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RESTRUCTURING
RESTRUCTURING
Process through which a company radically changes

its contractual relationship that exists among its

creditors, shareholders, employees and other

stakeholders.

NEED FOR RESTRUCTURING
• Poor financial performance

• To take the advantage of business opportunity

• If an organization wants to come up with a new

corporate strategy

Reason for restructuring
 Dogged by problems of
• Plummeted sales figures
• Demoralized work force
• Government investigations related to manufacturing
violations
• Legal and regulatory challenges
• Hassan(turnaround specialist) was brought in 2003.
SCHERING PLOUGH
• result of the merger between schering
corporation(Schering) and Plough which took
place in 1971.
• offered a promising line of pharmaceutical
products to consumers
• Product line: antibiotics, antihistamines, and
other pharmaeceuticals
• Has undergone a lot of leadership change.
Reason for restructuring
 Dogged by problems of
• Plummeted sales figures
• Demoralized work force
• Government investigations related to manufacturing
violations
• Legal and regulatory challenges
• Hassan(turnaround specialist) was brought in 2003.
ENABLING THE STRATEGIC SUCCESS
PEOPLE INFORMATION

ORGANISATIONAL STRATEGIES

FINANCE TECHNOLOGY
STRATEGY AND PEOPLE

People as a resource
•Personal and organisational competences
•Performance management

Strategy

People and behaviour Organising people


•Personal behaviour •HR function
•Collective behaviour
•Line managers
•Structures and processes
STRATEGY AND INFORMATION

Information and business models


Information and strategic capability
•Extended functions
•Improved services
•Electronic processing
•Competitive performance

•Information and competitive strategy

STRATEGY

Information and structuring


•Devolved models

•Bypassing gatekeepers
Information and strategic
capability:
• Improved services: sales representatives were
influenced to not only sell the products to
customers rather maintain the long term
sustainable relationships with the
customers.
• Competitive performance: to gain an edge
over their competitors, they started
investing a lot on R&D, product
development and leadership competencies
so as to enable them take the managerial
roles in the future.
Information and business models:

• Extended functions:
 Maintaining the long term relations
 Emphasis on Innovation.


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MANAGING FINANCE
Ø Managing for value (Value and cost drivers)

§ Funds from operations-


o The revenue generation skewed towards one product before the
restructuring.
o The acquisition of OBS and later the merger with Merck
resulted in economies of scale which reduced the overhead
costs to a great extent.
§ Investment in assets- Huge R&D expenditure

Ø Funding strategies

§ Business risk- patent expiry, absence of high profit margin


drugs
§ Financial risk- poor ROI from R&D investment

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Ø Financial expectations (of stakeholders)


§ Employees- employee empowerment, change in bonus


structure

§ Customers-
o Provided value for money via Garamycin and Claritin in the
past.
o Faced criticism for Rebetron.
o In 2008,Vytorin and Zetia came under scanner for providing
lesser value for money as compared to a similar generic drug,
Zocor.
o The restructuring exercise focused on providing best-value
products to customers
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STRATEGY & TECHNOLOGY


Ø Technology and the competitive situation
§ Porter’s Five forces analysis-
o Barriers to entry
o Substitution
o Relative power of suppliers and buyers
o Competitive rivalry

Ø Technology diffusion
§ Core competences- focus on employees and Phase III pipeline
of drugs

§ Developing/acquiring technology-relied on acquisition of


current players

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THE COMPANY BEFORE AND AFTER


RESTRUCTURING
ØRestructuring with respect to
§ Employees
§ Products
§ Innovation in Product Portfolio
§ Quality controls
§ Investment in R&D

ØMerger with Merck


§ Strategic benefits
§ Financial benefits
Ø
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FUTURE CHALLENGES
• A balance between the huge investment incurred and the pool
of new drugs obtained

• Establishing synergy between Merck and Schering-Plough


Corporation for the organizational health of the joint
company



PRESENT SCENARIO
• In 2009, they registered revenue of $27.4 billion from which
US comprised $14.4 billion

• Merck is looking at acquisitions and alliances with local firms


to scale up its business in India


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Managing Finance
Ø Managing for value (Value and cost drivers)

§ Funds from operations-


o The revenue generation skewed towards to facilitate the overall
planning and control of roads on a national basis.
o The divestment of which reduced the overhead costs to a great
extent.
§ Investment in assets- Huge infrastructure expenditure

Ø Funding strategies

§ Business risk- security issues, the costs of works or services decrease


but administration costs increase slightly.
§ Financial risk- poor ROI from infrastructure investment

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Ø Financial expectations (of stakeholders)


§ Employees- employee empowerment,


§ Customers-
o developer contributions - from developers for benefits their
developments gain from land transport infrastructure
improvements
o betterment contributions - from landowners that benefit from
road improvements
o other contributions from approved organisations, community
groups or other entities, eg funding from ACCfunds
generated from road tolls for new land transport
infrastructure, eg the Northern Gateway Toll Roadpublic
transport fares and advertising revenue.
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THE COMPANY BEFORE AND AFTER


RESTRUCTURING
ØRestructuring with respect to
§ Funder
§ Deliverer
§ Quality controls
§ Investment in infrastructure

• Divestment
§ Strategic benefits
§ Financial benefits:
Ø

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Future Challenges
• Identification of client and deliverer functions.
• More emphasis on efficiency in the provision of works or
services and the start of contracting out work.
• Public works organizations tend to be replaced by a
Ministry of Transport for policy direction.
• Separation of client and delivery organizations.

Present Scenario
•The total number of employees is 450 and having a
budget of over $ 1 billion (NZD).
•Transit New Zealand and Land Transport New Zealand
will become one body and some of their roles will be
transferred to the Department of Transport.
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Thank You

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