Organization Development and Behaviour exam questions¶

Theory questions¶

Question

Discuss similarities and differences between strategic alliances and acquisitions.
Make sure you clarify how to choose between the two alternatives.

Answer

TODO In alliances, one has to manage separately its own company and also keep control of the behavior of the other,

Question

Discuss the definition of group and explain the 5 Step of Group Development Model. If you are in charge to form a group that has to think, design and launch new products on the market, what is the most important step you would pay attention to? Why?

Answer

TODO

Question

What are the differences between JV and M&A, and when you would adopt one instead of the other?

Answer

TODO

Question

Describe the "avoidance" conflict management style, write an example organizational situation where it is appropriate and one where it is not.

Answer

TODO

Small case questions¶

Question

Advanced Electronic group, a small US firm specialized in developing and patenting electronic components for the B2B market, is thinking about entering the South-East Asian market to exploit lower production costs, and possibly export back to the US if the government decides to remove trade barriers.
The company would seek a partner for marketing and financing operations, and managers have no prior experience in the SEA market.

What are the difficulties that the managers can face when expanding abroad?
What is the most appropriate entry mode for the company according to you? Why?

Answer

TODO

Question

Eataly is a company that sells Italian fine food products that started internationalizing only 2 years after its establishment, they opened first in the US and second in Asia. Even if the company has constantly grown, is margins have shrinked progressively. According to someone, this result might be due to the cultural distance between Italy and the countries in which they opened the stores.

Describe what is culture and the dimensions of national culture according to the Hofstede model.
Do you believe that these people are right when they say that margins have reduced due to cultural distance? What could be the effect that cultural distance play? Motivate your answer.

Answer

Cultures consists of learned, shared, interrelated sets of symbols that create orientation for members of a society.
According to the Hofstede model, national culture is defined as the differences in work-related attitides, more than the other factors like profession or age. In this model there are several factors that affect cultural distance, namely:

power distance
uncertanty avoidance
degree of individualism
degree of masculinity
degree of long term orientation

Cultural distance can have several negative effects such as increased costs of entry or decreased operational benefits, and it could also hamper the firm's ability to work and transfer its core competencies correctly.

In the case of Eataly, the company may have found itself operating in a country where it is costly or even impossible to import fresh Italian foods, which may lead to local production of food. However, if cultural distance was so high that people would not buy food from Italian producers, the company should have seen a slow increase in revenues (not margin shrinking), so cultural distance plays a small role here.

Question

Mrs. Karagounis will be the managing director of a joint venture that an Italian and an Indian company are planning to sign in the next weeks. The objective of the alliance is to jointly develop a new product that none of the parent companies is already making. Therefore, neither the amount of investments nor the time required to reach the results can be anticipated. The Italian parent company is worried that something could go wrong before and during the execution of the alliance.

Describe what could go wrong in an alliance using the alliance life-cycle model.
Since the objective of the alliance, what are the most critical phases of this alliance you would seriously pay attention to? Motivate your answer.

Answer

The life cycle of alliance consists of 4 phases, and in each phase something can go wrong:

set-up: not enough partner screening, unclear strategic expectations, narrow design
start-up: weak resources to develop
ongoing operations: conflicts in style or even content
dissolution: inability to disengage from the alliance

Since the alliance has a strong focus on innovation and development, the most important phase in term of attention is the one about ongoing operations, where conflicts about content and style of R&D (the main objective of the alliance) may arise.

Question

Your startup has been acquired by a large multinational company. You are worried about the integration between your small, very innovative company and the large one, because you think the large company could ruin the organizational culture of your startup and in the mid-term its ability to innovate.

Describe the organizational culture models that could characterize your organization and that of the large company using the Trompenaars model.
What type of integration approach would you use if you would be in the shoes of the large company?

Answer

The Trompeenars model is two-dimensions matrix that considers:

how much the company is "people oriented" rather than "task oriented"
how much the company is "egalitarian" rather than "hierarchical"

According to these factors, there are four possible cultural models:

incubator: people oriented and egalitarian
guided missile: task oriented and egalitarian
family: people oriented and hierarchical
Eiffel tower: task oriented and hierarchical

A company adopting the "guided missile" model grants autonomy to acquired companies, recognizing the benefits from highly integrated acquired teams. By adopting an "egalitarian" model for the parent company, the startup is able to maintain its innovative spirit and abilities, but the parent company should also be "task oriented" to promote the delivery of objectives by the acquired company, and not "familty oriented" since there aren't strong relationships between the members of each company.

Question

According to a recent survey of McKinsey & Company, companies that adopted a team-based organization for a long time have been able to cope with the lockdown (e.g. everyone working from home) better than those which adopted such mode only recently.

Describe the "Five stage model" of team development
Describe what could be the reasons that explain the results of the survey.

Answer

The five stage model consists of:

forming: people get to know each other and try to have a common ground and understanding about issues
storming: each member of groups says their opinions and feedbacks and conflicts and disagreements shape
norming: people try to establish friendship and common sense and feelings
performing: groups members start to collaborate and typically performing tasks toward achieving the goal
adjourning: people terminate the group since the goal is achieved

The reasons of success here lies on the fact that when companies adopt a team-based organization, people are used to collaborate with each other much more often and they are familiar with the way of working together, reducing levels of individualism and mentally preparing employees to face new challenges (such as the pandemic) in teams made of people coming from different backgrounds.

Question

Mrs. Jameson, a CEO of a company adopting a pure functional structure complains: "I am always trying to solve the conflicts between the production and sales managers. The production manager reports that sales people are constantly asking for unnecessary variations, while the sales manager reports that the production people are always late".
Mrs. Jameson believes that the organization has some problems and that the two managers do not even talk among each other. She thinks the level of integration between production and sales needs to be increased.

Describe what is the challenge of "balancing between differentiation and integration"
How would you help Mrs. Jameson to increase the level of integration? In other words, what integration mechanisms would you suggest? Why?

