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Recovery and

     C M Clarke-Hill   1
SWOT Profile and Possible
Strategies      O
      Aggressive Strategy       Reconfiguration

  S                                               W

      Diversification           Turnaround
        Strategy                 Strategy

Pressures on the Modern Business
        in the mid 1990s
 Erosion of Trade Barriers
 Tough Foreign Competition

 Technological Advances

 Volatile Capital Markets

 Continuing Recession

 Consumer Caution

 Changes in Consumer Patterns
  Symptoms of Decline
Turnaround Strategies arise when
  firms face:
 A slow decline in their markets

 Falling ROCE and other returns to
  sales and profits
 Rapid decline in market share and
  in performance measures
 Industrial structural change
        Sources of Decline
Internal Sources              External Sources
   Defects in Management        Competitive forces
   Errors of Omission           Economic & Political
     – Neglect of key tasks       Change
     – Failure to change         Changes in Demand
   Errors of Commission         Lifestyle Changes
     – Over expansion
                                 Changes in
     – Poor integration           Technology
     – Lack of resources
                                 Consumer
                                 New Products
   Two Main Types of Turnaround
Operational            Strategic Turnaround
The focus is on ways   The focus is on
of improving the       adjusting the strategic
operation of the       focus of the business
business and           in terms of its
designed to halt the   Product/Market profile
decline.               and halt the decline.
Typical Turnaround Strategies

 Cost Reduction Strategies
 Asset Reduction Strategies

 Financial Restructuring Strategies

 Management and Cultural Change
 Revenue Increasing Strategies

 Product/Market Redefinition
   The Time Path of
Successful Turnarounds
  The time path for successful
    turnarounds to achieve
 sustainable recovery varies by
 case, but five common stages
        can be identified:

           C M Clarke-Hill    8
Five Common Stages:
 Inaction by management
 Crisis or moment of truth

 Fire fighting by senior management

 Refocusing of the strategic
  direction of the business
 Sustainable recovery - The
  recapturing of competitive
     A Typical Turnaround
Preparatory         Short-Term          Growth
Stage                  Fix              Stage

• Restructure      • Cost Reduction • Repositioning
  Leadership and     Asset              Strategy
  Organizational     Re-deployment • Revenue
  Culture          • Selective Product/ Increasing
• Financial          Market Strategy Strategy

     Laura Ashley Plc
   Death of Founder - Laura Ashley in 1989
   Company run by husband Bernard
   Laura Ashley has problems in US market
   Recession
   Laura Ashley ‘loses’ its design way…
   Share price falls
   Crisis at Laura Ashley
    Laura Ashley Cont...
 Several new CEOs... 4 in ten yrs
 Bernard reduces his links with firm

 Redundancies, shop closures, new
  ways of working
 New woman CEO - Ann Iverson

 Turnaround at Laura Ashely
Turnaround at Laura Ashley
 New ways of working - rebuilding the
  value chain
 New people recruited in key posts

 New executive committee

 Need to ‘re - invent’ the brand

 Re-position Laura Ashley, but not
  lose our traditional customers
 New marketing for the spring
  collection 1997
   Turnaround at Laura Ashley plc
Preparatory        Short-Term        Growth
Stage                 Fix            Stage

• New CEO        • Cost Reduction • Repositioning
• New Mktg.      • Value Chain         Strategy
  Director         Re-built          • Revenue
• Organizational • Selective Product/ Increasing
  Culture           Market Strategy Strategy
• Financial       • Reinvent the   • New
  Restructuring     brand            Marketing
                  • Marketing
The Feasibility of Recovery based
         on Six Factors
Slatter (1984)
 The number of causes of decline

 The severity of the crisis

 Stakeholder attitudes

 Strategic management style

 Industry attractiveness

 Relative business strength
      Crisis Deepens 1
 Iverson sacked
 New CEO and new top management

 Crisis deepens - share price falls to
  13 pence per share
 MUI buys controlling interest

 More losses

 Another top management change
     Crisis Deepens 2 -
   Closes stores
   Sells or closes manufacturing
   US Operation technically insolvent
   Sells US operation to management
    for $1
   Organises a rights issue
   New team tries to re-build the company

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