Business Restructuring: What It Is and How It Works

In the introduction of Chapter 13, GM's successful product portfolio restructuring is discussed (pg 431-433). The restructuring was a massive success due to the combination of investment, divestment, and protection of different products. Choose one of those 3 components of their strategy and discuss why you think it was a vital contributor to the success.

Running head: BUSINESS RESTRUCTURING
BUSINESS RESTRUCTURING
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General Motors had been able to reposition itself in the market successfully through
its products restructuring decision. The company had been losing its sales, percent margin
and operating income for the last four years between 2006-2009. It was then when the
company decided to restructure its products portfolios. The same decision had led the
company to become successful once again. The company had taken three major decisions that
is- divesting in Hummer Pontiac Saab Saturn, investing in Volt and protecting the Buick
Cadillac Opel Vauxhall Holden. However one of the most important restructure decision of
the company according to me is its decision to divest in Hummer Pontiac Saab Saturn. This is
so because the Hummer Pontiac Saab Saturn was unable to attract the market and was also
unable to provide a competitive position to the company (LeClair, 2018).
Therefore it can be said that a defensive strategic plan was adopted by General motors
to regain its market position. And it decided to discontinue some of its major brands that were
not meeting the criteria’s of strategic growth or profitability. Therefore due to divestment into
unprofitable products, General motors had been able to invest into new products and protect
some of its core brands or products (Adriaanse, 2017). Therefore the company is planning to
improve its market shares by underwriting the Volt. And it is also trying to increase the
profitability of the company by managing its retained brands properly. This is how the
General motors is trying to occupy a significant position in the segment of electric cars.
Moreover after its decisions to carry out divestment the company has been able to improve
the sales revenue, percentage margin, reduce the marketing and sales expenses, reduce the
general expenses and increase the operating income and increase the return on sales.
Divestment strategy refers to a retrenchment strategy in which business downsizes
their operations or business activities (Bergh, 2017). Therefore a divestment strategy includes
eliminating a business portion that is unprofitable. Firms may decide to sell, spin off or even
close a particular business unit under its divestment strategy. The main aim of the divestment

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strategy is to reduce the financial burden due to the unprofitable business units for the
purpose of using its funds towards more profitable business units. For instance General
motors decided to divest the Hummer Pontiac Saab Saturn such that it can use its funds on
other profitable business units (Kumar & Sharma, 2019). Therefore divestment introduces
market discipline and competition and then depoliticizes other services. Some of the major
market share leaders they have also been under situations of pressure in their core markets.
And in case of companies, a loss in share results in loss in sales revenue, cash flow and also
net revenue. All share leaders whether the existing ones or the new ones are faced with the
same problem. Therefore all businesses try to protect their market share. Moreover businesses
that are operating in the less attractive markets are the ones who need to reduce their market
share in order to invest the same into a more profitable business unit.

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References
Adriaanse, J. (2017). Restructuring Plan. Turnaround Management and Bankruptcy: A
Research Companion, 69, 365.
Bergh, D. D. (2017). Restructuring and Divestitures. In Oxford Research Encyclopedia of
Business and Management.
Kumar, V., & Sharma, P. (2019). Introduction to Merger, Acquisition, and Corporate
Restructuring. In An Insight into Mergers and Acquisitions (pp. 1-29). Palgrave
Macmillan, Singapore.
LeClair, D. R. (2018). General Motors: Globalization, Disruption, and Sustainability.
In Business Despite Borders (pp. 165-177). Palgrave Macmillan, Cham.