CASE STUDY ON TURNAROUND STRATEGY, ENVIRONMENTAL THREAT AND OPPORTUNITY
PROFILE
A reputed public limited company, M/s XYZ & Co. with a
strong brand image and goodwill in the market, manufactures Refrigerators. Last
year it decided to take over an ailing public sector enterprise, located at
Hyderabad named M/s ABC & Co. which is also manufacturing branded
Refrigerators. The ailing unit had accumulated losses to the tune of Rs.90
crores and was having a huge work force of 5000, with production virtually
coming to a grinding halt/stand-still statue at the time of takeover.
The management of M/s XYZ & Co. prepared a turnaround
strategy and adopted a multi-pronged strategy for its taken over company viz.,
ABC & Co. As a result, over a period of one year:
-
Wasteful expenditure got curtailed considerably
-
Production increased
-
Production range got augmented
-
Investment in HRD had been stepped up
-
Costumer and dealer interaction had improved
Each of the above steps were taken up on a ‘war-footing’.
Ø
An analysis of job and personality profiles of
all personnel from ‘workmen’ to ‘managers’ was undertaken by an outside
consultant. This study revealed a lot of startling things including the fact
that about 400 workers with union influence, were mostly on outdoor duty, where
they could not be supervised all the time.
Ø
A voluntary retirement scheme (VRS) was
introduce, which helped to reduce the workforce of 4000. Those workers, not
willing to be a part of the ‘new work culture’, where targets had to be met,
left under VRS.
Questions:
(i)
Do you consider the Turnaround Strategy adopted
by M/s XYZ & Co. satisfactory? Give reasons.
(ii)
Discuss the nature of synergistic effects, if
any, resulting from M/s XYZ’s take over of M/s ABC & Co.
(iii)
Prepare an Environmental Treat and Opportunity
Profile (ETOP) and a strategic advantage profile (SAP) for evaluation of the
present strategy.
(iv)
What were the key factors underlying successful
implementation of the strategy? Explain
You may take suitable assumption, as may be required, in
this case study.
Analysis
(i)
Adopted multi-pronged strategy yielded different
desired results like-
·
Revenue generation of the company has increased
due to the increase in production.
·
Wasteful expenditure got curtailed considerably.
The essence of any good ‘turnaround strategy’ is cost reduction and cutting
down of redundant discretionary cost in manufacturing and man power cost.
·
Helped to boost up declining trend in
performance and paved way for improved long-run efficiency of operations.
·
Augmentation of product range has helped to shot
up of company’s market share.
·
The study by the consultant has yielded
stupendous results to eliminate a lot of unproductive work practices.
·
The VRS introduction has helped to reduce the
work force by 20%. As XYZ &Co. has been able to proclaim their seriousness
about the change. Those workers of erstwhile ABC & Co. not willing to be a
part of the new work culture, where targets had to be met, left under VRS.
·
By stepping up investment in HRD to train the
remaining workforce has ushered in a new working system and philosophy.
·
For the purpose of developing their market, the
company is now drawing program to enter into the growing export market.
(ii)
Due to the all-round multi-pronged strategy of
the company-
·
Operation synergy is evident through the
introduction of new product, leading to increased use of its facilities with
the reduction in unit fixed cost.
·
Sales synergy through the sale of additional
product range with the existing marketing infrastructure and improved customer,
dealer introduction.
·
Management synergy by way of showing managerial
competence to solve different problems of the erstwhile ABC & Co.
·
The combined impact of all the above has jointly
contributed to positive synergy for the company.
(iii)
Environmental Threat and Opportunity Profile
Business
(+) New forms of competition
(-) New entry of Global leader and MNC
Government (+) Globalization
(-) Liberalization
Socioeconomic (-) Resource constraints
(+)
All round infrastructure development in the country including more power supply
for the industry
Technological (+) High growth envisaged in
industrial production and technological upgradation.
(iv)
Strategic Advantage Profile (SAP)
Manufacturing (-) Ageing plant facilities, requiring
gradual replacement and upgradation.
(+)
Machinery with robust design and proper maintenance are available to withstand
the increased production.
Marketing (+) Capable sales
force
R&D (+)
Backup from XYZ & Co.
Corporate resources (+) Result oriented
management team with positive attitude and abundant talents with initiative and
zeal.
(v)
Key factors constitute the important significant
factors in the success of particular business. In the instant case, some of the
key factors are:
Ø
New management team of XYZ & Co. with
dedication
Ø
Implementation of multi-pronged strategies in
its real earnest.
Ø Augmented product range.
