Restructuring or business turnaround is 360-degree reorganisation of a company (also see Analysis 360°) in order to secure its strong market position and healthy operations on a long-term. For state owned enterprises in Serbia the government use the “UPPR” which is a temporary debt restructuring plan prepared in advance to suit all distressed companies. The plan is only designed to keep these enterprises “alive” while receiving government subventions and by-law protection from creditors. There is almost no attempt to resolve real problems such as non-competitiveness or inefficiency. As management (before and during “restructuring”) could have never figured out how to do the turnaround on their own the state is (desperately) chasing foreign investors throughout the world. Foreigners are expected to bring viable strategies and make a Serbian company part of their global network. The alternative is to wait for a company to cease to exist anyway due to natural attrition and retrenchments. Read more about FDI in Serbia in “Why do we import our exporters and how to stimulate home grown companies to succeed in exports?” .

Serbia started its transition to market economy while being still part of ex-Yugoslavia under Ante Marković as premier (1990). Unfortunately nineties were lost but even during past 18 years the country didn’t progress much let alone completed the transformation. Most laws are there but real life proves they don’t make much impact. Why? Most of local companies, both state owned and private, haven’t achieved enough competitiveness to make a living under market rules. As a result they regularly try to bypass the market whenever possible by securing business in the old way. State owned companies almost exclusively talk about new production targets and job preservation with no word about own weaknesses, lack of competitiveness and improvement. Similarly many private companies survive solely by doing business with the state while making losses in normal B2B and B2C activities. None of them have products or services that could be sold with profit in a market where competitive forces apply – locally or abroad.

The reason for this situation is quite ‘simple’: lack of business knowledge and experience in doing business under strictly market rules on one hand and reluctance to allow a full change throttle to happen on the other. In the same time “UPPR” is restricted to debt restructuring which can only buy time without even trying to find route cause and making turnaround. This is why FDI is more than welcome in Serbia as it comes with strategy, business capacity and competitiveness above the sole capital which is all we need. Or not?

It is important to understand that the real reasons for current situation rarely rest in poor financial management or wrong capital structure at a first place but in poor (outdated) business model, lost market share and lost sales, declined competitiveness of company’s products and services and loss of most perspective employees. In essence, if the objective for any restructuring is business turnaround then those issues have to be addressed right from the beginning. Restructuring team has to set new business model and organisational structure that can secure company’s adaptation to new market conditions and delivery of competitive products and services to customers while growing its market share – all resulting in sustainable profits and positive cash flows. Restructuring of debt and capital structure is only a single step in company’s turnaround process as it, if performed on its own, would bring only a temporary relief but not a resolution to real inefficiencies that caused the problem at first place.

If a company fell into trouble and restructuring is deemed necessary, it is hardly to believe that the old management team who brought the company into the unfortunate situation could drive it out on their own. They will definitely need some new blood and/or help from outside. Probably a new management team with good company turnaround and change management experience and/or consultants to guide and facilitate existing managers on a road to recovery.

If you need to kick off your turnaround process – a complex and risky operation – but lacking experience in this area you can first read/download my free white paper: COMPANY TURNAROUND PROCESS.


Read my text to learn how to concentrate on quality of the business model, marketing, sales practice, revenue, supply chain structure, cost structure and that of your capital. Start with creating sense of urgency and analyse the situation to uncover financial, operating and market position weaknesses as well as opportunities to enable building viable scenarios for restructuring and turnaround. These may involve new capital injection, sales of part of the business, downscaling, withdrawing some products or services, or withdrawing from certain markets, entering strategic partnership, launching new business model/products/services etc.


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