Business strategies and restructuring during difficult economic situations

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Difficult economy condition can be taken as a positive phase for the business when the customer purchasing capability has decreased and organization has to search for options to decrease manufacturing and operating cost to retain it's PAT (profit after tax) In this scenario business strategies & Business structuring has to be adjusted keeping in mind the economic condition of parent country for localized industry and world economy in case of Multinational corporations.

Organizations nowadays are constantly confronted with challenging issues that may affect its corporate growth or they may be faced with debt obligations which are overwhelming. Hence the companies need to develop some business strategies which will boost the growth of its organization and help to restructure itself. And at this critical stage, the organization's business restructuring firm will provide the right strategy at the right time to ensure its success.

More and more companies and holding nowadays ranging form midlevel enterprises to large level corporations have been restructuring and implanting programs to comply with changing economic environment and new business objectives to enhance their effectiveness. The primary drivers which lead to restructuring are improve management systems and business processes, make a company more attractive to strategic investors and capital markets and a need to increase a business's value.

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Research Background:

Strategy is a long term, wide impact corporate decision. It is much more than just visioning, forecasting and planning."Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".

In other words, strategy is about where the business is trying to get to in the long-term direction.There are also some strategies which business applies at its adverse time when it is not able to compete with its competitors or for any reason for its survival in the market. Business strategies are those strategies and tactics that will enable the company to reach its goals and specified objectives. Strategizing is much more than just visioning, forecasting and planning. In the new rapidly changing economy, all substantive issues of strategy have been redefined as issues of implementation. Strategizing means a match between the internal capabilities of the company and its external environment. In modern times business strategy is defined as a set of analytic techniques for understanding better, and so influencing, a company's position in its actual and potential marketplace.

4) Organization background:

Wockhardt Ltd. is a pharmaceutical company which has gone through debt restructuring recently in past months. It has taken up a corporate debt restructuring package with its lenders. To recover their dues some banks have chosen to go to court. Hence wockhardt's corporate debt restructuring was to be implemented without any hiccups for dissenting banks settling.

The preference share issue portion of the scheme postpones cash outflows from wockhardt to the second half of 2018. Its foreign currency convertible bonds matured with redemption value of about Rs660 crore on 25th October 2009. A part of its annual interest liability-2% on most loans-is also being converted into NCPS. Its NCPS that are going to be redeemed at 20% premium in December 2018 will meet up its derivative losses.

Wockhardt will thus manage its Rs1,441 crore estimated liability during 2009. And rest Rs790 crore will be met from its sale proceeds of its animal health and nutrition businesses. CDR will take care of the rest of the things. Since its preference shares are quasi-equity, wockhardt's debt to equity ratio will fall to more reasonable levels. That will help it to get its fresh working capital essential to grow its business in following years. Its core pharmaceutical business will drive sales and profit growth which will enable it to service it existing liabilities and have enough cash to meet its future dues from CDR Pacakage.

Wockhardt got about half of its revenues from Europe, 27% from India and 18% from US in 2008. During the September 2009 quarter, consolidated revenues grew by 2.2% to Rs922 crore and Ebidta fell by 6.3% to Rs182 crore. But it incurred a loss due to mark-to-market losses, forex losses and provision for premium for FCCB redemption. These will be lower after the CDR package is implemented. Wockhardt's core pharmaceutical business now needs to deliver results, on a sustained basis, for a few quarters, for the company to regain credibility with investors. Till then, such uptrends in its share price may not last for long.

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http://www.livemint.com/2009/11/30224342/Wockhardt8217s-debt-restruc.html

5)Rationale for the chosen topic:

Corporate restructuring has been the focus of much debate in the past few years. This has also proved that financial restructuring has the highest positive impact on performance of organizations followed by the portfolio restructuring. Restructuring often gives business new hope to redevelop itself in the market and to make its survival. While organizational restructuring has very little consistent impact on performance of organizations. Organization restructuring strategies help you to get the most form people when the business signigicantly changes by developing a plan for corporate restructuring, mergers and layoffs.

There are also competitive strategies to be successful today. The company must become competitor-oriented in order to gain competitive advantage in the market. The company avoids the strength of the competitors and look for weak points in their position and than launch marketing attacks against those weak points. Hence I have chosen this topic of explaining business strategies and restructuring in this topic, which is most important nowadays globally.

http://en.wikipedia.org/wiki/Restructuring

6) Research Questions:

1) How is business strategy managed?

