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Turnaround Strategy
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Tanya Sammut-Bonnici
University of Malta
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Case C
Case B
Case D
Time
Failure
Minimum
acceptable level
Figure 1 Types of sharpbenders. Source: Adapted from Grinyer, Mayes and McKiernan (1988); p. 14.
If good
Reinforce
Comparison
Refocus Implement Operating Performance
strategy patterns,
beliefs/rules
(OBRs)
Aspiration
Figure 2 A conceptual model of the stages of reactive behavior. Source: Extended Cyert and March model (McKiernan,
1992); p. 58.
Table 1 Triggers.
took and, in particular, those actions which are also were reluctant to reduce debt, and here
specific to them. For this reason, we show the there is a distinction with pure turnarounds
percentage of sharpbenders citing an action in in that the latter make considerable efforts to
column 1, the percentage of other randomly reduce debts. Sharpbenders are more likely to
selected companies citing an action in column invest to improve performance.
2 and the difference between the two scores in
column 3. CHARACTERISTICS OF SUSTAINED
The major difference between sharpbenders PERFORMANCE
and control companies in terms of action taken
are management changes. Eighty-five percent of Following the turnaround, sharpbenders needed
sharpbenders cited management changes, some to adopt characteristics, which would enable
55% more than the control companies. They sustained levels of performance – to refer back
also devoted considerable efforts to improving to Figure 1, organizations want cases A and C,
marketing and reducing production costs. rather than B (where the recovery achieved is
Unlike the control companies, they were very only short term). The characteristics identified
reluctant to diversify and there were markedly in the Sharpbenders (1988) study are contained
reduced levels of acquisition. Interestingly, they in Table 3:
Good management 4+ 90
Appropriate organizational structure 4+ 75
Effective financial and other controls 4+ 50
Sound product market posture 5+ 45
Good marketing management 2+ 55
High quality maintained 2+ 35
Tightly controlled costs 3+ 40
Source: Grinyer, Mayes, and McKiernan (1988), p. 110.
turnaround strategy 5
Selective
Stage 2 Cost Asset
product / market
reduction redeployment
strategy
Stage 3 Repositioning
Figure 3 Five generic strategies of recovery. Source: Adapted from Hoffman (1989).
6 turnaround strategy
• good management is seen to be critical to survival before the luxury of a strategy can be
sustained recovery; considered. This is contrary to the strongly
• appropriate organizational structure often held Chandlerian view that structure follows
meant a much leaner one, with fewer layers strategy.
in the hierarchy;
• tightly controlled costs meant better ENDNOTES
controls, rather than cutting costs.
1 Original
article by Duncan Angwin and John
GENERIC TURNAROUND STRATEGIES McGee. Updated by Tanya Sammut-Bonnici.
Grinyer, Mayes, and McKiernan (1988)
academic study is consistent with the review of See also acquisition strategy; divestment; down-
practitioners’ work by Hoffman (1989) in identi- sizing; joint ventures
fying a three-stage process for recovery, although
not all organizations need to go through all three
Bibliography
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CONCLUSION
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