When Porter's generic strategies are not enough: complementary strategies for turnaround situations

Abstract

Purpose – Porter's generic strategy matrix often proves inadequate for use by distressed firms, because it assumes that ventures operate “normally” in competitive environments. Leaders of troubled ventures facing turnaround situations need to interpret the complex factors involved, as generic strategies alone prove insufficient. Researchers have not yet come up with a model for selecting strategies in turnaround situations to match Porter's model for generic competition. This paper fills this specific void. Design/methodology/approach – A model for strategies which could be applied in the turnaround situation was proposed, based on grounded research methodology. This model was then evaluated by a focus group of expert credit risk managers with turnaround experience. The research answers three questions: What are the key determinants of a turnaround situation? What complementary strategy will result in a turnaround of each situation? What strategic practices support the different complementary strategies? Findings – Resource munificence and causality (origin of distress) are the key determinants in the model, which posits four types of turnaround situation: performing well; underperformance; distress; and crisis. For each associated strategic practices are recommended. Application to the case example of Starbucks illustrates its value. Practical implications – The proposed model was well accepted by the expert panel, in some cases immediately applied. Participants expanded the practices recommended for each strategy. Originality/value – The study breaks new ground in this field and challenges other researchers to dispute the model's assumptions. The model's straightforward application assists turnaround managers to clarify complex situations.