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Turnaround strategy is about doing different things and attempting to change companies' fortunes by fundamental adjustments in strategy, such as acquisition and divestment. Operating turnarounds are about doing things differently in terms of processes such as manufacturing, so that the firm's efficiency can be improved. Three categories of turnarounds are proposed: traditional asset cost surgery, product‐market pruning, and piecemeal strategies. The characteristics identified in successful turnaround strategies involve good management, which is seen to be critical to a sustained recovery. An appropriate organizational structure often means a much leaner one, with fewer layers in the hierarchy. Tightly controlled costs mean better controls, rather than cutting costs. Turnaround strategies typically go through three stages. In the first stage leadership and organizational culture face a restructuring. In the second stage costs are reduced, assets redeployed, and product and market strategies become more selective. As a result, the company moves to a third stage where it repositions itself in the market and industry.
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turnaround strategy1
Duncan Angwin, John McGee, and Tanya
Turnaround strategy is about doing different
things and attempting to change companies’
fortunes by fundamental adjustments in strategy,
such as acquisition and divestment. Operating
turnarounds are about doing things differently
in terms of processes such as manufacturing, so
that the rm’s efciency can be improved.
Three categories of turnarounds are proposed:
traditional asset cost surgery, product-market
pruning, and piecemeal strategies. The char-
acteristics identied in successful turnaround
strategies involve good management, which
is seen to be critical to a sustained recovery.
An appropriate organizational structure often
means a much leaner one, with fewer layers in
the hierarchy. Tightly controlled costs mean
better controls, rather than cutting costs.
The Grinyer, Mayes, and McKiernan (1988)
empirical study of corporate turnarounds by UK
manufacturing companies does nd evidence
to suggest that turnarounds have distinct
stages. Figure 1 shows the different types of
“sharpbender” identied.
Case A is the rm showing early recovery.
The rm is aware of its decline in performance
and anticipates that on such a trend, it is likely
to breech its managerial-determined minimum
acceptable level of performance. Although the
rm is far from extinction, actions are taken
in advance, the crisis averted, and a path of
sustained improvement achieved.
Case B is the rm taking intermediate action
to break through its line of minimum acceptable
standards. Alarm bells are ringing and actions
taken to recover. However, such actions are
insufcient perhaps supercial, addressing
symptoms rather than causes and the rm
returns to its decline trajectory. At this point, the
rm may countenance more sweeping changes
to restore the rm to a trajectory of sustained
improvement. However, should this step not be
taken, it is likely that the rm will continue to
oscillate around the line of minimum accept-
able standards, with successive uplifts being
more difcult to achieve than previously, before
ultimately failing.
Case C is a rm which is late in reacting to
the crisis. The rm has breached its managerial-
determined minimum level of performance and
has begun to approach the line of failure. It is
the classic turnaround, as described by Slatter
(1999). In this instance, the rm needed the
spur of breaking its internal standards, as well as
the threat of extinction to begin to take substan-
tial action. By so doing, sustained recovery is
Case D is the rm that does not perceive the
threat of extinction, despite breaking its own
minimum acceptable standards, or is unable to
make any changes before termination.
Research gives the following wide variety of
reasons for corporate decline:
Over-expansion: rms that have expanded
too far nd that they are stretched in both
managerial and nancial terms. This is the
classic criticism of the diversication boom
of the 1960s in the United Kingdom, which
led to massive under-performing conglo-
Inadequate nancial controls and high costs:
these often occur when a business grows
beyond the capability of its original systems,
so that costs spiral out of control.
New competition entering the market:the
arrival of a new competitor can substantially
distort the competitive dynamics of a market
and damage a rm’s health.
Unforeseen demand shifts: the nature of the
market may change dramatically. Where a
rm has substantial and rigid asset cong-
urations, this can spell disaster – the
classic example being the impact on IBM
of the widespread switch from mainframe
to desktop computers. The area most
on people’s minds at the moment is the
potential impact of the Internet.
Poor management: managers may have a false
sense of condence in their own abilities.
This can arise from experiencing a period
of success, causing an atmosphere of infal-
libility, and the screening of information.
Of course, poor management may also just
mean poor management.
Wiley Encyclopedia of Management, edited by Professor Sir Cary L Cooper.
Copyright © 2014 John Wiley & Sons, Ltd.