Answer

Differentiation stands for allocating the people and resources in order to achieve core competences.
On the other hand, integration helps coordinate these tasks through some mechanisms.
Two factors affect appropriate integration:

interdependency
- pooled interdependence,
- sequential interdipendence
- reciprocal interdipendence
information need

Mrs. Jameson's role is choosing the best mechanism of integration which can fit the differentiation model in the best way. In this case the most affordable one is adopting a permanent committees in which managers meet in temporary meetings to solve the problems, including the issue of “not talking”.

Full case questions¶

Case

Deutsche Post's increasing international diversity

The internationalization of Deutsche Post is closely linked to the opportunities and pressures resulting from the deregulation of national and international markets and the associated globalization of the transport and logistics industries.
The foundation was laid by the "big bang" reform of the German postal system in 1990, the law concerning the Structure of Posts and Telecommunications Retained Deutsche. Deutsche Post was a state-owned company, but aimed to prepare the company for gradual privatization (the firm went public In 2000 with an initial sale of 20 percent of share capital).
In the following years, the company went through a period of consolidation and restructuring which saw the integration of the former East German Post. By 1997, a year which saw a liberalization of the German postal market, the company had put into place the groundwork for a period of rapid international expansion. The subsequent globalization of Deutsche Post's activities was largely given by the demands of a growing number of business customers for a single provider of integrated national and international shipping and logistics services.

Over the next five years Deutsche Post responded by acquiring key players in the international transport and logistics market, notably Danzas and DHL, with the aim of becoming the leading global provider of express and logistics services. This international expansion enabled Deutsche Post, renamed Deutsche Post World Net (DPWN) in order to highlight its global ambitions, to gain a major contract with the fellow German company BMW for the transport, storage and delivery of cars to its Asian dealerships. As part of a so-called "START" programme, DPWN initiated in 2003 a programme aimed at harmonizing products and sales structures, creating integrated networks and implementing group-wide process management in order to realize the benefits of the economies of scale resulting from its global operations.
At the same time DPWN implemented the "One brand, One face of the customers" motto by making the DHL brand its global public face, with the expectation that this "familiar and trusted brand name will aid us as we continue to develop globalized services". Deregulation and wider political changes, reflected in the elimination of trade restrictions, continued to curve international expansion.

China's entry into the World Trade Organization enhanced the potential for growth in the International postal market. Accordingly, DPWN strengthened its commitment to this increasingly important market and was rewarded with a 35% growth rate over the period from 2002 to 2004 and, through a joint venture with Sinotrans, gained 40% market share of Chinese cross-border express services.
DPWN aimed to exploit regulatory changes closer to home as well. With its subsidiary Deutsche Post Global Mail (UK) gaining a long-term license for unlimited bulk mail delivery from the British regulator Postcomm, DPWN saw further opportunity for growth in the UK and continued to expand its presence in the British postal market through the acquisition of the postal operator Speedmail.

Thinking about the operations of M&A that Deutsche Post did to sustain its international expansion, what kind of integration approach do you think Deutsche Post might have used?
Discuss the reasons why in China Deutsche Post decided to enter the market through a JV. Motivate your answer.

Answer

HIGH-HIGH, symbyosis

Enter bc of revenues, JV to speed up the problem

The organization and its environment¶

Organizations and organizational effectiveness¶

Case

How Joe Coulombe Made Trader Joe's a Success Story

Trader Joe’s, an upscale specialty supermarket chain, was founded in 1967 by Joe Coulombe, who then owned a few convenience stores that were fighting an uphill battle against the growing 7-11 chain.
7-11 offered customers a wider selection of lower-priced products and Coulombe could not compete. For his small business to survive, Coulombe decided to change his strategy and supply upscale specialty products such as wine, drinks, and gourmet foods to customers. Coulombe changed the name of his stores to Trader Joe’s and stocked them with every variety and brand of California wine that was then being produced. He also began to offer fine foods like bread, crackers, cheese, fruits, and vegetables to complement and encourage wine sales. His planning paid off; customers loved his new upscale supermarket concept and the premium products he chose to stock sold quickly—and they were more profitable to sell. From the beginning Coulombe realized that finding a new niche in the supermarket business was only the first step to help his small, growing company succeed. He knew that to encourage customers to visit his stores and buy more expensive gourmet products he needed to provide them with excellent customer service. So, he had to find ways to motivate his salespeople to perform at a high level. His approach to organizing was to decentralize authority and empower salespeople to take responsibility for meeting customer needs. Rather than instructing employees to follow strict operating rules and to get the approval of their supervisor before making customer-specific decisions, employees were given autonomy to make their own decisions and provide personalized customer service. Coulombe’s approach led employees to feel they “owned” their supermarkets, and he worked to develop a culture based on values and norms about providing excellent customer service and developing personalized relationships with customers, who are often on first-name terms. Coulombe led by example and created a store environment in which employees were treated as individuals and felt valued as people. For example, the theme behind the design of his stores was to create the feeling of a Hawaiian resort: employees wear loud Hawaiian shirts, store managers are called captains, and the store décor uses lots of wood and contains tiki huts, where employees provide customers with food and drink samples and interact with them. Once again, this helped to create strong values and norms that emphasize personalized customer service. Finally, Joe Coulombe’s approach was strongly influenced by the way he went about controlling salespeople. From the outset he created a policy of promotion from within the company so that the highest-performing salespeople could rise to become store captains and beyond in the organization. And, from the beginning, he recognized the need to treat employees in a fair and equitable way to encourage them to develop the customer-oriented values and norms needed to provide personalized customer service. He decided that full-time employees should earn at least the median household income for their communities, which averaged $7,000 a year in the 1960s and is $48,000 today—an astonishingly high amount compared to the pay of employees of regular supermarkets such as Kroger’s and Safeway. Moreover, store captains, who are vital in helping create and reinforce Trader Joe’s store culture, are rewarded with salaries and bonuses that can exceed $100,000 a year. And all salespeople know that as the store chain expands they may also be promoted to this level. In sum, Coulombe’s approach to developing the right way to organize his small business created a solid foundation on which this upscale specialty supermarket has grown and prospered.

