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 package
5. Needs additional investments.
6. Planned strategy required
7. Make optimum utilization of resources
8. Long term strategy
9. Need of co-operation of employees
10. Measurement of result through sales and profitability
11. Combination of strategies
12. Role of consultants

Successful Turnaround (INDICATORS)

1. Increase in the volume of goods produced
2. Increase in the sales
3. Increase in the market share
4. Increase in the profitability
5. Financial stability
6. Satisfactory cash flow position
7. Removal of sickness
8. Optimum utilization of available resources

Need of Turnaround:
1. Negative cash flow or shortage of liquid funds.
2. Lowering/declining of profits
3. Declining of market price
4. Inefficient maintenance of physical facilities
5. Irregular wage payments
6. Frequent breakdowns in production unit
7. Mismanagement of an enterprise
8. Non payments of Interest
9. 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 Approach
B. Humane Approach.
(3)Follow up shapes for the turnaround strategy.

Steps for Turnaround Strategy:

1. Providing financial Backing
2. 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 enterprise
2. Change of management structure
3. Provision of creative leadership
4. Proper planning and execution
5. Adequate cash flow
6. Wide coverage
7. 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 reasons
1. Mismanagement
2. Under estimation of the cost of the project
3. Delay in the implementation of the project
4. Increase in the cost due to delay in implementation of project.
5. Under utilization of resources
6. Diversion of funds
7. Lack of management depth
8. Bad industrial relations
9. Bureaucratic management
10. Inadequate working capital
11. Heavy expenditure in advertisement.

B. External reasons
1. Adverse Govt. rules & regulations
2. Adverse Product price control policy
3. Recession trend/economic conditions
4. Social and political atmosphere around company
5. Tough competition in the market
6. Shortage of basic recourses like manpower, raw material etc.
7. Changes in technology
8. Changes in consumer behavior
9. Storage in power supply
10. 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 functioning
2. Favorable social image.
3. Guidance to businessman
4. Support from employees
5. Creates social consciousness
6. Business expansion
7. Fair business

Principles of Business Ethics:

1. Avoid exploitation of consumers
2. Avoid profiteering
3. Encourage healthy competition
4. Ensure accuracy
5. Regular tax payments
6. Proper account keeping
7. Fair treatment to employees
8. Keep shareholders informed
9. No discrimination among employees
 10. No bribe, Practice fair business
11. Discourage secret arrangement
12. Service before profit.
13. Avoid monopoly
14. Fulfill customer rights
15. Accept social responsibility.

Business Ethics in Indian Context:

1. Limited attention to business ethics
2. Unethical Practices are use extensively
3. Businessman severally criticized due to their unethical practices.
4. Businessman have limited respect in the society
5. 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 Packages
1. Total Quality management
2. Business Reorganization
3. Business Restructuring
4. Modernization
5. Taking up to BIFR
 6. 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 enterprise
3. Adjustment in the capital structure
4. Raising market share
5. Reducing/avoiding losses
6. Cordial labor-management relations
7. Growth & diversification
8. Reducing financial burden
9. Raising turnover
10. Removing sickness.

Important Short Notes:

1. BIFR (Board for Industrial & Financial Reconstruction)
2. MRTP (Monopolies & Restrictive trade practices Act, 1969)
3. Modernization
4. Business Restructuring
5. Total Quality Management (TQM)
6. Business Reorganizing.