What Is a Turnaround Strategy?

The business environment can be fraught with risks, which means that some companies will occasionally face periods of financial distress or operational decline. As part of efforts to overcome these issues, businesses can use a turnaround strategy. 

This is a carefully developed plan that acts as a structured framework to stop decline and steer the business back toward sustainability and growth. Indeed, taking this strategic approach, when it’s based on reliable data and commitment to meaningful change, can help address financial issues that threaten survival, restore stakeholder trust, and provide clarity on the most effective routes to recovery. As a result, this is an invaluable tool for businesses that are looking for ways to stabilize their operations and return to profitability.

We’ve created this article to provide insights into the definition of a turnaround strategy, its key elements, examples of effective use, and its applications in the global business landscape. Importantly, as this is a global rather than localized service, we’ve taken an international perspective to ensure relevance across jurisdictions and markets.

Defining a Turnaround Strategy

A turnaround strategy is usually defined as a structured and systematic plan to reverse a company’s decline and return it to profitable operations. These strategies are distinct from the routine cost-saving measures or minor operational adjustments that companies might implement occasionally. Rather, turnarounds tend to involve significant measures triggered by serious distress that could put the business’ survival in jeopardy.

This shouldn’t be confused with similar and related tools, such as restructuring and recovery strategies, either. Restructuring strategies tend to focus specifically on methods of reorganizing a company’s assets and liabilities. A recovery strategy involves gradual improvements that boost the firm’s operational performance or market positioning. 

By contrast, turnarounds have a broader focus than either tool and are more urgent in nature. It comes into play when companies are facing times of crisis and require radical actions that help it survive and move forward. As a result, its main objectives focus on stabilizing finances, regaining market confidence, and restoring profitability.

When Is a Turnaround Strategy Needed?

Turnaround strategies are usually necessary when companies start to experience the key signs of declining business. These can include seeing significantly shrinking profit margins, debt levels escalating, and experiencing a notable loss of market share to competitors.

There can also be various factors that trigger or contribute to these types of decline that lead to turnarounds being necessary. These include:

Internal factors

• Inefficient operations
• Outdated business models
• Poor leadership decisions
• Rising costs of overhead

External factors

• Shifting consumer preferences
• Technological disruptions
• Increased regulatory burdens
• Economic downturns
• Geopolitical issues

Additionally, turnarounds tend to be common in industries that are particularly susceptible to these types of triggers. For instance, airlines, automotive businesses, retail, and manufacturing.

Key Phases of a Turnaround Strategy

While turnaround strategies can vary depending on the business or the challenges it faces, there are some common key phases most follow.

Stabilization

This phase is focused on selecting and implementing immediate measures to halt control losses and preserve cash flow. For instance, the company may freeze discretionary spending, negotiate terms with suppliers or creditors, and minimize non-essential activities.

Assessment

This phase is about identifying what the root causes of the decline are. The company, often in collaboration with a corporate restructure consultant​, will review various areas of the organization. These typically include financial performance, operational processes, and strategic aspects. One of the most important outcomes of this is being able to distinguish between temporary setbacks and more serious structural issues.

Restructuring

This is where significant adjustments to address the identified problems are implemented. The details depend on the issues, but measures may include making workforce reductions—making it worth exploring the question of “What is workforce restructuring?”, adjusting the capital structure, divesting of units that are underperforming, or modifying key business processes.

Recovery

This is the phase wherein the focus shifts from managing a crisis to designing and implementing growth objectives. The aim here is to go beyond ensuring the company’s survival, but taking steps that allow it to thrive and be competitive in the long term. As a result, some common measures here include launching new products, exploring fresh markets, and investing in innovation.