2 turnaround strategy
Performance Case A
Case B
Case D
Case C
acceptable level
Figure 1 Types of sharpbenders. Source: Adapted from Grinyer, Mayes and McKiernan (1988); p. 14.
When the crisis is too obvious to ignore,
managers tend to react in a sequential way,
taking the least risky actions at rst, and then
becoming progressively more radical if the crisis
worsens and they have time to act.
The stages of reactive behavior are well
captured in Figure 2. Comparisons are contin-
ually drawn between reference points such as
competitor performance, share performance,
and ambitions and aspirations for prot perfor-
mance. Should this comparison be favorable,
then the innermost loop will be followed with
the current behavior being reinforced. Should
the comparisons prove unfavorable, then the
rst stage will be followed. If desirable results
are not forthcoming, then executives may move
progressively outwards in Figure 2 until the
third stage of a fundamental review of strategy
is undertaken.
Whilst it may be clear that an organization is
on a decline trajectory, it is vital that triggers
are identied to bring about action. If triggers
cannot be identied, then it is likely that nothing
will change, despite the abundance of warning
The important triggers for bringing about
change are seen in Table 1. A well-known
example of an acquisition as a trigger prompting
a strategic change is the Hanson bid for imperial
chemical industries (ICI). In ghting off the
bid, ICI announced the de-merger of Zeneca.
The main trigger identied is a new CEO.
His/her importance is in terms of supplying a
new vision and symbolizing that things need to
change. Indeed, such a person has undoubtedly
been appointed with a mandate for change.
In terms of early, intermediate, and late stage
recoveries, the broad pattern, as one might
turnaround strategy 3
If good
New opportunities perceived
If stage two fails
If unsatisfactory
If stage one fails
Stage one:
Stage two:
changes in
same OBR
Stage three:
Change recipe
and OBR
Figure 2 A conceptual model of the stages of reactive behavior. Source: Extended Cyert and March model (McKiernan,
1992); p. 58.
Ta b l e 1 Tr i g g er s .
Sharpbenders citing this factor (%)
Intervention from external bodies 30
Change of ownership or the threat of such a change 25
New chief executive 55
Recognition by management of problems 35
Perception by management of new opportunities 10
Source: Grinyer, Mayes, and McKiernan (1988), p. 47.
expect, is for the early stages to have internal
triggers and have a management able to perceive
problems and opportunities. As we move to the
late stagers, all triggers are important with an
increased external emphasis.
If there are triggers in place then the sort of
actions that might be taken to bring about a
ested to know the actions which sharpbenders
4 turnaround strategy
Ta b l e 2 Actions taken.
Percentage of rms citing factor Sharpbenders Control companies % difference
Major changes in management 85 30 55
Stronger nancial controls 80 70 10
New product market focus 80 80 0
Diversied 30 70 (40)
Entered export market vigorously 50 30 20
Improved quality and service 55 50 5
Improved marketing 75 30 45
Intensive efforts to reduce production costs 80 30 50
Acquisitions 50 80 (30)
Reduced debt 50 80 (30)
Windfalls 85 70 15
Other 25 20 5
Source: Grinyer, Mayes, and McKiernan (1988), Sharpbenders p. 64.
took and, in particular, those actions which are
specic to them. For this reason, we show the
percentage of sharpbenders citing an action in
column 1, the percentage of other randomly
selected companies citing an action in column
2 and the difference between the two scores in
column 3.
The major difference between sharpbenders
and control companies in terms of action taken
are management changes. Eighty-ve percent of
sharpbenders cited management changes, some
55% more than the control companies. They
also devoted considerable efforts to improving
marketing and reducing production costs.
Unlike the control companies, they were very
reluctant to diversify and there were markedly
reduced levels of acquisition. Interestingly, they
also were reluctant to reduce debt, and here
there is a distinction with pure turnarounds
in that the latter make considerable efforts to
reduce debts. Sharpbenders are more likely to
invest to improve performance.
Following the turnaround, sharpbenders needed
to adopt characteristics, which would enable
sustained levels of performance – to refer back
to Figure 1, organizations want cases A and C,
rather than B (where the recovery achieved is
only short term). The characteristics identied
in the Sharpbenders (1988) study are contained
in Table 3:
Ta b l e 3 Key features of sustained improved performance.
