Page 3: Divestment
In 1996 with seven separate divisions, the Glynwed Group of companies was diverse and lacked focus. A fundamental aspect of any form of strategy is the identification of the scope of the activities and markets served. For example, should an organisation concentrate upon just a few areas of activity or many? It was clear at this time that some of the markets served by Glynwed were mature. In mature markets growth is low, pricing is often very competitive and leadership is hard to develop. Although mature markets can be profitable, investment is constantly necessary in order to outperform competitors.
In addition, Glynwed had no leading position in any international market and was far too dependent upon its activities within the UK. This can be a problem. As history has shown, when recessions occur in a geographical market upon which a business is singularly dependent, it can also make a business’ activities far too cyclical and in line with the upswings or downturns in one economy. For example, in the early 1990s, many businesses failed, particularly those in industrial markets, because they were far too dependent upon the UK economy, and had not spread their activities overseas.
Glynwed was a large business, mostly serving industrial markets that always feel upswings and downturns more. Thus the mid-90s was a key time to make some long-term strategic decisions about repositioning the business. Repositioning is an important part of a business strategy because it enables an organisation to identify the most appropriate ‘battlegrounds’ for the business.
The starting point was to identify in which markets demand was likely to grow and those in which demand was likely to fall. It was also important to relate this strategy to the competences or capabilities of the organisation.
This would then form the basis of a product/market strategy. After careful analysis within Glynwed, decisions were made to focus the business upon the two areas of pipe systems and consumer and foodservice products. There could have been no more radical strategy as this meant that, as a result, two thirds of the activities of the Group were declared non-core. However the subsequent disposal of building and foundry products, metals distribution and metals processing businesses raised substantial amounts of capital. These were then used to contribute to the parallel stage in the repositioning process, that of acquisition.