Chapter 1: Turnaround

Definition:Radical shifting of the performance towards improvement is called as turnaround. It

is an attempt to remove various weaknesses & make it strong, stable & profit making.According to P. H. Collin, turnaround means “making a company profitable again”.

Application of turnaround (Characteristics)1. Method of restructuring an organization.2. Applicable to loss making/uneconomical/sick units.3. Objective is to make positive performance.4. Needs appropriate turnaround package5. Needs additional investments.6. Planned strategy required7. Make optimum utilization of resources8. Long term strategy9. Need of co-operation of employees10. Measurement of result through sales and profitability11. Combination of strategies12. Role of consultants

Successful Turnaround (INDICATORS)1. Increase in the volume of goods produced2. Increase in the sales3. Increase in the market share4. Increase in the profitability5. Financial stability6. Satisfactory cash flow position7. Removal of sickness8. Optimum utilization of available resources

Need of Turnaround:1. Negative cash flow or shortage of liquid funds.2. Lowering/declining of profits3. Declining of market price4. Inefficient maintenance of physical facilities5. Irregular wage payments6. Frequent breakdowns in production unit7. Mismanagement of an enterprise8. Non payments of Interest9. Declining trend in production.

Introducing Turnaround:(1) Creating suitable background for the introduction of turnaround plan /package.

A. Execution of turnaround by the existing management team.B. Appointment of consultant for the execution of turnaround package.C. Removal/ replacement of CE till the completion of turnaround process.

(2) Selecting the strategy for the introduction of turnaround. (Approach)A. Surgical ApproachB. Humane Approach.

(3) Follow up shapes for the turnaround strategy.

Steps for Turnaround Strategy:1. Providing financial Backing2. Identification of problems faced by an enterprise.3. Preparation of comprehensive action plan.4. Execution of action plan.

Modernization, decentralization & diversification are also covered within turnaround process. Turnaround is a team activity. It requires co operation and participation of all managers & employees in its implementation.

Successful Turnaround Strategy:1. Relevant to the enterprise2. Change of management structure3. Provision of creative leadership4. Proper planning and execution5. Adequate cash flow6. Wide coverage7. Viability of business

Chapter 2: Industrial Sickness

Definition:

Potentially sick industrial company is a company whose accumulated losses are more than fifty percent or more of its peak net worth during the immediately preceding four financial years.

Reasons for industrial sickness:

A. Internal reasons1. Mismanagement2. Under estimation of the cost of the project3. Delay in the implementation of the project4. Increase in the cost due to delay in implementation of project.5. Under utilization of resources6. Diversion of funds7. Lack of management depth8. Bad industrial relations9. Bureaucratic management10. Inadequate working capital11. Heavy expenditure in advertisement.

B. External reasons1. Adverse Govt. rules & regulations2. Adverse Product price control policy3. Recession trend/economic conditions4. Social and political atmosphere around company5. Tough competition in the market6. Shortage of basic recourses like manpower, raw material etc.7. Changes in technology8. Changes in consumer behavior9. Storage in power supply10. Delay in getting any financial assistance.

Business Ethics:Business ethics encompasses how a person in business deals with the employees,

associates of all kind. The term ethic refers to code of conduct that guides an individual while dealing with others. Ethics directs human behavior and also differentiates between good and bad, right & wrong and between fair & unfair human behavior and actions.

No business can really go to state of sickness if done honestly. The main reason is seen the purposeful misuse of the fund. Certain ethical values such as honesty and fairness are universal & stable over centuries. Ethical action means an action, which is socially & morally good.

Ethical Practices:Business practices which are legally, morally and socially fair and consumer friendly

are ethical practices. Supply goods regularly, charge price, pay fair wages to workers, to give them decent treatment and welfare facilities and to give fair return to shareholders. Etc.

Unethical Practices: Supplying inferior quality of goods, charging high prices, false advertisement, short weights, black marketing, disregard to labor laws & other rights of employees including right to form trade union. Exploitation of child labor & women workers. Mismanagement of fund. Avoiding of payments of taxes as per existing laws.

Importance of Business Ethics:1. Orderly functioning2. Favorable social image.3. Guidance to businessman4. Support from employees5. Creates social consciousness6. Business expansion7. Fair business

Principles of Business Ethics:1. Avoid exploitation of consumers2. Avoid profiteering3. Encourage healthy competition4. Ensure accuracy5. Regular tax payments6. Proper account keeping7. Fair treatment to employees8. Keep shareholders informed9. No discrimination among employees

10. No bribe, Practice fair business11. Discourage secret arrangement12. Service before profit.13. Avoid monopoly14. Fulfill customer rights15. Accept social responsibility.

Business Ethics in Indian Context:1. Limited attention to business ethics2. Unethical Practices are use extensively3. Businessman severally criticized due to their unethical practices.4. Businessman have limited respect in the society5. Businessmen take undue interest in socially undesirable activities.6. Socially conscious and progressive businessmen support ethical business.7. Indian business must be made ethical.

Role of Trade Union:1. Formation of code of ethics.2. Education and Persuasion.

Chapter 3: Turnaround Packages

Turnaround Packages1. Total Quality management2. Business Reorganization3. Business Restructuring4. Modernization

5. Taking up to BIFR6. Business Process Reengineering.

Total Quality management Total employee involvement Just in Time (JIT) KAISEN & House Keeping Total Quality Control Total Machine Maintenance

Business Reorganization:

Characteristics: Process of resetting Wide and comprehensive term Lengthy process Necessary for solving problems/difficulties Wide coverage Methods used Responsibility of management Benefits available

Business Restructuring:

Needs:1. Adjustment in the product mix:2. Modernization of an enterprise3. Adjustment in the capital structure4. Raising market share5. Reducing/avoiding losses6. Cordial labor-management relations7. Growth & diversification8. Reducing financial burden9. Raising turnover10. Removing sickness.

Important Short Notes:1. BIFR (Board for Industrial & Financial Reconstruction)2. MRTP (Monopolies & Restrictive trade practices Act, 1969)3. Modernization4. Business Restructuring5. Total Quality Management (TQM)6. Business Reorganizing.