Description
Description explain about strategic choices to turnaround excellence.
???????????? ????? 67
Strategic Choices to Turnaround Excellence
????????????????
Chung Su, Tzong-Der Horng
???
1
????
2
1
Department of Business Administration, KYU
[email protected]
2
Department of International Business, KYU
[email protected]
Abstract
S.F.C. is the sole agent of N company which is a J apanese ship parts supplier. The
company has been passed more than one industrial life cycle since it founded. It faced the first
decline in sales when the R.O.C. government published the fishing trawler license prohibition
in 1975. S.F.C. implemented market development strategy immediately and overcame the
crisis of slump successfully. Gradually, S.F.C. forwarded to new life cycle.
However, the curve trend of sales indicates that the business environment is changing
and alarms the top of the company to work up the problem in time. In fact, the sales of S.F.C.
has seen turn down over two years. Thus, to work out a solution and to overcome the situation
is the most important mission to the company.
In this qualitative study, we induct all about environmental information and suggest two
strategies to solve problems of S.F.C. The first strategy is that S.F.C. was restructured and
become a holding company. The parent company holds a new company which is engaged in
developing ship parts agent market of mainland China. This solution is one of the acquisition
growth strategies. The second strategy is that S.F.C. was restructured and become a holding
company. The parent company holds a new company which is engaged in developing
generators agent market of mainland China. This solution is a mixed strategy of acquisition
growth strategy and collaborative growth strategy. Besides, this mixed strategy is a new
category of strategic transformation in theory.
Keywords: Turnaround, Repositioning, Strategic Transformation
???????????????? 68
? ?
S.F.C.????????????????????? N ???????????
??????????????????????????????????? 1975
?????????????????????????????????Market
development strategy?????????????????????????????
???????????
????????????????????????????????????
??????????????????????????????????????
?????????
???????????????????????????????????
??????????????????????????????????????
???????????????????Acquisition growth strategy?????????
??????????????????????????????????????
??????????????????????(Collaborative growth strategy)???
???????????????????????(Strategic transformation)????
????
???????????????????
1. Introduction
Some time, as Day and J ung stated, a company must change more quickly than this
gradual evolution allows; it need break with past, an accelerated pace of change-a
transformation. So does S.F.C., a member of ship parts industry. In fact, the sales performance
of Taiwan ship parts industry turned down by some factors, including the uncertainty of
global oil price, the trend of global economy, the open policy of mainland China and the
downward tendency of main ports in Taiwan these years. S.F.C. is also affected and is now at
the bottleneck of sales. It must react to the problem of external change as soon as possible or
it will lose market gradually. Thus, developing a strategy set to cope with gap between the
needs of the market and the capabilities of the enterprise is essential.
Based on the focused group interview, this paper proposes strategies which follow and
extend the approach of strategic transformation for top executives of S.F.C. to solve the
???????????? ????? 69
problem. According to the opinion of Pearce II and Robbins (2008), strategic transformation
is the last step in the process of business turnaround and it consists of two broad options:
company growth through acquisition or diversification and collaborative growth through
alliances or joint ventures. However, in this case, the study conducts all information and finds
that there is a third option: a mixture strategy of diversification and joint venture. This is a
new category of strategic transformation option.
As to the contribution of this study, the solutions of this case not only benefit S.F.C. as well as
enterprises under the same situations in practice but also advance strategic concepts in theory.
The purpose of this study is to address the question that in general, which strategic
moves are associated with successful turnaround? Before making out this question, we should
identify the terms, turnaround and repositioning, which are relative to the question.
2. Review of Literature
2.1 Turnaround
In 1975, Schendel and Patton presented a question. ”Why are some firms able to
break-out of stagnating or declining performance pattern?” Therefore, they were regarded as
the first that considered the cause of the turnaround situation in assessing the appropriateness
of turnaround strategies.
Although turnaround is an important concept that many firms would have to think of it in
their life cycles, not many studies have delved into the field between the mid-seventies and
the early nineties; thus, the topic is considered largely idiosyncratic and open-end.
The definition of turnaround is varying depending on aspects and research strategies.
Solnet also stated that turnaround ranges on a continuum from improving poor performance to
returning an organization from severe distress to acceptable levels of performance (Solnet,
2010). From the point of management aspects, some researchers view turnaround as a
performance issue in strategic management; some researchers view turnaround as a process in
organizational management. The research strategies also vary from one context to another. As
stated by Krueger and Willard (1991):
Researchers have asked managers for their perceptions of decline and recovery, gleaned
insights from secondary data and used data base.
