Five, the RTL-owned television channel, is cutting up to a quarter of its staff as part of a comprehensive restructuring, which will see

sweeping changes in the UK broadcasters managerial structure. Up to 87 jobs out of a total workforce of 354 could be cut and several departments are to be integrated. Five is the latest commercial broadcaster to announce a restructuring and significant headcount reduction amid collapsing advertising revenues. Enders Analysis predicts a fall in TV ad spending from 3.5bn in 2007 to 2.8bn in 2010, slowly rising to 3.1bn in 2013. (FT, Mar 2009) Critically evaluate Fives decision to undertake corporate restructuring through downsizing. Explain why this can also be a risky strategy given the firms underlying operations. (30 Marks)

Guide: Students need to demonstrate their understanding of cost structure (for example, fixed costs increasing operational gearing) and at the same time discuss why it is the dominant strategy for the business to downsize (for example, downsizing enables companies to focus on their core competences, risk reduction benefits of diversified operation are limited because of shareholders normally hold diversified portfolios of shares, more options available for low cost outsourcing etc) . However students are also encouraged to show that this can also be risky to the firm as the business can lose out in capable workforce when the market picks up.