Downsizing or layoff is a widespread strategic decision and change practice since 1970’s and during the economic downturn in the year 2016 it became a more common phenomenon. Changing patterns in reasons cited for job loss support this impression of the rising importance of restructurings. Differences in factors such as the state of the economy and the signal sent by job loss could make the process of downsizing and the effects of job loss differ between restructurings of healthy organizations and downsizing due to financial distress. Downsizing Approaches There are many kind of approaches in downsizing. The reasons for the firm to undertake such approaches also varies. They include restructuring, closing or selling of a business unit, cost reduction, cost savings, increased productivity through greater efficiency and effectiveness and coping with external pressure including recessions and economic downturn, economical change, increased competitive pressures through greater globalization of business and technological Continue reading
Business Strategies
Equity Carve-Out (ECO)
An Equity Carve-Out (ECO) is a partial public offering of a wholly owned subsidiary. Unlike spin-offs, ECOs generate a capital infusion because the parent offers shares in the subsidiary to the public through an Initial Public Offering (IPO), although it usually retains a controlling interest in the subsidiary. Like spin-offs, ECOs have become increasingly popular in the last several years. An equity carve-out involves conversion of an existing division or unit into a wholly owned subsidiary. A part of the stake in this subsidiary is sold to outsiders. The parent company may or may not retain controlling stake in the new entity. The shares of the subsidiary are listed and traded separately on the stock exchange. Equity carve-outs result in a positive cash flow to the parent company. An equity carve-out is different from a spin-off because of the induction of outsiders as new shareholders in the firm. Secondly equity Continue reading
Merger Procedure under Companies Act 1956
A merger is a complicated transaction, involving fairly complex legal considerations. While evaluating a merger proposal, one should bear in mind the following legal provisions. Sections 391 to 394 of the Companies Act, 1956 contain the provisions for amalgamations. The procedure for merger or amalgamation normally involves the following steps: Examination of object Clauses: The memorandum of association of both the companies should be examined to check if the power to amalgamate is available. Further, the object clause of the amalgamated company (transferee company) should permit it to carry on the business of the amalgamating company (transferor company). If such clauses do not exists, necessary approvals of the shareholders, boards of directors and Company Law Board are required. Intimation to stock Exchanges: The stock exchanges where the amalgamated and amalgamating companies are listed should be informed about the amalgamation proposal. From time to time, copies of all notices, resolutions, and Continue reading
Case Study: Amazon’s Competitive Advantage
Amazon.com is a multinational E commerce company, which was founded by Jeff Bezos who is considered to be one of the world’s top innovative executives. Amazon.com started as an online bookstore and expanded with time to sell almost everything. The role of information system in this company is a leading role, because the company is an online retailer. The company started as an online store for books to rapidly expand to sell everything such us beauty items, auto parts, apparel, electronics and groceries. Amazon’s logo shows an arrow that stretches from A to Z, which also forms a smile to indicate Amazon’s care for customers’ satisfaction. Core Competency The core competencies for Amazon has been identified as customer convenience and accessibility, unlimited options for selection, custom-made services, the superiority of the content of the web site, the efficient and good quality search tool to find the items of one’s choice Continue reading
Porter’s Five Forces Analysis of McDonalds
McDonald’s is an American fast food restaurant chain with its global headquarters in Oak Brook, Illinois. It has over 36,000 restaurants found in 120 countries all over the world, serving 68 million customers each day. It was founded as a barbeque restaurant in 1940 by Richard and Maurice McDonald. In the year 1955, a businessman Ray Kroc joined the company as a franchise agent and bought the company from the McDonald brothers. McDonald’s Corporation, incorporated in the year 1964, operates and franchises McDonald’s restaurants. A McDonalds restaurant is operated by a franchisee, an affiliate, or the McDonalds corporation itself. McDonalds primary products include burgers, french-fries, soft drinks, milkshakes, wrap and desserts. The company has also introduced different menus like salads, fish, smoothies and fruits in response to changing customer tastes in order to lock-in customers. McDonald’s is operating under a new organizational structure starting from July 2015, categorized into four Continue reading
Case Study: Corporate Restructuring at Arvind Mills
The case provides an overview of the Arvind Mills’ expansion strategy, which resulted in the company’s poor financial health in the late 1990s. In the mid 1990s, Arvind Mills’ undertook a massive expansion of its denim capacity in spite of the fact that other cotton fabrics were slowly replacing the demand for denim. The expansion plan was funded by loans from both Indian and overseas financial institutions. With the demand for denim slowing down, Arvind Mills found it difficult to repay the loans, and thus the interest burden on the loans shot up. In the late 1990s, Arvind Mills ran into deep financial problems because of its debt burden. As a result, it incurred huge losses in the late 1990s. The case also discusses in detail the Arvind Mills debt-restructuring plan for the long-term debts being taken up in February 2001. Issues: » Debt driven expansion plan, financial restructuring of Continue reading