To what extent does restructuring transform corporate market and financial performance? Discuss using an extended example.
Restructuring is simply the reorganisation of a company’s structure to combat external or internal forces that hinder the maximisation of shareholder value. The term restructuring is quite broad an is an umbrella term for any action taken by a firm to maximise shareholders wealth (Wright et al) or a company’s reaction when it’s under pressure (Usui and Colignon, 1996). These actions “bracket mergers and acquisitions with much else” (Froud et al., 2002, P.2). This essay should explain in great detail how restructuring can transform corporate market and financial performance. It will focus on financial, portfolio and
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Employees also tend to feel worried about their job security when any form of restructuring takes place. Their insecurities are manifested through their actions that usually prove costly for the newly merged or acquired organisation and can eventually drive it to failure. High labour turnover, absenteeism and decreased productivity are some of the actions that could be manifested as a result of job insecurity. A disparity in core competencies is a final reason why mergers and acquisitions are becoming more prone to failure. Hamel and Prahalad (1994) argue that an organisation can never gain long term financial rewards if its core competencies are ignored. Thus merging with or acquiring a company with contrasting core competences isn't likely to be successful. The merger between Daimler Benz (makers of Mercedes Benz) and Chrysler is a perfect example of a failed merger. Due to a clash of organisational culture and contrasting core competencies, the merger eventually ended in failure. There were good intentions behind the merger but finding the balance between Daimler Benz's high end auto mobiles and Chrysler's middle of the road range proved more difficult than anticipated thus Chrysler was eventually sold off. Druckers (1985) critique of mergers and acquisition argued that managers often seek to restructure in this manner to spread risk but it doesn’t