Literature Review Paper Corporate Restructuring

Question: Discuss about theLiterature Review Paperfor Corporate Restructuring. Answer: Corporate Restructuring in the West The restructuring literature in the companies found in the west provides a hint of the failure or success of actions of restructuring undertaken by the management in determining and creating business value. (Ruigrok, 1999) argues that the experiences of the companies found in the West, can be of benefit to other businesses found in the developing countries.The main aim of enterprise restructuring is to transform businesses into capitalist firms which creates value. Western Europe and North American managers, scholars, and politicians have long regarded restructuring as mainly a temporary phenomenon(Ruigrok, 1999). In this view, restructuring was considered as a company stage during which it had to adapt to the changes of the environment such as Asian competition, slower growth rate, and higher prices of input. The late 1980s to 1990s events have made this perspective unsustainable(Ruigrok, 1999). It seems unsafe to continue assuming that many firms will continue in the coming years t o restructure. This is because of the ongoing monetary and economic integration in the EU (European Union), further discussions on economic integration with North Atlantic Area and the Americas, and the economic crisis in the Asia (Onundo Riany, 2012). As a result, this brings up questions of the direction and nature of the efforts of corporate restructuring, and possible differences of cross-nationals among the West corporates. Through literature review, this study analyzes the significance to restructuring to the organizations, especially the West trading companies. The Firms Performance and Organizational Restructuring For the organizations that want to remain relevant in the world of business, organizational restructuring is a vital strategy. (Shermon, 2012) defines the restructuring as the changing of the structure of a firms operations, governance, financing, and investment structures. (Three Sigma Inc, 2002) defines restructuring as the process of introducing structural changes in the daily business management for onetime transaction activities such as acquisitions, debt swaps, spin-offs, and repurchasing stock. It is viewed that the main concern of restructuring is to change structures for the quest of long-term and short-term benefits. According to (Shermon, 2012) the undertakings of restructuring can be categorized into three main classifications. Those types are the portfolio, organizational, and financial restructuring. Restructuring that is based on financials comprises of the firms capital changes, which includes the debt-equity swaps, recapitalization leverage, and leverage buyout. A financial restructuring common way is to increase equity through new share issuing. However, portfolio restructuring comprises substantial changes in the firms asset mix or the firms business lines, which include spin-offs, liquidation, and asset sales (Vyacheslav, 2000). On the other hand, organizational restructuring encompasses substantial changes in the firms organizational structure, which comprises of the spreading span of control, corporate governance reformation, reducing product diversification, redrawing of divisional boundaries, downsizing employment, revising compensation, and flattening of hierarchic levels. This pap er is focuses on the restructuring of the organizational which comes with the changes in policies of human resources. There is need to change the current human resource policies in line with the changing situation. The department of the human resource needs to initiate change management. (Vyacheslav, 2000) demonstrates that in order to maintain the employees external and internal equity, there should be streamlining of the current pay structure. (Andreas Kemper, n.d.) notes that there are signs that can be used to determine the need for organizational restructuring. Such signs include influenced performance appraisals; unpredictable organizational communications, significant staffing increases or decreases are contemplated; accountability for results are not communicated clearly and measurable resulting in subjective and retaining personnel and turnover becomes a problem that is significant; parts of the organization are substantially under or over staffed; new skills and capabilities are needed to meet current or expected operational requirements; technology and/or innovation are creating changes in workflow and production processes; fragmented, and inefficient; and stagnant workforce productivity or diminishing morale (Jarso, 2016). Organizational restructuring in a number of ways has shown to be important and that they are more important in strategies implementation of due to good formulation but that are not confined to reducing costs of operation. A study conducted by (Srivastava, 2013) on the effect of restructuring on the operational issues of the West countries public traded companies in 2013, tested whether the restructuring resulted in substantial changes. In their study, they applied profit margin, the ratio of total asset turnover after and before the restructuring as substitute for the firms performance, return on assets, and changes in revenues (Srivastava, 2013). They were able to determine through the analysis that there was substantial increase in return on assets, profit margin, and total revenue after restructuring. However, there was no proof of substantial effect on the ratio of asset turnover. The researchers were able to find existence of substantial evidences of significant market expectations and over response to the announcements of restructuring. They performed a study to explore corporate performance improvements in companies involved in acquisition and merger. Similarly, other researchers carried out a study to analyse the merger relationship in the US steel industry. The research used the methodology of New Empirical Industrial Organization. This analysis was carried out by observing the time between 1951 to 1988. The study examined the relationship between mergers in the U.S. steel industry and the market power. According the study results, there was slight boost to power in the steel industry since 1972 1984 (Jarso, 2016). In steel industry, acquisition and merger resulted in improvement of solvency, cash flow positions, liquidity, and efficiency. Also, one study conducted in the US in 1998 found out than less than 20% of the firms, had considered restructuring as an essential step of integrating the acquired firm into their organization (Jarso, 2016). However, firms which have a comprehensive integration plans, have managed to develop in their industries, an average value. (Wambui, 2012) conducted a research on the impact of restructuring on the operation of the organization specializing in mobile phone industry in UK. The study agreed that, all three techniques of restructuring have positive impact on the firms market share and growth. The findings from their study demonstrated that organizational restructuring had the least effect on the firms market share, the second was portfolio restructuring, whereas, financial restructuring had the highest impact. Nonetheless, on the market growth rate, organizational restructuring had the highest impact. References Andreas Kemper, F. K., n.d. Corporate Restructuring Dynamics: A case Study Analysis, Oestrich-Winkel, German: s.n. Jarso, H. A., 2016. Restructuring Strategy and Performance of Major Commercial Bank in Kenya, Nairobi: University of Nairobi, Kenya. Onundo Riany, G. H. M. O. O., 2012. Effects of Restructuring on Organization Performance of Mobile Phone Service ProvidersChrista. International Review of Social Sciences and Humanities, 4(1), pp. 198-204 . Ruigrok, W. P. A., 1999. Corporate Restructuring and New Forms of Organizing: Evidence from Europe.. [Online] Available at: https://www.freepatentsonline.com/article/Management-International-Review/57645213.html [Accessed 25 4 2017]. Shermon, G., 2012. Creating an optimized organisation: Key Opportunities and Challenges, s.l.: s.n. Srivastava, S. B., 2013. Organizational Restructuring and Social Capital Activation, Berkeley: University of California . Three Sigma Inc, 2002. Organizational Restructuring, s.l.: s.n. Vyacheslav, T., 2000. An Investigation into Methods of Restructuring and Reorganizing Industrial Enterprises. Club of Economics in Miskolc TMP , Volume 5, pp. 81-84. . Wambui, N. A., 2012. Corporate Restructuring and Firm Performance In The Banking Sector Of Kenya, Nairobi Kenya: University of Nairobi.