Description
Operating Turnaround Strategies During Crisis Periods A Research On Manufacturing Firms
Available online at www.sciencedirect.com Available online at www.sciencedirect.com
Procedia Social and Behavioral Sciences 24 (2011) 49–60
7
th
International Strategic Management Conference
Operating turnaround strategies during crisis periods: a
research on manufacturing firms
Mehmet Tikici
a
, Ece Omay
b
, Neslihan Derin
c
, eyda Nur Seçkin
d
Mehmet Cüreolu
e
a b c d
Inonu University, Malatya, 44280, Turkey
e
SMEs Development Organization, Malatya, 44200, Turkey
Abstract
Many firms face with organizational declines at some point in their life cycles because of both external and internal
factors. As an alternative response to the times of crisis, operating turnaround strategies are targeted to enhance a
firm’s chances of ending the threat and achieving sustainable performance recovery. In this study, it is aimed to
determine whether operating turnaround strategies are implemented by manufacturing firms operating in Malatya to
cope with recent global crisis; if implemented to what extent they are executed and how business performance is
affected as a result.
Keywords: Crisis, Operating turnaround strategies, Manufacturing firms
© 2011 Published by Elsevier Ltd. Selection and/or peer-review under responsibility 7
th
International
Strategic Management Conference
1. Introduction
Many firms today face with organizational declines at some point in their life cycles because of both
external and internal factors. Most often organizations enter the state of decline when they fail to
anticipate, recognize and adapt to external and internal pressures that threaten the organization’s
existence. As one of the important factors leading firms to decline, crises represent a significant threat to
firms’ high priority values and demand a time-pressured response [1].
As an alternative response to the times of crisis, operating turnaround strategies are targeted to enhance
a firm’s chances of ending the threat and achieving sustainable performance recovery. Operating
turnaround strategies can be defined as the set of consequential, directive decisions and actions aiming to
reverse a declining business as quickly as possible through asset reduction, cost cutbacks and revenue
generating [2]. In this study, it is aimed to determine whether operating turnaround strategies are
© 2011 Published by Elsevier Ltd. Open access under CC BY-NC-ND license.
Selection and/or peer-review under responsibility of 7th International Strategic Management Conference
1877–0428 © 2011 Published by Elsevier Ltd. Open access under CC BY-NC-ND license.
Selection and/or peer-review under responsibility of 7th International Strategic Management Conference
doi:10.1016/j.sbspro.2011.09.046
50 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
implemented by manufacturing firms operating in Malatya to cope with recent global crisis; if
implemented to what extent they are executed and how business performance is affected as a result. The
conceptual scope of this study is determined as examining operating turnaround strategy and its variants
in a theoretical frame by reviewing literature. The research part includes testing to what extent operating
turnaround strategies are implemented and their effects on business performance by statistical methods.
2. Operating Turnaround Strategies
According to Brandes and Brege, turnaround strategy can be defined as a process in which firms seek
to reverse the organizational decline and increase business performance [3]. Up to now, various
turnaround actions were described. Hofer (1980) described operating turnaround actions for firms
suffering from inefficiency or threat of bankruptcy and strategic turnaround actions for firms suffering
from improper alignment with their markets [4]. According to Hoffer, strategic turnaround choices
involve either a new way to compete in the existing business or entering an altogether new business [5].
On the other hand, operating turnaround strategies aim to improve efficiency through cost cutbacks,
increasing revenues, reducing assets and/or combination of those strategies [6].
A cost-cutting strategy involves cutbacks in discretionary expenses. Asset reduction strategy refers to
disposal of assets, especially fixed ones. Finally, a revenue generating strategy is an attempt to improve
cash flows by increasing sales [7]. According to Hofer, firms which are substantially below break-even
need to initiate asset reduction strategies. If firms operate near or slightly below break-even point then
they should implement cost cutting and revenue generating strategies. In case of an intermediate position
then a combination of these strategies should be exercised [8]. As noted by Hofer, there is a direct
relationship between the severity of the firm's financial downturn and the need for drastic cost and asset
reductions [9]. Since during downturn periods declining firms often suffer cash outflows, “asset and cost
reductions are urgently needed to 'stop the bleeding' before the firm fails” [10]. The important point here
is that financial downturn of the firm is considered as a temporary and reversible situation; aiming to
improve firm’s financial performance and protect it from negative external and internal pressures [9].
There are both external (fall in demand, increased competition, economic crises etc..) and internal
factors (weak financial control, failures to update products, invest in core competencies etc..) leading
firms to implement operating turnaround strategies. Of the external factors, economic crisis is a major
cause giving rise to organizational decline [11], resulting in sharp falls in sales, profits and productivity
[12]. Regardless of whether factors are external or internal, exercising operating turnaround actions
include undesirable situations and top management plays an important role in reversing decline [13]. As
indicated in previous researches, leaders and top management are two key factors in coping with hard
times and play a critical role in ending the threat, achieving sustainable recovery. They are the change
agents to reverse decline [14]. The important point here is top management’s awareness which depends
on interpretation of information about firm’s external and internal environment. So, first of all top
management should acknowledge that crisis exists and action is immediately needed [15].
Operating turnaround strategies are commonly exercised especially in early stages of a turnaround
period [11]. By asset and cost surgery and revenue generating, it is aimed to recover immediately and end
the threat [13]. On the other hand, to achieve sustainable recovery and high level of business performance
depends on determining the key factors of decline and taking proper precautions against them [16].
Focusing on solely operating turnaround strategies does not guarantee good performance and does not
result in long lasting success [17]. Most often declining firms suffer from more severe problems, so asset
and cost reduction are unlikely to eliminate the main problems causing firms to decline [10].
Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60 51
Firm’s capability of adaptation to its environment, crisis management skills, organizational structure,
resource dependency, strategic alternatives, impacts of external or internal crisis on firm [12] are critical
success factors for reversing poor performance [18]. Besides, according to Chowdhury and Lang, the
intensity of the crisis and resource availability are important for success of a turnaround effort [19]. On
the other hand, severe time pressures, limited resources, diminishing stakeholder support and competitor
actions are the factors challenging sustainable performance recovery [2].
2.1. Cost Cutbacks
When organizations enter the state of declining, most often they focus on cutting costs to reverse poor
performance and try to maintain or achieve a specific level of profitability. In order to make cuts, first of
all cost analysis is needed so that some cost centers can be eliminated or at least unnecessary expenses are
reduced significantly. Reducing maintenance costs, eliminating shrinkages in supply usage, leasing tools
& machinery instead of purchasing, reducing expenses in marketing and R&D are some examples for cost
reduction [20].