Common Types of Turnaround Strategies

Some of the key types of strategic turnaround measures include:

• Cost-cutting strategies – This involves strategically reducing overhead, streamlining business processes, and improving operational efficiency. Workforce reductions, adoption of automation, and facility consolidation are common features here.
• Revenue-enhancement strategies – This is a strategy that places greater emphasis on growth than on methods that involve contraction. As a result, common components of this include launching new products, diversifying into fresh markets, and establishing processes to capture a larger market share.
• Asset restructuring – This involves companies selling off non-core assets, divesting themselves of divisions that are no longer profitable, or the reallocation of capital to areas that present greater potential for growth. Strategies here focus on freeing up resources to better support the firm’s core strengths.
• Leadership changes – Bringing in new executives or external consultants is a common aspect of turnarounds. This often provides fresh perspectives in firms that have become strategically stagnant and can restore credibility with stakeholders.

Examples of Turnaround Strategy in Business

There are various examples of high-profile companies that have implemented turnarounds effectively. 

Apple is perhaps one of the most notable here. In the late 1990s, the company was experiencing significant financial decline. In response, it implemented turnarounds that used a combination of leadership changes, streamlined operations, and launches of innovative new products, such as the iMac. As a result, it not only survived but transitioned into a phase of innovation that contributed to it becoming one of the world’s most successful companies.

Turnarounds aren’t always effective, though. A high-profile failure here is that of Blockbuster, which suffered decline as the home video market trends shifted toward digital-first products. Leadership failed to embrace and capitalize on these changes—even declining offers from Netflix—and waited too long to implement turnarounds. Their delay in action contributed to eventual bankruptcy.

This type of failure really illustrates that turnarounds must be used correctly, including getting the timing of such measures right. If they’re not well-executed and effectively aligned with evolving markets, companies can find their options are severely limited and the challenges difficult to overcome.

Challenges in Implementing a Turnaround Strategy

Alongside the potential opportunities turnarounds present, there can also be significant challenges to overcome.

Challenge	Explanation
Resistance to change	Employees, leaders, and other stakeholders may be reluctant to engage with turnaround efforts—partciularly when there are layoffs—which can influence effectiveness.
Resource pressure	Time pressures in which urgent action must be taken to ensure survival alongside limited availability of financial resources can make it difficult to produce high-quality results. There may also be additional costs, such as a restructuring charge.
Balancing expectations with reality	Investors often demand immediate results at times of crisis, while customers and employees may require reassurance. It can be challenging to manage their expectations while also acknowledging the reality of the situation.
Managing risks	Periods of upheaval are often fraught with various risks—legal, financial, and reputational in nature. Companies must carefully plan risk identification and management practices throughout turnaround.

The Role of Consultants and Global Application

Consultants and advisors can be invaluable contributors to the successful outcomes of turnaround strategies. From a practical standpoint, they provide expertise in niches such as finance, operations, regulatory compliance, and restructuring. They also provide essential objectivity that can enable them to better identify issues and present effective solutions. This combination of independence and expertise makes external consultants vital in complex corporate restructuring. 

It’s also important to note that turnaround strategies are not local, but global solutions. International operations are increasingly accessible, but this also means that strategies must be implemented with cross-border considerations. Consultants with experience navigating international challenges are essential here.

FAQs

What is a turnaround strategy in business?

It is a structured plan aimed at reversing a company’s decline through financial stabilization, operational efficiencies, and restoration of profitability.

How does a turnaround strategy differ from restructuring?

Restructuring focuses on reorganizing assets and liabilities, while turnaround is a broader concept aimed at revitalizing finances, operations, and strategies.

What are the first steps in a turnaround plan?

Implementing stabilization measures to mitigate losses, followed by assessments into the causes of decline are usually the first steps.

Can turnaround strategies fail?

They can, particularly when they’re implemented too late or fail to address the key problems that cause decline. Leadership drive, timing, and effective execution are key.

Who should lead a turnaround strategy?

Turnaround is typically led by senior executives and department managers, often supported by external consultants and advisors.

References

ENEB. (2025, May 22). Blockbuster: The fall of a giant for not embracing innovation. ENEB. https://eneb.com/blockbuster-the-fall-of-a-giant-for-not-embracing-innovation 

Heracleous, L. (2016, January). Strategic Leadership and Innovation at Apple Inc.. ResearchGate. https://www.researchgate.net/publication/322271342_Strategic_Leadership_and_Innovation_at_Apple_Inc