Strategic Management - Restructuring
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FACULTY OF BUSINESS
Nurturing professionals with high moral and ethical values
Assoc. Prof. Dr. Mohd Fuad Mohd [email protected] 6629
16th. March 2013
Strategic Management
RESTRUCTURINGRESTRUCTURING
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FACULTY OF BUSINESS
Nurturing professionals with high moral and ethical values
Organization restructuring happens when thereporting hierarchy of a company changes.
RESTRUCTURINGRESTRUCTURING
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HELPS A COMPANY PREPARE FOR THEFUTURE!
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Organizational leaders often find it necessary tochange how their units operate for reasons like:changing unit priorities
UNDERSTAND
Plan for Change
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enhancing organizational effectivenessaddressing budget reductions
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Organization RestructuringOrganization Restructuring
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Organization Restructuring & ChangeOrganization Restructuring & ChangeManagementManagement
1. Background
2. Scope and Process : Organization Diagnosis
3. Output : Organization Diagnosis
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4. Task Determination (Current)
5. Future Tasks and Direction
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Decreased Org.
Efficiency dueto rapid growth
(particularly in
terms of org.
size)
Organizational SituationOrganizational Situation
1. Background1. Background
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Need for
Change
Lowered
Managerial
Capacity of Mid.
Mgmt. due to
considerableincrease in
headcount
Lack of
within the org.
Lack of
Customer-
centered
Mindset of
Employees due
to increased
bureaucracy
within the org.
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Employees Initial Attitude of the ProjectEmployees Initial Attitude of the Project
Sensitiveness Junior
and
Senior
Leader
1. Background (Contd)1. Background (Contd)
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Defensiveness
Expectation
All
Employees
All
Employees
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Overcoming problems concerned,
1) in-depth organization diagnosis was conducted
2) change management tools were utilized to
1. Background (Contd)1. Background (Contd)
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Determination of Issues Diagnosis & Task DevelopmentAction Planning
to Strengthen Org. Capability
Focus
Phase I Phase II Phase III
Organization Diagnosis Scope and ProcessOrganization Diagnosis Scope and Process
2. Scope and Process :2. Scope and Process : OrganizationOrganization DiagnosisDiagnosis
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Interview(Junior)
Main
Issues
Determined
FocusGroup
Interview(Senior)
FocusGroup
Interview(Leader)
Exec.Interview
EOS Result
Review
Tasks
Identified
External/ Internal
Environment
Review
Task
Development
Top Mgt.
Workshop
to determine
tasks
Action Plan
Solution
Development
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Change Management ToolsChange Management Tools
Develop Business Case to attract employees attention
Identify and analyze Key Stakeholder
2. Scope and Process : Org. Diagnosis (Contd)2. Scope and Process : Org. Diagnosis (Contd)
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Assess Communication Channel
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PriorityTasks Urgency Short-Term
Effectiveness
Manpower Structure
Org. Structure Re-design
Remarks
EasyImplementa-
tion
StrategicImportance
Each task has to be ranked based on their strategic importance, easy implementation, urgency
and short-term effectiveness (Amway Korea example)
3. Output : Org. Diagnosis3. Output : Org. Diagnosis
Redefining and Sharingof Vision & Strategy
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Performance MgmtSystem Re-design
Job Analysis
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Leadership Development
CommunicationEffectiveness Planning
Succession Planning
Korean Title PromotionPolicy Re-design
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Org. StructureRe-design
SuccessionPlanning
LeadershipDevelopment
Performance MgmtSystem Re-design
Infrastructure for Change Mgmt
3. Output : Org. Diagnosis (Contd)3. Output : Org. Diagnosis (Contd)
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Manpower Structure
Re-design
Job Analysis
Implement Team-
Based Org.
