The concept of restructuring focuses on change .
The oxford dictionary (2007) defines restructuring as ‘ giving a new structure ,
One can say that corporate restructuring is a structured decision making
exercise undertaken to evaluate the current endowments of a co. by fine
tuning the available skills, machinery ,& technology to meet the challenges of
Restructuring is a corporate management term that stands for the act of partial
dismantling or otherwise reorganizing a company to make it more efficient
and therefore more profitable.
It generally involves selling of portion of the company & making drastic staff
reduction .restructuring is often undertaken as part of a takeover by another
Corporate restructuring refers to a broad array of activities that expand
or substantially modify its financial structure or bring about a
significant change in its organizational structure or internal financing .
Corporate restructuring is the reorganization of a company to attain
greater efficiency and adopt to new markets.
Corporate restructuring refers to liquidating projects in some areas and
redirecting assets to other existing or new areas.
(Weston et al. 2005)
Muller (1988) argues that changing culture and image of
the company are the most important rational influencing
restructuring. He also states that the human dimension is
imperative in any such exercise.
Gibbs (1993) expressed the view that corporate
restructuring is needed under three conditions:
The presences of free cash flow,
Ineffective corporate governance,
The threat of takeover
CHANGE IN FISCAL & GOVT. POLICIES: change in govt. policies such as
deregulation have led many companies to tap new market & customers. Here,
co. have to pursue restructuring to adapt their structure to the new challenges .
LPG: liberalization, privatization, globalization have change the rule of the
game. Restructuring is the only way to survive in this change business
IT REVOLUTION: companies have to adopt this technology in this modern
CONCEPT OF CUSTOMER DELIGHT: the changing profiles has intensified
competition & companies have to reshape their activities to survive in business.
e.g. general motors, Tata oil mills co. , M&M etc. have change to satisfy the needs
and expectation of the customer.
COST REDUTION: customer to only expect quality
products, but also affordable price. To becomes cost
effective , one of the tools of corporate restructuring.
DIVESTMENT: It means sold off or divided the
operations into smaller business. E.g. L&T sale of L&T
CEMENT, TATA exit from Tata oil mills co. (TOMCO)
ENHANCING SHAREHOLDER VALUE: when
company is not able to generate adequate returns,
restructuring can bring about effective allocation and
use of resources.
INCOMPATIBLE COMPANY OBJECTIVES: when
company objectives are no longer compatible with the
current portfolio, restructuring is planned.
ENVIORNMENT CHANGE: forces like demand,
increase in competitive pressures, increasing
stakeholder expectation, & increasing need of
innovation etc. force the company to initiate
TRANSFERRING CORPORATE ASSETS: companies
often have assets that they are unable to use efficiently.
They choose restructuring to transfer their assets to
more efficient user.
Corporate restructuring deals with elements that can
change the effectiveness and performance of an entity.
The basic objective is to introduce path breaking
changes in the structural and performance parameters
of the company so that the entity returns to the list of
profit making entities.