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Managing change

Managing change. Other issues…. Recap. What is organic growth Name me the different types of takeovers!. What is “Synergy”?. The whole is greater than the sum of the individual parts. Two kinds of “synergy”. Cost Savings. Revenues. Eliminate duplicated functions & services

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Managing change

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  1. Managing change Other issues…

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

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

  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

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

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

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

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

  10. Example of Retrenchment Starbucks rationalises its store portfolio in Australia – 2008 Poor competitive position there – hard to compete with existing coffee shop operators Strategic decision to focus investment on the US market

  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

  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

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

  14. New owners / leaders Why might new owners want to make changes? • 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

  15. New owners / leaders You will learn more about the role of culture and leadership later • 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?

  16. Poor business performance 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?

  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. Tesco – food production… http://news.bbc.co.uk/1/hi/business/7477190.stm Cadbury’s Kraft takeover… http://news.bbc.co.uk/1/hi/business/8469176.stm http://news.bbc.co.uk/1/hi/business/8469087.stm Google threatens to withdraw from China http://news.bbc.co.uk/1/hi/business/8455712.stm Man Utd raise £504m in bond issue http://news.bbc.co.uk/1/hi/business/8475317.stm BA – cutting costs & TU issues Portsmouth FC Blacks – effect of the recession http://news.bbc.co.uk/1/hi/business/8451235.stm Choose your news story…

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