From the point of strategic management, Krueger and Willard stated precisely that a
turnaround can be considered complete after there has been an increase in earnings before
taxes and extraordinary items during a minimum of four years following the nadir of the
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turnaround; Chathoth, et al. defined briefly that a turnaround is as the action taken to prevent
the occurrence of financial disaster. There are many studies focus their preference on the
strategies changes to prevent/cope with the occurrence of financial disaster. However, Pandit
(2000) suggested that defining turnarounds on the basis of profitability alone is problematic.
For example, profitability may decline very slowly at first and then suddenly plummet and
there may be a time lag between improvements in competitiveness and subsequent profit
improvement. Moreover, a gradual loss of competitiveness is often not reflected as a gradual
deterioration in profitability.
In terms of strategic changes, Hofer regarded the severity of the crisis as a contextual
factor determining the appropriateness of certain recovery actions. In situations where the
crisis facing the firm is not severe, small changes such as cost pruning can affect recovery.
However, when the crisis facing the firm is more severe, more dramatic changes such as asset
reduction or market reorientation are required (Pandit, 2000). He analyzed written cases on 12
poorly performing firms and found support for his theory that the appropriateness of a
strategic or operating turnaround depends on whether the firm's "illness" stems from poor
strategy or poor operations; In addition, Bibeault (1982) proposed a five stage model: top
management change, evaluation, emergency, stabilization and re-posturing/return to normal
growth(J eyavelu, 2009); Pearce and Robbins(1993), also reveal that organizational turnaround
can be achieved through a two-stage process: retrenchment and recovery. The division of
response tactics and turnaround stages broke out a series of arguments between researchers.
Hambrick and Schecter proposed a three strategy model and criticized that the work of
Schendel and Patton is subjective; the strategic turnaround seems not as realistic as Hofer’s
claim, causing 100 percent and 200 percent or more increases in market share, for most
mature businesses. They reasoned that 90 percent of all year–to-year market share changes of
mature businesses, according to PIMS data base, were less than five share-points. Presumably,
weak businesses would exhibit even a more negative distribution.
Their study presented that efficiency-oriented moves were associated with successful
turnaround. After this article, the discussion of entrepreneurial strategies was not many. The
main stream of research focused efforts on that the efficiency/retrenchment strategies are
necessary or not in the turnaround process.
Balgobin and Pandit proposed a five stage model which identified five overlapping but
distinct stages of the turnaround process. These five stages were termed: decline and crisis;
triggers for change; recovery strategy formulation; retrenchment and stabilization; and return
to growth. Afterward, Boyne proposed a framework, the 3R model, to describe the stages of
the turnaround process. He regarded that turnaround is influenced positively by retrenchment,
???????????? ????? 71
repositioning and reorganization.
No matter how many stages a turnaround process was divided. These models are static.
Chowdhury thought that turnaround is not a single state but a process composed of a sequence
of events, that is to say, turnaround involves change which is dynamic.
From the point of organizational management, Khandwalla suggests that turnaround is
simply recovery to profitability from a loss situation (Solnet, 2010). Heggde and Panikar
(2011) defined turnaround situation as one where a company suffers declining economic
performance for an extended period of time and the performance level is so low that the
survival of the company is in threat unless efforts are made to improve its performance.
Chowdhury (2002) defined turnaround to occur when a firm perseveres through an
existence-threatening performance decline; ends the threat with a combination of strategies,
systems, skills, and capabilities; and achieves sustainable performance recovery. According to
the definition, Chowdhury developed a four-stage model which divided the elements of
turnaround into three critical requirements, including incidents, events and concepts; the
model also explained how the elements germane to each stage. Based on the concept of
decline, Chowdhury extended the trace. Chowdhury (2002) stated:
The skeleton for the model comes mainly from the work of Bhave (1994), Krueger and
Willard (1991), and Weitzel and Jonsson (1989). We then derive the elements from a disparate
literature on decline and turnaround, place them in their respective stages, and, finally,
amalgamate the stage into a composite model. This approach is consistent with Weitzel and
Jonsson (1989).
Chowdhury opposed the view of strategic management that turnaround responses are
broadly categorized as strategic and operating. He proposed three events, domain definition;
scope overlap; and strategic contours, in this model to modify the dichotomy.
Despite disputes, the point of strategic management or the point of organizational
management, in disciplines. Managers are interesting in the treatments of responding decline.
Generally, managers with operating orientation or efficiency orientation, the solution of
turnaround is refocusing, a reduction in the size and scope, on the core business and the tools
of implement seem to focus on short-term tactics, for example, cost controls, asset reduction,
and revenue generation. Managers with strategic orientation or entrepreneurial orientation, the
tools of turnaround seem to focus on long-term moves such as new products, diversification,
vertical integration, new market share initiatives, and redefining the business.
