Re-structuring the Corporation

Re-structuring the Corporation: Re-structuring involves strategies for reducing the scope of the firm by exiting from unprofitable business. Restructuring is a popular strategy during post liberalization era where diversified organizations divested to concentrate on core business. Re-structuring strategies:

• Retrenchment: Retrenchment strategies are adopted when the firm‟s performance is poor and its competitive position is weak.
• Divestment Strategy: Divestment strategy requires dropping of some of the businesses or part of the business of the firm, which arises from conscious corporate judgement in order to reverse a negative trend.
• Spin-off: Selling of a business unit to independent investors is known as spin-off. It is the best way to recover the initial investment as much as possible. The highest bidder gets the divested unit.
• Management-buyout: selling off the divested unit to its management is known as management buyout.
• Harvest strategy: A harvest strategy involves halting investment in a unit in order to maximize short- to- medium term cash flow from that unit before liquidating it. Liquidation: Liquidation is considered to be an unattractive strategy because the industry is unattractive and the firm is in a weak competitive position. It is pursued as a last step because the employees lose jobs and it is considered to be a sign of failure of the top management.