Wednesday, February 27, 2019
To What Extent Does Restructuring Transform Corporate Market and Financial Performance?
To what extent does restructuring transform corporate merchandise placeplace and pecuniary operation? Discuss using an ext revokeed spokesperson. Restructuring is simply the reorganisation of a gilds structure to combat external or internal forces that obstruct the maximisation of sh arholder value. The marge restructuring is quite broad an is an umbrella term for any action spotn by a firm to exploit sh atomic number 18holders wealth (Wright et al) or a companys reaction when its under pressure (Usui and Colignon, 1996). These actions bracket mergers and skills with practically else (Froud et al. , 2002, P. 2).This essay should explain in great detail how restructuring jakes transform corporate market place and fiscal performance. It will focus on financial, portfolio and organisational restructuring and more than specifically the following restructuring actions mergers and acquisition and outsourcing and off-shoring. In addition Marks and Spencer and British Air modes would be employ interchangeably as extended examples to further illustrate stated points. Restructuring actions unremarkably eliminate to revive failing blood linees. By delayering or confluence with an some other short letter firms ar likely to become more belligerent and more profitable.It is besides not uncommon for restructuring to be used as a burden measure to stay ahead of the game and react to competition. If done in good order and when necessary, it should result in economies of outmatch, decreased operational exist and easier communication. Financial restructuring refers to changes in a companys financial structure. It involves managing debts, stocks and shareholder payments. Portfolio restructuring on the other hand deals with products, acquisitions and diversification. Finally organisational restructuring is mainly c formerlyrned with the human resources in the company.Mergers and Acquisitions are the close to common forms of restructuring. In value te rms, the merger of whole companies with ( often eras hostile) takeover continues to be the most important form of restructuring. (Froud et al P 3). Companies prefer to restructure in this manner as it brings numerous hour gathers and plunder instigate in transforming market and financial performance immediately. Firstly, merging with or acquiring a company gives an instant increase in market share. It is the easiest way to enter into a advanced market and retain a larger client base overnight.British Airways recent merger with Iberia has been well(p) to shareholders, employees and customers. According to the airline their corporate market would be transformed as they would be flying to more destinations, own more aircrafts and have more passengers. Thus making it more competitive and strengthenceing the companys image and brand. In addition, their financial performance would be transformed as they stand to benefit from a significant decrease in costs and benefit from economi es of scale the merger is bound to provide.These costs savings can be then passed on to the customer and power enable British Airways to be competitive on price a luxury it king have not been able to afford prior to the merger. The merger might also admirer British Airways break into the South American market a market in which it had no prior expertise or significant market share in. In addition to an increased market share, Kotlers 8 C framework details how a firms market power could be increased through mergers and acquisitions (Kotler et al 2005).Firms gain greater control of every aspect of their products, greater efficiency, greater control of customer experiences and increased buying power if they have links with their competitors, challengers, collaborators, commodities, components, customers or consumers. disdain aiding in transforming corporate market and financial performance to some extent, mergers and acquisitions arent dislodge from critique. This form of restructur ing despite being the most common is also the most critiqued. Firstly, there is the issue of Monopoly and fair competition. The Acquisition of a competitor could instanter make a firm the market leader.Consumers suffer as a result. There might be little product differentiation, increased prices and barriers to new entrants could be put to prevent other smaller companies from entering the market thus giving a single organisation too much power. The government sometimes has to step in to minimise the formation of monopolies. British Airways were hopeful for a merger with American Airlines which would have made them a dominant airline in major airports across the world. The deal was last stopped because of its anti competitive nature. In addition to monopolies, a normal critique on mergers and acquisitions is they just dont work. the Boston consultancy group estimate that 64% of recent US acquisitions actually destroy value for the acquirers shareholders (Kotler et al 2004) earlie r than increased profitability, mergers and acquisitions have come to be associated with lowered morale, lineage dissatisfaction, sterile behaviour (Meeks 1977, Sinetar 1981, Attendorf 1986, Cartwright & Cooper 1993). Three major reasons for the sorrow of mergers and acquisitions are a clash of organisational culture, human relations dilemmas and abandoning center competencies. Different organisations have extraordinary styles of going near their day to day operations.When a company merges with or acquires another the dominant culture usually prevails however employees from the organisation with the slight dominant culture might still extradite on doing things the way theyve always done it thus causing this clash. Errors associated with clashing cultures could range from handsome to disastrous and if this carries on for a prolonged period of time, the opposite of the sensed benefits of mergers and acquisitions is most likely to occur. Employees also tend to feel worried roughly their job security when any form of restructuring takes place.Their insecurities are manifested through their actions that usually prove costly for the newly merged or acquired organisation and can eventually drive it to failure. High labour turnover, absenteeism and decreased productivity are some of the actions that could be manifested as a result of job insecurity. A disparity in snapper competencies is a final reason wherefore mergers and acquisitions are becoming more prone to failure. Hamel and Prahalad (1994) argue that an organisation can never gain long term financial rewards if its core competencies are ignored.Thus merging with or acquiring a company with contrasting core competences isnt likely to be boffo. The merger between Daimler Benz (makers of Mercedes Benz) and Chrysler is a perfect example of a failed merger. Due to a clash of organisational culture and contrasting core competencies, the merger eventually ended in failure. There were good intentions t in can the merger exactly finding the balance between Daimler