What was Joe Coulombe’s approach to organizational design?
What specific decisions did he make to create Trader Joe’s organizational structure and culture?
Go online and see how Trader Joe’s is performing today. What new problems of organizing has it been facing as it has grown?

Answer

TODO

Stakeholders, managers, and ethics¶

Case

How Westland/Hallmark put profit above safety

By all appearances the Westland/Hallmark Meat Co., based in Chico, California, and owned by its CEO Steven Mendell, was one the most efficient, sanitary, and state-ofthe-art meatpacking plants in the United States. The meatpacking plant, which regularly passed inspections by the U.S. Department of Agriculture (USDA), employed over 200 workers who slaughtered and then prepared the beef for shipment to fast-food restaurants such as Burger King and Taco Bell. Most of the millions of pounds of meat the plant prepared yearly, however, were delivered under contract to one of the federal government’s most coveted accounts: the National School Lunch Program, which named the plant supplier of the year in 2005.42 So at the end of 2007 when the Humane Society turned over a videotape, secretly filmed by one of its investigators who had taken a job as a plant employee, to the San Bernardino County district attorney that showed major violations of safety procedures, it caused an uproar. The videotape showed two workers dragging sick cows up the ramp that led to the slaughterhouse using metal chains and forklifts, shocking them with electric prods, and shooting streams of water in their noses and faces. Not only did the tape show inhumane treatment of animals, it also provided evidence that the company was flaunting the ban on allowing sick animals to enter the food supply chain, something that federal regulations explicitly outlawed for fear of human health and disease issues. By 2008, the USDA, concerned that contaminated beef had entered the supply chain, especially the one leading to the nation’s schools, issued a notice for the recall of 143 million pounds of beef processed in the plant over the last two years, the largest recall in history. In addition, the plant was shut down as the investigation proceeded. In 2008, when CEO Steven Mendell was subpoenaed to appear before the House Panel Energy and Commerce Committee, he denied these violations had taken place and that any diseased cows had entered the food chain.When panel members demanded that he view the videotape, he claimed he had not seen it, even though it was widely available, and he was forced to acknowledge that “two cows” had in fact entered the plant and that inhumane treatment of animals had taken place.43 Moreover, federal investigators turned up evidence that as early as 1996 the plant has been cited for overuse of electric prods to speed cattle through the plant and had been cited for other violations since, suggesting these abuses had been going on for a long period. This view gained strength when one of the workers shown in the videotape claimed that supervisors were pressuring workers to ensure 500 cows a day were slaughtered and processed so the plant could meet its quota and make the high profits the meatpacking business provides—and that he and other workers had no say in the matter: They were just “following orders from the supervisor.” These unethical and illegal work practices led investigators to fear that over the years, thousands of sick cows had been allowed to enter the food chain. Most of the 143 million pounds of beef recalled had already been consumed anyway. Not only customers, and especially schoolchildren, have been harmed by the company’s illegal actions, however. It seems likely that the plant will be permanently shut down and all 220 workers will lose their jobs. Indeed, the employees directly implicated by the video have already been prosecuted and one, who pleaded guilty to animal abuse, was convicted and sentenced to six months of imprisonment in 2008. 44 Whether or not the company’s managers will experience the same fate remains to be seen, but clearly all stakeholders have been hurt by the unethical, inhumane, and illegal actions by managers that, as the Humane Society had suspected for years, were commonplace in the plant. Discussion Questions 1. In your opinion, why did the managers and employees of the meat packing plant behave in the way they did? 2. Outline a series of steps the plant’s managers should have taken to prevent this problem from occurring.

In your opinion, why did the managers and employees of the meat packing plant behave in the way they did?
Outline a series of steps the plant’s managers should have taken to prevent this problem from occurring.

Answer

TODO

Organizing in a changing global environment¶

Case

How IKEA Manages the Global Environment

IKEA is the largest furniture chain in the world, and in 2011 the Swedish company operated over 270 stores in 25 countries. In 2011 IKEA sales soared to over $35 billion, or over 20% of the global furniture market; but to its managers and employees this was just the tip of the iceberg. They believed IKEA was poised for massive growth throughout the world in the coming decade because it could provide what the average customer wanted: well-designed and well-made contemporary furniture at an affordable price. IKEA’s ability to provide customers with affordable furniture is the result of the way it expands globally and operates its global store empire. In a nutshell, IKEA’s global approach focuses on simplicity, attention to detail, cost consciousness, and responsiveness in every aspect of its operations and behavior. IKEA’s global approach derives from the personal values and beliefs of its founder, Ingvar Kamprad, about how companies should treat their employees and customers. Kamprad, who is in his early 80s (and in 2010 ranked as the 11th-richest person in the world), was born in Smaland, a poor Swedish province whose citizens are known for being entrepreneurial, frugal, and hardworking. Kamprad definitely absorbed these values—when he entered the furniture business, he made them the core of his management approach. He teaches store managers and employees his values; his beliefs about the need to operate in a no-frills, cost-conscious way; and his view that they are all in business “together,” by which he means that every person who works in his global empire plays an essential role and has an obligation to everyone else. What does Kamprad’s approach mean in practice? All IKEA employees fly coach class on business trips, stay in inexpensive hotels, and keep traveling expenses to a minimum. And IKEA stores operate on the simplest rules and procedures possible, with employees expected to cooperate to solve problems and get the job done. Many famous stories circulate about the frugal Kamprad, such as that even he always flies coach class and that when he takes a soda can from the minibar in a hotel room, he replaces it with one bought in a store—despite the fact that he is a multibillionaire. IKEA’s employees see what Kamprad’s global approach means as soon as they are recruited to work in a store in one of the many countries in which the company operates. They start learning about IKEA’s global corporate culture by performing jobs at the bottom of the ladder, and they are quickly trained to perform all the various jobs involved in store operations. During this process they internalize IKEA’s global values and norms, which center on the importance the company attaches to their taking the initiative and responsibility for solving problems and for focusing on customers. Employees are rotated between departments and sometimes stores, and rapid promotion is possible for those who demonstrate the enthusiasm and togetherness that show they have bought into IKEA’s global culture. Most of IKEA’s top managers rose from its ranks, and the company holds “breaking the bureaucracy weeks” in which managers are required to work in stores and warehouses for a week each year to make sure they and all employees stay committed to IKEA’s global values. No matter which country they operate in, all employees wear informal clothes to work at IKEA—Kamprad has always worn an open-neck shirt—and there are no marks of status such as executive dining rooms or private parking places. Employees believe that if they buy into IKEA’s work values, behave in ways that keep its growing global operations streamlined and efficient, and focus on being one step ahead of potential problems, they will share in its success. Promotion, training, above-average pay, a generous store bonus system, and the personal well-being that comes from working in a company where people feel valued are some of the rewards that Kamprad pioneered to build and strengthen IKEA’s global approach. Whenever IKEA enters a new country, it sends its most experienced store managers to establish its global approach in its new stores. When IKEA first entered the United States, the attitude of U.S. employees puzzled its managers. Despite their obvious drive to succeed and good education, employees seemed reluctant to take initiative and assume responsibility. IKEA’s managers discovered that their U.S. employees were afraid mistakes would result in the loss of their jobs, so the managers strove to teach employees the “IKEA way.” The approach paid off: The United States has become the company’s second best country market, and IKEA plans to open many more U.S. stores, as well as stores around the world, over the next decade.

