changing market conditions. In February 2000, the

company announced a 5 billion five -year growth strategy, aimed at bringing about asignificant improvement in its performance. The initiative was named path to growth

strategy(PGS). The exercise involved a comprehensive restructuring of operations and

businesses. While many industry observers welcomed the move, some were sceptical

about the slow moving old economy giants ability to regain its momentum in time to

meet the intensifying competition.

Unilever (called the Unilever Group) functioned as the operational arm of Unilever NV

(Netherlands), and Unilever Plc., (UK), its two parent companies.

Though the parent companies operated as separate legal entities (with separate stock

exchange listings), they functioned as a single business, with a single set of financials and

a common board of directors. Unilever was formed in 1930 when a Dutch margarine

company, Margarine Unie, and a British soap company, Lever Brothers merged.

While, Margarine Unie had been formed by merging many margarine companies during

the 1920s and was a leading global player in the business, Lever Brothers was a name

worth reckoning within the worldwide soap market and had soap factories across the

world.

Lever Brothers, diversified into many other businesses (primarily related to foods). At the

time of the merger, Margarine Unie and Lever Brothers, together, had operations in over

40 countries. In the 1930s and 1940s, Unilever strengthened its presence in the US by

acquiring Thomas J. Lipton (1937) and Pepsodent (1944).


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While the company's competitive position was adversely hit when its arch rival P&G

launched Tide, a synthetic detergent, in 1946, it continued to prosper in Europe.

This was because of the post-war boom in the demand for consumer goods, the growing

popularity of margarine and personal care products, and the new detergent technologies.

During the 1960s and 1970s Unilever rapidly expanded its operations through vertical

and horizontal integration, emerging as a diversified conglomerate by the early 1980s.

Diversification into different businesses was prompted in one way or the other by the

existing business lines. For instance, oilseeds crushed for use in the margarine and soap

businesses, yielded a by- product called cattle cake and this lead the company into the

animal feeds business.

Likewise, by-products such as glycerine and fatty acids, formed from processing oil for

use in margarine and soap production, prompted its entry into the chemicals business.

The company operated 24 packaging plants (for its consumer products) in six European

countries, from where goods were distributed worldwide. This activity made the

company one of the largest truckers in Britain and one of the largest shipping company

owners...

What 'PGS' is all About

To achieve the objectives of the PGS, Unilever decided to concentrate on the following

areas - modify the existing organizational structure, focus on leading brands, support

these leading brands with strong innovation and focused marketing strategies; rationalize

the supply chain; simplify business processes; and restructure or weed-out under-

performing businesses and brands .


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Unilever expected the PGS to result in annual cost savings o f 1.5 billion by 2004. An

additional 1.6 billion in savings was to come from global procurement by the end of

2002.

Apart from this, the PGS was to involve laying off over 25,000 employees

(approximately 10% of the employee base) by 2004, on account of divestments or site

closures, and restructuring and simplification of processes.

The company announced that though the restructuring would be worldwide, it would

mainly focus on the US and Europe...


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Results of PGS (Till 2003)

In 2000, the company witnessed a dramatic increase in its turnover with sales

increasing by 16% to 47.6 billion. This was mainly attributed to the acquisition of the

Bestfoods, Slim-fast, Ben & Jerry's and Amora Maille businesses.

Since the announcement of the PGS, Unilever's share price had recovered by 30% to $59

in August 2001, and this seemed to highlight the positive results of its restructuring

1exercise.

By july 2002, Unilevers 400 leading brands accounted for 88% of the sales, up from

75% in 1999. By then, over 30000 employees had been laid-off commenting on the

positive results of the PGS in mid- 2002. FitzGerald said we have now reached the mid-

point in the PGS and we continue to be confident about delivering our programme. Brand

focus continues a pace with 88% of our turnover now attributable to leading brands.

These brands are showing great resilience in a tough economic environment and will

drive accelerating top line growth


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CASE STUDY II

Case details:

Period : 2000-2003

Organisation : SIEMENS Limited

Industry : Engineering and Manufacturing

Background

Siemens Engineering and Manufacturing Company of India Limited was incorporated in

the year 1956, as a subsidiary of Siemens AG., Germany. The company started


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manufacturing switchboard products at its Worli Factory, Mumbai. Thereafter, as the

business grew, the company expanded its business into other product segments of power

generation, power distribution, and medical engineering products.

By the year 1966, the company had four factories in different parts of the country

employing more than 2500 people. In 1990, the name of the company was changed to

Siemens India Ltd. In the same year, the company was divided into six products divisions

and formed into strategic business units. In the year 1991, there was further restructuring

of business divisions. Again, in the year 1994, the name of the company was further

changed to Siemens Ltd. In the same year, product divisions were further sub-divided to

achieve operational efficiency. The number of business divisions was increased to ten.However, to be very precise, from the wide range of the above-mentioned businesses--the

major business segments of Siemens Ltd were in power, communication, medical

solution, industrial automation, and railway and transport systems.