Number of characteristics cited Percentage of rms cited
Good management 4+90
Appropriate organizational structure 4+75
Effective nancial and other controls 4+50
Sound product market posture 5+45
Good marketing management 2+55
High quality maintained 2+35
Tightly controlled costs 3+40
Source: Grinyer, Mayes, and McKiernan (1988), p. 110.
turnaround strategy 5
Stage 3
Stage 2
Stage 1 Restructure leadership and organizational culture
Stage / Strategy Action Conditions
1 Restructuring Replace top managers Internal causes of tur naround
Use temporary structures Need to diversify
Alter organizational structure Control and communications problems
Alter culture Aid repositioning
Culture change
Structure change
2 Cost reduction Reduce expenses Internal causes of decline
Institute controls Sales 60-80% of break-even
Asset Sell assets Over-expansion/low capacity use
Redeployment Shutdown or relocate units Sales 30-60% of break-even
Rapid technological change
Rapid entry of new competitors
Selective product/ Defensive
market strategy Decrease marketing effort
Divest products Over-expansion
External causes of turnaround
Offensive High capaci ty use
Incr ea se marketing Possessing operating and
Increase prices Strategic weaknesses
Improve quality, service
3 Repositioning Defensive Over-expansion (defensive)
Niche Improved short-run profitability
Market penetration External causes for turnaround
Decrease price Major decline in market share
Divest products Non-diversified firms faced with
external causes of
decline (offensive)
Diversification into new
Figure 3 Five generic strategies of recovery. Source: Adapted from Hoffman (1989).
6 turnaround strategy
good management is seen to be critical to
sustained recovery;
appropriate organizational structure often
meant a much leaner one, with fewer layers
in the hierarchy;
tightly controlled costs meant better
controls, rather than cutting costs.
Grinyer, Mayes, and McKiernan (1988)
academic study is consistent with the review of
practitioners’ work by Hoffman (1989) in identi-
fying a three-stage process for recovery, although
not all organizations need to go through all three
stages – see Figure 3.
Turnarounds are just one example of crisis situ-
ations in corporate strategy, and readers should
be aware that this has particular implications for
how strategy is viewed in such circumstances. In
the case of turnarounds:
A proactive top-down style of management
has been advocated as necessary and effec-
tive for turnarounds. For other strategy
decisions, a Mintzbergian bottom-up view,
or indeed a middle-up-down perspective is
more common.
Rapid change is critical to survival in a
turnaround, although currently dominant
in strategic management is the processual
view, which emphasizes the complexity and
difculty of change, so that it is perceived as
a long and involved process.
Structure comes before strategy in so far as
changes are made for the company’s very
survival before the luxury of a strategy can be
considered. This is contrary to the strongly
held Chandlerian view that structure follows
1Original article by Duncan Angwin and John
McGee. Updated by Tanya Sammut-Bonnici.
See also acquisition strategy;divestment;down-
sizing;joint ventures
Banaszak-Holl, J. (2000) Advances in applied business
strategy,vol. 5: turnaround research: past accomplish-
ments and future challenges. Administrative Science
Quarterly,45, 633–635.
Boyne, G.A. (2004) A “3Rs” strategy for public service
turnaround: retrenchment, repositioning, reorga-
nization. Public Money and Management,24 (2),
97– 103.
Furrer, O., Pandian, J.R. and Howard, T. (2007)
Corporate strategy and shareholder value during
decline and turnaround. Management Decision,45 (3),
372– 92.
Grinyer, P., Mayes, A. and McKiernan, P. (1988) Sharp-
benders, Basil Blackwell, Oxford.
Hoffman, R.C. (1989) Strategies for corporate
turnarounds: what do we know about them. Journal
of General Management,14(3 Spring), 46– 66.
Slatter, S. and Lovett, D. (1999) Corporate turnaround.
Penguin, UK.
Sudarsanam, S. and Lai, J. (2001) Corporate nan-
cial distress and turnaround strategies: an empir-
ical analysis. British Journal of Management,12 (3),
183– 199.
... Panicker and Manimala (2015) described turnaround as management actions at arresting organizational decline or at reversing a loss situation to achieve a breakeven point. The turnaround strategy is about making fundamental adjustments to the growth strategy of a business such as acquisitions, mergers, and divestment (Angwin, McGee & Sammut-Bonnici, 2015). ...
