Section 3: Identifying and choosing strategic options
Turnaround situations
Few companies manage to maintain a position at the cutting edge of their sector decade after decade. Sometimes it is necessary to develop a turnaround or renewal strategy that will rescue a company that is currently perceived as failing or performing sub-optimally. Successful strategies in such circumstances include the following:
- Major changes in management, often including more effective leadership.
- Stronger financial controls, often in term of controlling internal costs.
- Stronger market focus, with new products/services meeting changing needs.
- Improved marketing building product awareness and brand image.
- Reduction in production costs, with a specific focus on the value chain.
- Improved quality or service, with emphasis on listening to customers.
Such strategies can be very effective in rescuing a company from its immediate problems but cannot guarantee performance in the future. Strategy is a continuing process.
Activity
Barclays Bank plc has a long history of success in balking. In the 1980's it was considered the leading bank in the UK. However a series of risky loans, culminating in defaults on Russian loans and the failure of LTCM left Barclays fighting for survival in late 1998. The appointment of a new Chief Executive who resigned on the day of his appointment through ill health did nothing to help matters. In 1999 , Matthew Barrett , a Canadian form the Bank of Montreal was appointed.
- The company set about a strategy named 'value based management' that concentrated on achieving shareholder value.
- Branches were closed
- Costs were cut
- Technology was used to improve productivity
- Key new staff were recruited
- The portfolio of business sectors was reviewed to realign with growth areas
- Woolwich known for its development of internet banking was acquired
- Customer relationship management was enhanced to defend and build the UK franchise
In 2004 with Barclays once again well regarded, Matthew Barrett moved up to the role of Chairman, with one of his early appointees John Varley taking the role of Chief Executive.
You should be able to recognise these as practical examples of the turnaround strategies described. Drag-and-drop them into the right place on the figure below. There will be more than one right answer for some of the categories.
Activity
Turnaround situations in major companies often hit the headlines. Have you noticed one recently? If not, go to the business section on the website of any newspaper - you are likely to find at least one! Do any of the turnaround strategies seem to be evident? Use the course forum to leave a note of your thoughts on this.