The Turnaround Strategy is a retrenchment strategy followed by an organization when it feels that the decision made earlier is wrong and needs to be undone before it damages the profitability of the company.
What is Turnaround Strategy?
A firm’s normal and accepted practice in the market where it operates is to ascertain the sales and cost figures, and decide which goods and services must go to which group of customers and at what prices. While an enterprising management may exhibit leadership in such situations, the main factor in deciding on what is and what is not viable is public acceptance of the product, along with the response of competitors. The challenge of the business leader is to determine the competitive position of his or her organization with respect to the acceptance or rejection of the various products produced.
The Turnaround Strategy is a retrenchment strategy followed by an organization when it feels that the decision made ear lier is wrong and needs to be undone before it damages the profitability of the company.
There are two schools of thought in the study of turnaround strategy. The first school has been labeled as failure oriented and is advocated by Professor John Child, who believes that good management of a company requires the removal of managers whenever the company performance is low. The second school has been labeled as success oriented. Professors Porter and Gross and company advocate the continuation of the same management even if the performance is low.
There is a broad array of reasons for failures and success in business environments as well. The reasons can be either external or internal. A failure is internal when it is the result of maldistribution of assets, ineffective organizational structure, and inefficient working procedures. A success is internal when it is the result of effective working structures and procedures and internal integration among the members. The external reasons for failure or success can be attributed to macroeconomic and government factors, changing business patterns, social environment, and industry structure.
A firm’s survival chances are better if it is a sound corporate entity, if it is a strong competitor in its industry, and if it is located in a vibrant, growing economic environment.
Turnaround strategies vary according to the level of problems they are set to solve. Some are designed to prevent the likelihood of failure, others to deal with the existing problems, and still others to deal with crises or financial collapse. There are typically four phases in managing a turnaround situation.
The first phase is called preparation. In this phase, the management identifies the problems and the causes of the problems begin to work at resolv ing them.
The second phase known as crisis, is the “dog-eat-dog” period in which individuals take strong initiatives. Management is very “hands-on” and they do not hesitate to make radical changes. Cost are not a primary consideration at this point, but human resources are a key resource that management should not sacrifice.
The third phase is recovery. After the adjustments, the organization can begin to see improvement in performance. The emphasis during this phase is to retain the improvements and not let them backslide.
The final phase is consolidation. This phase is the time when there are few if any problems and the business can begin to look for external opportunities.
The fundamental key to successful crisis management is the leadership of the management. Leaders must be calm and should muster courage. Mistakes are inevitable during crises as is defeat because crisis, by definition, is a state of emergency. However, the management can still lead the company to success when there is a crisis of this magnitude.
Turnaround strategies are often used to revitalize a company’s operations. This process is designed to save a company that is in financial difficulty. The turnaround process offers much hope to any company believing that it is in financial trouble. The first step is for the management to take instant drastic action to stop the damages from getting bigger.
You should make an assessment of every business unit of the firm and decide whether the unit can still produce a profit or not. If it can’t, then it should be closed. Next, you should come up with a sales and marketing plan that’s going to catch the customer’s attention and willingness to buy from the firm. When you make the required changes and if everything goes well, then you can begin to think of a strategy that’s going to make the firm profitable again.
A firm should immediately make changes in its line of business so that it could make profits and stay in business. Obviously, the firm cannot afford to take actions that will put the company in a weaker financial position.
This strategy is adopted when the company has suffered losses in various areas of its operations, including its marketing, production, labor, distribution, and finance. Some guidelines in dealing with the single loss strategy are:
-Management must pursue the strengths of the business.
-Total sacrifices must be made.
-Strong, tough, and sometimes mean measures need to be implemented.
-Management must be open, receptive, and honest to employees.
-The losses of the firm’s competitors must be taken advantage of.
-The special workers who are targeted as disaster prone should be thrown out immediately.
Footless-In-The-Face Strategy is an aggressive strategy used in a market decline where management decides to take their time in considering their options. This strategy shows a great deal of confidence on the part of the management, who has no intention of retreating.
This strategy is called “footless” because managers embrace their products and they want nothing to do with any option to reduce them, like passing on the cost to customers or ceasing to produce that product. It is called “in-the-face” because management’s display of confidence is right in the face of all enemies.
Managers should not let their customers know about the company’s problems. During this strategy of “footless-in-the-face”, company leaders should focus on maintaining the current earnings of the firm and try to cut their expenses.
You may use this strategy in a depressed market when a competitor wants to pass on the cost to its customers in order to sustain its profit margins.
This strategy entails the decision to lower costs by giving price concessions to customers, but not price concessions that will lower the firm’s profits.
Profits are preserved by formulating a sales and a production plan, which are used to determine what must be produced and how much should be produced. The purpose is to leave no surplus of goods in the company.
Managers should maximize on the resources of the company or ensure that the productive capacity of the firm is fully utilized. In a situation where the firm has overproduced, then the cost of unsold goods has to be reduced to the minimum.
If a firm has reserves that are available on the books, then managers should try to take advantage of them by liquidating old inventories on hand by introducing specials.
This strategy is used when a firm is just starting to recover. In this situation, the firm has little choice but to pass on the cost to customers.
Then come the marketing and production plans to boost sales. Again, profits are kept as high as possible during this strategy. As profits begin going up, then management may resume the “Clinching-The-Victory” strategy.
How to Survive in a Recession
What is a recession?
A recession is a period of time where there is an overall downturn in business and where unemployment increases. During a recession there is a slower growth in the economy, a decline in personal income and a slowdown in manufacturing, construction, and sales.
What are the advantages of a recession?
