Turnaround Strategy

The Turnaround Strategy is a retrenchment strategy followed by an organization when it feels that the decision made earlier is wrong and needs to be undone before it damages the profitability of the company. Simply, turnaround strategy is backing out or retreating from the decision wrongly made earlier and transforming from a loss making company to a profit making company.

Causes include: 

1.Revenue downturn caused by a weak economy 

2.Overly optimistic sales projections 

3.Poor strategic choices 

4.Poor execution of a good strategy 

5.High operating costs 

6.High fixed costs that decrease flexibility Insufficient resources 

7.Unsuccessful R&D projects 

8.Highly successful competitor 

9.Excessive debt burden 

10.Inadequate financial controls 

Example: Dell is the best example of a turnaround strategy. In 2006. Dell announced the cost-cutting measures and to do so; it started selling its products directly, but unfortunately, it suffered huge losses. Then in 2007, Dell withdrew its direct selling strategy and started selling its computers through the retail outlets and today it is the second largest computer retailer in the world.