Despite many changes and repeated divisional restructuring, the company could not get

the desired result to counter all-time competition. Then in the year 1996 -97 (18 months

period), the company made a loss of almost Rs.1.5 billion for the first time since itsinception in the Indian business. This situation compelled the Siemens management to go

for intense all-round corporate restructuring.The meaning of this corporate restructuring

was to give a new structure to rebuild and rearrange the organization.


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Manpower Downsizing

As a first step in July 1997, the company introduced a voluntary retirementscheme (VRS) followed by three such schemes till the year 2001 for all its employees in

the factories at Worli, Kalwa and Joka, especially for those who were above 40 years of

age or had completed 10 years of services. Those who were interested in VRS were paid

a maximum lump sum amount of six hundred thousand rupees as compensation and those

who were not interested in the VRS scheme were offered alternative jobs in different

functions / locations. However, regular dialogues with the employees helped the

management to reduce and adjust employees at the Worli, Joka and Kalwa factories. At

the same time, the company faced the new problem of training the remaining employees

who were required to do different jobs in new areas and with new skills.

These downsizing processes on four occasions reduced the employee strength by more

than 4500 employees. However, the cost of VRS, relocation, and retraining of around

1000 (out of 4600) employees hit hard on the company's financial result. The company

during the financial year 1997-98 made a further loss of Rupees 560 million. With the

successes of downsizing, the processes of manpower reorganization had been a

commanding task in the organization. The employee strength came down to 3896 in the

year 01/02 compared to 8322 in 96/97. These downsizing processes revamped the human

resource planning in the organization and removed many operational deficiencies.


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Financial Restructuring

From the very inception, the company had engaged a renowned auditing firm, M/sFergusson & Co. Ltd., to carry out its annual financial audits. However, despite good

results year after year, the company fell short of working capital every year. Therefore it

had to borrow capital from banks and from other investors at a high interest. At the end of

every financial year, after paying the interests to the creditors, the company was short of

working capital to run the business.

The company, in the year 1997-98, appointed M/s KPMG Ltd. to look after its financialaudit. During the process of preliminary findings, it was observed that a large amount of

inventory items were in the stocks, both as finished goods as well as raw materials, which

were slow moving for a long time and were continuously audited as stocks, year after

year. Similarly, there were some customers who did not pay their dues for long periods of

time, on some pretext or another, and were shown as outstanding customers. Hence, the

KPMG advised the company to write off the old stocks as well as long outstanding

payments from customers.

The decision to write off the old stocks and doubtful dues from customers was agreed

upon by the company. These measures added further financial loss during 1997-98.

However, the company could dispose off some obsolete stocks and recover few pending

dues from customers at later dates. The revenue generated was added up as surplus to the

organization. This one time action of writing off the old / obsolete stocks and doubtful

dues from customers helped the company to stop borrowing from banks and other

financial brokers / institutions. The debt /equity ratio of the company in the year 1997-98

was 1.3:1. In the year 2002-03 this figure went down to 0.01:1, which showed how


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financial restructuring helped the organization to overcome the problem of working

capital.

Restructuring of Processes and Systems in Different Divisions of

Siemens Ltd.

Apart from downsizing the employee strength in some strategic business units and

financial restructuring the company, in the year 1997, introduced Time Optimised

Processes (TOP). These were similar to the business process re-engineering segments of

its business. The processes started optimizing business processes of every function like

sales, marketing, manufacturing, service, finance and human resources which were nottuned to productive performance. The uneconomical processes were removed to cut cost

and improve the quality of business.

The company went further to look for economic consideration of its capacity utilization

in the factories. It was observed that the return on capital investments made in earlier

years in different factories was not paying proper dividends as planned during the budget

period. Therefore, the company decided to go for outsourcing of products and services indifferent factories to achieve operational efficiency through a process of cost reduction.

At the same time, the company also introduced stringent measures to follow the ISO

9000 quality system along with recovery and renewal in all its divisions.

Medical Solutions Division (MSD)

The manufacturing of medical products in Siemens India commenced in the year 1957 at

the premises of Worli Works, in Mumbai. The process of restructuring started in the

Medical solutions division in early 1993 with the objective of manufacturing high-end

medical solutions products for Siemens AG to cater to the South East Asian market. In

1994, a new manufacturing site was selected in the state of Goa, which had the cost


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advantage as sales taxes were exempted for the first five years for the new companies

which set up industries there.

