5 Popular Business Restructuring Models

 

Business restructuring is the process of reorganizing operations, organizational structure, or strategy to enhance efficiency and competitiveness. Depending on its objectives and current situation, a business can choose from various restructuring models. In this article, we will explore five popular business restructuring models that help optimize resources, improve performance, and build a foundation for sustainable growth.

 

 Article content

• 1. What is Business Restructuring?

• 2. The McKinsey 7-S Model

• 3. The Kaizen Model (Japan)

• 4. The Divestiture Model

• 5. The M&A Model (Mergers & Acquisitions)

• 6. The Digital Transformation Model

• 7. Challenges and Solutions for Restructuring

• 8. Key Considerations for Businesses When Choosing a Restructuring Model

• 9. FAQs

• 10. Conclusion

1. What is Business Restructuring?

Business restructuring is the process of making fundamental and systematic changes to an organization’s structure, operational processes, finances, or business strategy to improve operational efficiency, optimize resources, and adapt flexibly to market changes and the competitive landscape. In Vietnam, restructuring is commonly applied in state-owned enterprises (SOEs) and small and medium-sized enterprises (SMEs), especially in the context of deep economic integration and robust digital transformation.

The main goals of restructuring are to increase productivity, reduce costs, improve management efficiency, and align strategy with industry trends and market demands. The choice of a suitable restructuring model depends on the industry, business size, and specific strategic objectives.

The most popular and effective business restructuring models today include:

• McKinsey 7-S Model

• Kaizen Model

• Divestiture Model

• M&A Model

• Digital Transformation Model

2. The McKinsey 7-S Model

The McKinsey 7-S Model is a strategic management tool used to analyze, evaluate, and align a company's internal structure during organizational restructuring, business model changes, or operational strategy shifts.

This analytical framework posits that a company’s effectiveness and success depend on the alignment and interconnectedness of seven core elements, divided into two groups:

• Hard Elements: These include Strategy, Structure, and Systems. They are easy to measure, manage, and adjust through processes, organizational charts, or business plans.

• Soft Elements: These include Skills, Style (leadership style), Staff, and Shared Values. They are directly related to people, corporate culture, employee motivation, and organizational identity.

The key feature of this model is its systemic thinking: changing one element impacts the entire system. Therefore, during a business restructuring or merger & acquisition (M&A), the McKinsey 7-S Model helps identify strengths and weaknesses and proposes solutions to synchronize strategy, resources, and culture, thereby enhancing competitiveness and operational performance.

 

2.1. Advantages of the McKinsey 7-S Model

• Comprehensive: Covers both hard and soft aspects, giving the business a holistic view of the organization.

• Flexible: Can be applied to various situations like M&A, strategic changes, or performance improvement.

• Focuses on Alignment: Helps identify and fix misalignments between elements, leading to sustainable change.

 

2.2. Disadvantages of the McKinsey 7-S Model

• Complex: Requires deep analysis, which can be challenging for small businesses or those lacking specialized expertise.

• Time and Resource Intensive: Implementation requires extensive data collection and participation from multiple levels, which can take months or years.

• Doesn't Focus on External Factors: The model is primarily internal, so it needs to be combined with other tools like SWOT or PESTLE to consider the external environment.

2.3. Practical Example

This model is suitable for large enterprises undergoing change, such as market expansion or internal restructuring. In Vietnam, it can be applied to companies like Vinamilk when they need to improve governance and organizational culture to support international expansion. For example, Vinamilk has used the principles of the 7-S model during its equitization process since 2003, expanding its organizational structure with 14 factories and international branches while reinforcing shared values through the vision of "Becoming Vietnam's number one symbol of trust for nutritional and health products." This has helped the company cope with external factors like technology and economic integration, achieving export revenues to 43 countries, including major markets like the Middle East and the EAEU. The model also supports Vinamilk in integrating technology into production and management, ensuring a balance between hard elements (structure, systems) and soft elements (culture, staff).

 

3. The Kaizen Model (Japan)

The Kaizen Model, also known as "continuous improvement," is a management philosophy originating from Japan. The core of Kaizen is to make small but continuous improvements in every process, from production and operations to management, to reduce waste, optimize efficiency, and enhance product and service quality. A unique feature of Kaizen is that it mobilizes the participation of all employees, from frontline staff to leadership, creating a culture of teamwork, innovation, and a long-term commitment to improvement.

It uses tools like PDCA (Plan-Do-Check-Act), 5S (Sort, Set in order, Shine, Standardize, Sustain), and small improvement teams (Kaizen teams).

