The Case for a business Turnaround summary

In several of these case studies I saw different strategies employed by each corporate entity to manage challenges in time of distress to refocus and readjust their mission statements.  The first case study which has to do with Scott Paper company presented a delicate situation whereby the company has to reduce payroll by 35% by eliminating 11,200 jobs, or go bankrupt.  The turnaround consultants were brought to each of the firms to device and execute plan for corporate renewal on assumption that each of the firms have enough potential to make it worth saving.  The root causes of the crisis were identified.   Scott Paper was resoundingly worth saving and eventually made a healthy turnaround by selling and eliminating many unnecessary corporate properties and perks. I also encountered the frequent root causes of corporate distress which included some of the followings:

·         Revenue downturn caused by a weak economy

·         Overly optimistic sales projections

·         Poor strategic choices

·         Poor execution of a good strategy

·         High operating costs

·         High fixed costs that decrease flexibility

·         Insufficient resources

·         Unsuccessful projects

·         Highly successful competitor

·         Excessive debt burden

·         Inadequate financial controls

The second case study was Intel memory chip technology whose approach to realigning their company goals was called “creative destruction.” When there is a technological improvement on technology production and your business entity doesn’t want to get left behind then you must turn to “strategic infection point” as did Intel.  Another interesting case was that of AT&T.  A corporate entity may not be functioning well strategically as one big conglomerate as was the case with AT&T; so breaking up the entity into subdivision and selling off some worked well for them to restructure the corporate entity.  The fourth alternative was the proposed corporate merger/acquisition by Lockheed as one other problem solver for some industries that need to be on top of Aerospace/defense game.  The tire industry case study was one with the demand shift.  The U.S. tire manufacturers knew that if they did not change to meet the customers’ demand shift they will be left out of the radial tire business.  

While each case was unique, the turnaround process frequently had involved the stages of management change - consultants were called in to manage the turnaround of the firm.  Situation analysis was performed to evaluate the prospects of survival on assumption that firms were worth turning around, depending on the root causes of the distress.  As a result of the strategic analysis the following were implemented in some of the corporate entities:

1.       Change of top management

2.      Divestment of certain assets

3.      Reformulation of strategy

4.      Revenue increase

5.      Cost reduction

6.      Strategic acquisitions

 Emergency action plan was also implemented to achieve positive cash flow as soon as possible by eliminating departments, reducing staff, etc. There was business restructuring, once positive cash flow was achieved, the strategic plan was implemented, improving continuing operations, adjusting the product mix and repositioning products as necessary. The management team begins to focus on achieving sustained profitability.  Return to normalcy - the company becomes profitable and the changes are internalized. Employees regain confidence in the firm and emphasis is placed on growing the restructured business while maintaining a strong balance.