In fact, the opinions to response decline are also various. The discussions about that the
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efficiency strategies are necessary or not have been last for two and half a decades. As to the
necessity of entrepreneurial strategies, the exploration about entrepreneurial turnarounds is
relative rare. However, as Castrogiovanni stated that traditional views on turnaround have
maintained that the response should match the problem. Thus, when the problems arise
primarily from inefficiency, retrenchment is warranted. However, when problems are strategic,
the turnaround effort should focus on entrepreneurial moves to reposition the business.
Obviously, entrepreneurial moves exhibit a high degree of correlation with repositioning in
the marketing.
2.2 Repositioning
The concept of repositioning can be found across a broad range of marketing or strategy
literature. A strategy of repositioning includes moving into new markets, seeking new sources
of revenue, developing new products, and altering the mission and image of a company
(Boyne and Meier, 2009). Therefore, repositioning has been variously employed as an
element to competitive strategy, as a mean of strategic change, as a category to product
strategy and as essential to corporate transformation. The term “repositioning” is conscious
adaptation to change a firm’s product, service, and market segments or even value proposition
to smooth the gap between the capabilities of the enterprise and the needs of the market. Thus,
Wild (2010) regarded repositioning as a strategy to create a new fit between the capabilities of
the firm and its external environment.
Boyne compared retrenchment with repositioning and stated that retrenchment can be
viewed as an “efficiency” strategy, repositioning is an “entrepreneurial” strategy that
emphasizes growth and innovation. This response to failure involves a new definition of the
mission and core activities of an organization, by becoming more dominant in an existing
market or by diversifying into new markets and products. He also regarded that repositioning
is the driving force of turnaround.
To identify repositioning strategies, Pearce and Robbins developed a model, strategic
transformation, to represent a set of indications of repositioning strategy.
A useful way to think about strategic transformation is in terms of the two broad options
that make it possible to achieve a competitive repositioning of the firm: company growth
through acquisition, and collaborative growth through alliances or joint ventures.
According to the opinion of Pearce and Robbins, it is obviously that strategic
transformation consists of two groups of strategy: acquisition growth strategies and
collaborative growth strategies. When strategic transformation is to be done with speed, the
strategies of acquiring or merging with another firm through horizontal acquisition, vertical
integration, related diversification, and conglomerate acquisition are favorable options. As to
???????????? ????? 73
collaborative growth strategies, they differ from each on many dimensions. For example, joint
ventures are particularly useful in enabling foreign companies to gain access to restricted
industries. An innovation is an idea, practice or object that is perceived as new by an
individual or a firm to create a new product or service. Strategic alliances are partnerships that
exist for a defined period, during which the partners contribute their resources to a
cooperative project while maintaining their independence.
All of these seven strategies were placed in the Figure 1. In spite of indicating the
company's strategic directions, these strategies represent the different magnitude of change
with the different speed of change.
Figure 1. Speed and magnitude of strategic transformation model Note. Resource from Pearce and
Robbins, 2008, p125
To summarize, when in a state of decline or poor performance, many businesses attempt
a “turnaround” (Solnet, 2010). Turnaround is a topic that involves lots of benefits to firms, but
only a few researchers explore the project. Schendel et al (1976), Hofer (1980), Bibeault
(1982), and Hambrick and Schecter (1983), were important antecedents of the project.
Especially, Bibeault (1982) was the first author of all to discuss a multistage model of
turnaround.
As Khandwalla (2001) stated, what makes turnarounds and turnaround research so
???????????????? 74
challenging is that it is a rich tapestry of information, actions and perspectives with
overlapping variables of interest. Generally, in terms of definition, there are two main streams,
strategic approach and organizational approach, in management. In terms of technique of
solution, there are at least two categories, retrenchment / efficiency strategy and repositioning/
entrepreneurial strategy for firms to deal with decline.
The model of strategic transformation derives from repositioning. The relationship
between repositioning and strategic transformation is that the repositioning takes a backseat to
a consideration of strategic transformation.
3. Methodology
3.1 Research Design
As a qualitative research tool, focus groups bring participants together to discuss a topic
which is mutual interest to both researcher and participants and to collect data. Thus, there are
two characteristics of a group: interaction and participants sharing a common identity relevant
to the discussion.
The major advantage of focus groups is that they offer the chance to observe participants
engaging in interaction that is concentrated on attitudes and experiences which are of interest
to the researcher. In addition to the advantage, the process of focus groups also offers new
idea regarding the topic, modification in opinion. For these reasons, we choose focus groups
to collect information in this research.
The goal of focus groups design is to reach the point of theoretical saturation. To achieve
the goal, we chose purposive sampling and planned multiple-category design in this case. The
purposive sampling was chosen because the topic about ship parts industry is not a common
issue; the knowledge resource and scope of participators is limited and specific, i.e., a
probability sampling method is not suitable in this case. As to multiple-category design, the
design allows us to make comparisons in two ways, from one group to another within a
category and from one category to another category. The major benefit of the design is that we
can obtain accurate information by way of triangulation process.