List the various ways in which IKEA has managed the global environment over time.
How would you explain the rationale behind the success of IKEA’s approach to managing its environment?

Answer

TODO

Organizational design¶

Basic challenges of organizational design¶

Case

Sony’s “Gaijin” CEO is Reorganizing the company

Sony, the famous Japanese electronics maker, was renowned in the 1990s for using its engineering prowess to develop blockbuster new products such as the Walkman, Trinitron TV, and PlayStation. Its engineers churned out an average of four new product ideas every day, something attributed to its culture, called the “Sony Way,” which emphasized communication, cooperation, and harmony among its company-wide product engineering teams.36 Sony’s engineers were empowered to pursue their own ideas, and the leaders of its different divisions, and hundreds of product teams were allowed to pursue their own innovations—no matter what the cost. While this approach to leadership worked so long as Sony could churn out blockbuster products, it did not work in the 2000s as agile global competitors from Taiwan, Korea, and the United States innovated new technologies and products that began to beat Sony at its own game. Companies such as LG, Samsung, and Apple innovated new technologies such as advanced LCD flat-screens, flash memory, touch-screen commands, mobile digital music, video, and GPS positioning devices, and 3D displays that made many of Sony’s technologies, such as its Trinitron TVs and Walkmans obsolete. For example, products such as Apple’s iPod and iPhone and Nintendo’s Wii game console better met customer needs than Sony’s out-of-date and expensive products. Why did Sony lose its leading competitive position? One reason was that Sony’s organizing approach no longer worked in its favor because the leaders of its different product divisions worked to protect their own personal empires and divisions’ goals and not those of the whole company. Sony’s leaders were slow to recognize the speed at which technology was changing and as each division’s performance fell, their leaders felt threatened and competition between them increased as they sought to protect their own empires. The result was slower decision making and increased operating costs as the leaders of each division competed to obtain the funding necessary to develop successful new products. By 2005 Sony was in big trouble; and at this crucial point in their company’s history, Sony’s top managers turned to a gaijin, or non-Japanese, executive to lead their company. Their choice was Sir Howard Stringer, a Welshman, who as the head of Sony’s U.S. operations had been instrumental in cutting costs and increasing profits. Stringer’s was known to be a directive but participative leader; although he was closely involved in all U.S. top management decisions he nevertheless then gave his top executives the authority to develop successful strategies to implement these decisions.

When he became Sony’s CEO in 2005 Stringer faced the immediate problem of reducing operating costs that were double those of its competitors because the leaders of its divisions had essentially seized control of Sony’s top-level decision-making authority. Stringer immediately recognized how the extensive power struggles among the leaders of Sony’s different product divisions were hurting the company. So, adopting a directive, command-and-control leadership approach, he made it clear that this had to stop and that they needed to work quickly to reduce costs—but he also urged them to cooperate to speed product development across divisions. By 2007 it was clear that many of Sony’s most important divisional leaders were still pursuing their own goals and were ignoring Stringer’s orders. By 2008 Stringer had replaced all the divisional leaders who resisted his orders, and he worked steadily to downsize Sony’s bloated corporate headquarters staff and replace the leaders of functions who also put their own interests first. He promoted younger managers to lead its divisions and functions—managers who would obey his orders and focus on the company’s performance because as Stringer said over time the culture or business of Sony had been management—not making new products. To turn around Sony’s still declining performance, Stringer had to adopt an even more directive approach. In 2009 Stringer announced he would take charge of the Japanese company’s struggling core electronics group and would add the title of president to his existing roles as chairman and CEO as he reorganized Sony’s divisions. He also replaced four more of its most important leaders with managers who had held positions outside Japan and were “familiar with the digital world.” In the future, he also told managers to prioritize new products and invest only in those with the greatest chance of success so Sony could reduce its out-of-control R&D costs. By 2010 Sony’s financial results suggested that Stringer’s initiatives were finally paying off; he had stemmed Sony’s huge losses, its products were selling better, and Stringer hoped Sony would become profitable by the end of 2011.To help ensure this Stringer also took charge of a newly created networked products and services group that included its Vaio computers, Walkman digital media players, PlayStation gaming console, and the software and online services to support these products. Stringer’s organizing approach was still focused on helping Sony regain its global leadership in electronic products.37 In January 2011 Stringer announced that Sony’s performance had increased so much that it would be profitable in the second half of 2011. Then within months came the news that hackers had invaded Sony’s Playstation website and stolen the private information of millions of its users. Sony was forced to shut down its Playstation website for weeks and compensate users, and together it expects the losses from this debacle to exceed $1 billion as well as the cost to its brand name. In addition, it also became clear that customers were not buying its expensive new 3D flatscreen TVs and that its revenues from consumer products would be lower than expected because of intense competition from companies like Samsung. In June 2011 Stringer reported that now the company expected to make a record loss in 2011, so his turnaround efforts have been foiled so far.

