A management team at Kaufmann is studying the latest year's operations and sales, which seem to have led to very confusing financial results. Sales exceeded forecast and production for the first six months, however Kaufmann reported a loss. Yet, when sales were below forecast and production above in the second six months, healthy income was reported.
Cummins Engine Co. is starting up production of diesel engine crankshafts in its plant in central Mexico. This operation requires much tighter tolerances than any product previously produced at the plant, and the young (recent MBA) manager who is in charge of the start-up is faced with several difficult decisions regarding the equipment to be used for crankshaft machining in Mexico. On the one hand, some of the equipment used for this purpose in Cummins' U.S. plant is inappropriate in the Mexican context. On the other, he has to operate under severe budgetary and supplier constraints. A subsidiary issue has to do with the long-term strategy for the Mexican plant, which has developed into one of the best in Cummins' worldwide network but risks being fragmented by the many opportunities for adding products that are available to it.
The vice president of the Lab and Clinical Services at Central Blood Bank is faced with the challenge of convincing a hospital to use economical shared patient transfusion testing services.
Three situations are described. A branch manager for a retail brokerage firm must decide whether to change the branch's cash management techniques to increase interest earnings. An auto mechanic must decide whether to oversell parts and repairs to meet sales and service quotas set by management. A research director must decide what to do about suspicions of product adulteration. The vignettes illustrate the impact of organizational context on individual decision-making and the importance of management of management systems and behavior for organizational integrity.
Executone has posted low returns in 1992 in the face of intense competition from AT&T and Northern Telecom, its principal rivals. Alan Kessman, president and CEO, is considering whether mid-course adjustments in strategy are necessary in the firm's telecommunications hardware and software businesses. Diagnosis of strategic issues in both the internal and external environment is a prerequisite to establishing a plan of action. Designed to illustrate concepts in strategy identification, evaluation, and formulation.
When BellSouth Enterprises decided to aggressively pursue the international cellular market, it needed new software in order to cope with the complexities of cellular billing and the country-specific variations in the international cellular market. BellSouth made the decision to enter into a strategic alliance with TeleSciences. This case explores why it made this decision and what the ramifications of this decision were for BellSouth and TeleSciences.
On November 9, 1987, the Government of India's Project Approval Board approved PepsiCo's second proposal to enter the country. The package that had been approved differed substantially, however, from the one that Pepsi and its local partners had proposed more than a year earlier. Pepsi estimated that the implied changes in project scope would increase the joint venture's initial investment requirements from about Rs. 200 million to Rs. 800 million, once start-up costs were taken into account.
Provides an overview of key issues on management of international alliances, including: 1) the logic of collaboration; 2) selecting partners; 3) structuring alliances; 4) alliance networks; 5) alliance dynamics; 6) limits to alliances; and 7) the role of governments.
Connor Formed Metal Products was a small, privately owned manufacturer of custom metal springs and stampings. Since becoming president in 1984, Bob Sloss had implemented many changes to the company's organizational structure, management control systems, and information systems. In particular, he introduced a computer system in one plant to track product jobs through the manufacturing process. Employees at every function and level of the company could access information about a particular customer or job. In 1990, Sloss wondered whether to roll out this system in the company's four other plants.
Involves analysis of a major capital investment proposal, an acquisition of another company, an estimate of the funds required for these two possible outlays, and a recommended course of management action.
Many industry-leading service providers are expanding internationally, with varying degrees of success. This note presents a framework for understanding the managerial challenges facing service firms as they enter foreign markets. In particular, focuses on key managerial tasks for successful internationalization and expands the concept of the "strategic service vision" to include the specific issues associated with cross-border growth.
Addresses the role of geographic scope in competition and strategy. Makes distinctions between the geographic scope of competition (or the effective area over which firms compete), the geographic scope of competitive advantage (or the geographic area from which a firm can draw locational advantages), and the geographic scope of strategy (the area over which a firm chooses to compete and locate its activities). The geographic scope of competition is influenced by technology, tastes, governments, and company strategy. Locational advantages are the result of favorable factor conditions, demand conditions, related and supporting industries, firm strategy, structure, and rivalry. The firm may choose to compete in a single market (a geographically focused strategy), in all markets (a global strategy), or some combination of markets. The firm can choose the configuration (location) and coordination of its activities. The firm adds value to geographically dispersed units through the choice of markets to serve, the location and coordination of activities, and the active management of economies of scale, scope, and learning.
Senior managers at large companies may think that occupancy costs are too insignificant to worry about, too technical to analyze, and too fixed to control. But occupancy costs can hurt a company's earnings, share value, and overall performance. To manage occupancy costs, managers must be able to identify their components, measure their impact, understand what drives them, and develop options to change them. Four basic tools help diagnose problems: a cost history, a loss analysis, a component analysis, and a lease aging profile. Executives also must understand cost drivers like leasing, location, and layout.
Drucker argues that in the post-capitalist society, managers must learn to negotiate a new environment with a different set of work rules and career expectations. Companies currently face downsizing and turmoil with increasing regularity. In addition, businesses in the post-capitalist society grow through many and varied complicated alliances, often baffling to the traditional manager. In this new world of business, managers must learn to use information in the place of authority as their primary tool. As companies increasingly become temporary institutions, the manager also must begin to explore what Drucker calls competencies: a person's abilities, likes, dislikes, and goals. If executives rise to these challenges, a new organizational foundation will be built. While a combination of rank and power supported the traditional organization, the internal structure of the emerging organization will be mutual understanding and trust.
Timothy Firnstahl, restaurateur, faced rising costs, inefficient management, and a recession. Firnstahl got the answer to his problem from Mikhail Gorbachev: slash the centralized command and liberate the company. In doing so, he would also transfer virtually all power and responsibility to his line managers. And after five months of intensive study and planning, he accomplished what he set out to do. He fired most of his corporate staff, empowered his restaurant managers with "100% Power and Responsibility," and undertook a massive promotion campaign.
Logistics have the potential to become the next governing element of strategy. Customer needs vary, and companies can tailor their logistics systems to serve them better and more profitably. The goal of logistics strategy is building distinct approaches to distinct groups of customers. The first step is organizing a cross-functional team to proceed through the following steps: segmenting customers according to purchase criteria, establishing different standards of service for different customer segments, tailoring logistics pipelines to support each segment, and creating economies of scale to determine which assets can be shared among various pipelines.
In the West, we believe that privatizing an Eastern European enterprise will invariably improve governance, management, and performance. But the positive effects of privatization are far from automatic. In fact, most newly privatized companies need dominant, experienced Western shareholders to compensate for the weaknesses of communist-educated managers. Whereas privatization with a strong shareholder can work miracles, privatizations without one rarely do well for long. Because owners must educate, motivate, or replace incumbent managers, ownership is critical. Privatization is a means to an end, not always an end in itself.
The author sets up a new metaphor for competition drawn from the study of biology and social systems. He suggests that a company be viewed not as a member of a single industry but as part of a business ecosystem that crosses a variety of industries. In a business ecosystem, companies "co-evolve" around a new innovation, working cooperatively and competitively to support new products and satisfy customer needs. In a large business environment, several ecosystems may vie for survival and dominance. In fact, it's largely competition among business ecosystems, not individual companies, that's fueling today's industrial transformation. Managers can't afford to ignore the birth of new ecosystems or the competition among those that already exist. McKinsey Award Winner.