Downsizing Case Study

Strategies – Downsizing
Numerous amount of people once thought that downsizing is an indicator of organizational decline, instead it is now accepted as a legitimate restructuring strategy. Downsizing is known as reducing the number of employees in the company, sometimes it could be the number of operating business units (Ireland, Hoskisson and Hitt, 2009). As mentioned earlier, Hewlett Packard incorporates downsizing strategy for its corporate restructuring. HP Chief Executive Meg Whitman also mentioned that in order to enable a more competitive and sustainable cost structure, job cuts is one of the way to do it for the new company (Egan, 2015). Downsizing have its advantages and disadvantages as well, the advantage is of course a reduced of
Corporate restructuring is expected to counter difficulties in competitive business environment. HP restructures its business to respond quickly and effectively to new opportunities as well as unpredictable pressures, thus reestablishing its competitive advantage. Demergers allows business units to spun off as a new entity. During restructuring, if a company downsizes, overall operational expenses will decrease, hence profit margins increases. From long term perspectives, demerging will provide investors to be persuaded on investment opportunities, subsequently capital rises and shareholders’ value will be increased and in addition both companies will be more inventive. HP could refocus and capture opportunities in business markets through new and high growth business (Nag and Pathak, 2009), such as adding a new revenue of growth through successful
Throughout the years, corporate restructuring become a buzz word during economic downturn. Almost every company undergo restructuring before, over the years the concept of restructuring has changed. It is no longer seen as just cutting costs and retrenchment, but it was used as a strategy to further improve company in order to create value for stakeholders, given the environmental changes. However, the process of restructuring costs is high and it is a heavy burden for all shareholders. Restructuring charge might incur in the process of furloughing or cutting jobs, closing facilities, shifting production or writing off assets. Hewlett Packard had used capital restructuring and management restructuring. In short, capital restructuring seeks to make changes in company’s finances, by that, HP had decided to outsource its manufacturing facilities. For management restructuring, HP spilt up in November 2015, by splitting up, Hewlett Packard will then be more organized and focus on their core businesses. The downsizing strategy that Hewlett Packard uses are well thought out, not only it reduces costs, but it provides both companies to be cost effective so that it could further improve on its business processes in order