What Is a Corporate Renewal Strategy?

A corporate renewal strategy, or a corporate turnaround strategy, is a response to a decline in the corporation's performance. If customers start buying less of a company's products, or the company has unexpected cost increases for materials and labor, the corporation can create a strategy to alleviate these problems. Another corporation can buy out a poorly performing firm, and use a corporate renewal strategy to make it more productive.

A corporation does not have to be bankrupt or incur a loss to use a corporate renewal strategy. The corporation has more options available if it implements its renewal strategy before other negative events happen, while it can still take out loans and attract new stockholders. Management can use a corporate renewal strategy while the business is still profitable to make sure it stays profitable.

When the corporation has multiple divisions, the turnaround strategy considers the future profitability of each division. If a division is losing money now, but it has the potential to earn high profits in the future, the corporation can fix the problems with that division. The corporation can sell off unprofitable divisions with less future income potential.

Corporate renewal strategies are harder to implement in some industries. A manufacturing company has to pay for equipment repair, maintenance, and energy bills to continue making new products, so it is difficult for the company to reduce its expenses. In an industry such as software, where the company does not need to buy and maintain many expensive machines and can hire workers in other countries without building factories there, it is easier for the company to reduce its costs.

Corporate renewal can involve changing the company's main business. A manufacturing company may decide that it is cheaper to import products made in another country and sell them to wholesalers. A newspaper company may decide to become an online media company, so it no longer has to pay for printing equipment, paper, and ink, and can show its stories to an international audience. A turnaround strategy can involve purchasing a competitor, especially if the competitor has useful patents or popular products.

Corporate renewal can involve changing the firm's product lines. The firm may be producing ads that target the wrong audience for its products, and ads for a new demographic may be able to attract more customers. Redesigning the product itself, or its packaging, may improve sales. The company may be using the wrong sales channels, such as focusing on retail stores when its customers prefer to purchase products online.