People-related expenses are one of the major cost items for firms. For this reason, most often firms
consider reducing headcount as an easy and obvious way to save on costs in hard times. However, layoffs
should not be taken into account as a key solution in cost reduction. Downsizing may cut labor costs in
the short run but may erode both employee and eventually customer loyalty in the long run [21]. If cost
cutbacks are realized just by reducing labour related expenses employee motivation and productivity
naturally will decrease and also key talents in the organization may be lost [22]. In workforce reduction,
the critical point is that employees who can be easily rehired and who are not involved in activities at the
core of the firm’s competitive advantage should be cut or employee productivity should be improved
[23].
2. 2. Revenue Generating
Improvement in capacity usage and production processes will be useful for revenue generating [24].
Revenue generating can be pursued by focusing on existing lines of products, initiating price cuts or
raising prices where products are price sensitive [17]. Moreover, increasing sales without running up
expenses, strict inventory control, decreasing debt turnover, increasing accounts receivables turnover rate
and stock turnover rate are other possible revenue generating actions [25].
2. 3. Asset Reduction
If a firm’s high priority values are under a significant threat and a firm has weak strategic alternatives,
asset reduction will be necessary. While reducing assets, it is aimed to enhance the efficiency of the
firm’s current operations through improved asset utilization. Operating asset reduction can be business
unit level sale, reduction in short term assets or closures and integration of fixed assets. Selling some
equipment & fixtures, useless land & building, narrowing scope of business, reducing unprofitable
investments and even selling some business units are examples for asset reduction [17].
3. Methodology
3.1. Research Goal
In this study, it is aimed to determine whether operating turnaround strategies are implemented by
manufacturing firms operating in Malatya to cope with the recent global crisis; if implemented to what
52 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
extent they are executed and how business performance is affected as a result. The conceptual scope of
this study is determined as examining operating turnaround strategy and its variants in a theoretical frame
by reviewing literature. The research part is composed of testing to what extent operating turnaround
strategies are implemented and their effects on business performance by statistical methods.
3.2. Sample and Data Collection
The population of the study consists of 252 manufacturing firms operating in Malatya Organized
Industrial Zone. Randomly sampling method is used with the sample size of 93. Data collection is
performed through questionnaire method applied to top managers with face to face interviews.
3.3. Measures
The questionnaire is composed of 5 sections including the level of recent global crisis’ negative effect
on firm and its stakeholders; asset reduction; cost cutbacks; revenue generating and business
performance. A five point Likert scale was used and all statements had response categories ranging from
‘none’ (1) to ‘very high’ (5). To what extent asset reduction (5 items), cost cutbacks (12 items) and
revenue generating (6 items) strategies were implemented was measured by totally 23 items adapted from
Eren (2005) [25]. Business performance was evaluated by six items adapted from Gowen & Tollen
(2002) [26]. In this scale, Cronbach Alfa coefficient is found as = 0.899 indicating that the scale is
highly reliable. The data is tested with frequency analysis, chi-square analysis and spearman correlation
coefficients and log linear analysis.
4. Research Results
Firm ages of the manufacturing firms participated in the survey are: 2 to 5 years (36, 6%), 6 to 12
years (32,3%) and 13 to 35 years (31,1%). 6,5 % of manufacturing firms’ employment size is 1-9; 50,5
% of firms’ employment size is 9-49; 38,7 % of is between 50 and 249 and finally 4,3 % of them has 250
and more employees. Business scopes of manufacturing firms participated in the survey are textile, food,
plastic, agriculture, metal, automotive & auto parts, machinery & equipment.
Managers participated in the survey were asked to mention to what extent recent global crisis affected
their firms, competitors, customers, suppliers and investments. Collected data is presented in frequency
tables (Table 1 – Table 5):
Table 1. The Level of Recent Global Crisis' Negative Effect On Firm
The Level of Crisis’ Effect On Firm Frequency Percent
None 1 1,1
Low 32 34,4
Moderate 39 41,9
High 11 11,8
Very High 10 10,8
Total 93 100,0
Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60 53
As depicted in Table 1, only 1,1% of the managers stated that recent global crisis did not affect firm
negatively. The level of recent global crisis’ negative effect on firm was mentioned as ‘low’ by 34,4%,
‘moderate’ by 41,9%, ‘high’ by 11,8% and ‘very high’ by 10,8%.
Table 2. The Level of Recent Global Crisis' Negative Effect on Competitors
The Level Of Crisis’ Effect On Competitors Frequency Percent
None
Low
0
27
0
29,0
Moderate 38 40,9
High 21 22,6
Very High 7 7,5
Total 93 100,0
As shown in Table 2, the level of recent global crisis’ negative effect on competitors was mentioned as
‘low’ by 29%, ‘moderate’ by 40,9%, ‘high’ by 22,6% and ‘very high’ by 7,5%.
Table 3. The Level Of Recent Global Crisis' Negative Effect On Suppliers
The Level Of Crisis’ Effect On Suppliers Frequency Percent
None 1 1,1
Low 34 36,6
Moderate 34 36,6
High 16 17,2
Very High 8 8,6
Total 93 100,0
According to Table 3, 98,9% of the managers stated that recent global crisis affected their suppliers
negatively. The level of recent global crisis’ negative effect on suppliers was mentioned as ‘low’ by
36,6%, ‘moderate’ by 36,6%, ‘high’ by 17,2% and ‘very high’ by 8,6%.
Table 4. The Level Of Recent Global Crisis' Negative Effect On Customers
The level of Crisis’ Effect On Customers Frequency Percent
None 3 3,2
Low 29 31,2
Moderate 23 24,7
High 25 26,9
Very High 13 14,0
Total 93 100,0
As shown in Table 4, 96,8% of the managers stated that recent global crisis affected customers
negatively. The level of recent global crisis’ negative effect on customers was mentioned as ‘low’ by
31,2%, ‘moderate’ by 24,7%, ‘high’ by 26,9% and ‘very high’ by 14%.
