Need for Restructuring and Errors to Avoid - Literature review Example

Download file to see previous pages Business restructuring involves the decision by an organization to be involved in the rearrangement of its business divisions through diversification into new businesses, brand acquisition, divestment, and outsourcing (Balogun and Johnson 2004). Asset restructuring involves the sale and leaseback of assets, receivable factoring, or securitization of debt. For an organization to make an effective decision on the restructuring approach to consider it is important to be engaged in a continuous assessment of its business portfolio, ownership and assets arrangement, and capital mix to ensure that it finds the most effective opportunities for maximizing shareholder value (Owolabi & Dada 2011).

In the process of engaging in significant changes of its business model, the financial structure or the management team with the objective of addressing organizational challenge’s and increasing shareholder value, the process of retracting ay require organizations to major lay-offs, through the objective of restructuring is often to minimize negative effects of the employees where possible (Stapleton 1985). The process of restructuring may also involve the sale of a company or a merger with another company to improve efficiency levels and establish an effective competitive advantage. Restructuring from this perspective is therefore a business strategy used in ensuring the long-term viability of organizations (Martin McConnell 1991). In addition, it is also possible for the creditors and shareholders of an organization to demand restructuring in situations where they perceive the prevailing business strategies of an organization as insufficient in preventing losses on investments (van Knippenberg & van Leeuwen 2001).

The nature of treat that facilitates restructuring in organizations are often varied but the most common catalysts include loss in market share, the decline in the power of the organizational brand, and a reduction of the profit margins of an organization. Other restructuring enhancers include the inability of an organization to retain highly qualified professionals and the introduction of major changes in the market, which have a direct effect on an organization’s business model (Owolabi & Dada 2011). ...Download file to see next pages Read More