Winds of Change - Survival plan for Goodies enterprises.

University Degree Business and Administrative studies

Alex Han (55BIS)

1. INTRODUCTION

1.1 Introduction to an Organisation’s Environment

From ‘ORGANISATIONAL CHANGE’

Barbara Senior pg 27

All organisations operate in at least three types of environment. The diagram above is a stylised depiction an organisation as a system operating in a multidimensional environment. This diagram however doesn’t show that an organisation’s environment is of very much dynamic nature.

Temporal Environment
Consist of factors that change through time. (i.e. Organisation life-cycle, Industry Life cycle)
The environment can be anticipated but cannot be controlled.
External Environment
Consists of factors that are outside the organisation’s boundary but nevertheless important to the outcome of organisation’s performance. The environment can be anticipated but cannot be controlled.
Internal Environment
Consists of factors that are inside the organisation’s boundary. Divided into informal and formal sub-systems.
The environment can be planned and controlled

We operate in these environments also, and will be faced with a lot of forces for change in all environments. If organisations responded continuously to the need for change, there would be no need for frame-breaking change.

However, in the real world, it is not as simple. Tushman et al.(1988) and Johnson (1987,1988) describe of a phenomenon whereby the organisation personnel become so comfortable with ‘how we work here’ and ‘what we hold important here’ that they also become blind to the warning signs of coming from the environment.

I have therefore put together a report which;

- Analyses our current situation

- Predicts our environments

- Plan for future

2 EXTERNAL ENVIRONMENT ANALYSIS

2.1 - External Environment Analysis Introduction

To understand the external environment, I have decided to use the PEST analysis as it is the most widely-used and recognised. It’s a useful mnemonic that categorises the four main external factors that influence an organisation’s structure, and its strategy. The analysis is shown in the next section.

2.2 PEST + Competition

2.2.1.Political/Legal

The reason that we have customers is mainly due to the Legislation in U.K that states all electronic equipment are eligible for three years after-service. This doesn’t mean three year warranty, but manufacturers having a duty to fix the equipment for three years. Usually out of this, one year is covered under Warranty. People then have an option to extend this warranty to 3 years for a slight fee.

In other countries such as Korea, the after-service length is only a year. However, there are a lot of just Electronics Repair shops that fixes almost anything electrical regardless of its make, or age. When you break something in U.K, you don’t expect to see it again for at least 3 months. In Korea, you get it fixed in a day, and brought back to you for very reasonable prices. The U.K legislation stops companies such as these entering the market, making the whole country very dependant on organisations such as Goodies.

2.2.2 Economic Factors

Our contract is with several firms in the Far East (Korea, Taiwan). They account for more than 75% of our current work. In 1997, there was a big Financial Crisis in the Far East where Taiwan and Korea were severely affected. A lot of Korean firms went bankrupt during this time. Korea had to ask IMF for help. Both the economies (especially Korea) have bounced back strong and are now in the process of stabilising. Another crisis of this sort will be fatal to us.

Being a warehouse, we uses a lot of electricity and heating. The utility bills are very expensive and it affects the business significantly.

As mentioned above, it is safe to assume that as long as people are using monitors, people will always break them sometime also.

2.2.3 Socio Cultural + Demographic

With more and more people becoming computer-literate due to reasons such as Internet, and 3-D Games, there has been an increase in demand for the Monitors market. The development of 3D Graphic Accelerator Chip has enabled realistic 3D effects, leading to increased sale of computer games. More and more gamers are appreciating playing games on a larger, better monitor.

Desktop computers need a VDU (Visual Display Unit) of some sort to operate and therefore it is safe to assume that there will be more than enough monitors to fix for the Repair Centres.