54 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
Table 5. The Level Of Recent Global Crisis' Negative Effect On Investments
The level of Crisis’ Effect On Investments Frequency Percent
None 8 8,6
Low 25 26,9
Moderate 22 23,7
High 23 24,7
Very High 15 16,1
Total 93 100,0
Table 5 indicates that only 8,6% of the managers stated that the recent global crisis did not influence
investments. The level of recent global crisis’ negative effect on investments was mentioned as ‘low’ by
26,9%, ‘moderate’ by 23,7%, ‘high’ by 24,7% and ‘very high’ by 16,1%.
Managers participated in the survey were asked to mention to what extent cost cutbacks were
implemented to cope with recent global crisis. Although cost cutbacks include 12 items (reducing staff,
improving employee productivity, improving supply conditions, eliminating shrinkages in supply usage,
reducing maintenance costs, reducing administrative expenses, leasing tools & machinery instead of
purchasing, reducing marketing expenses, reducing R&D expenses, negotiation with credit grantors on
falling interest rates, reducing costs by focusing on few customers, innovation for cost reduction), the
mean value of cost cutback is calculated instead of analyzing each item separately.
Table 6. Cost Cutbacks
Cost Cutbacks Frequency Percent
None 9 9,7
Low 33 35,5
Moderate 42 45,2
High 8 8,6
Very High 1 1,1
Total 93 100,0
As shown in Table 6, only 9,7% of the firms did not attempt to reduce costs. 35,5% of managers
stated that cost cutbacks were exercised at a low level; 45,2% stated as moderately and 8,6% stated as
highly. The percentage of top managers stating as very high is only 1,1% .
Managers were asked to mention to what extent revenue generating strategies were exercised in order
to cope with recent global crisis. Although revenue generating consists of 6 items (increasing accounts
receivables turnover rate, decreasing debt turnover rate, increasing sales without running up expenses,
implementation of price strategies to increase sales, strict inventory control, increasing stock turnover
rate); the mean value of revenue generating is calculated instead of analyzing each item separately.
Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60 55
Table 7. Revenue Generating
Revenue Generating Frequency Percent
None 4 4,3
Low 16 17,2
Moderate 35 37,6
High 33 35,5
Very High 5 5,4
Total 93 100,0
According to Table 7, only 4,3% of the firms did not attempt to increase revenue. 17,2% of managers
stated that revenue generating were exercised at a low level; 37,6% stated as moderately and 35,5%
stated as highly. The percentage of top managers stating as very high is only 5,4% .
Managers were asked to mention to what extent asset reduction strategies were exercised in order to
cope with recent global crisis. Although asset reduction includes 5 items (selling equipment and fixtures,
selling useless land and building, reduction in unprofitable investments, narrowing scope of business,
selling some business units); the mean value of asset reduction is calculated instead of analyzing each
item separately.
Table 8. Asset Reduction
Asset Reduction Frequency Percent
None 40 43,0
Low 35 37,6
Moderate 15 16,1
High 3 3,2
Very High 0 0
Total 93 100,0
As shown in Table 8, 43% of the respondents mentioned that asset reduction strategies were not
implemented. 37,6% of them stated that assets were reduced at a low level, 16,1% stated as moderately
and 3,2% stated as high.
Managers were asked to evaluate their business performance and mention to what extent increase in
sales, return on investment (ROI), operating profit margin, cash flow, employee morale and decrease in
unit labour costs were realized. Them mean value of business performance is calculated instead of
analyzing six items stated above.
56 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
Table 9. The Level of Positive Change in Business Performance
Business Performance Frequency Percent
None 14 15,1
Low 24 25,8
Moderate 41 44,1
High 13 14,0
Very High 1 1,1
Total 93 100,0
As shown in Table 9, 15,1% of managers mentioned that a positive change in business performance
was not realized. 25,8% of them mentioned that the level of positive change in business performance is
low; 44,1% stated as moderate and 14% stated as high. Only 1,1% of the respondents mentioned that the
level of positive change in business performance is very high.
According to Table 10, at the significance level of 0,01; the relationship between operating turnaround
strategies and business performance is significant.
Table 10. Chi-Square Test For Operating Turnaround Strategies And Business Performance
Value Asymp. Sig.
Operating Turnaround Strategies * Business Performance 19,475 0,0001 ***
“***” 0,01, “**” 0,05, “*” 0,1
According to Table 11, at the significance level of 0,01; only the relationship between business
performance and revenue generating is significant.
Table 11. Chi-Square Test For Business Performance, Cost Cutbacks, Revenue Generating, Asset Reduction
Value Asymp. Sig.
Business Performance * Cost Cutbacks 4,526 0,104
Business Performance * Revenue Generating 13,036 0,001 ***
Business Performance * Asset Reduction 0,429 0,807
“***” 0,01, “**” 0,05, “*” 0,1
As depicted in Table 12, the relationship between revenue generating and increase in ROI; the
relationship between revenue generating and increase in operating profit margins; the relationship
between revenue generating and decrease in unit labour costs are significant at the significance level of
0.1; 0,5; 0,01 respectively.
Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60 57
Table 12. Chi-Square Tests For Revenue Generating with Business Performance
Chi-Square Value Asymp. Sig.
Increase In Sales * Revenue Generating 1,671 0,434
Increase In ROI * Revenue Generating 5,710 0,058 *
Increase In Operating Profit Margin * Revenue Generating 7,605 0,022 **
Increase In Cash Flow * Revenue Generating 3,557 0,169
Increase In Employee Morale * Revenue Generating 2,583 0,275
Decrease In Unit Labour Costs * Revenue Generating 12,382 0,002 ***
“***” 0,01, “**” 0,05, “*” 0,1
As shown in Table 13, although a significant relationship does not exist between business performance
and cost cutbacks; at the significance level of 0,05, the relationship between increase in cash flow and
cost cutbacks is significant. Moreover, the relationship between decrease in unit labour costs and cost
cutbacks is significant at the significance level of 0,01.
Table 13. Chi-Square Tests For Cost Cutbacks with Business Performance
Chi-Square Value Asymp. Sig.
Increase In Sales * Cost Cutbacks 1,541 0,463
Increase In ROI * Cost Cutbacks 2,104 0,349
Increase In Operating Profit Margin * Cost Cutbacks 1,636 0,441
Increase In Cash Flow * Cost Cutbacks 7,260 0,027 **
Increase In Employee Morale * Cost Cutbacks 0,096 0,953
Decrease In Unit Labour Cost * Cost Cutbacks 19,990 0,0001 ***
“***” 0,01, “**” 0,05, “*” 0,1
According to Table 14, the relationship between decrease in unit labour costs and asset reduction is
significant at the significance level of 0,01.
