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Corporate Restructuring

CORPORATE RESTRUCTURING


Many companies are more successful that their rivals because they are able to take advantage of new technology and produce, market, and distribute their products quicker and more cheaply than their rivals. They are able to provide services and products more efficiently. Conversely, companies that have failed to incorporate these improvements have lost the ability to compete effectively, resulting in losses in market share and profit margin. These companies must reorganize the way they do business in order to raise quality, lower costs and speed the production of their product. This process of reorganization is called restructuring. Parts of the company that are not profitable or not necessary to the principal business are sold or closed down, with the proceeds used to invest in improvements in the core business.

These improvements commonly involve increased automation and better, more efficient organization and processes, often resulting in the elimination of jobs. The combination of spinning off non-core businesses and reducing employment is referred to as "downsizing," or "right-sizing." In fact, the operative factor is often improved skill matching, where people with outmoded job skills are replaced by people with skills that are better matched to new business processes. This typically means workforce reduction as new, more efficient processes allow consolidation of job functions. During the 1980s, many companies in service and manufacturing sectors restructured in response to increased competition, both from within the domestic economy and from foreign competitors able to enter new markets because of the progressive removal of trade barriers.

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