Last updated: Thursday, May 23, 2013
The Nature of Restructuring is Changing Business StrategyPosted: Wednesday, April 25, 2012
While the global economic crisis is not over and the domestic economy is still slowing down; all enterprises, regardless of operating time, ownership models or scales, have to restructure to adapt themselves to a new context to survive and develop. And, when they want to expand or shrink their scales, they will inevitably have to design reform processes in the company of business objectives. The nature of restructuring is changing business strategy, said Dr Pham Thu Hang, General Secretary of the Vietnam Chamber of Commerce and Industry (VCCI), and Director of SME Promotion Centre, in an interview with the Vietnam Business Magazine on corporate restructuring. Thanh Yen reports.
Corporate restructuring and economic restructuring have become common concepts in daily business life. However, do you think actual corporate restructuring is strong enough?
There are many reasons why companies need a big solution like restructuring. According to statistics, many successful companies in the world perform frequent reshuffles, even every 7 - 9 years. Leaders of these businesses are visionary in working out strategies and designing new models for their companies.
Another reason for corporate restructuring comes from competition pressures on the market. For instance, there is a demand for business reshuffle under the current context of economic crisis. When companies want to expand or shrink their scales, they will inevitably have to design reform processes in the company of business objectives. That is also restructuring.
However, it is important that companies have to identify their positions and influences in production chains and service supply chains. That positioning is also considered in larger aspects: Position in the economy, in the industry, and in an economic area. This helps companies determine best restructuring contents.
This is why businesses speak a lot about corporate restructuring but they do not do it strongly because they have not really defined their positions.
This means enterprises must know themselves. So, what aspects do they need to look at?
In fact, many companies thought that they have restructured but they do not make any major changes to production and business efficiency. According to surveys, some only reshuffled personnel and waited for improvement from these position changes. This is inefficient. To restructure successfully, companies need to analyse, and evaluate technical factors: capital, target market and organizational structure.
In Annual Business Report 2010 issued by the Vietnam Chamber of Commerce and Industry (VCCI), authors noted that there was a rapid movement in some new and highly profitable sectors like information - communications, scientific and technological services and education but companies in these industries did not have large scales and did not create many jobs. One year later, when VCCI issued the Annual Business Report 2011, changes in these companies did not improve much.
Similarly, VCCI’s reports showed traditional manufacturing industries of Vietnam could not change technologies to generate higher value. As such, the technology is really a "bottleneck" problem of not only companies but also the entire industry.
The above evidences show that only when companies analyse and assess all three factors: capital, target market and organizational structure, to define new effective business strategy or successful restructuring.
What are the major trends in current restructuring?
From successfully restructured companies, we see two major tendencies: resource-based restructuring or comparative advantage-based restructuring. In working out restructuring plans, they must base on what they have to choose best tendency.
However, isn’t the core of restructuring still the human factor?
That’s right. There are many things to do in a business re-engineering process. But, the leading centre of this transformation and purification process remains human factors, or personnel reshuffle. Even when personnel restructuring is successful, it must be based on internal training processes which aims to equip new working knowledge and skills to adapt new environment and operate new good organisational system. In fact, a very few Vietnamese companies spend big budget on training. When it performs restructuring, this must be changed.
Does VCCI support businesses with their restructuring?
In December 2011, the Politburo issued Resolution 09-NQ/TW dated December 9, 2011 on "Building and promoting the roles of Vietnamese entrepreneurs in the period of accelerating industrialisation, modernisation and international integration.” Implementing the Resolution, VCCI works out and implements its restructuring plan to consolidate, strengthen and improve operating quality to become a powerful political, social and career organisation.
Together with its own self-changing effort, VCCI also studies practical experience on corporate restructuring of the country and the world to build and implement business restructuring support programmes, especially paying attention to solutions to build and implement appropriate, modern business strategies.
VCCI will also organise investigations and surveys on industries, economic sectors to support information for businesses to perform restructuring plans. In particular, VCCI will build and recommend the Party and the State to implement national programmes on entrepreneur training, business start-up training and knowledge of business, law and social responsibility for new companies from 2011 to 2020.
Specifically, VCCI has recently supported enterprises in Ninh Binh and Thanh Hoa provinces to define visions, strategic orientations and business objectives to perform restructuring, improve operational efficiency and competitiveness of enterprises, and help enterprises to achieve sustainable development and succeed in international integration. Such support programmes will continue to be deployed in other locations.