Structure
Korean Title
Promotion Policy
Re-design
Redefining and
Sharing of Vision &
Strategy
Effective
Communication
Planning
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Possible ChangesPossible Changes in Employees Attitude after the Projectin Employees Attitude after the Project
3. Output : Org. Diagnosis (Contd)3. Output : Org. Diagnosis (Contd)
Positive attitude of project intention among team leadersincreased
Employees trust of the top management increased
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Employees expectation of the project increased
But, lets wait and see attitude still exists especiallyamong the juniors
There are still some managers who are not prepared tobuythe project objectives, hence not willing to participatein current initiatives for change
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Key Findings
HRM and HRD are separated; HRD is tied with GA
(Usually HRM and HRD form one HR department;
alternatively, each of the three functions operateindependently)
Despite the increase in number of IBOs, sales
function has remained unchanged.
Local Sourcing serves as an independent unit, with
an executive as the department head.
Amway Korea
Management PR & Govt
4. Current Task4. Current Task
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Implications & Solutions
Review HRDs roles and relocate as necessary.
Review the capacity of sales function in line with
the increase in both revenue and number of IBOs.
Review Local Sourcings position in the org., and
investigate potential linkage with other function(s).Due to the rapid growth of the org. there exists
possibility of moral hazard, which may lead to need
for internal audit function.
Review span of control : Sales & MKT,
Management Service
Biz. Relations
Marketing
Special Event
Tech. Reg/QA
RM & GDS
Distribution
Logistics Planning
CSD
RDC
Treasury
HRM
Local Sourcing
Service Affair
PR & Govt Affair
Legal Affairs
BCR & BSM
Import & Export
Purchasing
Local Sourcing
Treasury
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Change Management
Succession Planning based on the New Org. Structure
Performance Management- Identify future leadership competency
Establish Training & Development Plan based on succession planning
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5. Future Tasks and Direction5. Future Tasks and Direction
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- Performance Management & Coaching Skills Training- Executive Development Program
- Customized in-house MBA program
Others
- Introduce Cafeteria Benefit Program
- Talent Management and Retention
- Develop Total Compensation Strategy
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Strategic Management
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businessIt is actually aIt is actually aIt is actually aIt is actually a
MERGERS & ACQUISITIONSMERGERS & ACQUISITIONS
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combination
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Merger
A transaction where two firms agree to integrate theiroperations on a relatively co-equal basis because they have
resources and capabilities that together may create a strongercompetitive advantage.
The combining of two or more companies, generally by
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acquiring company in exchange for the surrender of theirstock
Example: Company A+ Company B= Company C.
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Acquisition
A transaction where one firms buys another firm with theintent of more effectively using a core competence by makingthe acquired firm a subsidiary within its portfolio of business
It also known as a takeover or a buyout
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It is t e uying o one company y anot er.
In acquisition two companies are combine together to form anew company altogether.
Example: Company A+ Company B= Company A.
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MERGER ACQUISITION
DIFFERENCE BETWEEN MERGER AND
ACQUISITION:
i. Merging of two organization in
to one.
ii. It is the mutual decision.
iii. Merger is expensive than
i. Buying one organization byanother.
ii. It can be friendly takeover orhostile takeover.
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.
iv. Through merger shareholderscan increase their net worth.
v. It is time consuming and thecompany has to maintain so
much legal issues.vi. Dilution of ownership occurs in
merger.
iii. cquisition is ess expensivethan merger.
iv. Buyers cannot raise their enoughcapital.
v. It is faster and easiertransaction.
vi. The acquirer does notexperience the dilution ofownership.
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When two or more companiescombines into one company
ma mer e with existin co
MergerMerger
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Merger
form new company
in India merger is called
Amalgamation
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MergerMergerMerger
Objectives
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Faster GrowthImproving ProfitabilityManagerial EffectivenessGaining Market PowerLeadership
Cost Reduction
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Acquisition
An Acquisition may be an act of acquiring
effective control by one company over assets
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or management o anot er company w t outany combination of companies..
Companies may remain independent, separate
But there may be change in control ofCompanies..
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Acquisition & Takeover
When Ac uisition is unfriendl or hostile
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It may be called Takeover
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Are there an alternatives to Mer ers or ac uisitions?
