Managing change
Other issues…
Recap
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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
Eliminate duplicated
functions & services
Better deals from suppliers
Higher productivity &
efficiency from shared assets
Revenues
Cross-selling to customers of
both businesses
Access to new distribution
Brand extensions
New geographic markets
opened up
65% of all mergers fail to benefit
shareholders
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Due to poor implementation
Different cultures
Successful mergers take time to implement!
What is retrenchment?
“To cut down or reduce
something”
“Tighten one's belt”
“Use resources more carefully”
The downsizing of a business
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Often necessary to increase competitiveness and achieve an
objective of cost minimisation
Reducing the scale of an operation will affect different
stakeholders, e.g.

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Employees

Delayering

Redundancies
Customers

Closures

Product withdrawals
Suppliers

Orders
Community

Jobs
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
Methods of retrenchment

Reduced output & capacity

Freeze on recruitment & offering voluntary
redundancies

Product & market withdrawals

Downsizing / rationalisation

Disposals of business units

De-mergers
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
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
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
Example (4)
Economic downturn hits
the IT services market
Fujitsu makes 10% of its
workforce redundant due
to substantial declines in
demand
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?
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
Poor business performance
Poor Business Performance
Do nothing?
Make Changes?
What do you think the likely
outcome will be?
Success?
What changes can be made?
Ownership?
Structure?
Strategy?
Processes?
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?
Future activity… or ‘cover
work’!
Create a ‘poster’
Use 2 A3 pages or 4 A4 sheets
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 ….?
Layout ideas….
Stakeholder or shareholder
Ansoff matrix
Your news article
Co name
Porter strategy
Stakeholder effects…
Type of Growth
Or
retrenchment
Choose your news story…
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Tesco – food production…
http://news.bbc.co.uk/1/hi/busine
ss/7477190.stm
Cadbury’s Kraft takeover…
http://news.bbc.co.uk/1/hi/busine
ss/8469176.stm
http://news.bbc.co.uk/1/hi/busine
ss/8469087.stm
Google threatens to withdraw
from China
http://news.bbc.co.uk/1/hi/busine
ss/8455712.stm
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Man Utd raise £504m in bond
issue
http://news.bbc.co.uk/1/hi/busine
ss/8475317.stm
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BA – cutting costs & TU issues
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Portsmouth FC
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Blacks – effect of the recession
http://news.bbc.co.uk/1/hi/busine
ss/8451235.stm
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