restructuring organizations
DESCRIPTION
it is about restructuring of the organizations in various ways. it also dealt with financial , organizational & portfolio restructuringTRANSCRIPT
Restructuring Organizations
Submitted by Soumya S.
IntroductionO Companies restructure for various
reasons are mentioned under portfolio strategy, mergers and acquisition & turn around management
O It may be expansion or contraction of portfolio
O Changes in nature, volume of business, business condition etc
O It helps to prevent a unit from becoming sick
O Process by which a firm does an analysis of itself and alters what it owes and owns, refocuses itself to specific task of performance improvements
O Involves activities to make more balanced and profitable
Corporate Restructuring
Giving a new structure to rebuild /rearrange.”
Thus,Corporate Restructuring is a structured decision-making exercise undertaken to evaluate the current endowments of company, and fine tuning the available skills, machinery, and technology
to meet the challenges of tomorrow.
The Oxford Dictionary, 2007
• Renegotiation of labor contracts to reduce overhead• Refinancing 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 (if the remainder represents only a fraction of the original firm, it is termed a stub).
O Ensure the company has enough liquidity to operate during implementation of a complete restructuring
O Produce accurate working capital forecasts
O Provide open and clear lines of communication with creditors who mostly control the company's ability to raise financing
O Update detailed business plan and considerations
Essentials of Restructuring
O Change in fiscal and government policies
O Liberalization, Privatization, and Globalization (LPG)
O Information Technology Revolution
O Concept of Customer Delight
O Cost Reduction
O Improving bottom-line
O Core Competencies
Reasons for Restructuring
O Enhancing shareholder value O Incompatible company objectives O Transfer of Corporate assetsO Evolving appropriate capital structure O Consistent growth and profitabilityO Incompatible company objectivesO Enhancing shareholder valueO Resolving conflictO Transferring corporate assets O Restructuring capital structure O Bifurcation of Business
Reasons for………..
O Inadequate commitment from the Top management
O Resistance to changeO Poor communicationO Absence of requisite skillsO Scepticism O Failure to understand the benefits of
restructuringO Availability of resourcesO Organizational WorkloadO Non adherence to time scheduleO Lack of clear and visible leadership
Barriers to Restructuring
O Customer Focus
O Core Business Processes
O Cross functional teams
O Information Technology
Key elements of M & A:
O Financial Restructuring:O Involves change in the capital structure and
capital mix of the company to minimize its cost of capital
O Also involves infusion of financial resources to facilitate mergers, acquisitions, joint venture, strategic alliances, LBOs, and stock buy-back
O Depends on availability of free cash flows, takeover threats faced by the company and concentration of equity ownership.
Types of Restructuring
O Generate cash for exploiting available investment opportunities
O Ensure effective use of available financial resources
O Change the existing financial structure, in order to reduce the cost of capital
O Leveraging the firm
O Preventing attempts of hostile takeover.
Purpose of Financial Restructuring:
O Involves divesting or acquiring a line of business perceived peripheral to the long term business strategy of the company
O Represents the company’s attempt to respond to the marketing needs without losing sight of its core competencies.
O Purpose:
O Restructuring as a result of some strategic alliance
O Responding to shareholder’s desire to downsize and refocus the company’s operations
O Responding to outside board’s suggestion to restructure
O Responding to strategies adopted as a response to exercising call or put options
Portfolio Restructuring
O Restructuring strategy designed to increase the efficiency and effectiveness of personnel, through significant changes in the organizational structure
O Is a response changes in the business and related environments.
O Takes the form of divestiture and acquisitions.
Organizational Restructuring
O Projects difference in terms of work culture and
value system
O Standardized restructuring strategy not possible
O Includes:
O Hardware Restructuring
O Software Restructuring
Strategies for Restructuring
O The structure of the organization is redefined,
dismantled or modified
O Focuses on:O Identifying the core competencies of the businessO Flattening the organizational layers to improve
organizational responsivenessO Initiating downsizing to reduce excess workforce
reduction in overheadsO Creating self-directed teamO Benchmarking against the toughest competitors in order
to adopt best practices
Hardware Restructuring
O Involves cultural and process changes, in order to establish a collaborative environment that facilitates growth and restructuring.
O Focuses on:O Adopting an open and transparent communication mechanismO Building an environment of guidance and coaching O Building an environment of trustO Raising the aspiration levels of individualsO Empowering people & encouraging decentralized decision
makingO Helping individuals develop foresight, i.e. understanding
changes and getting ready for the anticipated changes O Training people to accept new ideas and challenging
assignments
Software Restructuring
O Process of eliminating existing inefficienciesO Aims at:
O Improving operations O Alter the relative strength of the organization to face
competitionO Facilitate creating of competitive advantageO Provide better customer satisfactionO Generate profits in a free market economyO Help the organization differentiate itself from
competitorsO Ensure it delivers value to the customers
Strategic Options in Corporate Restructuring
Types
Types
Types
14-22