We are currently situated in Bedford. This place is popular for warehouses, and factories because of the cheap rent, and cheap and abundant work-force. I felt that the people that live in Bedford were a lot different from London. They were all pretty much happy with their lives and jobs which gave the organisation a laid back atmosphere. They did what they were told and they did it for much less pay than what would be expected in London. Bedford is also not too far from London, while being in a good transport location for the Postal Services to deliver and pick up monitors.
2.2.4 Technology

In “Tips to survive in the Digital Era”, Professor Jang states that Computer Technology is changing at an incredible pace. It took just 30 years for computers to be where they are now, whereas the telephone has been around for 100 years. Monitors also have been evolving. 20 years ago, there was no colour on the monitors. 10 Years ago, they could only handle 256 colours at the most. Now, we have 32 bit-colour scheme. Not only this, monitors are becoming much thinner and lighter. CRT (Cathode Ray Tube) monitors are slowly getting extinct, and it’s now the era of LCD Display Units.

Our engineers will have to keep up with the latest monitor technology if we want firms to continue seeking our services. I have been told that once you know the basics, they are all same when repairing.
Monitor prices are becoming cheaper and cheaper nowadays (especially the CRT), and there is a worry that people would just throw away the monitors and get a new one rather than getting it fixed (e.g. Mobile Phones). This isn’t a immediate worry for us, but I think it’s one of the reasons that made the we are looking into other areas such as Import/Export.

2.2.5 Competition

We have an advantage in that our Finance Director is a very able Korean business woman. It would not be far from the truth to say that the Korean monitor making companies have chosen us to represent them because they trust her and her abilities. The market itself isn’t a very competitive market, but nevertheless there always are worries that some other firm which is either much more efficient or bigger is going to come and take over the market. Till now, it’s been a mature oligopoly market.

We currently have BS5750 Quality Standard. This has been a major ...

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2.3 Porter’s Five Key Analysis

2.3.1 Threat of Entry

Economies of Scale
Economy of scale doesn’t really play a major role in this industry. They don’t produce

anything, nor buy things in bulk. Spare parts are supplied by their clients.

Capital Requirement

As expected, Capital Requirements are quite high

Forklift Trucks
Rent/Buy Warehouse (at least 65,000 sq Feet)
Pellet Trucks
Database Management System (suited to this industry)
Barcode system
Account System (SAGE)
Equipment (For packing, unpacking, trolleys)
Staff (Engineers, Desk-workers, Labour Workers)

Therefore one could say that the entry barrier is quite high when it comes to Starting-Capital Requirement

Differentiation

There are two main differentiators between us and other organisations in our industry.

Firstly, there are close personal links between the Finance Director and the managers in Korean companies such as Samsung Corporation

The second differentiator is that around 80% of our staffs have had more than 10 years of experience in the same industry. This is because they were working in Hulcote Electronics (Goodies previously) beforehand. Everyone working there was vastly experienced.

2.3.2 Power of Buyer + Supplier

In our industry, the buyer + supplier are not linked, but the same people.

2.3.3 Threat of Substitutes

I can see three different substitutes that could develop.

Firstly, the Korean Monitor Manufacturing companies could use other Repair Centres.

But Koreans usually always prefer to deal with Koreans because of their responsible nature. Therefore it is unlikely that he or any other managers will change to a different Repair centre unless we makes a serious mistake.

Secondly, Korean Monitor Manufacturing companies could build their own repair centres over in U.K.

This however isn’t a viable idea not only due to the cost and time involved, but because of the tough U.K legislations that stops non-UK SMEs(Small Medium Enterprises) from entering the U.K market.

Thirdly, it might soon be cheaper to scrap the monitor and delivering a new monitor rather than fixing it.

Prices of monitors have been decreasing rapidly. Even more so now that Flat Screen Monitors have started decreasing in price. Old CRT (Cathode Ray Tube) monitors are 1/10 of the price it used to be 5 years ago.

2.3.4 Competitive Rivalry

Johnson&Scholes state in their book that,

“The most competitive conditions will be those in which entry is likely, substitutes threaten and buyers or suppliers exercise control.”

Entry won’t be easy for small organisations due to the start-up capital required as it is a fair amount of money. As for big organisations, they will be reluctant to invest money as the market is already mature, and the return compared to the investment is not that great.

Substitutes as mentioned above are not very likely as they are producing a unique service rather than a product.

Regardless of everything above, the main reason why we have survived and will survive in the future is due to the fact that we specialise in dealing with Korean monitor manufacturers. Without this, I am sure that we would have had to compete very fiercely with other organisations. Korea is probably the number one monitor manufacturer in the world. This reason alone makes us operate in a much less competitive environment. In fact, it’s not an exaggeration to say that we don’t really have to compete with anyone.

