Tough times, tough measures

Many companies today are wrestling with disruptive changes in their business and regulatory environments. Companies in mature markets often find themselves saddled with excessive assets, resources and costs in the face of slowing growth and declining revenue. At the same time, they may lack the agility to capitalize on major growth opportunities in emerging markets such as Brazil, Russia, China, India and others. Companies or institutions in beleaguered industries such as automotive, health care, financial services, transportation and higher education face similar cost challenges, as do companies striving to deliver on the promise of a merger or divestiture.

These strategic business challenges cannot be addressed through simple belt-tightening or administrative or overhead cost reduction. They require strategic restructuring that addresses a company’s underlying business model, operating model and capital model.

Deloitte has the breadth and depth of knowledge to help with many dimensions of the restructuring process. Our cost management teams work closely with other specialists in Strategy, Operations, Human Capital, Information Technology, Financial Advisory, Tax and Risk to help tackle the most complex restructuring challenges. Learn more about the offering.

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Cost restructuring in three dimensions
For many companies, strategic restructuring is essential for competitiveness and growth. And for those on the brink of failure, it’s a key to survival. Strategic cost restructuring occurs along three dimensions:

Business model. This defines what a company sells (products or services), who it sells to (customers), and where it sells (markets). Companies facing major disruptions – e.g., changing industry dynamics, increasing competitive threats, shifts in growth and demand and changes in regulatory environments -- will need to re-evaluate their business model. Restructuring along this dimension involves choosing or redefining an efficient and effective business model that aligns with the company’s long-term strategy and financial vision. Effective alignment in this dimension can provide strategic and competitive advantage.

Operating model. This defines how a company produces, sells and delivers its products and services. Changes to the business model typically require significant changes to the operating model that affect everything from organization structures and business functions to production facilities, sourcing strategies and information technology. Aligning the company’s operating model with the right business model suggests operational efficiency and a more sustainable and scalable cost performance.

Capital model. This defines how a company funds its operations and rewards its shareholders. Deteriorating financial performance and the stagnant economy have made it tough for many companies to fund their current or future business operations. To tackle the challenge, they should consider redesign and restructure their underlying capital model. Key focus areas include liquidity management, financial leverage, asset intensity, debt / equity tradeoffs and working capital efficiencies. Focus on this dimension provides a more effective internal cost of capital and financial efficiency and advantage.

Restructuring along these three dimensions can deliver dramatic strategic, operational and financial improvements that are both immediate and sustainable.

How we can help

Deloitte has the breadth and depth of knowledge to help with many dimensions of the restructuring process. Our cost management teams work closely with other specialists in Strategy, Operations, Human Capital, Information Technology, Financial Advisory, Tax and Risk to help tackle the most complex restructuring challenges.

The three dimensions of strategic restructuring are not mutually exclusive. Our teams take into account the linkages and trade-offs between the dimensions to develop a broad solution that increases the overall enterprise value. We also have deep experience helping organizations overcome resistance to change, which is often the single biggest obstacle to sustained improvement.

Our disciplined approach to restructuring can reduce false starts and deliver sustained results. We have completed more than 300 restructuring projects, and are known for developing executable strategies and delivering tangible results. We are confident in our savings estimates and are willing to share financial risks with clients through value-based billing options.

Bottom-line benefits

  • Improved profitability and greater growth – both organic and inorganic
  • Reduced costs, typically in the range of 10 - 30% across the entire business
  • Leaner balance sheet, with significant improvement in return on assets
  • Cost-conscious culture
  • Scalable cost structures that can adapt to changing market conditions and support future growth
  • Improved cost of capital

Four ways to create more value now

Face the future. Although the path to economic recovery will vary by industry and geography, it looks like it’s going to be slow and erratic. Recognize when it’s time to change your strategy, your business model and your priorities may also need to change. Be ready to strike a new balance between liquidity, costs and strategic investment for growth.

Ask the tough questions. Objectively assess your current market position and don’t be afraid to ask tough questions. What is your real outlook for the future? Where did past transformation efforts fall short? Did you settle for small, tactical improvements that are already slipping away? Do you have the right leadership team to tackle tomorrow’s challenges?

Use scenarios to build your plan. To get where you want to go, you’ll need a clear plan. Do you have effective scenario planning? What are the keys to creating sustainable business value? Are you managing stakeholder expectations? What investments are needed in people, technology, brands and markets? How will you adapt to unexpected market changes?

Take control of execution. Effective execution will require strong discipline and leadership. How will you determine executive alignment for your plan? Do you have a clear strategy and roadmap to achieve your goals? Do you have the appropriate resources in place to execute the plan? Is your implementation team sufficiently empowered to deliver the required results? Do you have processes and tools in place to consistently track results and trigger intervention alarms as required?

Restructuring in action

  • A consumer products company saved $125 million and tripled net profits by shifting its overall business model towards higher integration across business units.
  • A credit card processing company saved $90 million annually by redesigning the operating model for several back office support functions.
  • A furniture manufacturer used restructuring to save more than $100 million, helping the company survive the downturn and reposition itself for growth.

As used in this document, “Deloitte” means Deloitte & Touche LLP, which provides audit, assurance and risk management related services, Deloitte Consulting LLP, which provides strategy, operations, technology, systems, outsourcing and human capital consulting services, Deloitte Tax LLP, which provides tax services, and Deloitte Financial Advisory Services (FAS), which provides financial advisory services. These entities are separate subsidiaries of Deloitte LLP. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.