MERGERS & ACQUISITIONSMERGERS & ACQUISITIONS
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Merger
Alternatives
Joint VentureStrategic Alliance
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m na ng ne c en
OperationsProductivity ImprovementHiring CapableManagers
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Limit Competition
Market PowerDiversificationGrowthEconom of Scale
MOTIVES & BENEFITS OFM & A
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Access to Foreign MarketResourcesDisplace existing ManagementCircumvent Govt Regulations
AggressivenessDiversifying RiskProfitability
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Accelerated Growth
Expanding Existing Markets
MOTIVES & BENEFITS OFM & A
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Expand InternallyExpand ExternallyDeveloping Operating FacilitiesPrice Paid for Merger
AC O S SS
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Enhanced Profitability
Economies of Scale
MOTIVES & BENEFITS OFM & A
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perat ng conom esSynergy
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Steps in AnalysisOf Mergers & Acquisitions Planning
Search &Screening
Financial
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Evaluation
Mode ofMerger
Negotiation
PostMerger
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Why is Important Problem With Merger
MERGER:WHY & WHY NOT
i. Increase Market Share.
ii. Economies of scale
iii. Profit for Research and
i. Clash of corporate cultures
ii. Increased business complexity
iii. Employees may be resistant to
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development.
iv. Benefits on account of taxshields like carried forwardlosses or unclaimeddepreciation.
v. Reduction of competition.
change
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Why is Important Problem With Acuiqisition
ACQUISITION:WHY & WHY NOT
i. Increased market share.
ii. Increased speed to market
iii. Lower risk comparing to
i. Inadequate valuation oftarget.
ii. Inability to achieve synergy.
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develop new products.iv. Increased diversification
v. Avoid excessive competition
iii. Finance by taking huge debt.
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Impact of Mergers and Acquisitions
Competition
Management
Public
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ImpactEmployees Shareholders
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Why Mergers and Acquisitions Fail?
Cultural Difference
Flawed Intention
No guiding principles
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No ground rules
No detailed investigating
Poor stake holder outreach
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How to Prevent the Failure
Continuous communication employees, stakeholders, customers,
suppliers and government leaders.
Transparencyin managers operations
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must be ready to greet a new or modified culture.
Talent management by the management
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M&A DEALS
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1. Tata Steel-Corus: $12.2 billion January 30, 2007
Largest Indian take-over
After the deal TATAS
became the 5th largest
STEEL co.
100 % stake in CORUS
paying Rs 428/- per share
Image: B Mutharaman, Tata Steel MD; Ratan
Tata, Tata chairman; J Leng, Corus chair;
and P Varin, Corus CEO.
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2. Vodafone-Hutchison Essar: $11.1 billion
TELECOM sector
11th February 2007 2nd largest takeover
67 % stake holdingin hutch
Image: The then CEO of Vodafone
Arun Sarin visits Hutchison
Telecommunications head office in
Mumbai.
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3. Hindalco-Novelis: $6 billionJune 2008
Aluminium and
copper sector Hindalco Acquired
Hindalco entered theFortune-500 listing of
world's largest
companies by salesrevenues
Image: Kumar Mangalam Birla
(center), chairman of Aditya Birla
Group.
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4. Ranbaxy-Daiichi Sankyo: $4.5 b Pharmaceuticals sector
June 2008
Acquisition deal largest-ever deal in the
Indian pharma industry
Daiichi Sankyo acquiredthe majority stake ofmore than 50 % inRanbaxy for Rs 15,000crore
15th biggest drugmakerImage: Malvinder Singh (left), ex-CEOof Ranbaxy, and Takashi Shoda,
president and CEO of Daiichi Sankyo.
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5. ONGC-Imperial Energy:$2.8billion
January 2009
Acquisition deal
Imperial energy is abiggest chinese co.
ONGC aid 880 er
share to theshareholders of imperialenergy
ONGC wanted to tapthe siberian market
Image: Imperial Oil
CEO Bruce March.
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