2.3.5 Competition and Collaboration

To survive and be competitive in our industry, a close collaboration between our customers and suppliers is needed. We have to keep in contact regularly and try and help each other as much as they can. This builds trust.

We can help the monitor manufacturers by regularly sending them a report stating the Fault reason for all broken monitor they receive. This helps the Monitor manufacturers to spot common faults and improve their design in the future which in turn adds value to our services.

3. Internal Environment Analysis

3.1 Internal Environment Analysis Introduction

In order to really gain a ‘feel’ of the organisation, I decided to work for a month in all the existing departments. This helped me understand the culture of the organisation in a really short amount time. I then arranged the information gathered into a Cultural Web Chart.

3.2 PARADIGM CHART/ANALYSIS

Rituals and Routines

In the Goods-in/out Department, the jobs are usually taken by 17-20 year olds for its physical nature, and because of their boyish nature they tend to try and do as little as possible and also get up to a lot of practical jokes with each other

There are no set-lunch areas but the groups all have their own areas. The workers for instance will eat lunch outside at a park or nearby. The Monitor Cleaning Ladies will eat their pack lunch in the designated area. The managers will usually order take-away to their office. The engineers are usually a mixture of both.

To encourage team spirit there is an annual Barbecue for the entire staff. I heard quite a lot of workers actually enjoy and look forward to this event.

Stories

While working there, I had the unfortunate accident of losing a whole fingernail. When I complained of the pain, I had 4 different workers showing me their bruises and scars that made my injury look like an insect bite. I later came to realise that they compare bruises regularly. Nevertheless, safety is stressed over and over again, even in this humorous context.

There are also stories of how the current management is running far more efficiently than the last one.

Symbols

All the desk-workers including the managers had their desks upstairs while the workers, engineers, and monitor cleaners were all situated downstairs on the floor. This was clearly the logical layout of the organisation, but I couldn’t help but notice how cleaner and newer the upstairs toilet and the kitchen was compared to downstairs. This wasn’t the only difference between upstairs and downstairs facilities. The workers downstairs only had 40 minute for lunch at a designated time between 12:00 and 1:00pm while the upstairs staff could take up to an hour when they needed it.

Internet was also only allowed on the upstairs computers even though every computer in the organisation was hooked up onto the same network. This meant the organisation took some extra measures so that Internet wasn’t allowed downstairs.

Organisational Structure

We try to keep to a formal structure even if it’s only on paper. But because we consist only of 23 people, the structure was quite loose at the bottom. I seem to remember thinking that the organisation reminded me of a big family. The Workers were the troublesome teenage kids, the Monitor Cleaning Ladies were like Mum figure, and the engineers like dad. Even though there was a natural segregation between the groups caused by age, and nature of work, they respected and liked each other. This was helped by the fact that quite a lot of them were related with each other in some way. For instance, two of the engineers had their son working in the Goods In department. A Monitor Cleaning Lady was also married to a guy working in the Goods Out department. This is encouraged by the Operations Director to build team spirit, and whenever there is a job opening, he always asks his staff first.

Power Structure

The staffs here all seem to be happy working there for the moment except the workers in Goods In/Out department who are only there for the money. Except for the workers, I seem to remember having the impression that hat they were satisfied to their current jobs.

Control Systems

I found out within a week that the most importantly regarded machine in our organisation was the Clocking Machine.

As long as we are not behind schedule, the workers are pretty left alone. But if we get behind schedule, first thing we do is check the Clocking Machine. If they have been not clocking in enough time, then they are told off or sacked. If not, they are just told to work harder or do some overtime.

Taking days off is frowned upon but it’s nothing compared to what will happen when you take a day off without at least 3 days notice. 3 day notice is vital unless it happens to be an emergency.

Paradigm

Overall, the feeling I got from our staff was

“Fair Work, Fair Play, Fair Pay”

They were happy working there because they were content with their pay. They then do adequate amount of work to keep the place rolling and not fall behind schedule, while trying to have as much fun as they can.