Table 14. Chi-Square Tests For Asset Reduction With Business Performance Factors
Chi-Square Value Asymp. Sig.
Increase In Sales * Asset Reduction 1,748 0,417
Increase In ROI * Asset Reduction 1,331 0,514
Increase In Operating Profit Margin * Asset Reduction 0,379 0,828
Increase In Cash Flow * Asset Reduction 1,241 0,538
Increase In Employee Morale * Asset Reduction 1,087 0,581
Decrease In Unit Labour Cost * Asset Reduction 17,867 0,0001 ***
“***” 0,01, “**” 0,05, “*” 0,1
According to Table 15, there is a positive medium strength linear relationship between operating
turnaround strategies and business performance at the significance level of 0,01.
58 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
Table 15. Correlation Coefficients For Operating Turnaround Strategies With Business Performance
Business Performance
Operating Turnaround Strategies
Correlation Coefficient
Sig. (2-tailed)
0,458
0,0001***
“***” 0,01, “**” 0,05, “*” 0,1
According to Table 16, there is a positive medium strength linear relationship between revenue
generating and business performance at the significance level of 0,01.
Table 16. Correlation Coefficients for Business Performance with Revenue Generating, Asset & Cost Reduction
Business Performance
Cost Cutbacks
Correlation Coefficient
Sig. (2-tailed)
0,181
0,082
Revenue Generating
Correlation Coefficient
Sig. (2-tailed)
0,403
0,0001***
Asset Reduction
Correlation Coefficient
Sig. (2-tailed)
0,102
0,333
“***” 0,01, “**” 0,05, “*” 0,1
As indicated in Table 17, at the significance level of 0,01 there is a positive medium strength linear
relationship between decrease in unit labour costs and cost cutbacks, asset reduction, revenue generating
separately. Moreover, while there is a weak positive linear relationship between revenue generating and
increase in operating profit margin at the significance level of 0,01, the relationship between revenue
generating and increase in returns on investment is positive and medium strength at the significance level
of 0,01.
Tablo 17. Correlation Coefficients For Cost Cutbacks, Revenue Generating, Asset Reduction With Business Performance Variables
Cost Cutbacks Revenue Generating Asset Reduction
Increase In Sales
Correlation Coefficient
Sig. (2-tailed)
-0,039
0,708
0,216
0,037
-0,058
0,581
Increase In ROI
Correlation Coefficient
Sig. (2-tailed)
0,158
0,132
0,342
0,001***
0,132
0,208
Increase In Operating
Profit Margin
Correlation Coefficient
Sig. (2-tailed)
0,168
0,107
0,327
0,001***
0,034
0,746
Increase In Cash Flow
Correlation Coefficient
Sig. (2-tailed)
-0,028
0,792
0,195
0,061*
-0,083
0,427
Increase In Employee
Morale
Correlation Coefficient
Sig. (2-tailed)
0,076
0,467
0,176
0,091*
0,023
0,829
Decrease In Unit
Labour Costs
Correlation Coefficient
Sig. (2-tailed)
0,401
0,0001***
0,417
0,0001***
0,341
0,001***
“***” 0,01, “**” 0,05, “*” 0,1
Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60 59
In this study, log linear analysis in which categorical variables can be assessed in a linear model via
logarithmic value calculation is also conducted [27]. Log linear analysis starts with saturated model and
whole main and interaction effects are analyzed. 4. and 5. level of interactions are eliminated from the
model since their probabilities are higher than 0,05. To determine the main and interaction effects
(predictors of the model), partial association test is used. According to partial association test results,
main effects and Cost Cutback * Revenue Generating effects are statistically meaningful at the
significance level of 0,05. The interaction effect of Revenue Generating * Business Performance is also
statistically meaningful at the significance level of 0,1. After the main and interaction effects are
analyzed, an appropriate model including interactions of Cost Cutback * Revenue Generating; Cost
Cutback * Asset Reduction and Revenue Generating * Business Performance is decided by backward
elimination. Incoherent chi-square values prove that decided model fit well with data (chi-square value:
87,578 and asymp. Sig: 1 > 0,05).
The level of implementing revenue generating strategies has an influence on business performance.
Similar interaction also exists for Cost Cutback & Revenue Generating and Cost Cutback. In order to
detail the relationship between revenue generating and business performance, odds ratios are calculated
and found as 6,52. This ratio indicates that high level of implementing revenue generating strategies
causes business performance to increase 6,52 times.
5. Conclusion
In this study, it is aimed to determine whether operating turnaround strategies are implemented by
manufacturing firms operating in Malatya to cope with recent global crisis; if implemented to what extent
they are executed and how business performance is affected as a result. First of all, 98,9 of the managers
stated that recent global crisis affected their firms negatively. However, only 22,6 of them mentioned that
the level of recent global crisis’ negative effect on their firms is high and very high. As a result of
measures taken to step up production, stimulate foreign and domestic demand; reconstruction of banking
sector, fiscal disciplines and efforts against inflation after the period of 2001 [28], Turkey’s success in
exiting crisis can be said as the underlying reason of predominantly low and moderate levels of recent
global crisis’ negative effect.
Regarding to whether operating turnaround strategies were implemented in order to cope with recent
global crisis, cost cutbacks were pursued by 90,3%; revenue generating by 95,7% and asset reduction by
57%. However, percentages of high and very high levels of operating turnaround strategies
implementation are low; cost cutbacks by 9,7%, asset reduction by 3,2% and revenue generating by
40,9%. Rather than cost and asset reductions, more firms tend to exercise revenue generating strategies
without increasing costs. Majority of the top managers participated in the survey mentioned that they
exercised operating turnaround strategies as a response to recent global crisis. However, the research
results indicate that the level of implementation is predominantly low and moderate. Consisting with the
findings related to the level of recent global crisis’ negative effect on firms, majority of them did not face
with severe organizational declines and as a consequence, they did not need to implement high level of
operating turnaround practices for immediate recovery. According to the findings, there exists a positive
medium strength linear relationship between operating turnaround strategies and business performance.
When this relationship is analyzed in detail, of the three operating turnaround practices, positive
relationship exists only between revenue generating and business performance. Research results show that
high level of revenue generating implementation causes business performance to increase 6,52 times
indicating that firms’ attempts to generate revenues without increasing costs result in higher positive
changes in business performance.