At the same time, the central government also exempted corporate taxes for these

industries located in Goa for a period of five years. However, this project did not give any

economic advantage to the company, as required by its principal in Germany. The

company subsequently decided to restructure the local manufacturing in phases over the

next three years to counter the increased manufacturing cost at its Worli factory in

Mumbai. In the year 1997, the Medical Solutions Division of the company had

manpower of 375 people in the factories which included 340 employees at Worli and 35

employees at Goa, including all officers.

In mid 1997, the company decided to procure the low-end products from outside vendors

who had the requisite technology and could spare their machines and equipment for

manufacturing these products. The idea was formulated to close down the Worli factory.

However, the company continued manufacturing the core technology products like oil

immersed multi-pulse X-ray generators at its Goa factory. In mid 1997, despite a lot of

opposition from the employees at Worli for relocation, the company discussed the issuewith workers and staff unions and offered transfers to relocate people in different

departments / divisions of the organization.

With the all-round success of VRS, Siemens was able to transfer 140 employees to other

locations and remaining took voluntary retirement from the division. With this action of

the management, the employee strength in the Worli factory became zero, while at Goa,

it was only 35. By the year 1999, the company was running the business of low-end

products at one factory at Goa with just 35 people producing the same sales turnover of

rupees 250 million which was earlier produced in the year 1996 at Worli with 340 people.

With this restructuring, the low-end medical device products of the company became

competitive and the company could regain its strength through a higher margin.


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Low Voltage Distribution Systems Division (LVDSD)

With the increased demand of power in the country due to industrializationimmediately after the second five years plan, the company expanded the manufacturing

of switchboard products. In the year 1960, the company set up a workshop at Hide Road,

Kolkata, for manufacturing and repair of power distribution equipment for the eastern

region. In the year 1980, with the further demand of energy equipment, this factory was

relocated to a new plant at Joka, just a few kilometers away from Kolkata. This division

was then considered as a part of switchboard division. In the year 1999, the name of the

switchboard division was changed to Energy Division. When the manufacturing facility

at Joka was transformed into a sub division, it was named Low Voltage Distribution

Systems Division.

However, in the year 2000-01, the low voltage industry was suffering from excessive

manufacturing capacity due to the presence of a large number of players and diminishing

demands as a result of depressed market conditions. The overall market for Low Voltage

Distribution Systems Division remained stagnant and was characterized by intense

competition, putting the price under tremendous pressure. As a consequence, the Lower

Voltage Distribution business posted a 40 percent drop in both turnover and order value.

In its endeavor to make operations feasible, the division proposed to introduce several

measures; this included an offer of alternative jobs to its workers at the Siemens

Metering, a plant in the neighborhood. This process of implementation made some delays

resulting in the unit making even more production losses, thus affecting the result. At the

end of the year 2001, the company closed down the Joka factory and adjusted its

employees to Siemens Metering Ltd. After the closure of this factory, the division started

procuring the low voltage products from the switchboard factory, thus making full-scale

utilization of free capacity at its Kalwa factory.


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The twin initiatives of closing down the high cost manufacturing operation at Joka and

implementing a completely new business process of deploying a lean cost structure whilst

maintaining high quality standards supported the division's turnaround. The entire

business restructuring was achieved within a time period of less than two years.

As a result of focused market approach, the division achieved an increase in the market

share. Customer loyalty and satisfaction was evidently demonstrated as it received

several orders. The division developed new products. The concentrated focus on its

spares and service business helped it record a four-fold increase in turnover in this line of

business over the last three years. To further augment its service network, the division

entered into a franchising arrangement with a Kolkata-based company, which utilizes theservices of former employees of Joka works.

Personnel Division

The process of renewal and recovery was not confined only to factories of a few

divisions, but also to the other areas of corporate systems. Being a part of corporate

systems, the personnel division handled the human resource functions in the company.

During the year 1994, the personnel division for the first time introduced an Enterprise

Resource Planning (ERP) system, People-soft, to upkeep the employee data, and created

an information highway for its concerned executives and managers. Then in the year

1997-98, the personnel division of Siemens Ltd. achieved a milestone for successful

downsizing and implementation of corporate goals and objectives by retraining and

relocating people for the emergent needs of the organization.

Apart from downsizing the manpower in other divisions, the personnel division also

initiated VRS and relocations of some of its own employees and managers and

outsourced some of the human resource processes and activities from outside parties who

had much more experience in this field. For example, the company outsourced the entire


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process of employee benefit schemes like handling of Provident Fund (PF) and gratuity

payments to an outside agency, M/s India Life Pension Services, with headquarters at

Bangalore. This outside agency maintained all accounts of PF, gratuity and other pension

schemes, and advised the personnel division of Siemens to make necessary paymentsafter the retirement or separation of employees. The personnel division also outsourced

the processes of salary payment to one of its affiliates, Siemens Information Systems Ltd.