 

 

3.1. Advantages of the Kaizen Model

• Low Cost: Does not require large investments in technology but focuses on small improvements from internal resources.

• Easy to Apply on a Small Scale: Suitable for SMEs, can be started in a specific department or process.

• Encourages Teamwork: Increases employee participation, boosting motivation and satisfaction, which leads to lower turnover rates.

• Flexible and Sustainable: Delivers long-term improvements, helping the business adapt quickly to market changes.

 

3.2. Disadvantages of the Kaizen Model

• Requires a Long Time to See Clear Results: Small improvements accumulate gradually, and it can take months or years to achieve a significant impact, requiring persistence.

• Depends on Corporate Culture: Success relies on commitment from both leaders and employees; without a collaborative culture, it can face resistance or failure.

• Difficult to Measure Short-Term: Initial results may not be clear, making it hard to maintain momentum.

• Not Suitable for Major Changes: Kaizen focuses on gradual improvement, so it needs to be combined with other models for breakthrough restructuring.

 

3.3. Practical Example

Rang Dong Light Source and Vacuum Flask Joint Stock Company (Rang Dong)—a leading Vietnamese company in lighting, electrical equipment, and LED solutions—successfully implemented the Kaizen model combined with Lean management and 5S principles from 2016 to optimize production and enhance competitiveness.

Process Improvement Strategy:

• Analyzing and eliminating various types of waste (excess inventory, defective products, waiting time).

• Encouraging employee contributions through an innovation reward mechanism (200,000 – 10 million VND per idea).

• Applying visual management and weekly team meetings to maintain progress and team cohesion.

Kaizen Implementation in Production:

• Applied to the LED and electronic ballast assembly lines, focusing on eliminating the 7 wastes and balancing the production flow.

• Combined with 5S (Sort, Set in order, Shine, Standardize, Sustain) to standardize the workplace environment.

Achieved Results:

• Productivity increased by 59% on the LED assembly line, creating an added value of 960 million VND/year.

• Product defect rate decreased by up to 70%.

• Revenue increased by 10.5%, reaching 2,939 billion VND.

• Profit increased by 49%, reaching 188 billion VND.

• Average employee income increased by 14.2%, reaching 12 million VND/month.

Strategic Impact:

• Increased competitiveness in the context of economic integration and digital transformation.

• Built a Continuous Improvement Culture, promoting proactive participation from all employees.

• Created a foundation for automation and the application of smart technology in production.

Applying Kaizen and Lean not only helped Rang Dong optimize costs and enhance production efficiency but also strengthened its brand position in both domestic and international markets.

 

4. The Divestiture Model

The Divestiture Model is applied when a business wants to sell off, eliminate, or separate business units, assets, or subsidiaries that no longer align with the organization’s core strategy. Businesses typically use this strategy to improve financial performance (increase ROA, ROE), reduce risk, and enhance shareholder value by removing underperforming units.

The divestiture strategy can be implemented in various forms, such as a direct sale, a spin-off (creating an independent subsidiary), or an equity carve-out (selling a portion of shares to the public).

 

4.1. Advantages of the Divestiture Model

• Reduces Financial Burden: Generates immediate cash flow from the sale of assets, helping to pay down debt or make new investments, thereby improving the balance sheet.

• Increases Strategic Focus: Allows the company to prioritize its core business, enhancing efficiency and competitive advantage.

• Optimizes Portfolio: Eliminates underperforming units, increases shareholder value, and improves adaptability to market changes.

• Attracts Investment: Can open up opportunities for new partnerships.

 

4.2. Disadvantages of the Divestiture Model

• Can Cause Organizational Imbalance: Cutting a business unit can lead to job losses, reduced employee morale, and operational disruption.

• Reduces Business Scale: Narrows overall revenue if the divested unit accounts for a large proportion, affecting market power.

• Valuation and Legal Risks: The selling price might be lower than the actual value if the market is volatile, and there are additional tax costs and contract disputes.

• Long-Term Impact: Could lose future growth opportunities from the divested unit if it recovers later.

4.3. Practical Example

In 2019, Vingroup implemented a divestiture strategy by transferring its retail arm, VinCommerce (VinMart, VinMart+), to Masan Group. Previously, VinCommerce owned over 2,600 stores and supermarkets but had accumulated losses of about 100 million USD due to fierce competition and high expansion costs.

The deal was structured as a share swap: Masan created CrownX to merge VinCommerce and Masan Consumer Holdings, initially holding 70% (later increased to ~85%), while Vingroup retained a minority stake with a buy-back option. The transaction was estimated to be worth 2.5 billion USD.

