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Managing change Other issues….

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Presentation on theme: "Managing change Other issues…."— Presentation transcript:

1 Managing change Other issues…

2 Recap What is organic growth Name me the different types of takeovers!

3 The whole is greater than the sum of the individual parts
What is “Synergy”? The whole is greater than the sum of the individual parts 3

4 Two kinds of “synergy” Cost Savings Revenues
Eliminate duplicated functions & services Better deals from suppliers Higher productivity & efficiency from shared assets Cross-selling to customers of both businesses Access to new distribution Brand extensions New geographic markets opened up 4

5 65% of all mergers fail to benefit shareholders
Due to poor implementation Different cultures Successful mergers take time to implement!

6 “To cut down or reduce something” “Use resources more carefully”
What is retrenchment? “To cut down or reduce something” “Tighten one's belt” “Use resources more carefully” 6

7 The downsizing of a business
Often necessary to increase competitiveness and achieve an objective of cost minimisation Reducing the scale of an operation will affect different stakeholders, e.g. Employees Delayering Redundancies Customers Closures Product withdrawals Suppliers Orders Community Jobs

8 What drives retrenchment?
Uncompetitive cost structure Inadequate returns on investment Poor competitive position Financial distress Market decline Failed takeovers Economic downturn Change of ownership All of which indicate the need for strategic change 8

9 Methods of retrenchment
Reduced output & capacity Freeze on recruitment & offering voluntary redundancies Product & market withdrawals Downsizing / rationalisation Disposals of business units De-mergers 9

10 Example of Retrenchment
Starbucks rationalises its store portfolio in Australia – Poor competitive position there – hard to compete with existing coffee shop operators Strategic decision to focus investment on the US market 10

11 More retrenchment ITV plc disposes of website Friends Reunited (2009) for £25, some £150m less than it paid for the business Friends Reunited had a poor competitive position (v Facebook) Considered non-core by new ITV management 11

12 Another retrenchment! Burberry plc announces plans to cut operating costs by £50m p.a. Sewing factory in Rotherham closed – production transferred to another group factory Example of capacity rationalisation 12

13 Example (4) Economic downturn hits the IT services market
Fujitsu makes 10% of its workforce redundant due to substantial declines in demand 13

14 Why might new owners want to make changes?
New owners / leaders New owners or leaders may be the result of Takeover Merger (combined owners and leaders) Management Buy Out (MBO) Next Generation Newly Appointed Directors Flotation on the Stock Exchange Whatever the cause they are likely to want to make changes Why might new owners want to make changes? 14

15 You will learn more about the role of culture and leadership later
New owners / leaders Why might new owners or leaders want to make changes? Own vision or mission Change in corporate objectives Cultural differences Personal leadership style Make a difference – fresh ideas Self glorification? You will learn more about the role of culture and leadership later 15

16 Poor business performance
Do nothing? Make Changes? What do you think the likely outcome will be? What changes can be made? Ownership? Structure? Strategy? Processes? Success? Failure? Why might it be easier to implement change if it is in response to poor business performance? What do you think the likely outcome will be? Success? Failure? 16

17 Future activity… or ‘cover work’!
Create a ‘poster’ Use 2 A3 pages or 4 A4 sheets

18 Take one of these ‘current’ news issues, or one of your choice…..
Decide whether the company is following a shareholder or stakeholder strategy – explain your choice Using either Porter’s Generic Strategy or Ansoff’s Matrix - Decide which strategy they are following - explain your choice Which stakeholders will be ‘most’ effective – need to look at TWO positive & TWO negative issues before making a final decision…. Identify whether there has been growth or retrenchment for this business. Explain ….?

19 Layout ideas…. Stakeholder or shareholder Your news article
Co name Type of Growth Or retrenchment Ansoff matrix Porter strategy Stakeholder effects…

20 Choose your news story…
Tesco – food production… Cadbury’s Kraft takeover… Google threatens to withdraw from China Man Utd raise £504m in bond issue BA – cutting costs & TU issues Portsmouth FC Blacks – effect of the recession

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