A recession often results in companies eliminating excess capacity and shedding jobs. You should focus on growing your business during a recession rather than being preoccupied with the business problems of your competitors. A recession should be viewed as an opportunity for competitive advantage.
Why you should never use a turnaround plan.
A “Turnaround Plan” is often used by managers to reverse declining sales and profits. However, it is a bad idea to implement a turnaround plan during a recession because it signals to the marketplace that the company is in trouble. The best policy is to wait until the recession has ended and the economy begins to grow again.
How to survive a recession in 5 easy steps.
The real key to succeed during a recession is to be proactive. To survive and thrive during a recession, a company has to achieve the following goals:
- REDUCE EXPENSES: The first thing that an organization has to do to survive a recession is to cut operating costs. There are several ways that organizations cut their expenses. The first option is to decrease discretionary and other general costs. The other options are to decrease production costs and sales expenses.
- INCREASE OPERATING PROFITS. The key to increasing operating profits is to review the organization’s cost structure and maximize on the resources of the firm of all cost savings to improve profits. The firm must also increase its billable rates to maintain the same profit level.
- LOWER STAFFING COSTS. In order to enhance profitability, a company has to minimize the staff cost. A firm should consider augmenting profits through temporary outsourcing of activities such as maintenance, telephone handling, etc. With this, the firm can save money for itself that it can be used for other necessary and important purposes.
- REVIVE THE COMPANY IMAGE: The more a company’s product is in demand, the more the company’s image improves. Always remember that customers do not care whether the economic times are good or bad. They are more interested in the company’s quality and service.
- IMPROVE QUALITY: Although profits are down, a company cannot halt its efforts to improve quality. Even in a bad economy, a company can always maintain its quality level. A high-quality product is one of the good ways of making money during a recession. You can also attract customers by offering a two to three-year product warranty and a fast response to their complaints.
Personally, I believe and so do experts that in a recession one must have the courage to make big moves and sometimes solve problems in a drastic manner. There are several things that you should not do in a recession. The five steps on how to survive a recession will surely help you to survive a recession.
How to Do Market Research
Market research is one step at a time thus you must know what you want to have in your market research. The first step in market research is to have your vision or goal. If you see the results you want and benefits to market research is it will help you in future on your strategy. If the findings of this market research will be possible for you to achieve the future goals you have on your market research.
The process of market research can be divided into four steps namely the research stage, data processing, analysis and presentation of results and the recommendations policy in the marketing research. The data processing stage in marketing research is where the data that are gathered is processed and organized in such a way that the research can be interpreted.
The analysis and presentation of results is the second step on how to do market research. It is important to have the data processed and interpreted because if you just have the raw data you will not be able to make any sense of the market research. In this stage, you put into consideration the data that you have gathered in the research stage as well as some of your own analysis; then you put together a report on the research.
The recommendations policy is the third stage that you learn on how to do market research. It is from this stage that you will know which of the conclusions will be implemented and how so you will follow through with the purpose of your market research. This step could take up more than fifty percent of the time of your market research.
Now that you know the steps on how to do market research, go out there a do your market research. By doing market research you will be able to know the level of the market that you are into, the marketing game that you should use and you will be able to achieve a bigger goal that you have in your business.
How to survive a recession
Any business owner will tell you that a well thought out business plan is the key to success. Maybe you already have a business plan–and it’s just gathering dust. Or perhaps you’re holding off in hopes that business will get better, the economy will go back to normal and you won’t have to do one.
There are few things that you will need before you are enable to survive a recession. You will need an organized plan that prepares your business for the tough times ahead. This organized plan will show you how the demand for your products will help you endure a recession.
The first step that you want to do is to find out how to survive a recession. In order to get the information that you’re looking for, you can do your own research or use a database system. The database system will give you access to the information that you need to increase the demand for your products.
After getting all of the information that you need on how to survive a recession, you will want to make sure that your products are available to your customers. Finding out how to survive a recession is not enough, you must make sure that your customers know how to find your products. You should have a marketing strategy in mind that will get your products in the hands of the people who want them. If you’re just getting started, you should have a marketing plan that will get you off the ground and keep people coming back.
Once you have all of the information that you need on how to survive a recession, you will want to start creating a marketing strategy. You will want to make sure that you follow this marketing plan–even when times get hard. Even with the tough economy, you will want to know that you have a written marketing plan that will keep your business afloat regardless of what happens.
What sales and marketing tactics are being used during a recession?
Sales personnel can learn a lot from a downturn.
In order for them to survive in a recession, they must change their entire approach. They must use all the available resources to find new customers and this means tracking down those customers online and making use of marketing associations that will distribute their message. The sales people should take advantage of every opportunity to reach out to their current customers and sell them on new products.
They should not forget that their favorite customers are also the most important ones. These customers have been with them for years through thick and thin, so they have the next level of loyalty. In fact they are the ones that will make it through the hard times.
The sales people must be prepared to take a pay cut. This means that their sales must exceed their costs and they cannot do this if they are spending time banging on the door of the picky customers. However, if they are successful in selling to more customers, they will eventually make themselves a greater amount of profit.
The marketing people must also look at the changing conditions as an opportunity. If there is a recession, this means that the competition is lessening. This is going to make the job of marketing easy because they won’t have to bang on the doors of so many potential customers so many times.
If they have already been doing their job and have a list of prospects or accounts that are most likely to buy their product immediately, these are the customers they will call on first.
When the sales and marketing people realize that the recession is an opportunity, they will be able to survive.
Sales people are the first in line at times of recession as they must do what it takes to bring in a sale. They need to not be afraid to write a proposal that is lower than usual. This way they can soften the blow of the lower profitability and still get business.