Assignment Of Strategic Management
Date: 24th Feb’2014
Topic: Case study of 10 companies who used turnaround strategy to improve
Definition Of Turnaround Strategy
The overall goal of turnaround strategy is to return an underperforming or distressed company to normal in terms of acceptable levels of profitability, solvency, liquidity and cash flow. Turnaround strategy is described in terms of how the turnaround strategy components of managing, stabilising, funding and fixing an underperforming or distressed company are applied over the natural stages of a turnaround. To achieve its objectives, turnaround strategy must reverse causes of distress, resolve the financial crisis, achieve a rapid improvement in financial performance, regain stakeholder support, and overcome internal constraints and unfavourable industry characteristics.
1. Anu Aga
Director and Former Chairperson, Thermax
The biggest challenge for Anu Aga, director and former chairperson of Theramax was to change the preset attitude towards the company’s “satisfactory underperformance". The kick off for Anu was an anonymous letter from one of the shareholders who blamed the company for its inactiveness about the situation. Anu completely restructured the strategy of the company and divested the company into six core businesses in energy and environment sectors. “By downsizing and improving our operational efficiency, we were able to bring down our employee cost from 16 per cent of turnover to less than 7.5 per cent, on a larger sales base. We also brought in a performance culture”, said Anu.
2. Bhavarlal H. Jain
Founder of Jain Irrigation Systems
The initial judgments made by the company board had put Jain Irrigation Systems into deep financial trouble around late 90s. Bhavarlal H. Jain however shoved off all the market allegations and restarted and ventured into non-core areas. Soon the company was doing well and got rid off all its debts. Today, Jain Irrigation Systems is a multinational organization based in Jalgaon, India with over 7,500 employees.
3. Govind Shrikhande
MD, Shoppers Stop
The drop down in the consumer sentiment resulted in hitting Shoppers Stop high in 2008. The company’s like-for-like sales growth turned pessimistic and continued till 2010. “It was a great time for learning. Our board challenged us to create a recession proof model that could face slowdowns. One of our chief learnings from the slowdown was to never compromise on customer experience. Customers should continue to get your best service and merchandise. Only then will they continue to shop with you”, said Govind Shrikhande. Among the boosting strategies, Govind opted to shut unprofitable formats. Focused on right-sized stores, controlled costs and most importantly repositioned the brand completely.
4. Himanshu Kapania
Managing Director, Idea Cellular
Among stiff competition and constraint regulatory rules, India Cellular was having a tough time surviving the market challenges. Among all the complications Himanshu Kapania did not loose his strategy of “sustained effort”. Himanshu’s key rejuvenating strategies comprised of mobilizing the finances, built capacity, expanded nationwide and improved customer service. Today Idea Cellular is the nation’s third largest mobile operator.
5. Nitin Paranjpe
CEO & Managing Director, HUL
‘Challenge’ is the only factor that is constant in any sector, may it be the consumers demand or the corporate environment. In 2008 HUL faced pricing pressure and had to make its brands competitive. When the crude oil prices hit the record low $140 a barrel to a low of $40, there were huge implications on pricing. To survive the crisis, Nitin Paranjpe, CEO & Managing Director of HUL had to respond with speed and agility....
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