Page 5 - Turnaround Strategy

Are you able to reduce or delay salary increases or bonus payouts? (3)
3. Yes, we can substantially reduce salary increases or bonus payouts 2. Yes, we can somewhat reduce salary increases or bonus payouts 1. No, we cannot reduce, or delay salary increases or bonus payouts 0. Not sure
Your Answer: 2 | Yes, we can somewhat reduce salary increases or bonus payouts
Are you able to reduce the number of employees in line with core functions? (3)
3. Yes, we can substantially reduce staff numbers not linked to core functions 2. Yes, we can somewhat reduce staff numbers not linked to core functions 1. No, we cannot reduce staff numbers
0. Not sure
Your Answer: 2 | Yes, we can somewhat reduce staff numbers not linked to core functions
Can the company’s capital structure be reworked? (3)
3. Yes, we can substantially rework the company’s capital structure 2. Yes, we can somewhat rework the company’s capital structure 1. No, we cannot rework the company’s capital structure
0. Not sure
Your Answer: 2 | Yes, we can somewhat rework the company’s capital structure
Are you able to reduce production costs relative to that of competitors? (3)
3. Yes, we can substantially reduce production costs 2. Yes, we can somewhat reduce production costs 1. No, we cannot reduce production costs
0. Not sure
Your Answer: 0 | Not sure
Asset Retrenchment (2 Questions) (Total Score 7)
Asset retrenchment is often pursued in concert with, or immediately following a cost-efficiency drive. An asset retrenchment strategy is where areas of the firm that are underperforming are appraised to determine if efficiencies can be made, or whether it is best to divest the asset completely rather than allowing it to continue operating at a weaker level than the rest of the firm. Some studies indicated that retrenchment was implemented only if cost efficiency strategies did not have enough impact to stabilise the firm’s finances, although in the majority of cases it is the natural second step following cost efficiencies.
The usefulness of asset retrenchment as a component of a turnaround strategy depends on the firm’s ability to generate cash flow from any disposal. It is often assumed that this will be the case, yet there can be significant difficulties surrounding simple disposal and cash generation due to asset specificity, liquidity in the secondhand market, and exit barriers. Similarly, where asset retrenchment involves the disposal of aging assets and their replacement with new, state-of-the-art counterparts, for example investing in new plant, equipment, or technology, careful assessment is obviously required to ensure that the efficiency savings will more than cover the investment and implementation costs.
Are you able to improve asset utilization? (3)
3. Yes, we are able to substantially improve asset utilization 2. Yes, we are able to somewhat improve asset utilization 1. No, we are not able to improve asset utilization
0. Not sure
Your Answer: 2 | Yes, we are able to somewhat improve asset utilization
Are you able to divest in underperforming assets? (4)
4. Yes, there are many assets we can retrench 3. Yes, there are some assets we can retrench 2. Yes, there are a few assets we can retrench 1. No, we cannot retrench any assets
0. Not sure
Your Answer: 3 | Yes, there are many assets we can retrench