Turnaround strategies are used by firms that are experiencing a decline in performance and aim to reverse that trend, returning the firm to growth and profitability. These strategies are typically used in industries that are in the decline stage of the industry life cycle. Research has identified three basic ways for turnaround strategies to work.
The first approach is asset and cost surgery, where firms sell off unproductive assets and outsource any activities in which they are not competitive. By shedding unproductive assets, firms can focus on their core competencies and streamline their operations, which can result in cost savings and increased efficiency.
The second approach is product and market pruning, which involves the opposite of diversification. Firms sell off products and businesses in which they are not competitive and instead focus on select products and markets. This allows the firm to concentrate its resources and efforts on areas where it has a competitive advantage, which can lead to improved performance.
The third approach is productivity improvements, which may involve an examination of many business processes. Small productivity improvements in many processes can add up to a substantial overall improvement. This approach involves identifying areas of inefficiency or waste and finding ways to eliminate or reduce them. By improving productivity, firms can operate more efficiently and cost-effectively, which can improve their competitiveness and profitability.
Reference
https://quizlet.com/274025150/exam-2-summary-questions-flash-cards/