The groups we conduced include the engineers of N company (S1), the staffs of
Kaohsiung Harbor Bureau (R1), the employees of W shipyard at Kaohsiung Harbor (R2), the
employees of X shipyard at Mai Liao Harbor (R3), the employees of Y shipyard at Taichung
Harbor (R4), the staffs, managers; engineers; and sales, of S.F.C. which were divided into
three groups as E1, E2, and E3. We elaborate briefly on the framework of multiple-category
design as follows.
???????????? ????? 75
Table I multiple-category design
Category of supplier S1
Category of S.F.C. E1,E2, E3
Category of retailer (official) R1
Category of retailer (private) R2, R3, R4
3.2 Data Analysis
After comparing and contrasting results of every group, we extract points that are
relevant to competition of S.F.C. and conduct these data with TOWS Matrix, an analysis tool,
which is designed for matching the environmental threats and opportunities with the
company's weaknesses and especially its strengths.
The environmental threats to competition of S.F.C. are follows:
T1: Chinese port business, especially Shanghai port and Ningbo Port, develop radically.
T2: Chinese ship parts industry develops also speedy.
T3: The business of official retail is reduction because of out sourcing.
T4: Low price ship parts are popular.
The environmental opportunities to competition of S.F.C. are follows:
O1: Chinese government keeps the market-open policy
The company's weaknesses to competition of S.F.C. are follows:
W1: The speed of delivery is not competition.
W2: The language skill of engineers who were sent to N company receiving training is not
corresponding to requirement.
W3: The status of sole agent limits the attempt of S.F.C. to develop overseas market.
W4: S.F.C. seems entering a decline stage.
The company's strengths to competition of S.F.C. are follows:
S1: N company provides technology support only to S.F.C. in Taiwan.
S2: N company trusts S.F.C. and keeps good relationship with the company.
S3: S.F.C. owns good reputation in the ship parts industry.
S4: S.F.C. possesses the experiences of selling generators in Taiwan.
According to O1-W2 and O1-W3, we developed a strategy that S.F.C. was restructured
and become a holding company. The parent company holds a new company which is engaged
in developing ship parts agent market of mainland China. The strategy was named as strategy
L.
According to O1-S4, we developed a strategy that S.F.C. was restructured and become a
holding company. The parent company holds a new company which is engaged in developing
generators agent market of mainland China. The strategy was named as strategy M.
???????????????? 76
4. Results and Discussion
From the point of strategic transformation, Strategy L is, no doubt, a kind of joint venture
which is one of collaborative growth strategies. However, strategy M belongs to neither
acquisition growth strategies nor collaborative growth strategies. In fact, this strategy is a mix
of acquisition growth strategy and collaborative growth strategy, i.e., this is a new category of
strategic transformation.
Figure 2. The Modified Speed and magnitude of strategic transformation model
In practice, the main distinctive competence, the unique strength to achieve superior
efficiency; quality; innovation or customer responsiveness, of S.F.C. is technology which is
supported from N company. The works of ship parts such as overhaul, renovation, and repair
need expertise, because these works influence life span of ship parts and operational safety of
a ship deeply. In ship parts industry, the company that has the capability to reduce these
perceived risks of customers is S.F.C.
According to the opinion of Hill and J ones, the distinctive competencies of an
organization arise from two complementary sources: its resources and capabilities. Grant also
stated that a firm’s ability to earn a rate of profit in excess of its cost of capital depends on two
factors: the attractiveness of the industry in which it is located, and its establishment of
???????????? ????? 77
competitive advantage over rivals. Moreover, the ability to establish competitive advantage is
much more important than that to build up industry attractiveness. In the context of ship parts,
S.F.C. possesses, both sole agent status of N company and word of mouth in service, barriers
to enter which is the character of industry attractiveness. The achievement in the industry is
incomparable under current circumstance. What the company needs to improve is competitive
advantage, for example, access to low price input.
The results of focus groups interview reveal that China market is a significant
opportunity that associated with obtaining low price input and high quality human resource.
However, the sole agent contract that S.F.C. had signed with N company is a limitation for
S.F.C. to invest China market at this moment. On the other hand, China market also attracts
J apanese businessmen. The volume of trade between J apan and China has been in excess of
that between J apan and America since 2004. For J apanese businessmen, it is predictable that
the trend of inclining to China market would not be changed. The external environment offers
an opportunity to S.F.C. playing the “market gateway to the P.R.C.” for J apanese supplier.
Thus, the solution that S.F.C. become a holding company and holds a new company to
develop China market actually benefits both S.F.C. and N company.
The contribution of this research in theory is to propose a modified model in strategic
transformation on the basis of Pearce and Robbins. In this model, we propose a strategy other
than acquisition growth strategies and collaborative growth strategies to deal with decline in
practice.