What pressures and forces from the environment led Stringer to change the balance between centralizing and decentralizing authority at Sony?
How would you describe Stringer’s approach to organizing? Is he seeking to create a more mechanistic or organic structure, or what kind of balance between them?

Answer

TODO

Designing organizational structure: authority and control¶

Case

Royal Mail: A Structural Conundrum

It may be surprising to some observers to find out that the Royal Mail Group is still one of the largest organizations in the UK. It now consists of Royal Mail itself, which concentrates on the letter and small packet business by utilizing 60 mail centers, 8 regional distribution centers, and 1,400 local delivery offices. Post Office Counters is also part of the Royal Mail Group and still boasts a network of 12,000 branches throughout the UK. Parcelforce Worldwide, the group’s parcel brand, is still a significant player in a highly competitive sector, and General Logistics Systems is Royal Mail’s European parcel company. The organization has not, however, always been in this form. As a nationalized business and later as a PLC wholly owned by the government, Royal Mail has had to contend with a succession of differing government reviews and policies and the loss of its prized letter delivery monopoly in 2006. An additional problem has been Royal Mail’s industrial relations record, which, over the years, could be described as difficult to say the least. The Internet also posed highly significant challenges to the business. A sharp reduction in social mail accompanied the rise of email, although the greeting card business has held up well. The Internet did however provide an opportunity for Royal Mail and Parcelforce to deliver a growing number of items sent out by Internet retailers such as Amazon. Post Office Counters has faced structural decline of a different type. It has also been hit by a decline in demand for letter post services, but more significantly it has ceded much of its role as an agent for paying pensions and child benefits as successive governments have tried to persuade customers to receive these payments through an electronic transfer system that is far less expensive to administer.Vehicle Licensing can now also be performed online. However, because of its heritage and presence in even the most remote parts of the country, it has been seen as a community service as well as a profit making enterprise. Consequently, politicians have often argued a case for keeping Post Offices in remote villages even if Post Office regional management have felt that it was not viable to do so. Understandably, managing a group of this size has posed some major challenges in terms of designing organizational structures. BT was, in fact, originally part of the Post Office under the name Post Office Telecommunications and gained their own identity only in 1981. Subsequently, Royal Mail operated as a highly bureaucratic organization encompassing letter and parcel delivery and Post Office counter functions. There was a low degree of specialization and a high degree of multi-skilling in some parts of the organization, for example, administrative staff could expect to serve on the counter and also work in the back office functions of Royal Mail. Sorting Office staff could also be trained on a variety of roles concerning sorting, distribution, and delivery of mail. A set of Post Office rules was available in several large volumes to consult in the case of almost any eventuality. In addition, there was a Postmaster/Postmistress in every city who took overall responsibility for the operation of the services within his or her district. In 1986, a decision was taken to separate the organization into Royal Mail Letters, Royal Mail Parcels, and Post Office Counters, which itself became a limited company in 1987. However, the organization did retain a group board to coordinate overall strategy, and each separate business gained its own managing director. Staff working in a particular business when the split was announced largely stayed there. A significant reorganization was implemented in the early 1990’s, when the Royal Mail introduced the “Business Development” initiative. The business was reorganized into nine divisions, instead of the 64 previous Postmaster/ Postmistress districts. These divisions were given responsibility for their own budgetary performance and effectively possessed a great degree of autonomy. Layers of management were removed, thus considerably reducing the number of levels between frontline staff and board level in a move that was also designed to promote empowerment amongst the workforce. An emphasis on rulebooks was now replaced by an expectation of initiative. A further split was then implemented on the operational part of Royal Mail where delivering, sorting, and distribution functions were separated. Meanwhile, the newly devolved Post Office Counters Ltd followed a different course. Many small Post Offices were already being run on a basis that involved the SubPostmaster or Sub-Postmistress buying a Post Office premises on the open market. They then receive a salary commensurate with the size of the business and can employ their own staff if required. They often also run a convenience store within the same premises. At the time of the split, larger offices were staffed by workers directly employed by the Post Office, mostly on a full time basis. In recent years, increasingly larger offices have been bought by Sub-Postmasters and Sub-Postmistresses and staffed by their own employees, many of whom are employed on a part-time basis. This trend has continued, and the number of directly managed offices has fallen from 1,500 in 1988 to 373 in 2011. The current coalition government have bold plans for the Royal Mail Group. They envisage gradual decoupling of Post Office Counters from the rest of the group and favor a mutual structure for the future. Meanwhile, preparations have begun for the sale of Royal Mail. It seems that structural change is rarely very far from the Royal Mail Group agenda.

Why did Royal Mail implement the “Business Development” process?
Post Office Counters have pursued a policy of increasing the number of Post Offices run autonomously by Sub-Postmasters or SubPostmistresses. Is this a form of centralization or decentralization? Explain your answer.

