6References: 15IntroductionBusiness competition and profit motive has driven institutions to adhere to very high performance standards. Achieving competitive edge has been a driving force to aggressive expansion strategies which most institutions do appreciate, but it is also unthinkable that a business can still achieve competitive advantage through downsizing which implies shrinking of business activity and their operations. Measures of downsizing are far reaching and can sometimes result in reputational risk to the organization but with proper management, it results in business turnaround and successful institutions. With downsizing especially though layoffs and retrenchment organization tend to learn on outsourcing of its functions and this strategy seemly is becoming a trend even in airline companies where all auxiliary and support function can be outsourced.
Both outsourcing and downsizing are measures of improving on operational efficiency (Cary LC 2000, p 350). This paper critically looks at the causes of downsizing and measures used to implement responsible downsizing strategies. It also examines the benefits of outsourcing to corporate institutionsDownsizing and restructuringDownsizing generally refers to the reduction in the scale of business activity mostly resulting from low relative return on investment to an entity.
Business entities and institutions down an overpowering profit motive and when there are super profits shareholders’ needs will be almost satisfactorily been achieved. Low returns or even losses incurred by a business concern will immediately lead to shareholders dissatisfaction and a need for corrective action on the part of management. This has always resulted in restructuring and reengineering processes which leads to fundamental changes in organizational information systems. Downsizing is one of the ways of trying to achieve a competitive edge through reduction the asset base and manpower.
For a demand driven service industries, when there’s foreseeable long term drop in demand, measures of cost cutting will always be put in place and this will result in reduction of the wage bill and facilitation costs. This will actually constitute reduction in staff through retrenchment and also reduction in asset base through reduction of some fixed assets through disposals. These measures however are not easily achievable since corporate social responsibility and legal responsibility especially regarding staffing matters will always be a challenge. Successful downsizing is always very challenging since a lot of interest groups with varied stakes are always involved.
It usually the duty of the corporate entity to maintain its reputation asset and consequently downsizing procedures will require proper management in order to protect the business identity (Yehuda, B 2003, p. 131). In the case of international air carrier global economic recession is the cause of its low demand hence downsizing initiatives. Downsizing actually is a defeat to the concept of corporate expansion through acquisition of competitors since it insinuates that a smaller and lean corporate enterprise is more profitable. Factors that cause downsizingLarge corporations and multinationals are usually perceived to be very stable and profitable institutions and consequently most these companies usually have expansion aggressive expansion strategies.
Downsizing is therefore not a growth decision for an institution rather it is a solution to the problem of low returns. Below are the factors that cause downsizing