Vingroup recovered significant cash flow to focus on technology and industry, particularly VinFast (electric cars) and VinSmart (smart devices), reducing its financial burden and reinforcing its strategic shift towards high-tech. Masan expanded its retail and FMCG market share, with consolidated revenue increasing by 10-15% and improved profits through supply chain integration. The transaction attracted investment from SK Group (South Korea), raising CrownX’s valuation to 6 billion USD, becoming a prime example of a restructuring model through divestiture in the digital economy.

 

 

5. The M&A Model (Mergers & Acquisitions)

The M&A (Mergers & Acquisitions) model is a corporate restructuring strategy aimed at expanding scale, increasing market share, gaining access to new technology, diversifying product portfolios, and optimizing resources. The deals can be horizontal to reduce competition, vertical to control the supply chain, or conglomerate to diversify risk. The standard process includes: target identification, negotiation, due diligence, and post-M&A integration, with major challenges in legal, financial, and corporate culture aspects.

The pre-M&A phase plays a decisive role. Inmergers provides comprehensive pre-M&A solutions including business valuation, strategic consulting, and market analysis, helping to optimize costs, reduce risks, and increase the success rate of a deal.

5.1. Advantages

• Rapidly Increases Scale and Resources: Allows businesses to expand quickly without building from scratch, saving time and costs.

• Accesses New Markets: Helps penetrate new regions, reach new customers, or acquire advanced technology, increasing competitive advantage.

• Optimizes Efficiency: Reduces costs by consolidating processes, eliminating redundancies, and increasing purchasing power.

• Increases Shareholder Value: Often leads to an increase in share price and profits due to synergy effects.

5.2. Disadvantages

• Risk of Cultural Conflicts: Differences in organizational culture can lead to internal conflicts, decreased productivity, and high employee turnover.

• High Costs: Includes transaction, due diligence, and integration fees, which can amount to millions of USD, along with the risk of debt if financed by borrowing.

• Legal Complexity: In Vietnam, compliance with the Competition Law, Investment Law, and approval from state agencies can take years.

• High Failure Risk: Approximately 70-90% of M&A deals do not meet expectations due to incorrect valuation or poor integration.

5.3. Practical Example

In the second half of 2024, Masan Group spent 200 million USD to acquire an additional 7.1% stake in VinCommerce from SK Group (South Korea), raising its ownership to approximately 92%. Previously, in 2019, Masan had acquired 85% of VinCommerce from Vingroup.

VinCommerce operates over 2,500 VinMart and VinMart+ stores, integrating an e-commerce platform through apps and online sales channels, creating a comprehensive retail-consumer ecosystem.

Objective: Expand market share amid competitive pressure from Shopee, TikTok Shop; strengthen digital transformation, and optimize the online-offline customer experience.

Results: Retail revenue increased by 15–20%, and net profit grew by 30% in the following quarter; logistics were optimized, customer data was leveraged, and consumer product exports to international markets were expanded.

The deal demonstrates that M&A is a strategic tool for Vietnamese businesses to enhance competitiveness and keep pace with integration and digitalization trends.

 

 

6. The Digital Transformation Model

The Digital Transformation Model is a business restructuring process that integrates digital technologies such as AI, blockchain, big data, cloud computing, and IoT to innovate operational processes, products/services, and business models. The goal is to increase efficiency, adapt to the digital environment, and enhance customer experience. This model is not just about adopting technology but also about changing organizational culture, training staff, and repositioning strategy. In Vietnam, digital transformation is driven by the National Strategy on the Fourth Industrial Revolution, focusing on the technology, retail, and manufacturing sectors.

 

 

6.1. Advantages

• Increases Efficiency: Automating processes can reduce costs by 30-50%, increasing productivity and processing speed.

• Improves Customer Experience: Personalizing services through data increases loyalty and revenue.

• Aligns with Modern Trends: Helps businesses adapt to Industry 4.0, expand into digital markets, and create a sustainable competitive advantage.

• Sustainable Growth: Data exploitation for forecasting and innovation leads to an average revenue growth of 15-20% per year.

 

6.2. Disadvantages

• Requires Large Investment: Costs for technology and infrastructure can be billions of VND, with the risk of not achieving a good ROI.

• Staff Training: Requires time and money for employees to adapt and can face resistance from the old culture.

• Security Risks: Increases the risk of cyber-attacks and data loss if proper security measures are not in place.

• Dependency on Infrastructure: In Vietnam, limitations in bandwidth or digital skills can slow down progress.

