Business Restructuring

What is business restructuring?

Business restructuring is the process of comprehensive revitalization of an enterprise, ranging from changes in business strategy, organizational restructuring to corporate culture, aimed at enhancing business efficiency, improving competitiveness, and further development.

Business restructuring is often carried out when a company’s development is hindered or, in worse cases, is necessary for survival to avoid bankruptcy. Practical experience has shown that many forced restructuring cases have helped companies transform, but objectively, many companies face significant difficulties, even leading to failure.

Contact us

The strategy for corporate restructuring

Restructuring involves business managers determining how to change products, target which consumer groups (customers), and utilize production technology chains or organize corporate management systems accordingly.

Restructuring, in its broadest sense, involves the examination and restructuring of a part, some parts, or the entire organization or unit. In a broader sense, it could be restructuring of the economic foundation, and in a narrower sense, it is the scope of our concern: Business restructuring.

Contact us

corporate restructuring strategies valentiam Business Restructuring

COMMON MISTAKES IN BUSINESS RESTRUCTURING

The trend of international economic integration and changes in state policies and laws lead to changes in the business legal environment, causing many enterprises to consider restructuring to overcome difficult circumstances and continue to develop. However, very few businesses carry out restructuring in the proper sense and achieve the expected results.

01

Enterprises have not proposed a restructuring strategy based on analyzing the compatibility between changes in the business legal environment (regulations regarding business operations) and the existing structure to determine long-term restructuring objectives. Instead, enterprises start restructuring with short-term plans targeting solutions such as organizational rearrangement, divestment, and personnel changes.

The restructuring fails to pinpoint the focal point for restructuring and restructuring objectives (across customer orientation, product changes, technology) before proceeding with secondary measures such as organizational rearrangement, senior personnel changes, and divestment. In other words, the restructuring strategy of many Vietnamese enterprises follows a reverse process—restructuring before identifying restructuring objectives.

02

03

Many enterprises focus solely on reducing production costs in hopes of increasing profits, which is an unnecessary action in implementing enterprise restructuring. This is because cost-saving activities are routine in operational management and do not need to wait until enterprise restructuring is implemented. Furthermore, during enterprise restructuring, insufficient attention is given to changes in state legal policies, and prioritizing this action will hinder investment in technology improvement, management systems, and recruitment to achieve the restructuring objectives for product restructuring and suitable distribution methods in line with new circumstances.

Many enterprises carry out divestment mechanically, even with projects currently operating at a loss but with future development potential as per the plan. Additionally, for state-owned enterprises, divestment is mandatory as directed by regulatory authorities, resulting in many enterprises selling off subsidiaries and projects at low prices.

04

05

Many enterprises aim to recoup capital rather than invest in new capital expenditures. his action is not suitable for implementing restructuring strategies because the fundamental principle of restructuring is investing in technology innovation, management systems, and recruiting talent to create new products and distribution methods in line with new consumer trends. Therefore, considering measures to mobilize new capital and resources is crucial in restructuring, rather than trying to retain or recoup capital.

STEPS IN BUSINESS RESTRUCTURING STRATEGY

Step 1

Forecasting changes in the business legal environment through surveys and market assessments to identify trends in various aspects, including state legal policies, product demands, production technologies, and new distribution methods.

Step 2

Describing the existing structure of the enterprise across various aspects: legal regulations regarding business organization types according to the Current Enterprise Law. and other relevant legal documents, followed by products, target markets, technologies, management systems (organizational structure, procedures, operational regulations, workforce quality), and ongoing projects.

Step 3

Analyzing the existing structure of the enterprise to determine whether it complies with state legal policies or mandatory regulations for specific types of enterprises according to the Current Enterprise Law to seize opportunities and avoid challenges from the new legal business environment, thereby identifying aspects requiring restructuring.

Step 4

Based on the discoveries, surveys, and evaluations of aspects requiring restructuring, determine restructuring objectives, including targeting customer orientation, product changes, and technology upgrades.

Step 5

Developing plans, roadmaps, and identifying solutions, programs, and projects to successfully achieve restructuring objectives across various aspects: Management systems (organizational structure, regulations, procedures), technology investment; improving distribution methods, and eliminating inappropriate business areas (divestment), transfers, spin-offs, or mergers.

Step 6

To ensure successful implementation of restructuring solutions, the enterprise needs an economic legal department for advice; advisors on state legal policies and forecasts of changes in the business legal environment; followed by a resource mobilization strategy to implement restructuring, such as capital sources, mobilizing suitable manpower for restructuring objectives, and establishing a network of relationships with appropriate partners.