Turnaround Strategy

Turnaround Strategy

Submitted by: Tanmay jana

Submitted To: Prof. Rishi Taparia

What is Turnaround Strategy ?

• Turnaround strategy means to convert, change or transform a loss-making company into a profit making company.

• It helps the sick company to stand once again in the market.

• It tries to reverse the position from declining sales to increasing sales, from weakness to strength, and from an instability to stability.

Why Turnaround Strategy?

Declining market share

Negative profit

Falling gross and Net margins

Increasing cost

Declining performance measures

Low turnover

Miss management

Managing turnaround strategies

• Joining internal turnaround team with external specialist.

• Consulting with external turnaround specialist.

• Removing the top management and merging with healthy organization.

Approaches of Turnaround Strategy

• Surgical Strategy

• Non-Surgical Strategy

Internal factors

External Factors

DecliningSales or margins

Imminent bankruptcy

Low

High

Cost Reduction

Asset reduction

Stability

Efficiency maintenance

Entrepreneurialreconfiguration

Recovery

Cause Severity Retrenchment phase

Recovery phase

Turnaround Situation

Turnaround response

Turnaround of

Problem Faced by Lou Gerstner

Problem in Approach 1. Lack of sophisticated marketing techniques and PR policies 2. Disconnect between research market 3. Strained relationship with customer

Management Problems 1. High beaurocracy 2. Executive – Customer disconnect 4. Low emphasis on marketing

Costs 1. High overhead costs 2. More employees than needed

Steps taken by Lou GerstnerCost Reduction 1. Sold of some non core business 2. Focus on not breaking up the company 3. Reducing expenses by 9%Remaking the Brand 1. O&M’s global advertising campaign: solution for a small planet 2. Product rationalization and focus on BrandsChange Management 1. Executive that rested the global approach were firedOrganizational Changes 1. Reorganized into global organization – CEC & WMC 2. Attention to sales organization 3. Reduction in board size 4. To reduce bid preparation time: Sales team split into 2– the Product Specialists and CRMs

Impact of the Strategies• Standardization in product and processes

• Global positioning

• No. 1 company for leaders (Fortune)

• No. 1 green company in the U.S. (Newsweek)

• No. 2 best global brand (Interbrand)

• No. 18 most innovative company (Fast company)

•  IBM's brand was valued by Interbrand at $75.5 billion in 2012