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doc_910324908.pdf
Description explain about strategic choices to turnaround excellence.
???????????? ????? 67
Strategic Choices to Turnaround Excellence
????????????????
Chung Su, Tzong-Der Horng
???
1
????
2
1
Department of Business Administration, KYU
[email protected]
2
Department of International Business, KYU
[email protected]
Abstract
S.F.C. is the sole agent of N company which is a J apanese ship parts supplier. The
company has been passed more than one industrial life cycle since it founded. It faced the first
decline in sales when the R.O.C. government published the fishing trawler license prohibition
in 1975. S.F.C. implemented market development strategy immediately and overcame the
crisis of slump successfully. Gradually, S.F.C. forwarded to new life cycle.
However, the curve trend of sales indicates that the business environment is changing
and alarms the top of the company to work up the problem in time. In fact, the sales of S.F.C.
has seen turn down over two years. Thus, to work out a solution and to overcome the situation
is the most important mission to the company.
In this qualitative study, we induct all about environmental information and suggest two
strategies to solve problems of S.F.C. The first strategy is that S.F.C. was restructured and
become a holding company. The parent company holds a new company which is engaged in
developing ship parts agent market of mainland China. This solution is one of the acquisition
growth strategies. The second strategy is that S.F.C. was restructured and become a holding
company. The parent company holds a new company which is engaged in developing
generators agent market of mainland China. This solution is a mixed strategy of acquisition
growth strategy and collaborative growth strategy. Besides, this mixed strategy is a new
category of strategic transformation in theory.
Keywords: Turnaround, Repositioning, Strategic Transformation
???????????????? 68
? ?
S.F.C.????????????????????? N ???????????
??????????????????????????????????? 1975
?????????????????????????????????Market
development strategy?????????????????????????????
???????????
????????????????????????????????????
??????????????????????????????????????
?????????
???????????????????????????????????
??????????????????????????????????????
???????????????????Acquisition growth strategy?????????
??????????????????????????????????????
??????????????????????(Collaborative growth strategy)???
???????????????????????(Strategic transformation)????
????
???????????????????
1. Introduction
Some time, as Day and J ung stated, a company must change more quickly than this
gradual evolution allows; it need break with past, an accelerated pace of change-a
transformation. So does S.F.C., a member of ship parts industry. In fact, the sales performance
of Taiwan ship parts industry turned down by some factors, including the uncertainty of
global oil price, the trend of global economy, the open policy of mainland China and the
downward tendency of main ports in Taiwan these years. S.F.C. is also affected and is now at
the bottleneck of sales. It must react to the problem of external change as soon as possible or
it will lose market gradually. Thus, developing a strategy set to cope with gap between the
needs of the market and the capabilities of the enterprise is essential.
Based on the focused group interview, this paper proposes strategies which follow and
extend the approach of strategic transformation for top executives of S.F.C. to solve the
???????????? ????? 69
problem. According to the opinion of Pearce II and Robbins (2008), strategic transformation
is the last step in the process of business turnaround and it consists of two broad options:
company growth through acquisition or diversification and collaborative growth through
alliances or joint ventures. However, in this case, the study conducts all information and finds
that there is a third option: a mixture strategy of diversification and joint venture. This is a
new category of strategic transformation option.
As to the contribution of this study, the solutions of this case not only benefit S.F.C. as well as
enterprises under the same situations in practice but also advance strategic concepts in theory.
The purpose of this study is to address the question that in general, which strategic
moves are associated with successful turnaround? Before making out this question, we should
identify the terms, turnaround and repositioning, which are relative to the question.
2. Review of Literature
2.1 Turnaround
In 1975, Schendel and Patton presented a question. ”Why are some firms able to
break-out of stagnating or declining performance pattern?” Therefore, they were regarded as
the first that considered the cause of the turnaround situation in assessing the appropriateness
of turnaround strategies.
Although turnaround is an important concept that many firms would have to think of it in
their life cycles, not many studies have delved into the field between the mid-seventies and
the early nineties; thus, the topic is considered largely idiosyncratic and open-end.
The definition of turnaround is varying depending on aspects and research strategies.
Solnet also stated that turnaround ranges on a continuum from improving poor performance to
returning an organization from severe distress to acceptable levels of performance (Solnet,
2010). From the point of management aspects, some researchers view turnaround as a
performance issue in strategic management; some researchers view turnaround as a process in
organizational management. The research strategies also vary from one context to another. As
stated by Krueger and Willard (1991):
Researchers have asked managers for their perceptions of decline and recovery, gleaned
insights from secondary data and used data base.