Answer

TODO

Designing organizational structure: specialization and coordination¶

Case

Liz Claiborne Refashions Its Structure

Liz Claiborne, like other well-known apparel makers, embarked on a major product expansion strategy in the 1990s when it acquired many smaller branded clothing and accessory companies and started many new brands of its own. The company’s goal was to achieve greater operating efficiencies so that rising sales would also result in rising profits. By 2006, it had grown to 36 different brands, but although revenues had soared from $2 billion to over $5 billion, its profits had not kept pace. In fact, profits were falling because costs were rising as operational efficiency fell due to the enormous complexity and expense involved in managing so many brands.25 So Liz Claiborne recruited a new CEO, William McComb, to find a way to turn around the troubled company. Within months he decided to reverse course, shrink the company, and move to a new form of organizational structure that would once again allow it to grow—but this time with increasing profitability. CEO McComb’s problem was to find a new organizational structure that would reduce the problems associated with managing its 36 different brands. He believed the company had developed a “culture of complexity” due to its rapid growth and overly complex organizational structure. The company had created five different apparel divisions to manage its 36 brands; brands were grouped into different divisions according to the nature of the clothing or accessories they made. For example, luxury designer lines like Ellen Tracy were grouped into one division; clothes for working women such as its signature Liz Claiborne and Dana Buchman brands were in a second; trendy, hip clothing directed at young customers such as its Juicy Couture line were in a third division, and so on. A separate management team controlled each division, and each division performed all the functional activities like marketing and design needed to support its brands. The problem was that over time it had become increasingly difficult both to differentiate between apparel brands in each division as well as between the brands of different divisions because fashion styles change quickly in response to the demands of changing customer tastes. Also, costs were rising because of the duplication of activities between divisions, and increasing industry competition was resulting in new pressure to lower prices to retail stores to protect sales. McComb decided it was necessary to streamline and change Liz Claiborne’s organizational structure to meet the changing needs of customers and the increasing competition in retailing because of the growth of private-label brands. First, he decided that the company would either try to sell, license, or if necessary close down 16 of its 36 brands and focus on the remaining 20 that had the best chance of generating good profits in the future.26 To better manage these 20 brands, he decided to change its organizational structure and to shrink from five different divisions to just two. This eliminated an entire level of top management, but it also allowed him to eliminate the duplication in marketing, distribution, and retail functions across the old five divisions and so would result in major cost savings. The two remaining divisions are now its retail division called “direct brands” and its wholesale division called “partnered brands.” Its new structure is intended to “bring focus, energy and clarity” to the way each division operates. The retail division, for example, is responsible for the brands that are sold primarily through Liz Claiborne’s own retail store chains, such as its Kate Spade, Lucky Brand Jeans, and Juicy Couture chains. The goals of grouping together its fastest-growing brands is to allow divisional managers to make better marketing and distribution decisions to attract more customers. For example, Liz Claiborne plans to increase targeted marketing on direct labels to 3% to 5% of annual sales and to find ways to get new clothing designs more quickly to its store to compete with chains like Zara that are able to innovate new clothing collections almost every month. The company also plans to open 300 more stores in the next few years to add to its 433 specialty stores and 350 outlets stores. In contrast, the problem in the wholesale division, which sells branded apparel lines such as Liz Claiborne and Dana Buchman directly to department stores and other retailers, is to reduce costs to slow down the growing threat from private labels. For example, sales of Macy’s private labels increased almost 10% during the 2000s. If managers of the wholesale division can find ways to improve operating efficiency, it can offer stores like Macy’s lower prices for its clothing to encourage them to stick with its brands. Similarly, if the division’s managers can find ways to reduce costs such as by turning inventory over more quickly, sharing marketing costs, and so forth, then even if the prices they can charge do fall, they can still increase profits. Wholesale managers are also partnering with department stores to develop exclusive lines of branded clothing so both parties benefit. For example, they reached an agreement with JCPenney to launch a line called Liz & Co. that will be sold only in its stores; so far sales have been good, and both partners have enjoyed higher profits. Thus CEO McComb realized that to reduce complexity and allow each division to build the right merchandising culture, it was necessary to change Liz Claiborne’s organizational structure. From grouping clothing products into divisions based on their quality or price, he changed to two market divisions where clothing brands are grouped according to the needs of each division’s customers—either the people in its stores or the retail chains that buy its clothes to resell to individual customers. The real problem is that each division faces a quite different set of strategic and operational problems, and with its new structure managers in each division can now focus on solving the specific set of problems to achieve the best performance from their particular brands. In 2010, McComb’s hope is that in the next decade the company’s sales will grow rapidly, but this time its new structure will lead to higher efficiency and effectiveness and so rising profitability.

What were the problems with Liz Claiborne’s old organizational structure?
How did McComb change Liz Claiborne’s structure to improve its effectiveness? Go to the Web and find out how his design changes have worked.

Answer

TODO

Creating and managing organizational culture¶

Case

A Tale of Two Cultures

In an attempt to give Southwest Airlines a competitive advantage based on low-cost, high-quality service, CEO Herb Kelleher developed terminal and instrumental values that made Southwest’s culture the envy of its competitors. Southwest managers and employees alike are committed to the success of the organization and do all they can to help one another and to provide customers with excellent service (a terminal value). Four times a year, Southwest managers work as baggage handlers, ticket agents, and flight attendants so they get a feel for the problems facing other employees. An informal norm makes it possible for employees to gather with Kelleher every Friday at noon in the company’s Dallas parking lot for a company cookout. Southwest keeps the organization as flat and informal as possible, and managers encourage employees to be creative and to develop rules and norms to solve their own problems. To please customers, for example, employees dress up on special days like Halloween and Valentine’s Day and wear “fun uniforms” every Friday. In addition, they try to develop innovative ways to improve customer service and satisfaction. All employees participate in a bonus system that bases rewards on company performance, and employees own over 22% of the airline’s stock. The entrance hall at company headquarters at Love Field in Dallas is full of plaques earned by employees for their outstanding performance. Everybody in the organization cooperates to achieve Southwest’s goal of providing low-cost, high-quality service. The culture of excellence that Southwest has created seems to be working to its advantage. Southwest increased its operating routes and profits every year and is the most profitable airline flying today. Contrast Southwest’s CEO and culture with that of Value Line, Inc. Jean Buttner, publisher of the Value Line Investment Survey, fashioned a culture that the company’s employees apparently hated. In her attempt to reduce costs and improve efficiency, she created instrumental values of frugality and economy that poisoned employees’ attitudes toward the organization. Employees were told to sign in by 9 A. M. every day and sign out when leaving. If they faked their arrival or departure time, they could be terminated. Because at Value Line messy desks were regarded as signs of laziness or “unproductivity,” Buttner required department managers to file a “clean surfaces report” every day, certifying that employees did tidy up their desks.51 Salary increases were also kept as small as possible and the company’s bonus and health plans were under tight rein. How have these values paid off? Many highly trained professional workers left Value Line because of the hostile atmosphere produced by these “economical” values and by work rules that devalued employees. Also, this turnover generated discontent among the company’s customers, who began to complain. So bad did feelings between employees and Buttner become that employees reportedly put up a notice on their bulletin board that criticized Buttner’s management CHAPTER 7 • CREATING AND MANAGING ORGANIZATIONAL CULTURE 227 style and suggested that the company could use some new leadership. Buttner’s response to this message from a significant stakeholder group was to remove the bulletin board. Clearly, at Value Line no culture of cooperation between managers and employees exists.