4 LEADERSHIP STYLE

4.1 LEADERSHIP STYLE INTRODUCTION

Management and Leadership are two very different things. Management is rather more firmly in the context of the formal organisation, with leadership more naturally associated with the informal aspects of organisations.

Leadership theories vary from those which state that there are a set of characteristics which leaders must have to be successful to those which argue that different styles of leadership are required according to different change situations.

I personally agree with the latter style, and believe that a there is no one best way, but a range of leadership styles which should be applied differently according to the situation. This is called a ‘contingency approach’ to leadership.

4.2 Contingency Leadership Models

There are many types of contingency leadership approaches such as Tannenbaum and Schmidt (1973) which arranges leadership behaviour along a continuum, selecting the style that is most appropriate to the situation according to the ‘three forces’.

Forces in the manager
Skill, knowledge, personality, attributes of the manager
Forces in the subordinate
Subordinates vary in their characteristics due to factors such as the degree of support needed, experience in work
Forces in the situation
Forces caused by internal and external Environment

This model however above doesn’t illustrate how much importance should be attached to each contingency factor. A better approach would be the flexible Hersey and Blanchard’s (1993) model which tries rank each contingency factor. According to this theory, a leader’s behaviour should depend on the readiness of followers to accept and follow. The ‘path goal’ theory of leadership also agrees with this idea of being flexible leadership. They all state that the appropriate leadership style is contingent upon various situational factors.

As our current situation indicates that we are in for a ‘bumpy’ ride up ahead, I will be keeping a tight control at the top during the next few months to monitor the operations of the company. We will be much more work-focused and will try and streamline our business so that we are in a better situation to fact the future.

However, when I am satisfied that our organisation has done everything we can internally to equip ourselves for the future, we will moving towards a more responsive, and open style of leadership to encourage innovative ideas from the staff.

5 FUTURE MOVES

5.1 Key Opportunities

Find other suitable Korean Manufacturers
This is definitely a key agenda for us. We are also the best candidate to be approaching Korean Manufacturers due to our past records.
Try and approach other far-eastern countries
We could approach other big Monitor Manufacturing Countries such as Taiwan, and Japan. We could hire other far-eastern people, to help with the dealings
Repair other electronic items rather than just monitors
This is an obvious opportunity that could be exploited. Most manufacturing companies don’t build just one item. For example, Samsung Corporation builds monitors, computers, cameras, Stereos, Phones., the list is endless. I’ve been told by our Engineers that they can fix most things electrical. If not, they should be trained. This could open up a whole new market segment for them.

5.2 Key Threats

Relations between Goodies and Korean manufacturers going bad
The major factor to our success so far has been due to our prior relations with Korean Manufacturing Companies. Should anything happen to this relationship, we could be in major trouble.
Competition from other U.K Repair Centres
Korean managers are loyal but not stupid. If we seem to be doing terribly compared to the big U.K Repair centres (i.e. in price and service quality), they will switch.
Goodies Engineers can’t keep up with Monitor Technology
If the monitor industry continues developing in the rate it is now, we will have to make sure that their engineers get the adequate training or hire more competent ones. If, by any chance they fail to prepare for this, they will probably end up breaking more monitors than fixing them.

BILIOGRAPHY

BOOK/MATERIALS USED

Organisational Change

Barbara Senior

Prentice Hall (2nd Ed)

School Lecture Notes

WEB-SITES USED

www.nova.edu/ssss/QR/QR2-4/rhodes.html

Researching Organisational Change and Learning: A Narrative Approach by Carl
Rhodes

www.itil.tso.co.uk/organisational_change.html

www.organisationalchange.co.uk

A UK based company providing cultural change and customised organisational
change consultancy services and managing change training services. Provides a lot of information

E.g. Let’s say the buyer of our services is Samsung Corporation as they require us to handle their after-sales services.

Samsung Corporation will have to make sure that Goodies don’t run out of spare parts stock because this could damage not Goodies, but Samsung’s reputation. If Goodies don’t do a good job, Samsung will hear about it through their customers.

“Living the Digital Era” Jang Hyun Shik pg 9

Exploring Corporate Strategy Johnson&Scholes pg 120