From the point of strategic management, Krueger and Willard stated precisely that a
turnaround can be considered complete after there has been an increase in earnings before
taxes and extraordinary items during a minimum of four years following the nadir of the
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turnaround; Chathoth, et al. defined briefly that a turnaround is as the action taken to prevent
the occurrence of financial disaster. There are many studies focus their preference on the
strategies changes to prevent/cope with the occurrence of financial disaster. However, Pandit
(2000) suggested that defining turnarounds on the basis of profitability alone is problematic.
For example, profitability may decline very slowly at first and then suddenly plummet and
there may be a time lag between improvements in competitiveness and subsequent profit
improvement. Moreover, a gradual loss of competitiveness is often not reflected as a gradual
deterioration in profitability.
In terms of strategic changes, Hofer regarded the severity of the crisis as a contextual
factor determining the appropriateness of certain recovery actions. In situations where the
crisis facing the firm is not severe, small changes such as cost pruning can affect recovery.
However, when the crisis facing the firm is more severe, more dramatic changes such as asset
reduction or market reorientation are required (Pandit, 2000). He analyzed written cases on 12
poorly performing firms and found support for his theory that the appropriateness of a
strategic or operating turnaround depends on whether the firm's "illness" stems from poor
strategy or poor operations; In addition, Bibeault (1982) proposed a five stage model: top
management change, evaluation, emergency, stabilization and re-posturing/return to normal
growth(J eyavelu, 2009); Pearce and Robbins(1993), also reveal that organizational turnaround
can be achieved through a two-stage process: retrenchment and recovery. The division of
response tactics and turnaround stages broke out a series of arguments between researchers.
Hambrick and Schecter proposed a three strategy model and criticized that the work of
Schendel and Patton is subjective; the strategic turnaround seems not as realistic as Hofer’s
claim, causing 100 percent and 200 percent or more increases in market share, for most
mature businesses. They reasoned that 90 percent of all year–to-year market share changes of
mature businesses, according to PIMS data base, were less than five share-points. Presumably,
weak businesses would exhibit even a more negative distribution.
Their study presented that efficiency-oriented moves were associated with successful
turnaround. After this article, the discussion of entrepreneurial strategies was not many. The
main stream of research focused efforts on that the efficiency/retrenchment strategies are
necessary or not in the turnaround process.
Balgobin and Pandit proposed a five stage model which identified five overlapping but
distinct stages of the turnaround process. These five stages were termed: decline and crisis;
triggers for change; recovery strategy formulation; retrenchment and stabilization; and return
to growth. Afterward, Boyne proposed a framework, the 3R model, to describe the stages of
the turnaround process. He regarded that turnaround is influenced positively by retrenchment,
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repositioning and reorganization.
No matter how many stages a turnaround process was divided. These models are static.
Chowdhury thought that turnaround is not a single state but a process composed of a sequence
of events, that is to say, turnaround involves change which is dynamic.
From the point of organizational management, Khandwalla suggests that turnaround is
simply recovery to profitability from a loss situation (Solnet, 2010). Heggde and Panikar
(2011) defined turnaround situation as one where a company suffers declining economic
performance for an extended period of time and the performance level is so low that the
survival of the company is in threat unless efforts are made to improve its performance.
Chowdhury (2002) defined turnaround to occur when a firm perseveres through an
existence-threatening performance decline; ends the threat with a combination of strategies,
systems, skills, and capabilities; and achieves sustainable performance recovery. According to
the definition, Chowdhury developed a four-stage model which divided the elements of
turnaround into three critical requirements, including incidents, events and concepts; the
model also explained how the elements germane to each stage. Based on the concept of
decline, Chowdhury extended the trace. Chowdhury (2002) stated:
The skeleton for the model comes mainly from the work of Bhave (1994), Krueger and
Willard (1991), and Weitzel and Jonsson (1989). We then derive the elements from a disparate
literature on decline and turnaround, place them in their respective stages, and, finally,
amalgamate the stage into a composite model. This approach is consistent with Weitzel and
Jonsson (1989).
Chowdhury opposed the view of strategic management that turnaround responses are
broadly categorized as strategic and operating. He proposed three events, domain definition;
scope overlap; and strategic contours, in this model to modify the dichotomy.
Despite disputes, the point of strategic management or the point of organizational
management, in disciplines. Managers are interesting in the treatments of responding decline.
Generally, managers with operating orientation or efficiency orientation, the solution of
turnaround is refocusing, a reduction in the size and scope, on the core business and the tools
of implement seem to focus on short-term tactics, for example, cost controls, asset reduction,
and revenue generation. Managers with strategic orientation or entrepreneurial orientation, the
tools of turnaround seem to focus on long-term moves such as new products, diversification,
vertical integration, new market share initiatives, and redefining the business.
