What is Corporate Restructuring and the types of Corporate Restructuring - MBA Notes

Answer:
Corporate restructuring is an organizational change to create a more efficient or profitable enterprise. 

Types of Corporate Restructuring

Corporate restructuring has three meanings or connotations:

· organizational restructuring
· business-level restructuring and
· Financial restructuring.

Organizational restructuring means changes in the structure of the organization—changing or reducing hierarchies or de-layering, downsizing, redesigning positions, reallocation of jobs or portfolios or changing the reporting system. 

Business-level restructuring (applies to multi-business organizations) deals with changes in the composition of a company’s businesses or product portfolios. The changes are done on the basis of movements in market share or performance of different businesses or products to improve efficiency or profitability at the corporate level.

Financial restructuring is concerned with changes in financial management in terms of equity pattern or equity holdings, debt-equity ratio, borrowing pattern, debt servicing schedule, etc. More common forms of restructuring are organizational restructuring and business-level restructuring.

 
Restructuring is essentially an adaptation strategy to change and is mostly incremental in nature. In contemporary business, most companies are in the process of constant change. Often older companies require more restructuring than the newer ones. 

First, those companies might have over-diversified including diversification into unrelated areas; second, the organizational structure might be very hierarchical not fitting into a dynamic market environment; third, there might be a conservative financial management system in relation to funds flow and investments.

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