Strategies for Weak

& Crisis Ridden

Businesses
 Fortify-
Turnaroun and-
A firm in an also d Strategy defend
ran or declining Strategy
competitive
position has four
basic strategic
options. End-Game
Fast-Exit or Slow-
Strategy Exit
Strategy
  A turnaround strategy is needed when a business is
going into crisis;
 The objective is to arrest and reverse the sources of
competitive and financial weakness as quickly as
possible.
 For preparing a situation turnaround strategy; the
Turnaround management must first diagnose what lies at the
root of poor performance.
Strategies for
Business in  Is it because of the weak economy that the sales are
dropping?
Crisis
 Was the competitive strategy not chosen properly?
 Does operating costs were high?
 Was there a scarcity of important resources?
 Had a workable strategy been poorly executed?
 Was there an overload of debts?
 ● The second task for the management is to decide whether
the business can be served or not.

Some of the root causes of trouble in business are

o low sales growth

Turnaround
o Taking too much of debt
Strategies for
Business in o Inability to use plant capacity due to which there are huge
Crisis (Contd..) fixed costs

o Failure of research and development

o Ineffective innovation

o Frequently changing the strategies

o Beaten up by the competitors, etc.

  Selling off Assets
Cutting these kinds
of problems and  Revising the existing strategy
achieving a
successful business  Launching efforts to boost revenues
turnaround can
involve any of the  Pursuing cost reduction
following options:
 Combined actions
  Asset reduction strategies are essential when
each flow is a critical consideration and when the
most practical ways to generate cash are,
1. Through sale of some of the firm’s assets-
(plant & equipment, land, patents,
inventories, or profitable subsidiaries.
2. Through retrenchment
Selling off Sometimes the assets are not sold by a crisi-ridden
Assets firm for unloading the losinng operations but for
raising funds to save and strengthen the
remaining activities of the business.
  When weak performance is caused by bad strategy,
the task of strategy overhaul can proceed along any
of several paths:
1. Shifting to new competitive approach to rebuild
the firm’s market position.
2. Overhaul internal operations and functional area
strategies to better support the same overall
Strategy business strategy;
Revision 3. Merging with another firm in the industry and
forging a new strategy keyed to the newly merged
firm’s strengths.
4. Retrenching into a reduced core of products and
customers more closely matched to the firms’s
strengths.
The best path depends on the existing conditions in
the industry, strengths and weaknesses and
competitive abilities of the firm.
  Increasing of revenues always aim at generating
and increasing sales volume.
 There are a number of revenue-building options:
price cuts, increased promotion, a higher sales
force, added customer services, and quicly
achieved product improvements.
 Attempts to increase revenues and sales volumes
Boosting are necessary
Revenues 1. It is not possible for the operating budget to
maintain a break even and reduce expenses.
2. The key profitability is to make omplete use of
existing capacity.
If the buyers are not price sensitive because of the
variable features of the product then the quickest
way to boost short term revenues may be to raise
prices other than opt for volume building price cuts.
  Cost-reduction turnarund strategies work the
best when the sick firm’s value chain and cost
structure are so flexible that it can allow it to
Cutting Cost recover when the costs of the firm are very high
when the firm is close to its break-even point
when inefficiencies of the firm can be identified
and easily corrected.
  The combination turnaround strategies can be
used in unpleasant situations where it is
essential to quick actions. Similarly, combined
actions are taken when new managers are
Combined brought in and are freely allowed to make the
actions necessary changes.
 The tougher the problems, the more likely it is
that the solutions will involve multiple strategic
initiatives.
  Closing a crisis-ridden business down
and liquidating its assets is sometimes
Liquidation- the best and wisest strategy.
the Strategy
 Liquidation can be unpleasant andd
of Last Resort painfull due to hardships of job
elimination.
  An end-game, slow-exit or harvesting strategy
steers a middle course between preserving the
status quo and existing as soon as posssible.
 The operating budget is chopped to a rock-
bottom level; reinvestment in the business is
End-game held to a bare minimum.
Strategies  Capital expenditures for new equipment are put
on hold or given low financial priority (unless
replacement needs are usually urgent); instead,
efforts are made to stretch the life of existing
eqpment and make do with present facilities as
long as possible.
  Objectives:
1. Make industry leaders for new firms to enter and for
challenges to gain ground.
2. Hold onto present market share
3. Strengthen current market position
4. Protect competitive advantage
 Strategic options
Fortify-and- 1.Increase advertising and R&D
Defend 2.Provide higher levels of customer service
Strategy 3.Introduce more brands to match rivals’ attributes.
4.Add personalized services to boost buyer loyalty
5.Keep prices reasonable and quality attractive
6.Build new capacity ahead of market demand
7. Invest enough to remain cost competitive
8.Patent feasible alternative technologies
9.Sign exclusive contracts with best suppliers and distributors.