In fact, the opinions to response decline are also various. The discussions about that the
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efficiency strategies are necessary or not have been last for two and half a decades. As to the
necessity of entrepreneurial strategies, the exploration about entrepreneurial turnarounds is
relative rare. However, as Castrogiovanni stated that traditional views on turnaround have
maintained that the response should match the problem. Thus, when the problems arise
primarily from inefficiency, retrenchment is warranted. However, when problems are strategic,
the turnaround effort should focus on entrepreneurial moves to reposition the business.
Obviously, entrepreneurial moves exhibit a high degree of correlation with repositioning in
the marketing.
2.2 Repositioning
The concept of repositioning can be found across a broad range of marketing or strategy
literature. A strategy of repositioning includes moving into new markets, seeking new sources
of revenue, developing new products, and altering the mission and image of a company
(Boyne and Meier, 2009). Therefore, repositioning has been variously employed as an
element to competitive strategy, as a mean of strategic change, as a category to product
strategy and as essential to corporate transformation. The term “repositioning” is conscious
adaptation to change a firm’s product, service, and market segments or even value proposition
to smooth the gap between the capabilities of the enterprise and the needs of the market. Thus,
Wild (2010) regarded repositioning as a strategy to create a new fit between the capabilities of
the firm and its external environment.
Boyne compared retrenchment with repositioning and stated that retrenchment can be
viewed as an “efficiency” strategy, repositioning is an “entrepreneurial” strategy that
emphasizes growth and innovation. This response to failure involves a new definition of the
mission and core activities of an organization, by becoming more dominant in an existing
market or by diversifying into new markets and products. He also regarded that repositioning
is the driving force of turnaround.
To identify repositioning strategies, Pearce and Robbins developed a model, strategic
transformation, to represent a set of indications of repositioning strategy.
A useful way to think about strategic transformation is in terms of the two broad options
that make it possible to achieve a competitive repositioning of the firm: company growth
through acquisition, and collaborative growth through alliances or joint ventures.
According to the opinion of Pearce and Robbins, it is obviously that strategic
transformation consists of two groups of strategy: acquisition growth strategies and
collaborative growth strategies. When strategic transformation is to be done with speed, the
strategies of acquiring or merging with another firm through horizontal acquisition, vertical
integration, related diversification, and conglomerate acquisition are favorable options. As to
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collaborative growth strategies, they differ from each on many dimensions. For example, joint
ventures are particularly useful in enabling foreign companies to gain access to restricted
industries. An innovation is an idea, practice or object that is perceived as new by an
individual or a firm to create a new product or service. Strategic alliances are partnerships that
exist for a defined period, during which the partners contribute their resources to a
cooperative project while maintaining their independence.
All of these seven strategies were placed in the Figure 1. In spite of indicating the
company's strategic directions, these strategies represent the different magnitude of change
with the different speed of change.
Figure 1. Speed and magnitude of strategic transformation model Note. Resource from Pearce and
Robbins, 2008, p125
To summarize, when in a state of decline or poor performance, many businesses attempt
a “turnaround” (Solnet, 2010). Turnaround is a topic that involves lots of benefits to firms, but
only a few researchers explore the project. Schendel et al (1976), Hofer (1980), Bibeault
(1982), and Hambrick and Schecter (1983), were important antecedents of the project.
Especially, Bibeault (1982) was the first author of all to discuss a multistage model of
turnaround.
As Khandwalla (2001) stated, what makes turnarounds and turnaround research so
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challenging is that it is a rich tapestry of information, actions and perspectives with
overlapping variables of interest. Generally, in terms of definition, there are two main streams,
strategic approach and organizational approach, in management. In terms of technique of
solution, there are at least two categories, retrenchment / efficiency strategy and repositioning/
entrepreneurial strategy for firms to deal with decline.
The model of strategic transformation derives from repositioning. The relationship
between repositioning and strategic transformation is that the repositioning takes a backseat to
a consideration of strategic transformation.
3. Methodology
3.1 Research Design
As a qualitative research tool, focus groups bring participants together to discuss a topic
which is mutual interest to both researcher and participants and to collect data. Thus, there are
two characteristics of a group: interaction and participants sharing a common identity relevant
to the discussion.
The major advantage of focus groups is that they offer the chance to observe participants
engaging in interaction that is concentrated on attitudes and experiences which are of interest
to the researcher. In addition to the advantage, the process of focus groups also offers new
idea regarding the topic, modification in opinion. For these reasons, we choose focus groups
to collect information in this research.
The goal of focus groups design is to reach the point of theoretical saturation. To achieve
the goal, we chose purposive sampling and planned multiple-category design in this case. The
purposive sampling was chosen because the topic about ship parts industry is not a common
issue; the knowledge resource and scope of participators is limited and specific, i.e., a
probability sampling method is not suitable in this case. As to multiple-category design, the
design allows us to make comparisons in two ways, from one group to another within a
category and from one category to another category. The major benefit of the design is that we
can obtain accurate information by way of triangulation process.