List the reasons why Southwest’s and Value Line’s cultures differ so sharply.
Could Value Line’s next CEO copy Southwest’s culture?

Answer

TODO

Organizational design and strategy in a changing global environment¶

Case

Schering-Plough Implements a New Global Strategy and Structure

One global company that found itself in trouble in the 2000s because of the way its structure and control systems were working was pharmaceutical maker ScheringPlough. In 2003, Schering was under pressures from many fronts. The Food and Drug Administration (FDA) was demanding a complete overhaul of its global manufacturing plants to increase and protect drug quality, and the patent on Claritin, its best-selling drug, was running out and it had few new products in the pipeline. Thus on both the quality and innovation dimensions, major sources of a differentiation advantage, the company’s strategy was in trouble. Schering-Plough’s board of directors recruited Fred Hassan, a Pakistan-born Harvard MBA, to turn the company around. After meeting with hundreds of groups of managers and scientists, and visiting the company’s operations around the globe, Hassan began to realize that the company’s main problems stemmed from its global strategy and structure.49 Over time, the company had developed a multidomestic approach to planning its global value-chain activities and it had divided its activities up into world regions, where essentially each world region acted as the product group that made decisions inside its world region/group. The problem was that each of the heads of the regional groups had gained a near total control of their operations, so each world region was doing things such as manufacturing and marketing and sales in its own unique way. As a result, managers at corporate headquarters, and especially its top-management team, were not getting accurate information about the way each region, and especially the country operations within each region, were performing. And major drug quality problems had arisen because the corporate center didn’t find out about the problems at the country level until a long time after they had occurred because of all the bureaucracy that had emerged at the level of the regional groups. Schering only makes one major type of product— drugs—so Hassan decided it did not need separate worldwide product groups or separate regional groups. He decided to slash the number of levels in the company’s global corporate hierarchy, eliminating all the layers between the country managers and himself. The heads of each international division now report directly to him or one of his top-management team members, so it is much easier to observe and evaluate their performance—and that of their divisions. It is also easier to standardize issues such as quality and sales practices around the world. He has also worked to expand the range of products each international division sells to achieve economies of scale. In 2007, for example, Hassan engaged in related diversification when he bought a major Dutch pharmaceutical company that is a leader in producing vaccines for animals and pets, as well as possessing a pipeline of potentially bestselling new drugs—it has five drugs in late trials, including an important new treatment for schizophrenia and bipolar disorder. His new global organizational structure worked so well and sales and profits increased so much that by 2010 it was bought by and became part of Merck, one of its major competitors. Hassan is now the chairman of Bausch & Lomb, an optical products company, where he is applying the same kinds of organizational structure changes to help increase that company’s global competitive position.

What kinds of problems was Schering-Plough experiencing with its global strategy and structure?
How did Schering Plough change its global structure to solve these problems?

Answer

TODO

Organizational change¶

Types and forms of organizational change¶

Case

Nike Learns How to Change

Nike, headquartered in Beaverton, Oregon, is the biggest sports shoemaker in the world. Throughout the 1990s it seemed that its founder and CEO, Phil Knight, and his teams of shoe designers could do no wrong; all their innovative design decisions led to the global acceptance of Nike’s shoes and record sales and profits for the company. As time went by, however, and its fortune soared, some strange dynamics occurred. The company’s managers and designers became convinced they “knew best” what customers wanted, and that their decisions about how to change and improve Nike’s future shoes would be enthusiastically received by customers. But things were changing in the sport-shoe environment. New competitors had entered the market and they began to offer alternative kinds of sports shoes—shoes targeted at specific market segments like skateboarders, soccer players, or power walkers. Nike had no shoes in these market segments. Moreover, Nike also failed to notice that sports shoes were evolving into performance shoes for more everyday uses such as walking or backpacking. It also failed to take note of consumers’ increasing preferences for dark blue and black shoes that wore well in cities and that could double as work and walking shoes. In the 2000s Nike’s sales and profits fell sharply as many of its new lines of sports shoes were not well received by customers, and CEO Phil Knight knew he had to find a way to turn his company around. Realizing that his designers were starting to make poor decisions, he brought in managers from outside the company to change the way decisions were made. An executive who was brought in to lead the outdoor products division advised Knight to take over and purchase small specialized companies, such as North Face, to quickly widen Nike’s product line. But Nike’s other managers and designers resisted this idea, believing that they could still make the best decisions. With sales still slumping, it became obvious that Nike would have to take over specialist shoe companies to grow successfully. One of the first of its acquisitions was Cole Haan, the luxury shoemaker, and Nike’s designers proceeded to revitalize its line of shoes by using their skills to make them more comfortable. Then, realizing it had to get into small markets, in the 2000s, Nike bought other small companies such as Hurley, the skate and surfboard apparel maker. To try to overcome its past errors in its decision making, however, Knight decided on a new way to design shoes for specialized niche markets, like the skateboarding, golf, and soccer markets. Henceforth, rather than having Nike’s designers all grouped together in one large design department, they would be split up into different teams. Each team would focus on developing unique products to match the needs of customers in its assigned market segment. The skate team, for example, was set up as a separate and independent unit, and its designers and marketing experts were charged to develop a unique line of shoes for the sport. Similarly, because of poor sales, Nike separated golf products from the rest of the company and created an independent unit to develop new golf shoes, clubs, and other golfing products. Nike was attempting to demolish the old companywide mindset that had resulted in its past decision-making errors that led to the wrong kinds of changes. With many different teams, each working on different lines of shoes and other products, Nike was hoping to build diversity into its decision making and create teams of experts who were attuned to changing customer needs in their segments of the sports product market. Nike’s new approach to decision making worked; most of its new shoes are now leaders in their market segments and its sales and profits have soared in the 2010s as a result of the way it has changed the way it makes decisions. Nike learned from its mistakes and Knight continues to promote organizational learning—the process of helping the members of an organization to “think outside the box” and be willing to experiment, take risks, and make change possible.