2) What are the problems in Localized Industries during difficult economic situations? State some business strategies used by these industries to overcome these problems.

3) What is Restructuring? Why there is a need of Restructuring in an organization?

7) Research and Objectives:

The aim of the study is to know, what are the different strategies used by companies around the world in crucial situations. In this research I will try to find out what are the factors which are affecting working of company? What are the factors which internally affect and what factor which externally affect the company after restructuring of an organization.

In this research, I will try to find out what is restructuring strategies and other business strategies of organizations at the time of crucial economic situations in market all over the world in different companies giving examples of several organizations around the world.

8) Literature Review:

1) How Business Strategy is managed?

Strategic Management:

In its broadest sense, strategic management is about taking "strategic decisions" - decisions that answer the questions above.

Strategic management process has three main components, shown in the figure below:

Strategic Analysis

This is all about the analyzing the strength of businesses' position and understanding the important external factors that may influence that position. The process of Strategic Analysis is assisted by a number of tools, including:

Five Forces Analysis: It is a technique for identifying the forces which affect the level of competion in an industry.

Market segmentation: Market Segmentation is a technique which seeks to identify similarities and differences between groups of customers or users.

Pest Analysis: pest analysis is a technique for understanding the environment in which a business operates.

SWOT Analysis: It is a useful summary technique for summarizing the key issues arising from an assessment of a businesses internal position and external environmental influences. 

Strategic Choice

This process involves understanding the nature of stakeholder expectations (the "ground rules"), identifying strategic options, and then evaluating and selecting strategic options.

Strategy Implementation

Often the hardest part. When a strategy has been analysed and selected, the task is then to translate it into organisational action.

2) What are the problems in Localized Industries during difficult economic situations? State some business strategies used by these industries to overcome these problems.

Localized Industries:

Economy of localized industries is dependent on the government policies & localized customer purchasing power , this can be dealt as a independent system separated from world economy since the organization is addressing the localized customer needs and vice-versa customers are dependent on same industries either due to government policies or monopoly .

Challenging economic condition can be arise in localized industries in case of following conditions.

Purchasing power of customer has decreased.

Monopoly of the industry has broken.

Purchasing power of customer has decreased.

This type of condition arise most probably due to Artificial or Natural disasters, decrease in product necessity and interest.

It's to be understood that in this type of economic condition decline in sales is not dependent on the decline in customer interest towards the product rather it's due to shortage of the liquid money with them.

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Business strategies:

Initiations like Joint Ventures with well established industries (Inline with your product profile) will boost the product quality which will gratify customers with same level of purchasing power.

Manufacturing cost of the product can be decreased using following tools to fall well under the level of decreased customer purchasing power.

Decrease the inventory by decreasing product opt put rate , since large part of money has to be used to maintain the inventory which is non value adding activity .here care should be taken that the product out put to be maintained in line with the customer consumption rate.

Increase the level of automation in the process for increased out put with same operating cost.

Employee's utilization rate should be evaluated based on present demand and actions like re structuring and temporary ------- should be taken to maintain the utilization at max limit.

Departments which are not directly related to product life cycle should be strictly checked for resource utilization.

Gap between the industry and customer should be narrowed to maximum possible limit by introducing

direct company outlet to minimize the supply chain cost.

Monopoly of the industry has broken.

This type of condition arise when government had opened the economy &/or alternate industry has

Entered in the localized market with better or same quality of product.

- During downturn of economy to balance demand - supply lever government will encourage local

Industries to enter into new market to sustain the demand by increasing the customers but by doing

that the local market get opened for global industries to venture in and challenge the local industries

and braking the monopoly.

Opening the localized market for other non regional industries will bring well developed international industries with better quality and price spectrum, which will bring pressure on local industries for raise the product quality to international standard.

- In this type of changing economic condition local industries has to take following steps to survive in the

Market.

Business strategies:

Being attached with local customers for a long time had given idea of their requirements and their preferences, taking these experience local industries can opt for following steps to sustain & grow in this type of scenario.

Strengthen the supply chain management of the product.