Benzs high end auto mobiles and Chryslers middle of the road range proved more ambitious than anticipated thus Chrysler was eventually sold off.Druckers (1985) critique of mergers and acquisition argued that managers often seek to restructure in this manner to spread risk but it doesnt guarantee success and usually results in failure. His five rules for successful acquisition give useful steps that managers might want to take into consideration prior to restructuring their organisation in this fashion. Outsourcing is another restructuring initiative used by firms when they find it necessary. Outsourcing aids in transforming the corporate market and financial performance of a firm to a great extent.It enables firms to focus totally on their core competencies as other organisations are hired to carry out activities that arent directly related to the companys operations. It saves costs, improves efficiency and aids in the carrying into action of rapid change. In addition, finding workers with the necessary qualifications and skill in a specific country required might be difficult, thus brinkward outsourcing becomes a necessity (King, 2009). One of the most outsourced operations in the get together Kingdom and the USA is Information Technology. There are more IT positions in the USA than there are graduates (Morrill, 2009).Marks and Spencers indulge in offshore outsourcing to aid with its IT operations. As a result they have been able to focus on areas of more importance to them which is the quality of their products and their customer good. Additionally, offshore outsourcing aids in creating jobs in developing third world countries where unemployment rates are high. almost of the accounting and research operations on Wall Street are outsourced offshore. The companies are usually based in India where the best candidates are selected for the job and would be paid a good wage according to the me asuring of living in India.However if the very same operations were to be performed in New York, the staff may not be as ball-hawking as those in India and would demand triple the salary in consistency to the higher standard of living in New York. All in all, Outsourcing is intended to ensure that the most skilled and most efficient peck do the job at a mutually beneficial financial cost. On the other hand, there are so many honest and political concerns associated with outsourcing. Many believe that its damaging to the economy as creating employment offshore decreases employment in the companys home country. utsourcing is a lamentable alternative to a firms internal management of Information Technology and go because it is tantamount to selling your birthright (Clark et al, 1995). Also, ethical issues such as exploiting local workers in offshore countries in a desperate bid to keep overheads to a bare minimum and maximise profits have been connected to outsourcing. numerous companies have been scrutinised and criticised for this. The likes of Nike and Primark have endured the embarrassment and scandal of engaging in kidskin labour in an attempt to keep overheads unrealistically low.Pisano (2009) argues that outsourcing operations especially manufacturing can provide a leak in learning which might enable competitors overseas to hone their skills and possible surpass the skills of the company outsourcing. different criticisms of outsourcing include quality control, loss of managerial control and hidden costs or the service being outsourced proving to be more costly in the long run. British Airways outsources almost all its operations. Back office operations, pay and accounting and its in-flight retail business are all outsourced.This has resulted in slimy employee relations, a breakdown in communication and poor customer service amongst a host of other things. Whilst Marks and Spencers restructuring included outsourcing IT operations which resulted in some employees being made redundant and other transferred to their outsourced off shore location. To conclude, restructuring transforms corporate market and financial performance to a significant extent. every firm needs to change especially when it is at risk of failure or its not as profitable as it once was.Marks and Spencers restructuring ensured the company was re-branded in the customers mind and an emphasis was placed on quality. As a result sales soared and market share was gained. On the other hand their restructuring initiatives also led to the company making the strategical decision to close all shops in France thus bringing about bad press, criticism from trade unions and the French government, law suits and parties calling for consumers to boycott Marks and Spencers stores. Restructuring is however necessary if a business is to remain competitive.If competitors are ever-changing and a firm decides to remain stagnant, it is only a matter of time before it becomes ir relevant. The decision to restructure must be dependent on the overall business strategy. Strategic management as a even up is concerned with how firms formulate and implement strategies in order to accomplish coveted performance goals. (Schendel and Hofer 1979). A more aggressive proactive strategy might be better suited for companies pursuing mergers and acquisitions whilst an organisation with a cost saving and value adding strategy might prefer to outsource.Restructuring does transform corporate market and financial performance but should only ever be used in synch with the overall corporate strategy to reap utmost benefits. Bibliography * MN220 Strategic Management Lecture 18- Restructuring. Sukhdev Johal. 2012 * Restructuring for Shareholder value and its implications for labour. Cambridge journal of economics. Julie Froud, Colin Haslam, Sukhdev Johal and Karel Williams * Bbc. co. uk/business Why firms bother to restructure. 12 Feb 2003 http//news. bbc. co. uk/1/hi/busine ss/711722. short-term memory * Caterpillar Two stories and an argument.J. Froud, K. Williams, C. Haslam, S. Johal, J. Williams. Accounting organisations and societies vol 23, 1998 * Globalisation, shareholder value, restructuring The (Non)Transformation of Siemens Alexander bortsch * The Psychological impact of mergers and acquisition on the individual A consider of building society managers. Sue Cartwright, Larry L. Cooper. 1993 * Principles of Marketing. Phillip Kotler, Veronica Wong, John Saunders, Gary Armstrong. Fourth European Edition * The Outsourcing of information services Transforming the nature of business in the information industry.Thomas D. Clark Jr, Rober W. Zmud, Gordon E. McCray. 1995 * An evaluation of the impact of corporate strategy and the role of information applied science on IS functional outsourcing. V Grover, M Cheon, J TC Teng * abstractive perspectives on the outsourcing of information systems. Myun J. Cheon, Vraun Grover and James T C Teng. 1995 * T he U. S is outsourcing onward its competitive edge. Gary P Pisano. HBR Blog network. 2009 * Offshore outsourcing Practical and ethical arguments for and against from a small business perspective. Danny King. 2009 *