turnaround strategy
TRANSCRIPT
What is Turnaround Strategy ?
• Turnaround strategy means to convert, change or transform a loss-making company into a profit making company.
• It helps the sick company to stand once again in the market.
• It tries to reverse the position from declining sales to increasing sales, from weakness to strength, and from an instability to stability.
Why Turnaround Strategy?
Declining market share
Negative profit
Falling gross and Net margins
Increasing cost
Declining performance measures
Low turnover
Miss management
Managing turnaround strategies
• Joining internal turnaround team with external specialist.
• Consulting with external turnaround specialist.
• Removing the top management and merging with healthy organization.
Internal factors
External Factors
DecliningSales or margins
Imminent bankruptcy
Low
High
Cost Reduction
Asset reduction
Stability
Efficiency maintenance
Entrepreneurialreconfiguration
Recovery
Cause Severity Retrenchment phase
Recovery phase
Turnaround Situation
Turnaround response
Problem Faced by Lou Gerstner
Problem in Approach 1. Lack of sophisticated marketing techniques and PR policies 2. Disconnect between research market 3. Strained relationship with customer
Management Problems 1. High beaurocracy 2. Executive – Customer disconnect 4. Low emphasis on marketing
Costs 1. High overhead costs 2. More employees than needed
Steps taken by Lou GerstnerCost Reduction 1. Sold of some non core business 2. Focus on not breaking up the company 3. Reducing expenses by 9%Remaking the Brand 1. O&M’s global advertising campaign: solution for a small planet 2. Product rationalization and focus on BrandsChange Management 1. Executive that rested the global approach were firedOrganizational Changes 1. Reorganized into global organization – CEC & WMC 2. Attention to sales organization 3. Reduction in board size 4. To reduce bid preparation time: Sales team split into 2– the Product Specialists and CRMs
Impact of the Strategies• Standardization in product and processes
• Global positioning
• No. 1 company for leaders (Fortune)
• No. 1 green company in the U.S. (Newsweek)
• No. 2 best global brand (Interbrand)
• No. 18 most innovative company (Fast company)
• IBM's brand was valued by Interbrand at $75.5 billion in 2012