restructure

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To what extent does restructuring transform corporate market and financial performance? Discuss using an extended example

Restructuring is effective way to change terrible company situation. It is related to enterprises development and control, which have an obviously effect on companies form of business, scope and methods implement plan. Moreover, it is refers to corporate market and performance. Therefore, a company restricting would contribute a new organization, which will change a numerous in terms of management structure, shareholders and company system and employee. As Lazonick (2003, p.3) argued: “Restructuring occurs when the corporation is no longer willing or able to develop or utilize the capabilities and assets that resulted from these past investment decisions.” Therefore, enterprise could contribute to a sustainable development via restructuring. This essay at first would discuss the reason why companies restructuring and in what extend restructuring. Next, consider three aspects restructuring: financial restructuring, portfolio restructuring and organizational restructuring. Finally, General Motor Corporation would be used to analysis actually implement in restructuring to discuss how restructuring impact on corporate market and financial performance.

First of all, enterprises need restructuring to increase their stock value. As Hill and Jones (2008, p.340) argued: “one main reason that diversified companies have restructured in recent years is the stock market has valued their stock at a diversification discount.” It means highly diversified firm is valued lower, which is related to their profits. There are four reasons explain why highly diversified companies less attractive for investors. At first, there is no multibusiness model that could prove investors participation in many different industries. Second, the complex statement of the highly diversified enterprise could conceal the individual business whether it is gain the profits. (Hill and Jones, 2008, p361) therefore, in this situation, invest the highly diversified enterprise seems to higher risk. In other word, enterprise which corporate with a single industry, their competitive advantages and financial statement would be clearer to understood. Simply, only investors believe a company could gain profits and do not need have a big risk; they would be pleasure to invest money. Third, as Hill and Jones (2008, p361) argued: investors have an experience that managers often have try to pursue too much diversification or because of wrong reason. Some diversifications base on those empire builders who pursue enterprise by their own sake, thus, sometimes firm’s cost could exceed additional value. Finally, they point out that: “a final factor leading to restructuring is that innovations in strategic management have diminished the advantages of vertical integration or diversification.” Therefore, restructuring assist to reduce the risk of investment and attract investors, in the same time, help for long-term development and reduce the excrescent costs.

Moreover, there are three important sectors in restructuring process. As Pomerleano et al (2005, p.12) argued: “restructuring refers to several related processes: recognizing and allocating financial losses, restructuring the financial claims of financial institutions and corporations, and restructuring the operations of financial institutions and corporations.” In other word, restructuring divide to three parts: Financial restructuring, Portfolio restructuring and organizational restructuring. According to the Borsch et al (2004, p.366) point out that: Financial restructuring related to changes in the debt equity mix, better payments to shareholders or stock buy-backs, firm’s governance structure and its relationship to shareholders and the capital market. Therefore, financial restructuring is related to company management structure, which have a direct relationship to firm’s performance. After that,...
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