Introduction
Corporate Restructuring is a strategic decision. It is an action taken by a corporate to significantly modify the financial and operational aspects of the company, usually when the business is facing financial stress. Also, Corporate Restructuring can also be considered as the process of changing the business operations and business portfolio in order to assess more profitable business options. In corporate restructuring, there are either operational or functional structure changes or changes in the business model of the company.
Basically, restructuring is the changes in financial adjustments to the liabilities and assets of the company. Some of the practical reasons for corporate restructuring are:
- Corporate Restructuring to reduce the costs of the company.
- Corporate Restructuring to concentrate on key products or accounts.
- Corporate Restructuring to incorporate innovation and new technology.
- Corporate Restructuring to make better use of human resources.
- Corporate Restructuring to improve the competitive edge in the business.
- Corporate Restructuring to spin-off a subsidiary company.
- Corporate Restructuring to merge or acquire other businesses.
- Corporate Restructuring to manage or consolidate debt
Designing Corporate Restructuring Program
Corporate Restructuring is a very crucial strategic decision for any corporation as it includes heavy finance and company’s crucial resources. The decisions taken will have a long-term impact on the company therefore, corporate restructuring is designed or conducted with proper planning and there are some considerations for restructuring :
Assessing Organizational Competencies and Strategic Capabilities
Before any restructuring, it is essential to assess the internal components of the organization that need restructuring i.e. vision, mission, objective, ideology, culture and strategies, organizational structure, management capabilities, financial and non-financial resources and competencies etc. Understanding all these aspects will help us to access the true standing of the company and the restructuring program can be designed accordingly.
Assessing reasons and need for change
Corporate restructuring requires strategic planning and it cannot be undone easily. Before embarking any change, it is must to cope with the need for the restructuring. The management and the concerned authority should assess all the reasons for the change and should justify all the reasons for the change.
All the forces associated with the company should be assessed and well defined before any restructuring.
Determining what is needed to be changed
Once we have the answer for why we need to go for restructuring, we should focus the attention towards what needs to be changed. There might be multiple options for restructuring and there might be different approaches to restructure the company and all these factors might impact the business in different ways. For this, management has to decide and come to a conclusion regarding what is to be changed.
In the same process, we need to assess whether the change needs to be radical or subtle and what value will it add to the process, product or service. Management teams need to consider whether the organization is capable of conducting the change and what possible impact will the change make in the situation.
What needs to be changed is greatly influenced by the organizational mission, vision, leadership, long-term and short-term objectives, management composition, organizational culture, resources and capabilities available etc.
We need to evaluate the changes that we need to make and understand the possibilities.
Understanding environmental reactions and analyzing them
An organization has different stakeholders and restructuring decisions directly or indirectly impact all these stakeholders differently. For such a crucial decision, one needs to understand the needs and expectations of all those stakeholders. Their decisions depend on the perception, circumstances and understanding of the process.
Corporate Restructuring Techniques
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