The problem of industrial sickness has become a worldwide phenomenon. Some industrial units are born sick and some achieve sickness. A sick industrial unit is a unit, which has incurred cash loss in the previous accounting year, in the current year and is likely to incur cash loss in the coming following years. A unit is said sick when its current ratio is less than 2:1. The firm which is operating much below break-even level that it is termed as a sick industrial unit.
An investigation of the root causes of failure, and long- term programs are essential to revitalize the organization. Turnaround strategy is a revival measure for overcoming the problem of industrial sickness. It is a strategy to convert a loss making industrial unit to a profitable one. Turnaround is a restructuring process that converts the loss-making company into a profitable one. It brings the industrial unit into its original position and stabilize its performance..
What are the essentials of a successful turnaround strategy?
Identifying the need for a turnaround strategy and implementing the change itself poses two distinct challenges:
* Defining a bold vision for how the company must change, based on a clear-eyed analysis of its core competitiveness, now and in the future.
* Recalibrating this "ideal" vision based on a realistic assessment of what the organization can do to align leadership, manage change and work through the disruption.
Lofty goals require pragmatic plans. It is therefore necessary to create detailed and customized strategies that will produce the change they are looking for. That’s why a turnaround strategy process starts with questions:
1. What kind of transformation is needed? The company’s current health has to be assessed in the context of industry dynamics, gauging how far its business model must shift to sustain or revive growth. Understanding this point of departure—and envisioned point of arrival—will establish the magnitude, difficulty and velocity of the change.
2. What is the right choreography? What needed to be changed – across strategy, operations, organization, customer orientation, capital structure and/or IT in the most logical sequence of action. The goal is to pull the right levers at the right time, without disrupting the company’s overall strategy.
3. How should the transformation be managed? Crafting a turnaround plan is one thing, but executing it effectively requires the right leadership structure. The company’s culture and the magnitude of the effort ahead should inform the degree of centralized oversight. Some organizations respond best to a central management office while others prefer to manage change through the line.
The document is an example on how to create a overview for corporate renewal. It uses analysis and identifies the reasons for failing performance in the market, and solutions to rectify them. Turnaround management involves management review, root failure causes analysis, and SWOT analysis to determine why the company is failing. Its a pragmatic, engaging approach to a SME turn around strategy based on f