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Turnaround Strategies


Derek
2017-09-03 05:29:48
Word Count: 626




Ways in which a firm can attain a successful turnaround strategy...

Any new vision has a life-cycle. This cycle has four phases impacted by the five forces when attempting to achieve and sustain a competitive edge within the mission of such visions. Mr Porter prescribes three “generic strategies”  to help “overcome” those forces (Des, Lumpkin, Eisner, McNamara, 2014). Additionally, there are strategies to assist managers in having a more effect in the four stages of the life-cycle. In the end, however, when a vision is in the decline phase, there are turnaround strategies a manager must not ignore if they truly wish to bounce back and see their vision through a longer tenure.

            Simply put, if a product or service is freefalling in the performance measurements (ratings, consumption demands, etc.),  it is in the decline phase and has minimal growth or profit value. A turnaround strategy simply intends to reverse this trend and enables a spike in growth and/or profit value. At this point, analysis is placed on both internal and external environments to identify imbalances of risk. Externally, we look for what customer base has remained but internally, we look for ways to reduce costs but increase efficiencies (Dess et al., 2014).  There are three common strategies to help with this.

            The first strategy is aimed at asset and cost surgery. The second is selective product and market pruning. The third is piecemeal productivity improvements. The surgery essentially removes admin expenses that hemorrhages cash flow and has little to zero return from a support value. These expenses include property and equipment. Similarly, product pruning looks to identify the parasite products/services that bring little to zero profit value to the table. Selectively remove the small value products and refocus on a core profit area of products. The piecemeal strategy seeks out areas to improve on internal processes. Every dollar counts and for each small inefficiency that is removed/replaced by improved practices, there will be a cumulative gain over time that will benefit the company bottom line. One way to do this is to incentivize employee reporting on waste (Dess et al., 2014). 

            It takes work to sustain a business model and remain attractive to the target customer base. It is a cycle and eventually, after a business matures, it will see decline and to push through the decline, new strategies must be pursued. The life-cycle is sustained by the strategic change cycle coupled with three respective turn-around strategies once strategic issues are found in a fresh environmental scan.

 

James

 

Dess, G., Lumpkin, G.T., Eisner, A., McNamara G. (2014). Strategic Management: Text and Cases (7th Ed.). Hoboken, NJ:  McGraw Hill Education


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