6.3. Practical Example

MWG (Mobile World Group) is implementing a comprehensive digital transformation strategy for the 2023–2025 period to enhance its e-commerce capabilities and optimize the customer experience. The model focuses on integrating technology into every stage: physical stores combined with an online platform (omnichannel retail), automated logistics, and after-sales service via a mobile app.

Key Technologies: Cloud computing for data management, Artificial Intelligence (AI) for demand forecasting, and a high-speed online order processing platform (over 1,000 products per day).

Growth Objectives: +300% in online revenue for the Bach Hoa Xanh chain, +50% for Avakids, and developing a digital sales channel for EraBlue in Indonesia.

Expected Results: Consolidated revenue of 150,000 billion VND (+12%), net profit of 4,850 billion VND (+30%), with technology retail accounting for >60% and food retail >30%.

Impact: Reduced operating costs, a 20–30% increase in online revenue, shortened delivery times, and enhanced customer satisfaction and competitiveness against international platforms.

 

 

 

7. Challenges and Solutions for Restructuring

 

 

7.1. Challenges

The restructuring process can lead to operational disruptions, affect short-term performance, and require a high level of commitment from leadership. Common challenges include:

• Resistance from Employees or Shareholders: Employees often fear job loss, changes in roles, or organizational culture, leading to reduced productivity and high turnover. Shareholders may object if they perceive risks to short-term profits.

• High Short-Term Costs: Investments in technology, staff training, consulting, or post-M&A integration require significant capital, which can increase debt and reduce cash flow.

• Risk of Failure if the Strategy is Unsuitable: If the external environment (such as global competition or legal regulations) is not properly assessed, restructuring can lead to loss of market share or bankruptcy

7.2. Solutions

To overcome these challenges, businesses need a systematic approach, focusing on people, finance, and strategy. The following solutions can be flexibly applied to various restructuring models in Vietnam:

• Build a Clear Plan and Communicate Transparently: Create a detailed plan with specific goals, timelines, and KPIs, while communicating regularly to reduce resistance.

• Hire Professional Consultants: Collaborate with consulting firms to assess risks, develop strategies, and support integration. Inmergers, a leading M&A platform in Vietnam, uses auto-matching technology to connect businesses with partners, helping to reduce costs and increase the effectiveness of restructuring.

• Pilot the Model on a Small Scale Before Full Implementation: Apply a pilot program in one department or branch to evaluate its effectiveness, make timely adjustments, and mitigate risks. This method is suitable for Kaizen or Digital Transformation, helping to save costs and build trust.

8. Key Considerations for Businesses When Choosing a Restructuring Model

Businesses should start by assessing their current situation, choosing a suitable model, anticipating risks, and building a clear roadmap, while ensuring legal compliance and alignment with corporate culture. The spirit of balancing short-term financial goals with long-term social responsibility will determine sustainable success.

8.1. Assess the Current State of the Business

• Collect Quantitative and Qualitative Data: Analyze financial reports (cash flow, profit, debt, liquidity), conduct internal surveys (employee satisfaction, process bottlenecks, leadership capabilities), and analyze the market (market share, industry trends, competitors).

• Identify Core Problems: Outdated operational or technological barriers; organizational structure that does not fit the business size and strategy; or a disconnect between the expectations of shareholders, management, and employees.

• Set Specific Goals: Financial targets (increase revenue by x%, reduce costs by y% in z months), operational efficiency (shorten production cycles, improve quality), and non-financial goals (improve culture, enhance digital capabilities).

8.2. Choose the Right Restructuring Model

• McKinsey 7-S: When you need to align Strategy, Structure, Systems, Shared Values, Skills, Style, and Staff. Suitable for medium-to-large businesses with multiple functional divisions.

• Kaizen (Continuous Improvement): Apply to manufacturing and supply chain businesses that need small, sustainable improvements. Focuses on optimizing processes, reducing waste, and improving quality.

• M&A (Mergers & Acquisitions): When you need to rapidly expand scale, technology, or market share. Requires careful consideration of valuation, cultural integration, and post-merger management.

• Divestiture: For non-core or underperforming business units. Frees up cash flow to invest in key areas.

• Digital Transformation: Necessary for businesses of all sizes, especially those wanting to increase competitiveness and flexibility. Prioritizes automation, data analytics, e-commerce, and technology-based management.

8.3. Anticipate Risks and Implement Contingency Plans

During restructuring and M&A, businesses need to anticipate and proactively manage various categories of risks.

• Financial risks may arise from a lack of capital or cash flow bottlenecks; mitigation measures include developing credit scenarios, setting up a reserve fund, and renegotiating debt.

• Human resources risks such as brain drain or resistance to change can be addressed through transparent communication, competitive compensation packages, and reskilling programs.