60 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
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doc_974578146.pdf
Operating Turnaround Strategies During Crisis Periods A Research On Manufacturing Firms
Available online at www.sciencedirect.com Available online at www.sciencedirect.com
Procedia Social and Behavioral Sciences 24 (2011) 49–60
7
th
International Strategic Management Conference
Operating turnaround strategies during crisis periods: a
research on manufacturing firms
Mehmet Tikici
a
, Ece Omay
b
, Neslihan Derin
c
, eyda Nur Seçkin
d
Mehmet Cüreolu
e
a b c d
Inonu University, Malatya, 44280, Turkey
e
SMEs Development Organization, Malatya, 44200, Turkey
Abstract
Many firms face with organizational declines at some point in their life cycles because of both external and internal
factors. As an alternative response to the times of crisis, operating turnaround strategies are targeted to enhance a
firm’s chances of ending the threat and achieving sustainable performance recovery. In this study, it is aimed to
determine whether operating turnaround strategies are implemented by manufacturing firms operating in Malatya to
cope with recent global crisis; if implemented to what extent they are executed and how business performance is
affected as a result.
Keywords: Crisis, Operating turnaround strategies, Manufacturing firms
© 2011 Published by Elsevier Ltd. Selection and/or peer-review under responsibility 7
th
International
Strategic Management Conference
1. Introduction
Many firms today face with organizational declines at some point in their life cycles because of both
external and internal factors. Most often organizations enter the state of decline when they fail to
anticipate, recognize and adapt to external and internal pressures that threaten the organization’s
existence. As one of the important factors leading firms to decline, crises represent a significant threat to
firms’ high priority values and demand a time-pressured response [1].
As an alternative response to the times of crisis, operating turnaround strategies are targeted to enhance
a firm’s chances of ending the threat and achieving sustainable performance recovery. Operating
turnaround strategies can be defined as the set of consequential, directive decisions and actions aiming to
reverse a declining business as quickly as possible through asset reduction, cost cutbacks and revenue
generating [2]. In this study, it is aimed to determine whether operating turnaround strategies are
© 2011 Published by Elsevier Ltd. Open access under CC BY-NC-ND license.
Selection and/or peer-review under responsibility of 7th International Strategic Management Conference
1877–0428 © 2011 Published by Elsevier Ltd. Open access under CC BY-NC-ND license.
Selection and/or peer-review under responsibility of 7th International Strategic Management Conference
doi:10.1016/j.sbspro.2011.09.046
50 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
implemented by manufacturing firms operating in Malatya to cope with recent global crisis; if
implemented to what extent they are executed and how business performance is affected as a result. The
conceptual scope of this study is determined as examining operating turnaround strategy and its variants
in a theoretical frame by reviewing literature. The research part includes testing to what extent operating
turnaround strategies are implemented and their effects on business performance by statistical methods.
2. Operating Turnaround Strategies
According to Brandes and Brege, turnaround strategy can be defined as a process in which firms seek
to reverse the organizational decline and increase business performance [3]. Up to now, various
turnaround actions were described. Hofer (1980) described operating turnaround actions for firms
suffering from inefficiency or threat of bankruptcy and strategic turnaround actions for firms suffering
from improper alignment with their markets [4]. According to Hoffer, strategic turnaround choices
involve either a new way to compete in the existing business or entering an altogether new business [5].
On the other hand, operating turnaround strategies aim to improve efficiency through cost cutbacks,
increasing revenues, reducing assets and/or combination of those strategies [6].
A cost-cutting strategy involves cutbacks in discretionary expenses. Asset reduction strategy refers to
disposal of assets, especially fixed ones. Finally, a revenue generating strategy is an attempt to improve
cash flows by increasing sales [7]. According to Hofer, firms which are substantially below break-even
need to initiate asset reduction strategies. If firms operate near or slightly below break-even point then
they should implement cost cutting and revenue generating strategies. In case of an intermediate position
then a combination of these strategies should be exercised [8]. As noted by Hofer, there is a direct
relationship between the severity of the firm's financial downturn and the need for drastic cost and asset
reductions [9]. Since during downturn periods declining firms often suffer cash outflows, “asset and cost
reductions are urgently needed to 'stop the bleeding' before the firm fails” [10]. The important point here
is that financial downturn of the firm is considered as a temporary and reversible situation; aiming to
improve firm’s financial performance and protect it from negative external and internal pressures [9].
There are both external (fall in demand, increased competition, economic crises etc..) and internal
factors (weak financial control, failures to update products, invest in core competencies etc..) leading
firms to implement operating turnaround strategies. Of the external factors, economic crisis is a major
cause giving rise to organizational decline [11], resulting in sharp falls in sales, profits and productivity
[12]. Regardless of whether factors are external or internal, exercising operating turnaround actions
include undesirable situations and top management plays an important role in reversing decline [13]. As
indicated in previous researches, leaders and top management are two key factors in coping with hard
times and play a critical role in ending the threat, achieving sustainable recovery. They are the change
agents to reverse decline [14]. The important point here is top management’s awareness which depends
on interpretation of information about firm’s external and internal environment. So, first of all top
management should acknowledge that crisis exists and action is immediately needed [15].
Operating turnaround strategies are commonly exercised especially in early stages of a turnaround
period [11]. By asset and cost surgery and revenue generating, it is aimed to recover immediately and end
the threat [13]. On the other hand, to achieve sustainable recovery and high level of business performance
depends on determining the key factors of decline and taking proper precautions against them [16].
Focusing on solely operating turnaround strategies does not guarantee good performance and does not
result in long lasting success [17]. Most often declining firms suffer from more severe problems, so asset
and cost reduction are unlikely to eliminate the main problems causing firms to decline [10].
Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60 51
Firm’s capability of adaptation to its environment, crisis management skills, organizational structure,
resource dependency, strategic alternatives, impacts of external or internal crisis on firm [12] are critical
success factors for reversing poor performance [18]. Besides, according to Chowdhury and Lang, the
intensity of the crisis and resource availability are important for success of a turnaround effort [19]. On
the other hand, severe time pressures, limited resources, diminishing stakeholder support and competitor
actions are the factors challenging sustainable performance recovery [2].
2.1. Cost Cutbacks
When organizations enter the state of declining, most often they focus on cutting costs to reverse poor
performance and try to maintain or achieve a specific level of profitability. In order to make cuts, first of
all cost analysis is needed so that some cost centers can be eliminated or at least unnecessary expenses are
reduced significantly. Reducing maintenance costs, eliminating shrinkages in supply usage, leasing tools
& machinery instead of purchasing, reducing expenses in marketing and R&D are some examples for cost
reduction [20].
