Downscaling as a corporate restructuring strategy of the firm

Downscaling, as one of downsizing strategies, involves permanent changes in employment size and tangible resources of the firm. In fact, a decrease in tangible resources is synonymous with reduction in the workforce associated; thereby allowing firms to easily survive and enhance their competitive advantage in the market. The majority of firms adopt the downscaling strategy because of fierce rivalry from direct competitors who are constantly expanding their market share, or in order to improve the firm performance through structural changes in workforce.

A typical example is in car industry. General Motos (GM), Ford and Chryles, namely the “big three”, simultaneously fired massively employees when faced with the serious sales decline and economic crisis. Specifically, GM laid off from 75,000 to 100,000 workers from 2008 to 2010 by closing several dealerships. Another example is the case of Boeing group. In a five-year period from 1997 to 2002, the group laid off about 55,000 workers; Boeing also cooperated with the governments to open Centers of re-employing and retraining these laid-off workers for new jobs. Similarly, General Electric, under direction of CEO Jack Welch, adopted “a strategy for maintaining excellence” by laying off about 10% of “underperforming” employees each year; in seven years, General Electric laid off more than 100,000 workers.

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