How did Nike change the way it made decisions and introduce new products?
In what ways could Nike use the change techniques discussed in this chapter to find ways to improve its effectiveness and competitive advantage?

Answer

TODO

Decision making, learning, knowledge management, and information technology¶

Case

How Mattel’s Barbie Lost the War against the Bratz Doll

The rapid pace at which the world is changing is forcing strategic managers at all kinds of companies to speed up their decision making; otherwise they get left behind by agile competitors who respond faster to changing customer fads and fashions. Nowhere is this truer than in the global toy industry, in which vicious combat rages in the doll business, worth over $10 billion a year in sales. The largest global toy company, Mattel, has earned tens of billions of dollars from the world’s best-selling doll, Barbie, since it introduced her over 50 years ago.83 Mothers who played with the original dolls bought them for their daughters, and granddaughters, and Barbie became an American icon. However, Barbie’s advantage as bestselling global doll led Mattel’s managers to make major strategic errors in the 2000s. Barbie and all Barbie accessories have accounted for about 50% of Mattel’s toy sales since the 1990s, so protecting this star product was crucial. The Barbie doll was created in the 1960s when most women were homemakers; her voluptuous shape was a response to a dated view of what the “ideal” woman should look like. Barbie’s continuing success, however, led Mattel’s CEO Bob Eckert and his top managers to underestimate how much the world had altered. Changing cultural views about the role of girls, women, sex, marriage, and women working in the last decades shifted the tastes of doll buyers. But Mattel’s managers continued to bet on Barbie’s eternal appeal and collectively bought into an “If it’s not broken don’t fix it” approach. In fact, given that Barbie was the best-selling doll, they thought it might be dangerous to change her appearance; customers might not like the product development changes and stop buying the doll. Mattel’s top managers decided not to rock the boat; they left the brand and business model unchanged and focused their efforts on developing new digital toys. As a result, Mattel was unprepared when a challenge came along in the form of a new kind of doll, the Bratz doll, introduced by MGA Entertainment. Many competitors to Barbie had emerged over the years because the doll business is so profitable, but no other doll had matched Barbie’s appeal to young girls (or their mothers). The marketers and designers behind the Bratz line of dolls had spent a lot of time to discover what the new generation of girls, especially those aged 7–11, wanted from a doll, however. It turned out that the Bratz dolls they designed met the desires of these girls. Bratz dolls have larger heads and oversized eyes, wear lots of makeup and short dresses, and are multicultural to give each doll “personality and attitude.”84 The dolls were designed to appeal to a new generation of girls brought up in a fast-changing fashion, music, and television market. The Bratz dolls met the untapped needs of “tween” girls, and the new line took off. MGA quickly licensed the rights to make and sell the dolls to toy companies overseas, and Bratz became a serious competitor to Barbie. Mattel was in trouble. Its strategic managers had to change its business model and strategies and bring Barbie up to date; Mattel’s designers must have been wishing they had been adventurous and made more radical changes earlier when they did not need to change. However, they decided to change Barbie’s extreme shape; they killed off her old-time boyfriend Ken and replaced him with Blaine, an Aussie surfer.85 They also recognized they had waited much too long to introduce new lines of dolls to meet the changed needs of tweens and older girls in the 2000s. They rushed out the “My Scene” and “Flava” lines of dolls that were obvious imitations of Bratz dolls, but they both flopped. And the decisions they made to change Barbie— her figure, looks, clothing, and boyfriends—came too late, and sales of Barbie dolls continued to fall. By 2006, sales of the Barbie collection had dropped by 30%, which was critical to Mattel because its profits and stock price hinged on Barbie’s success—and they both plunged. Analysts argued that Mattel had not paid enough attention to its customers’ changing needs or moved quickly to introduce the new and improved products necessary to keep a company on top of its market. Mattel brought back Ken, but then in a sign of its mounting problems, Mattel’s lawyers sued MGA Entertainment, arguing that the Bratz dolls’ copyright rightfully belonged to them. Mattel complained that the head designer of Bratz was a Mattel employee when he made the initial drawings for the dolls and that Mattel had applied for copyright protection on a number of early Bratz drawings. Mattel claimed that MGA hired key Mattel employees away from the firm and these employees stole sensitive sales information and transferred it to MGA. In 2008 a judge ruled in Mattel’s favor and ordered MGA to stop using the Bratz name, and a jury awarded Mattel $100 million in damages. After an appeal, in 2009 a federal judge upheld the verdict and ruled that the Bratz doll is Mattel property and that MGA could sell the doll only until the end of 2009. In 2010 the companies were locked in a bitter dispute: Mattel wanted the rights to produce and sell the Bratz doll line, but MGA’s founder was still trying to protect the profits made from the Bratz dolls’ success. Meanwhile stores stopped selling the Bratz doll, Mattel revitalized its line of Barbie dolls, and its CEO exultantly declared that “Barbie is back” as increased doll sales helped raise the company’s profits by 86% in the spring of 2010.86 Imagine then, how Mattel’s managers reacted to the decision of the federal appeals court in July 2010 when it threw out the previous court decision and ruled that MGA Entertainment did have the right to make and sell the Bratz doll because their looks and image were not subject to existing copyright law! The rights to the Bratz doll were given back to MGA, and MGA is currently suing Mattel for major damages that have cost it hundreds of millions in profits.

Why were Mattel’s managers so slow to change their decision making about the design of the Barbie doll over time? What kinds of cognitive errors may have contributed to this?
What kinds of factors affected the way managers at both Mattel and MGA made their decisions over time during their battle over control for the Bratz dolls?

Answer

TODO

Authors: Giacomo, Matteo