Opened market had also opened the doors for alternate source of raw material from around the world with better price and quality.

Get aggressive your marketing to get benefit of opened market with wide customer spectrum.

Evaluate the manufacturing cycle for cost reduction.

Make JV with global industries taking advantage of local customer acquaintance of you and global quality of them.

4) What is restructuring? Why there is need of Restructuring?

Restructuring generally refers to Corporate Restructuring, it is the reorganization of a company to improve its profitability. Restructuring may occur because of company buy-outs, corporate acquisitions or bankruptcy. It is a term used to describe the concerted attempt by businesses to change the way they are organised, usually to cut costs and become more effective and efficient. Organization restructuring happens when the reporting hierarchy of a company changes.

After organization restructuring certain groups will report to different departments, and some departments may be newly created or disappear altogether. Executives have a responsibility to create their company's success, one day or the other. Whether the company is doing well or poorly, executives plan to do better. Good planning requires good data and good analysis, which reduce decision errors. Executives plan to avoid decision errors. One of the causes of decision errors is knee-jerk decision making. Contracting and outsourcing are also considered as a pressure valve to reduce fixed costs in the face of declining customer activity and optimism. Restructuring also refers to redeployment in organizations. Organization need to design a redeployment assessment process at time of redeployment

One of the main reasons to do strategic restructuring is that it reduces financial losses, simultaneously reducing tensions between debt and equity holders to facilitate a prompt resolution of a distressed situation. While some other reasons are it ensures the company has enough liquidity to operate during implementation of a complete restructuring. It helps to produce accurate working capital forecasts and provide open and clear lines of communication with creditors who mostly control the company's ability to raise financing. Hence restructuring is too much needed in times of difficult economic conditions of the organisations.

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http://business.qandas.com/general-business/what-is-restructuring.html

Research Methodology:

Types of variable

Categorical Variable

Continuous Variable

Qualitative Variable

Quantitative Variable

Unit of measurement

Attribute Variable

Active Variable

Dependent Variable

External Variable

Intervening Variable

Independent variable

Casual Model

Study design

I

What is Qualitative research methodology?

Qualitative research methodology is used to understand how people feel and why they feel as they do. Researcher's main aim in qualitative research to collect in-depth information by inquiring question such as why do you say that? The sample size in this qualitative research methodology is to be smaller comparing with the quantitative research methodology which is including large sample size. There are number of methods used in the qualitative research but most popular method is in depth interview and group discussion is two common methods for collecting qualitative information.

The main aim of the qualitative research is complete and detail research. In this research method, researcher only knows roughly in advance what he is looking for. This method is subjective and individual researcher interprets differently and for fulfills their aim researcher use participant, in-depth interviews and observation methods. Generally data is in the form of world, picture or objects in qualitative research methodology

What is Quantitative research methodology?

Quantitative research methodology is used to calculate how many people believe, assume or act in the particular way? In the quantitative research methodology the number of sample is large, anything from 50 to any number. For the purpose of research there are structure questionnaires are used, mainly closed question is used in the quantitative methodology. This methodology is very useful because the answer of the question is already set by the researcher, the responders have to select one of the option. There are various methods in quantitative research for the researcher to collect information but commonly researcher is used telephone interview or on-street interviews.

The main aim of the quantitative research is to classify features, count them and construct statistical model for attempt to put in plain words what is observed. It is important in quantitative research that all aspects of the study are carefully designed before data is collected

Data Collection Methods:

PRIMARY DATA

Primary data for this research will be gathered by interviewing and questionnaires by the researcher. The advantage of the primary data is that is fresh and never used information in relation to the topic.

SECONDARY DATA

Secondary data for this research will be obtained thorough books, journals, articles, newspapers etc. secondary data provides the best work which has been done previously on the topic.

Data Analysis:

There are five steps for Data analysis

Step one- Validation and editing ( quality control)

Step two- Coding

Step three- Data Entry

Step FOUR- Machine Cleaning of Data

Step five- Tabulation and Statistical Analysis

Multivariate techniques are suitable for analyzing data when there are two or more measurement on each element and the variables are analyzed simultaneously. Multivariate techniques will be used.

Timescale:

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Bibliography:

Guidelines for best practice in restructure and redeployment.pdf