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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, produc- tion, orga nisation and fi nan ce func-
tions. Ana lysis of bu siness units
External ana- lysis 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 corpo- rate ob ectives, mis- sion sta tement, and corpo rate (business unit) strategy
Planning
Tactical planning : mar ke ting, pro du c- tion, orga nisation and fi nan ce objec- tives 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._Goldratt7/27/2019 63095080 Corporate Restructuring
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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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Corporate Restructuring - a path breaking strategy for running business successfully55
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