Movie Case Study
The scene shows Darcy Maguire (played by Helen Hunt) leading a meeting. She asks the executives, how can we turn this company around. She has just joined Sloane Curtis, an advertising company. She knows that the company isn’t able to tap into the female driven advertising. This is a 40 billion dollar market. In this blog, Learning Perspectives will explore the meaning of turnaround in business.
What is Turnaround in business?
When a company experiences poor performance and want to change its course, this is referred to as a business turnaround. To perform a successful turnaround, a company must acknowledge their bad performance . Acknowledging helps to turn losses into profit for the company. Turnaround strategies are used to convert a negative trend in business to a positive one.
Turnaround Strategies
Turnaround strategies are many. Many times it begins with reorganization of a company. It can include mergers & acquisitions and takeovers, cost-cutting, lay-offs and management change. These strategies depend on what the company is going through in the current period.
Other techniques involved are the 4Rs. They are retrenchment, repositioning, replacement and renewal.
Retrenchment strategy
Retrenchment means reduction. This strategy involves reduction of costs by laying off employees, closing down unproductive verticals and/ or outsourcing. All these strategies help in cutting down the costs of the company.
Replacement Strategy
As the name suggests, replacement strategy looks to replace the CEO of the company. This is done so that a new leader can bring in a fresh approach and change within the company.
Repositioning Strategy
This strategy means repositioning the company with new innovative products. Changing market position too helps the company to grab new markets.
Real-Life Example of Turnaround
L&T Finance was struggling with low return on investment. L&T finance decided to turnaround the situation under the leadership of Dinanath Dubhashi. They decided to focus on the cost structure of the company, getting the right people and laying off the people who did not contribute and executing the right strategies.
They slashed their 20 products to 5 products. This helped them to trim their cost. Many loss making verticals were also shut as they had no hopes of scaling. With many other strategies in place, the company was able to turnaround the negative ROI and make it positive.
L&T adopted the retrenchment strategy to turnaround. Today L&T Finance is one of the leading NBFC [Non-banking Finance Corporation].