(SISL), which developed a software package of such services.

Then in the year 2000, in order to systemize its operations in personnel, the division

opted for the ISO 9000 quality system, to regulate all the processes of personnel function

and became one of the very few companies in the country holding independent ISO 9000certification for its personnel function.

In the year 2005, the company introduced a new HR initiative on performance

management to be known as EDGE (16). EDGE stands for Employee Dialogue for

Growth and Entrepreneurship. EDGE was developed looking at the overall growth and

development of employees from a holistic and long-term perspective. In the same year, as

per companies shared service initiative, HR processes across all Siemens' entities werenow streamlined and aligned with Siemens BPO global processes under one organization.


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Outcome of Restructuring

The overall restructuring in Siemens started showing results after a few years of

operations resulting in all-round satisfaction of stakeholders. The financial highlights

beginning from 1998-99 in Table 6 exhibits the unique results of corporate restructuring.

The share price of Rs. 10 (face value) which was hovering on the Bombay Stock

Exchange (BSE) or National Stock Exchange (NSE) around Rs. 140 / 150 in 1997 rose to

Rs 5500 / 5600 in March 2006. As per ET 500 (Feb.'06), Siemens ranks one of top ten

performing companies in India and a leader among 49 listed multinational company at

BSE / NSE. While in the same footing Siemens AG stock price on 30th Sept 2005 was

quoted 64.10 [euro] compared to 41.89 [euro] in Sept. 2001.

Initially, restructuring processes followed by Siemens resulted in some amount of

uncertainty in the minds of the employees. However, after the positive results of

restructuring started pouring in, the cloud of uncertainty cleared.

The company which had losses for the first time since its inception decided to undertake

a cleansing operation by downsizing manpower, optimizing all processes, outsourcing

products and services and keeping the quality standards ahead of all future actions. These

also included maintaining high employee morale at this juncture of productive changes.

Even when there was a need for financial restructuring, the company did not spare much

time to take action. Continuous shortage of working capital forced the company to

change auditing systems. Initially, this action made incurred losses for the company but it

helped the management to reduce heavy interest payments in the long run. Above all, this

course of operational restructuring finally helped the organization to go into the black.

From the year 2000-01 onwards, the company did make a turnaround and started earning

regular profits, resulted from the processes of progressive restructuring which are still

continuing in the organization


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CONCLUSION:

From the above cases of restructuring, the point may arise that, prior to

restructuring, none of these companies were managed properly. They were huge in size;the company management could not select the right strategic options to push their

businesses ahead of other priorities. Or, even, the core competency levels had reached to

its saturation points when these business units were no longer viable and therefore

restructuring was the only option to avoid losses or stagnation. The above arguments may

be well suited to Hindustan unilever and Siemens where, these companies had enough

strength in power, infrastructure, medical equipment and Turnkey projects. Unilever had

its weaknesses in selective segments and Siemens had its advanced technologies but with

huge manpower and multiple operations which were not cost competitive. All these

forced the above companies to go for all-round restructuring. Unilever took a wise

decision and a dopted the concept of path to growth strategy which included changes in

the organizational structure, various Unilever businesses, branding strategies, operational

processes and the supply chain management practices.

Siemens Ltd. took a cultural shift and made an all round comeback and renewal in its

business through corporate restructuring. Even the parent company Siemens AG., despite

having vast sales regions and business areas, could not do that well compared to its

counterpart in Siemens India Ltd

All these studies finally reveal how progressive organizational restructuring can be

incorporated in an organization. When any company makes losses or is likely to face

odds in business, all-round pro-active changes are needed for the survival of that

organization. And the changes brought about by both these corporate giants have indeed

helped them in regaining their market share and most importantly their image.


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However, all the above process of restructuring have added shareholders market value

and can be construed as successful restructuring from the point of competitive advantage.

Such innovative restructuring should always be made in the strategic plans for the

survival, growth, and to remain competitive in the market.

So we may conclude by saying that CORPORATE RESTRUCTURING is an

innovative strategy which in my general terms, leads to the beautification of a business

and in technical terms results in the optimum utilization of various resources, increases

net value of the firm in its market, allows better functioning and positioning of

employees.

Through this entire research and study, I can confidently suppor t my projects tag line

CORPORATE RESTRUCTURING - a path breaking strategy for running business

successfully .

Lastly, I would like to conclude by stating a wise quote said by one of business

worlds most unforgettable man

" Whenever you see a successful business, someone once made a courageous decision"

--Peter F. Drucker

63095080 Corporate Restructuring

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