People-related expenses are one of the major cost items for firms. For this reason, most often firms
consider reducing headcount as an easy and obvious way to save on costs in hard times. However, layoffs
should not be taken into account as a key solution in cost reduction. Downsizing may cut labor costs in
the short run but may erode both employee and eventually customer loyalty in the long run [21]. If cost
cutbacks are realized just by reducing labour related expenses employee motivation and productivity
naturally will decrease and also key talents in the organization may be lost [22]. In workforce reduction,
the critical point is that employees who can be easily rehired and who are not involved in activities at the
core of the firm’s competitive advantage should be cut or employee productivity should be improved
[23].
2. 2. Revenue Generating
Improvement in capacity usage and production processes will be useful for revenue generating [24].
Revenue generating can be pursued by focusing on existing lines of products, initiating price cuts or
raising prices where products are price sensitive [17]. Moreover, increasing sales without running up
expenses, strict inventory control, decreasing debt turnover, increasing accounts receivables turnover rate
and stock turnover rate are other possible revenue generating actions [25].
2. 3. Asset Reduction
If a firm’s high priority values are under a significant threat and a firm has weak strategic alternatives,
asset reduction will be necessary. While reducing assets, it is aimed to enhance the efficiency of the
firm’s current operations through improved asset utilization. Operating asset reduction can be business
unit level sale, reduction in short term assets or closures and integration of fixed assets. Selling some
equipment & fixtures, useless land & building, narrowing scope of business, reducing unprofitable
investments and even selling some business units are examples for asset reduction [17].
3. Methodology
3.1. Research Goal
In this study, it is aimed to determine whether operating turnaround strategies are implemented by
manufacturing firms operating in Malatya to cope with the recent global crisis; if implemented to what
52 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
extent they are executed and how business performance is affected as a result. The conceptual scope of
this study is determined as examining operating turnaround strategy and its variants in a theoretical frame
by reviewing literature. The research part is composed of testing to what extent operating turnaround
strategies are implemented and their effects on business performance by statistical methods.
3.2. Sample and Data Collection
The population of the study consists of 252 manufacturing firms operating in Malatya Organized
Industrial Zone. Randomly sampling method is used with the sample size of 93. Data collection is
performed through questionnaire method applied to top managers with face to face interviews.
3.3. Measures
The questionnaire is composed of 5 sections including the level of recent global crisis’ negative effect
on firm and its stakeholders; asset reduction; cost cutbacks; revenue generating and business
performance. A five point Likert scale was used and all statements had response categories ranging from
‘none’ (1) to ‘very high’ (5). To what extent asset reduction (5 items), cost cutbacks (12 items) and
revenue generating (6 items) strategies were implemented was measured by totally 23 items adapted from
Eren (2005) [25]. Business performance was evaluated by six items adapted from Gowen & Tollen
(2002) [26]. In this scale, Cronbach Alfa coefficient is found as = 0.899 indicating that the scale is
highly reliable. The data is tested with frequency analysis, chi-square analysis and spearman correlation
coefficients and log linear analysis.
4. Research Results
Firm ages of the manufacturing firms participated in the survey are: 2 to 5 years (36, 6%), 6 to 12
years (32,3%) and 13 to 35 years (31,1%). 6,5 % of manufacturing firms’ employment size is 1-9; 50,5
% of firms’ employment size is 9-49; 38,7 % of is between 50 and 249 and finally 4,3 % of them has 250
and more employees. Business scopes of manufacturing firms participated in the survey are textile, food,
plastic, agriculture, metal, automotive & auto parts, machinery & equipment.
Managers participated in the survey were asked to mention to what extent recent global crisis affected
their firms, competitors, customers, suppliers and investments. Collected data is presented in frequency
tables (Table 1 – Table 5):
Table 1. The Level of Recent Global Crisis' Negative Effect On Firm
The Level of Crisis’ Effect On Firm Frequency Percent
None 1 1,1
Low 32 34,4
Moderate 39 41,9
High 11 11,8
Very High 10 10,8
Total 93 100,0
Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60 53
As depicted in Table 1, only 1,1% of the managers stated that recent global crisis did not affect firm
negatively. The level of recent global crisis’ negative effect on firm was mentioned as ‘low’ by 34,4%,
‘moderate’ by 41,9%, ‘high’ by 11,8% and ‘very high’ by 10,8%.
Table 2. The Level of Recent Global Crisis' Negative Effect on Competitors
The Level Of Crisis’ Effect On Competitors Frequency Percent
None
Low
0
27
0
29,0
Moderate 38 40,9
High 21 22,6
Very High 7 7,5
Total 93 100,0
As shown in Table 2, the level of recent global crisis’ negative effect on competitors was mentioned as
‘low’ by 29%, ‘moderate’ by 40,9%, ‘high’ by 22,6% and ‘very high’ by 7,5%.
Table 3. The Level Of Recent Global Crisis' Negative Effect On Suppliers
The Level Of Crisis’ Effect On Suppliers Frequency Percent
None 1 1,1
Low 34 36,6
Moderate 34 36,6
High 16 17,2
Very High 8 8,6
Total 93 100,0
According to Table 3, 98,9% of the managers stated that recent global crisis affected their suppliers
negatively. The level of recent global crisis’ negative effect on suppliers was mentioned as ‘low’ by
36,6%, ‘moderate’ by 36,6%, ‘high’ by 17,2% and ‘very high’ by 8,6%.
Table 4. The Level Of Recent Global Crisis' Negative Effect On Customers
The level of Crisis’ Effect On Customers Frequency Percent
None 3 3,2
Low 29 31,2
Moderate 23 24,7
High 25 26,9
Very High 13 14,0
Total 93 100,0
As shown in Table 4, 96,8% of the managers stated that recent global crisis affected customers
negatively. The level of recent global crisis’ negative effect on customers was mentioned as ‘low’ by
31,2%, ‘moderate’ by 24,7%, ‘high’ by 26,9% and ‘very high’ by 14%.
54 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
Table 5. The Level Of Recent Global Crisis' Negative Effect On Investments
The level of Crisis’ Effect On Investments Frequency Percent
None 8 8,6
Low 25 26,9
Moderate 22 23,7
High 23 24,7
Very High 15 16,1
Total 93 100,0
Table 5 indicates that only 8,6% of the managers stated that the recent global crisis did not influence
investments. The level of recent global crisis’ negative effect on investments was mentioned as ‘low’ by
26,9%, ‘moderate’ by 23,7%, ‘high’ by 24,7% and ‘very high’ by 16,1%.