• Legal and compliance risks often result from errors in M&A or transfer agreements; these can be prevented through in-depth legal consultation and internal audits.

• Cultural and communication risks include value conflicts or loss of morale; solutions involve defining shared core values and maintaining continuous communication programs.

• Technology risks such as security vulnerabilities or non-integrated systems can be reduced by conducting cybersecurity assessments and following a phased integration roadmap.

 

8.4. Build a Roadmap and Measure Performance

A clear roadmap should be structured into three phases: Initiation (0–3 months) — data preparation, communication, and training; Implementation (3–12 months) — executing key changes and monitoring performance metrics; Stabilization (12–18 months) — evaluation, optimization, and standardization.

Key KPIs include:

• Financial: EBITDA, ROS, ROE

• Operational: lead time, defect rate, customer satisfaction index

• Digital: automated transaction rate, CRM/ERP coverage, data analytics adoption

• HR: key employee retention rate, employee satisfaction score

Monitoring tools may consist of management dashboards (Power BI, Tableau), periodic review meetings (board reviews, town halls), and early warning systems for off-track KPIs.

 

8.5. Ensure Legal Compliance and Corporate Culture Alignment

All relevant legal regulations — labor, tax, environmental, M&A, and capital transfer — must be reviewed. Businesses should ensure transparency and full reporting to regulatory authorities. Employee training programs should be implemented to instill shared core values, along with an anonymous feedback channel to detect early signs of cultural resistance.

 

8.6. Focus on Long-Term and Social Responsibility

Restructuring initiatives should emphasize long-term sustainable impact, such as energy efficiency and ESG risk management. Companies should prepare sustainability reports in accordance with international standards, engage with communities through vocational training programs, charitable contributions, and develop a responsible supply chain.

 

9. FAQs

 

9.1. Comparison Between Vietnam’s Equitization Model and Japan/US Divestiture Model

In Vietnam, the equitization of state-owned enterprises (SOEs) aims to improve governance efficiency, reduce the burden on the state budget, and attract private capital. This process primarily applies to SOEs, typically involving the transition from 100% state ownership to mixed ownership, with the state often retaining a controlling stake. It takes place in a nascent financial market with limited transparency and governance.

By contrast, in Japan and the US, divestiture and restructuring aim to optimize shareholder value, focus on core business areas, and restructure investment portfolios. These apply to both SOEs and large private corporations, using diverse methods such as selling non-core assets, selling shares, spinning off business units, mergers, or subsidiary IPOs. Post-divestiture, the state rarely intervenes, and these actions take place in mature, transparent financial markets.

 

9.2. The Most Common Restructuring Model in Vietnam’s SOEs

The prevalent model combines equitization with organizational and governance restructuring. Key features include:

• Converting SOEs into joint-stock companies

• Adopting a governance structure with a Board of Directors and Supervisory Board

• Financial restructuring: resolving bad debts, reducing costs, and optimizing capital sources

• HR restructuring: streamlining operations and reforming salary systems

• IT application: improving transparency and internal controls
  Some enterprises also adopt public-private partnerships (PPP) or IPOs combined with foreign investment strategies.

9.3. Should the Kaizen Model Be Applied in Vietnam Without Modification?

The short answer is no — it should be adapted to local conditions. Reasons include:

• Cultural differences: Kaizen demands discipline, persistence, and a continuous improvement mindset, which need to be localized to fit Vietnamese corporate culture
  
  

• Management capacity: many Vietnamese companies lack robust performance evaluation systems required for Kaizen
  
  

• Business scale: Kaizen suits medium-to-large manufacturing businesses; smaller or service-oriented companies may need adjustments
  
  

• Leadership commitment: without full commitment from leadership, Kaizen can backfire
  

The recommended approach is a Vietnamese-adapted version of Kaizen that matches local realities.

 

9.4. Factors Differentiating Restructuring Models for Rural vs. Urban Businesses in Vietnam

Rural businesses typically face limited infrastructure, lower-skilled labor with less access to technology, low competition, and difficulty accessing capital — often relying on banks or self-funding. They tend to be less ready for innovation but have strong community ties and traditional values. The most suitable restructuring models focus on process optimization, adopting appropriate technology, and workforce training.

In contrast, urban businesses enjoy developed infrastructure, a highly skilled workforce, strong competitive environments, and easier access to capital via markets or investment funds. They are generally more receptive to innovation but have weaker community ties. Suitable restructuring models include KPI-based management, ERP implementation, deep equitization, and international partnerships.

Link:  https://inmergers.com/en/business-restructuring-models

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