The groups we conduced include the engineers of N company (S1), the staffs of
Kaohsiung Harbor Bureau (R1), the employees of W shipyard at Kaohsiung Harbor (R2), the
employees of X shipyard at Mai Liao Harbor (R3), the employees of Y shipyard at Taichung
Harbor (R4), the staffs, managers; engineers; and sales, of S.F.C. which were divided into
three groups as E1, E2, and E3. We elaborate briefly on the framework of multiple-category
design as follows.
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Table I multiple-category design
Category of supplier S1
Category of S.F.C. E1,E2, E3
Category of retailer (official) R1
Category of retailer (private) R2, R3, R4
3.2 Data Analysis
After comparing and contrasting results of every group, we extract points that are
relevant to competition of S.F.C. and conduct these data with TOWS Matrix, an analysis tool,
which is designed for matching the environmental threats and opportunities with the
company's weaknesses and especially its strengths.
The environmental threats to competition of S.F.C. are follows:
T1: Chinese port business, especially Shanghai port and Ningbo Port, develop radically.
T2: Chinese ship parts industry develops also speedy.
T3: The business of official retail is reduction because of out sourcing.
T4: Low price ship parts are popular.
The environmental opportunities to competition of S.F.C. are follows:
O1: Chinese government keeps the market-open policy
The company's weaknesses to competition of S.F.C. are follows:
W1: The speed of delivery is not competition.
W2: The language skill of engineers who were sent to N company receiving training is not
corresponding to requirement.
W3: The status of sole agent limits the attempt of S.F.C. to develop overseas market.
W4: S.F.C. seems entering a decline stage.
The company's strengths to competition of S.F.C. are follows:
S1: N company provides technology support only to S.F.C. in Taiwan.
S2: N company trusts S.F.C. and keeps good relationship with the company.
S3: S.F.C. owns good reputation in the ship parts industry.
S4: S.F.C. possesses the experiences of selling generators in Taiwan.
According to O1-W2 and O1-W3, we developed a strategy that S.F.C. was restructured
and become a holding company. The parent company holds a new company which is engaged
in developing ship parts agent market of mainland China. The strategy was named as strategy
L.
According to O1-S4, we developed a strategy that S.F.C. was restructured and become a
holding company. The parent company holds a new company which is engaged in developing
generators agent market of mainland China. The strategy was named as strategy M.
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4. Results and Discussion
From the point of strategic transformation, Strategy L is, no doubt, a kind of joint venture
which is one of collaborative growth strategies. However, strategy M belongs to neither
acquisition growth strategies nor collaborative growth strategies. In fact, this strategy is a mix
of acquisition growth strategy and collaborative growth strategy, i.e., this is a new category of
strategic transformation.
Figure 2. The Modified Speed and magnitude of strategic transformation model
In practice, the main distinctive competence, the unique strength to achieve superior
efficiency; quality; innovation or customer responsiveness, of S.F.C. is technology which is
supported from N company. The works of ship parts such as overhaul, renovation, and repair
need expertise, because these works influence life span of ship parts and operational safety of
a ship deeply. In ship parts industry, the company that has the capability to reduce these
perceived risks of customers is S.F.C.
According to the opinion of Hill and J ones, the distinctive competencies of an
organization arise from two complementary sources: its resources and capabilities. Grant also
stated that a firm’s ability to earn a rate of profit in excess of its cost of capital depends on two
factors: the attractiveness of the industry in which it is located, and its establishment of
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competitive advantage over rivals. Moreover, the ability to establish competitive advantage is
much more important than that to build up industry attractiveness. In the context of ship parts,
S.F.C. possesses, both sole agent status of N company and word of mouth in service, barriers
to enter which is the character of industry attractiveness. The achievement in the industry is
incomparable under current circumstance. What the company needs to improve is competitive
advantage, for example, access to low price input.
The results of focus groups interview reveal that China market is a significant
opportunity that associated with obtaining low price input and high quality human resource.
However, the sole agent contract that S.F.C. had signed with N company is a limitation for
S.F.C. to invest China market at this moment. On the other hand, China market also attracts
J apanese businessmen. The volume of trade between J apan and China has been in excess of
that between J apan and America since 2004. For J apanese businessmen, it is predictable that
the trend of inclining to China market would not be changed. The external environment offers
an opportunity to S.F.C. playing the “market gateway to the P.R.C.” for J apanese supplier.
Thus, the solution that S.F.C. become a holding company and holds a new company to
develop China market actually benefits both S.F.C. and N company.
The contribution of this research in theory is to propose a modified model in strategic
transformation on the basis of Pearce and Robbins. In this model, we propose a strategy other
than acquisition growth strategies and collaborative growth strategies to deal with decline in
practice.
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