Managers participated in the survey were asked to mention to what extent cost cutbacks were
implemented to cope with recent global crisis. Although cost cutbacks include 12 items (reducing staff,
improving employee productivity, improving supply conditions, eliminating shrinkages in supply usage,
reducing maintenance costs, reducing administrative expenses, leasing tools & machinery instead of
purchasing, reducing marketing expenses, reducing R&D expenses, negotiation with credit grantors on
falling interest rates, reducing costs by focusing on few customers, innovation for cost reduction), the
mean value of cost cutback is calculated instead of analyzing each item separately.
Table 6. Cost Cutbacks
Cost Cutbacks Frequency Percent
None 9 9,7
Low 33 35,5
Moderate 42 45,2
High 8 8,6
Very High 1 1,1
Total 93 100,0
As shown in Table 6, only 9,7% of the firms did not attempt to reduce costs. 35,5% of managers
stated that cost cutbacks were exercised at a low level; 45,2% stated as moderately and 8,6% stated as
highly. The percentage of top managers stating as very high is only 1,1% .
Managers were asked to mention to what extent revenue generating strategies were exercised in order
to cope with recent global crisis. Although revenue generating consists of 6 items (increasing accounts
receivables turnover rate, decreasing debt turnover rate, increasing sales without running up expenses,
implementation of price strategies to increase sales, strict inventory control, increasing stock turnover
rate); the mean value of revenue generating is calculated instead of analyzing each item separately.
Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60 55
Table 7. Revenue Generating
Revenue Generating Frequency Percent
None 4 4,3
Low 16 17,2
Moderate 35 37,6
High 33 35,5
Very High 5 5,4
Total 93 100,0
According to Table 7, only 4,3% of the firms did not attempt to increase revenue. 17,2% of managers
stated that revenue generating were exercised at a low level; 37,6% stated as moderately and 35,5%
stated as highly. The percentage of top managers stating as very high is only 5,4% .
Managers were asked to mention to what extent asset reduction strategies were exercised in order to
cope with recent global crisis. Although asset reduction includes 5 items (selling equipment and fixtures,
selling useless land and building, reduction in unprofitable investments, narrowing scope of business,
selling some business units); the mean value of asset reduction is calculated instead of analyzing each
item separately.
Table 8. Asset Reduction
Asset Reduction Frequency Percent
None 40 43,0
Low 35 37,6
Moderate 15 16,1
High 3 3,2
Very High 0 0
Total 93 100,0
As shown in Table 8, 43% of the respondents mentioned that asset reduction strategies were not
implemented. 37,6% of them stated that assets were reduced at a low level, 16,1% stated as moderately
and 3,2% stated as high.
Managers were asked to evaluate their business performance and mention to what extent increase in
sales, return on investment (ROI), operating profit margin, cash flow, employee morale and decrease in
unit labour costs were realized. Them mean value of business performance is calculated instead of
analyzing six items stated above.
56 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
Table 9. The Level of Positive Change in Business Performance
Business Performance Frequency Percent
None 14 15,1
Low 24 25,8
Moderate 41 44,1
High 13 14,0
Very High 1 1,1
Total 93 100,0
As shown in Table 9, 15,1% of managers mentioned that a positive change in business performance
was not realized. 25,8% of them mentioned that the level of positive change in business performance is
low; 44,1% stated as moderate and 14% stated as high. Only 1,1% of the respondents mentioned that the
level of positive change in business performance is very high.
According to Table 10, at the significance level of 0,01; the relationship between operating turnaround
strategies and business performance is significant.
Table 10. Chi-Square Test For Operating Turnaround Strategies And Business Performance
Value Asymp. Sig.
Operating Turnaround Strategies * Business Performance 19,475 0,0001 ***
“***” 0,01, “**” 0,05, “*” 0,1
According to Table 11, at the significance level of 0,01; only the relationship between business
performance and revenue generating is significant.
Table 11. Chi-Square Test For Business Performance, Cost Cutbacks, Revenue Generating, Asset Reduction
Value Asymp. Sig.
Business Performance * Cost Cutbacks 4,526 0,104
Business Performance * Revenue Generating 13,036 0,001 ***
Business Performance * Asset Reduction 0,429 0,807
“***” 0,01, “**” 0,05, “*” 0,1
As depicted in Table 12, the relationship between revenue generating and increase in ROI; the
relationship between revenue generating and increase in operating profit margins; the relationship
between revenue generating and decrease in unit labour costs are significant at the significance level of
0.1; 0,5; 0,01 respectively.
Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60 57
Table 12. Chi-Square Tests For Revenue Generating with Business Performance
Chi-Square Value Asymp. Sig.
Increase In Sales * Revenue Generating 1,671 0,434
Increase In ROI * Revenue Generating 5,710 0,058 *
Increase In Operating Profit Margin * Revenue Generating 7,605 0,022 **
Increase In Cash Flow * Revenue Generating 3,557 0,169
Increase In Employee Morale * Revenue Generating 2,583 0,275
Decrease In Unit Labour Costs * Revenue Generating 12,382 0,002 ***
“***” 0,01, “**” 0,05, “*” 0,1
As shown in Table 13, although a significant relationship does not exist between business performance
and cost cutbacks; at the significance level of 0,05, the relationship between increase in cash flow and
cost cutbacks is significant. Moreover, the relationship between decrease in unit labour costs and cost
cutbacks is significant at the significance level of 0,01.
Table 13. Chi-Square Tests For Cost Cutbacks with Business Performance
Chi-Square Value Asymp. Sig.
Increase In Sales * Cost Cutbacks 1,541 0,463
Increase In ROI * Cost Cutbacks 2,104 0,349
Increase In Operating Profit Margin * Cost Cutbacks 1,636 0,441
Increase In Cash Flow * Cost Cutbacks 7,260 0,027 **
Increase In Employee Morale * Cost Cutbacks 0,096 0,953
Decrease In Unit Labour Cost * Cost Cutbacks 19,990 0,0001 ***
“***” 0,01, “**” 0,05, “*” 0,1
According to Table 14, the relationship between decrease in unit labour costs and asset reduction is
significant at the significance level of 0,01.
