CORPORATE RESTRUCTURING

Concept of Corporate Restructuring

• To survive and compete, present day organization. should do away with their existing culture, policies, structure and start with a clean sheet.

• They have to put more emphasis on the business process as a whole and do everything to keep the customer.

PROCESS OF RESTRUCTURING1. CUSTOMER FOCUS: To succeed in a highly competitive world, every

business will have to listen to the customer, find out what he needs and deliver more than what he expects.

2. CORE BUSINESS PROCESS:• The organization must divide itself into strategic

business units. Focusing on an individual core competency. Then, it should divide the individual SBU into core business processes by deciding what product attributes, technologies, designs, skills etc are most important from the customer’s point of view.

• Once the key processes are identified it is necessary to decide which areas need to be restructured and order in which they should be handled, since restructuring all the process simultaneously is not possible.

3. STRUCTURAL CHANGES THROUGH REEINGEERING:• This approach involves radical rethinking and

transformation of key business processes leading to coordination and flexibility in responding to changes in the environment.

• There are 4 key elements in reengineering

Organization should define distinctive competencies. The organization should asses the core processes

that adds value to the distinctive competencies. The organization should organize work around

processes rather than functions by creating cross-functional, self managed teams.

It ties up the firm’s activities closely with suppliers and customers.

4. CULTURAL CHANGES: A strategic change often requires changing

the culture of an organization. A culture change refers to a change in employees values, norms, attitudes, beliefs and behaviours

METHODS OF RESTRUCTURING1. EXTERNAL RESTRUCTURTING:• Asset based restructuring is undertaken

through (i) acquisition/takeovers, mergers, (ii)asset swaps (iii)demerger/spin off• Capital restructuring is carried through (i)leveraged buyouts (ii)shared buybacks (iii)Conversion of debt to equity

2. INTERNAL RESTRUCTURING: This involves portfolio or organizational

restructuring.• Portfolio changes are effected after the SWOT

analysis of the company.• Organizational changes are adopted to ensure

better service to the customers.