To What Extent Does Restructuring Transform Corporate Market and Financial Performance?
To what extent does restructuring transform corporate market and financial performance? Discuss using an extended example.
Restructuring is simply the reorganisation of a company’s structure to combat external or internal forces that hinder the maximisation of shareholder value. The term restructuring is quite broad an is an umbrella term for any action taken by a firm to maximise shareholders wealth (Wright et al) or a company’s reaction when it’s under pressure (Usui and Colignon, 1996). These actions “bracket mergers and acquisitions with much else” (Froud et al., 2002, P.2). This essay should explain in great detail how restructuring can transform corporate market and financial performance. It will focus on financial, portfolio and organisational restructuring and more specifically the following restructuring actions: mergers and acquisition and outsourcing and off-shoring. In addition Marks and Spencer and British Airways would be used interchangeably as extended examples to further illustrate stated points.
Restructuring actions usually occur to revive failing businesses. By delayering or merging with another business firms are likely to become more competitive and more profitable. It is also not uncommon for restructuring to be used as a preventative measure to stay ahead of the game and react to competition. If done correctly and when necessary, it should result in economies of scale, decreased operational costs and easier communication. Financial restructuring refers to changes in a company’s 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 concerned with the human resources in the company.
Mergers and Acquisitions are the most common forms of restructuring. "In value terms, the merger of whole companies through (often hostile) takeover continues to be the most important form of
Restructuring is simply the reorganisation of a company’s structure to combat external or internal forces that hinder the maximisation of shareholder value. The term restructuring is quite broad an is an umbrella term for any action taken by a firm to maximise shareholders wealth (Wright et al) or a company’s reaction when it’s under pressure (Usui and Colignon, 1996). These actions “bracket mergers and acquisitions with much else” (Froud et al., 2002, P.2). This essay should explain in great detail how restructuring can transform corporate market and financial performance. It will focus on financial, portfolio and organisational restructuring and more specifically the following restructuring actions: mergers and acquisition and outsourcing and off-shoring. In addition Marks and Spencer and British Airways would be used interchangeably as extended examples to further illustrate stated points.
Restructuring actions usually occur to revive failing businesses. By delayering or merging with another business firms are likely to become more competitive and more profitable. It is also not uncommon for restructuring to be used as a preventative measure to stay ahead of the game and react to competition. If done correctly and when necessary, it should result in economies of scale, decreased operational costs and easier communication. Financial restructuring refers to changes in a company’s 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 concerned with the human resources in the company.
Mergers and Acquisitions are the most common forms of restructuring. "In value terms, the merger of whole companies through (often hostile) takeover continues to be the most important form of
Bibliography: * MN220 Strategic Management: Lecture 18- Restructuring. Sukhdev Johal. 2012 * Restructuring for Shareholder value and its implications for labour * The U.S is outsourcing away its competitive edge. Gary P Pisano. HBR Blog network. 2009 * Offshore outsourcing: Practical and ethical arguments for and against from a small business perspective