Blog
More Evidence of Retrenchment as Cost Cutting Bites
11th September 2012
Regular readers of the Business Studies blog will have noted the many examples of retrenchment which have arisen in recent years. Students who'd like an introduction to the concept of retrenchment might also find this revision presentation handy. It pays to look out for examples of retrenchment in the business news because the stories themselves usually provide examples of wider strategic issues being faced by the firms involved. Take these three recent examples I picked up from the news in the last 7 days...
Kodak has been going through a painful process of retrenchment after it was declared bankrupt. The company will cut another 1,000 jobs by the end of 2012 having already reduced its workforce by about 2,700 worldwide since the beginning of this year.
Kodak, which is in the process of auctioning about 1,000 patents, needs to raise nearly $700m (£440m) to repay its creditors and exit bankruptcy. The firm said it expects to save about $330m from the new job cuts.
Another household name looking to achieve significant cost reductions is Philips Electronics. The firm has said it will axe 2,200 more jobs as it battles the tough economic climate and attempts to save 1.1bn euros (£877m) in annual costs. The announcement was made by Philips' CEO Frans van Houten who has announced a strategy of improved efficiency and reduced complexity in the business. Van Houten also wants to change the culture at Philips to make it more entrepreneurial.
In his first year as boss, Van houten responded to tougher competition and a slowdown in demand by cutting thousands of jobs, replacing his entire executive team and making the company’s unprofitable television operation a joint venture.
http://www.bbc.co.uk/news/business-19554444
And one final example of retrenchment to help make the point that many substantial businesses are continuing to look closely at the scale and scope of their operations in response to the continued economic downturn.
RBS insurance arm Direct Line Group announced last week proposals to axe nearly 900 roles and close a site in the North East of England. The group, which owns the Churchill, Green Flag brands and employs some 15,000 staff in the UK, is planning the redundancies as part of plans to make £100 million of cost-savings by the end of 2014.