NMC Health Restructuring Proposal

Restructuring a company is something that requires confidence, strategy, and above all, a reason. For the purposes of this paper, I will consider the NMC Health, a company in the health sector involved in investing in healthcare. The company has two distinct divisions, the Healthcare Division and the Distribution Division. The company was established in 1973 and has since grown by leaps and bounds. The distribution business was commenced in 1981 in Abu Dhabi and has grown to become one of the largest pharmaceutical distributors in the region. The company, as at the end of 2016 financial year, made revenues amounting to $1.2208 billion, a 38.6% increase from 2015. Net profits for the same period remained at $151.4 million, a 76.5% increase from 2015. Out of the revenues, $823.3 million and $431.9 were from the Healthcare and Distribution Divisions respectively. Healthcare profits increased by 78.6% while Distribution Divisions profits rose by 7%. From this analysis, the Healthcare Division seems to be growing phenomenally as compared to the Distribution Division. The company has shown an almost complete reliance on one economy which is based on oil. The company has a fleet of 230 vehicles for the Distribution Division. 

NMC Health Plc is a perfect candidate for restructuring since it has two distinct challenges. First, it has two operational divisions which are interdependent and two; the company is heavily dependent on one economy. According to Daft, Murphy, and Willmott, (2014, p.97), managers should design, and if necessary design again organizations that will make such organizations achieve their goals. A restructuring would involve splitting the company to two. The main company should be the Healthcare Division while the subsidiary would be the Distribution Division. The Distribution Division would require having its separate management and operations so that it is made feasible and capable of planning its strategy and direction. The company needs to diversify its market base to enable it to be more resilient especially when there are problems with oil-based economies. 

To drive this discussion, there are critical secondary sources that will be used as guides. First, Collins (2006, p.234) will be used. Collins (2006) describes how a determined leader becomes successful and gives precise examples of situations where such leaders were able to sail through their companies through tough periods of restructuring. Gulati and Puranam (2009) discuss the importance of informal and formal organizations and their overlapping advantages. Concerning restructuring NMC Health, Gulati and Puranam (2009), will provide insights on how the Distribution Division will be weaned off from the parent and as such make, it has its formal structures independent of the Health Division.  Shabaninejad et al., (2014), looks at the various competitive factors a company in the pharmaceutical (healthcare) market should look at before deciding to invest to remain competitive. This article will be important in guiding the various competitive factors that NMC Health should focus on to conquer markets in the international markets. Besides the articles, this proposal will focus on the financial statements of competitors, such as Mediclinic International, which is also based in the UAE but has operations in many parts of the globe. The competitor has adopted the diversification strategy and has been successful.

References

Collins, J., 2006. Level 5 leadership: The triumph of humility and fierce resolve. Managing Innovation and Change, 234.

Daft, R,L., Murphy, J. & Willmott, H. (2014). Organizational Theory and Design: An International Perspective, 2^nd ed. Cengage Learning. 

Gulati, R. and Puranam, P. (2009) ‘Renewal through reorganization: The value of inconsistencies between formal and informal organization’, Organization Science, 20(2), pp. 422–440.Shabaninejad, H., Mehralian, G., Rashidian, A., Baratimarnani, A. and Rasekh, H.R., 2014. Identifying and prioritizing industry-level competitiveness factors: evidence from pharmaceutical market. DARU Journal of Pharmaceutical Sciences, 22(1), p.35.