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Valuing high-tech startups using traditional valuation models has continued to pose valuation challenges to entrepreneurs, investors as well as financial analysts. The complications in valuing startups are heightened by the variations in valuation methodologies and the absence of operational data. Identifying the appropriate methodology for valuing startups is crucial to establishing value and a prerequisite for accessing funding through mergers or acquisitions. The purpose of this study was to examine the effect of valuation methods on the likelihood of mergers and acquisitions of high-tech startup organizations in the Nigerian capital market. The theoretical underpinning of this study is rooted in valuation theory and mergers and acquisitions theories. The extent to which valuation methods impact the likelihood of securing funds through mergers and acquisitions was the overarching research question. Random sampling was used to obtain records of valuation methods and mergers and acquisitions that occurred between 2006 and 2016 from companies in the high-tech sector. A binary logistic regression model was used to test the impact of valuation methods on the likelihood of mergers and acquisitions of high-tech startups. The impact of valuation methods on the likelihood of mergers and acquisitions was found to be not statistically significant. The participants indicated a preference for specific valuation methods during negotiations for mergers and acquisitions. The findings have implications for positive social change via a reduction in the unemployment rate by encouraging startups with their innovation and entrepreneurship. This should help to facilitate the emergence of sound valuation methods for valuing high-tech startups in the Nigerian capital market.
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Corporations often find themselves in a situation where performance declines occur. This study reviews the research on corprate turnaround strategies. Based on these studies, the corporate turnaround cycle and its major causes are indentified. Five generic strategies that are used by firms in turnaround situations are also identified and described. Implications for future research and practice are discussed.
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Purpose The paper aims to assess the impact of corporate strategy on shareholder value in decline and turnaround situations. Design/methodology/approach A sample of 45 turnaround firms was selected and matched against a control sample which did not face continuous decline over the time period studied. The impact of corporate strategy on shareholder value was tested using cumulative beta excess return measures to capture the long‐term basis of corporate strategy. Findings The paper finds that the beta excess return measures captured the hypothesized relationships between strategy and shareholder value for the sample firms studied. Practical implications Beta excess return measures are superior to case studies or event studies for identifying the long‐term effects of corporate strategy. Originality/value Relatively few studies have compared the strategies of turnaround firms with a matched sample of non‐declining firms. The use of cumulative beta excess returns to assess long‐term valuation of corporate strategy is original.
Extant research on corporate turnaround from financial distress has prescribed a range of strategies to effect corporate recovery. However, no large sample study has examined the general applicability and effectiveness of these strategies. We set out to test the effectiveness of strategies and identify the underlying factors of effectiveness – the impact of timing, intensity and implementation of strategies on corporate recovery. We examine a sample of 166 potentially bankrupt UK firms drawn from 1985 to 1993 and track their turnaround strategies for a period of three years from distress. These strategies include operational, asset, managerial and financial restructuring. Our results show recovery and non-recovery firms adopt very similar sets of strategies, and managers of non-recovery firms restructure more intensively than recovery firms Nevertheless, non-recovery firms seem far less effective in strategy implementation than their recovery counterparts. Whereas recovery firms adopt growth-oriented and external-market focused strategies, non-recovery firms engage in fire-fighting strategies.
Problems of public service 'failure' are high on the political agenda in the UK, and many national and local organizations are searching for effective turnaround strategies. Although little research on turnaround in the public sector has been undertaken, there is a substantial number of studies of decline and recovery in private firms. Evidence from these studies suggests that turnaround is more likely in companies that pursue retrenchment, repositioning and reorganization. The relevance of this '3Rs' strategy to the public sector is analysed, and the potential consequences for public service improvement are evaluated. This article will help managers to think more clearly about turnaround strategies that could work in their organizations.
See also acquisition strategy; divestment; downsizing; joint ventures Bibliography Banaszak-Holl Advances in applied business strategy: turnaround research: past accomplishments and future challenges
See also acquisition strategy; divestment; downsizing; joint ventures Bibliography Banaszak-Holl, J. (2000) Advances in applied business strategy, vol. 5: turnaround research: past accomplishments and future challenges. Administrative Science Quarterly, 45, 633-635.
Corporate turnaround
  • S Slatter
  • D Lovett
Slatter, S. and Lovett, D. (1999) Corporate turnaround. Penguin, UK.