Turnaround Strategy Essay

4975 words - 20 pages

IntroductionIncreasing global and domestic competition, the business environment tends to be more turbulent, more and more organizations have realized the importance of reforming its future competitive competence in order to succeed in a changing environment. In practice, no matter what companies' size are, they could easily get into trouble to survive, their performances are unexpectedly unacceptable to their shareholders, creditors etc. Of course, the reasons for a company could be innumerable,it may be the internal reasons or the external reasons, or both. "Through the SWOT analysis can provide a good overview of whether a firm's business position is fundamentally healthy or unhealthy'' (Thompson&Gamble&Stickland, 2006: 85). The strengths and weaknesses of a firm are the part of the internal environment of a firm and can be controlled by the firm. Whereas, the opportunities and threats are the part of a firm's external environment that are uncontrollable factors. Both weaknesses and threats can often pose serious risks and competitive disadvantage to the firm. Thus, the firm can easily get into turnaround situation. Once this situation occurs, managers must first be able to diagnose the symptoms of the firm. Then, managers must take a series of remedial actions to cure the firm's symptoms. Finally, managers must also evaluate whether its corrective actions are properly fitting for the situation, and ensure the firm return to growth again.The concept of turnaround"A "turnaround" can refer either to a business firm that faces financial disaster or action taken to prevent the occurrence of that financial disaster" (Sloma, 1985:11). All turnaround situations not only deal with transforming any struggling firm to a profitable one again, but also deal with those firms whose performance is seriously dissatisfied by the management. Particularly, those unacceptable performances refer to a company's financial performances."According to Sloma' statement, turnaround situation can be classified into four stages, which are cash crunch, cash shortfall, quantity of profit and quality of profit" (Sloma, 1985:20). All of these four stages share two basic characteristics. First, the stages of turnarounds are unable to exist together. This is because the extent to which the financial difficulties are quite different, the time they need to change the embarrass situation should also different. Second, all stages of the turnaround situations may stem from the managers' selfishness. Because of their position in the company and ego, they are often unwilling to recognize the problems or to take the responsibilities. Thus, they may intentionally cover the truth and delay to deal with it. Unfortunately, the bad situations do not get better by themselves, but it will make the things worse.In deed, most turnaround situations could be avoided, if managers can be able to identify those early-warning signals. This is because before the turnaround situation...

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