Role of strategic flexibility in the choice of turnaround strategies: A resource based approach

Abstract

With the recent economic recession and the increase of business failures along with that crisis, the study of organizational decline and turnaround responses has become even more crucial. The aim of this paper is to contribute to the quest for successful turnaround strategies by taking a resource based approach. Considering the role of sustainable resources of the organization and the strategic flexibility to exploit them properly as well as exploring new ones, the study contributes to the analysis and management of turnaround situations by investigating how the interaction of these two important factors affects the optimum strategy choice during the recovery period. The paper first gives a synopsis of the perspectives on turnaround strategies, resource based view and strategic flexibility based upon the previous literature and theories. The proposed model of the study which adopts the two staged view of turnarounds consisting of retrenchment and recovery, suggests a 4-cell matrix for each stage, to determine both the focus of retrenchment and focus of recovery for each quadrant as well as the prior strategies to be implemented in four different cases of variations contingent upon the level of sustainable resources and strategic flexibility of the organization. The rationale behind each strategy is also explained based on literature. It is expected that a shift of quadrants within the matrix will occur by implementing the suggested recovery strategies. The model looks forward to helping academicians and practitioners gain insight into how to analyze and manage turnaround situations and tailor their strategies accordingly both during recession and post-recession periods.