Table 14. Chi-Square Tests For Asset Reduction With Business Performance Factors
Chi-Square Value Asymp. Sig.
Increase In Sales * Asset Reduction 1,748 0,417
Increase In ROI * Asset Reduction 1,331 0,514
Increase In Operating Profit Margin * Asset Reduction 0,379 0,828
Increase In Cash Flow * Asset Reduction 1,241 0,538
Increase In Employee Morale * Asset Reduction 1,087 0,581
Decrease In Unit Labour Cost * Asset Reduction 17,867 0,0001 ***
“***” 0,01, “**” 0,05, “*” 0,1
According to Table 15, there is a positive medium strength linear relationship between operating
turnaround strategies and business performance at the significance level of 0,01.
58 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
Table 15. Correlation Coefficients For Operating Turnaround Strategies With Business Performance
Business Performance
Operating Turnaround Strategies
Correlation Coefficient
Sig. (2-tailed)
0,458
0,0001***
“***” 0,01, “**” 0,05, “*” 0,1
According to Table 16, there is a positive medium strength linear relationship between revenue
generating and business performance at the significance level of 0,01.
Table 16. Correlation Coefficients for Business Performance with Revenue Generating, Asset & Cost Reduction
Business Performance
Cost Cutbacks
Correlation Coefficient
Sig. (2-tailed)
0,181
0,082
Revenue Generating
Correlation Coefficient
Sig. (2-tailed)
0,403
0,0001***
Asset Reduction
Correlation Coefficient
Sig. (2-tailed)
0,102
0,333
“***” 0,01, “**” 0,05, “*” 0,1
As indicated in Table 17, at the significance level of 0,01 there is a positive medium strength linear
relationship between decrease in unit labour costs and cost cutbacks, asset reduction, revenue generating
separately. Moreover, while there is a weak positive linear relationship between revenue generating and
increase in operating profit margin at the significance level of 0,01, the relationship between revenue
generating and increase in returns on investment is positive and medium strength at the significance level
of 0,01.
Tablo 17. Correlation Coefficients For Cost Cutbacks, Revenue Generating, Asset Reduction With Business Performance Variables
Cost Cutbacks Revenue Generating Asset Reduction
Increase In Sales
Correlation Coefficient
Sig. (2-tailed)
-0,039
0,708
0,216
0,037
-0,058
0,581
Increase In ROI
Correlation Coefficient
Sig. (2-tailed)
0,158
0,132
0,342
0,001***
0,132
0,208
Increase In Operating
Profit Margin
Correlation Coefficient
Sig. (2-tailed)
0,168
0,107
0,327
0,001***
0,034
0,746
Increase In Cash Flow
Correlation Coefficient
Sig. (2-tailed)
-0,028
0,792
0,195
0,061*
-0,083
0,427
Increase In Employee
Morale
Correlation Coefficient
Sig. (2-tailed)
0,076
0,467
0,176
0,091*
0,023
0,829
Decrease In Unit
Labour Costs
Correlation Coefficient
Sig. (2-tailed)
0,401
0,0001***
0,417
0,0001***
0,341
0,001***
“***” 0,01, “**” 0,05, “*” 0,1
Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60 59
In this study, log linear analysis in which categorical variables can be assessed in a linear model via
logarithmic value calculation is also conducted [27]. Log linear analysis starts with saturated model and
whole main and interaction effects are analyzed. 4. and 5. level of interactions are eliminated from the
model since their probabilities are higher than 0,05. To determine the main and interaction effects
(predictors of the model), partial association test is used. According to partial association test results,
main effects and Cost Cutback * Revenue Generating effects are statistically meaningful at the
significance level of 0,05. The interaction effect of Revenue Generating * Business Performance is also
statistically meaningful at the significance level of 0,1. After the main and interaction effects are
analyzed, an appropriate model including interactions of Cost Cutback * Revenue Generating; Cost
Cutback * Asset Reduction and Revenue Generating * Business Performance is decided by backward
elimination. Incoherent chi-square values prove that decided model fit well with data (chi-square value:
87,578 and asymp. Sig: 1 > 0,05).
The level of implementing revenue generating strategies has an influence on business performance.
Similar interaction also exists for Cost Cutback & Revenue Generating and Cost Cutback. In order to
detail the relationship between revenue generating and business performance, odds ratios are calculated
and found as 6,52. This ratio indicates that high level of implementing revenue generating strategies
causes business performance to increase 6,52 times.
5. Conclusion
In this study, it is aimed to determine whether operating turnaround strategies are implemented by
manufacturing firms operating in Malatya to cope with recent global crisis; if implemented to what extent
they are executed and how business performance is affected as a result. First of all, 98,9 of the managers
stated that recent global crisis affected their firms negatively. However, only 22,6 of them mentioned that
the level of recent global crisis’ negative effect on their firms is high and very high. As a result of
measures taken to step up production, stimulate foreign and domestic demand; reconstruction of banking
sector, fiscal disciplines and efforts against inflation after the period of 2001 [28], Turkey’s success in
exiting crisis can be said as the underlying reason of predominantly low and moderate levels of recent
global crisis’ negative effect.
Regarding to whether operating turnaround strategies were implemented in order to cope with recent
global crisis, cost cutbacks were pursued by 90,3%; revenue generating by 95,7% and asset reduction by
57%. However, percentages of high and very high levels of operating turnaround strategies
implementation are low; cost cutbacks by 9,7%, asset reduction by 3,2% and revenue generating by
40,9%. Rather than cost and asset reductions, more firms tend to exercise revenue generating strategies
without increasing costs. Majority of the top managers participated in the survey mentioned that they
exercised operating turnaround strategies as a response to recent global crisis. However, the research
results indicate that the level of implementation is predominantly low and moderate. Consisting with the
findings related to the level of recent global crisis’ negative effect on firms, majority of them did not face
with severe organizational declines and as a consequence, they did not need to implement high level of
operating turnaround practices for immediate recovery. According to the findings, there exists a positive
medium strength linear relationship between operating turnaround strategies and business performance.
When this relationship is analyzed in detail, of the three operating turnaround practices, positive
relationship exists only between revenue generating and business performance. Research results show that
high level of revenue generating implementation causes business performance to increase 6,52 times
indicating that firms’ attempts to generate revenues without increasing costs result in higher positive
changes in business performance.
60 Mehmet Tikici et al. / Procedia Social and Behavioral Sciences 24 (2011) 49–60
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