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CONCEPT AND REASONS

OF
CORPORATE
RESTRUCTURING
PRESENT BY:
LINGARAJ SUBUDHI
AKHILESWAR SAHOO
MFC 3 RD SEM

CONCEPT OF CORPORATE
RESTRUCTURING
The concept of restructuring focuses on change .
The oxford dictionary (2007) defines restructuring as giving a new

structure , to rebuild/rearrange.
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 tomorrow.
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 firm.

Different auther present different viwes on the concept


of corporate restructuring . Let us examine some views:
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 .
(CHANDRA 2007)
Corporate restructuring is the reorganization of a company

to attain greater efficiency and adopt to new markets.


restructuring refers to liquidating projects in some
areas and redirecting assets to other existing or new areas.

Corporate

(Weston et al. 2005)

CONCEPTUAL FREAMWORK
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

REASONS OF CORPORATE
RESTRUCTURING
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 environment.
IT REVOLUTION: companies have to adopt this technology in this

modern business enterprises


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.
Cont...

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.
Cont

ENVIORNMENT CHANGE: forces like demand,

increase in competitive pressures, increasing


stakeholder expectation, & increasing need of
innovation etc. force the company to initiate
restructuring.
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.

conclusion
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.