Kent Chemical: Organizing for International Growth Essay
Kent Chemical: Organizing for International Growth
Instructions:-
1. What were the problems facing Luis Morales as he began implementing Ben Fisher’s international expansion strategy?
2. How do you evaluate the organizational changes he made in response to those problems? Why were they unsuccessful?
3. What do you think of the Sterling Partners recommendations? What did Kent get for the $1.8 million fee?
4. What should Morales recommend? What should Chairman Ben Fisher decide?
Solution
Kent Chemical: Organizing for International Growth
Question 1
Ben Fisher elected Louis Morales as the head of the revitalized international division to implement Fisher’s vision of a globally integrated company. Morales started implementing the integration strategy by taking focusing on Kent’s fifteen foreign joint ventures, increasing the company’s international existence, and acquiring other overseas companies. Morales efforts bore fruits since international sales grew from 11% at $139 in 1999, to 27% at $598 million in 2007. He, however, faced various problems when implementing the international expansion strategy. Firstly, the company came up with a corporate reporting method to consolidate financial reports and control operations. However, the system caused strain in the joint ventures by creating discord because it resulted in the employees second-guessing the local country managers. Also, the new system set exaggerated financial targets that did not line up with the market realities.
Secondly, the relations between the subsidiaries and their American technical contacts shifted because the requests for capital allocation went through the regional managers, Morales, and the corporate level. The corporate administrators became critical and less collaborative to the requests made by the Country Managers. Thirdly, the previous independence enjoyed by the overseas subsidiaries resulted to the managers protecting their self-interests. An example is when the Korean joint venture decided to make fire retardants, a decision that challenges the German subsidiary which used to export the retardants to Korea previously. Frustrations between product organizations and geography also occurred in the American units as evidenced by an employee who withheld approvals to force the U.K. subsidiary to bring its receivables under control. Such conflicts made it difficult to work together and integrate strategies for the overseas operations. Thirdly, the regional organization of the international division faced difficulty coordinating issues that had global implications. Nobody in Kent coordinated products, or the sourcing decisions, or price globally. Also, the research group never received communication of the international product-development requirements and priorities since the international unit had a regional structure instead of being product-based. It was, therefore, difficult for the research team to deal with offshore opportunities and needs since its efforts focused on responding to specific problems and identified applications.
Question 2
In 2006, Morales appointed three
global business directors (GBDs) to respond to the challenges experienced when
trying to implement the international expansion strategy. The GBDs were
responsible for three business lines: fire-protection products,
consumer-products, and medical plastics. They aimed at injecting
consumer-oriented thinking into the overseas subsidiaries, assuming global
technology control and marketing responsibility, and integrating the international
and domestic parts of Kent’s operations respectively. The GBDs were, however,
unsuccessful in their role. As evidenced by their different objectives, the
GBDs lacked precise knowledge about their roles. It was, therefore, difficult
for the regional directors to work with them. Also, the subsidiaries viewed the
consumer-products GBD as an interference to local issues since he lacked
experience and understanding thus making progress difficult. Morales stated
that the GBD’s inability to link the international unit with the domestic-product
divisions and suppose the disagreement-resolution responsibilities were the
main reason for their failure. Lastly, the GBD’s failed in their task because
of the people appointed since none of the vice presidents viewed them as
equals.
Question 3
The Sterling Partners recommendations were realistic and applicable. Kent faced difficulty since its corporate team set unrealistic targets that did not factor in local demand, and competition. The recommendations focused on the local consumer needs, distribution channel differences, and competition that was different in the various countries. The consultants, therefore, took a realistic approach to solve Kent’s challenges. The recommendation that the medical plastics business required global control cemented the need for the integration and coordination of operations in the medical plastics business. It was necessary for the company to streamline its activities in this sector to ensure that the customers received standard and quality goods at the right time. In this case, the consultants supported the idea of global control in the areas that would benefit from it. The recommendation for the fire control products factored in the needs of both the multinational corporations and the smaller national and regional customers. It was practical to provide global control to the multinational corporations as were Kent’s strategies. The consultants highlighted that the company would achieve more if it also focused on the smaller national and regional customers by responding to the consumer needs and the competitors. Consequently, the company would profit more since it would meet the requirements of its customers. The consultants, therefore, provided a realistic and practical way that would allow Kent to respond to the needs of all its stakeholders.
The consultants illuminated Kent’s issues for a $1.8 million fee. The consultants’ analysis concluded that the company was facing challenges because it was imposing uniform organizational solutions on a strategically diverse portfolio. Kent got a wake-up call to change its strategies and align them with the requirements of the market and the respective products. Eventually, all Kent’s stakeholders would benefit once the company implemented those recommendations. The $1.8million fee was a good expense.
Question 4
Kent is in need of change especially with the globally economy headed for a recession. The two attempts by Morales were in good faith since he was looking for a way for the subsidiaries to better communicate with the corporate officials. The organizational changes failed because the managers were not receptive to change and supportive of the idea of answering to the GBDs. Morales should recommend that Kent takes up the recommendations presented by the consultants. The issues that Kent was facing were because of using similar strategies to an otherwise diverse portfolio. The company should, therefore, align its strategies with a particular product, market, demand, and competitive environment. It is possible to do this by providing adequate training that explains the need for restructuring and cooperation from all members. New managers to follow-up the new strategies should be chosen from the present country managers and regional managers to minimize cases of resistance. Additionally, the managers should work in hand with the corporate team and inform them of their decisions. In turn, the corporate team should provide support regarding finances, and advice. They should not criticize plans without improvement ideas.
Ben Fisher should decide to align strategies with the needs of the consumers, market, demand, and the company. The company requires change. The change recommended is workable if the concerned parties work towards it. Fisher should, therefore, decide to take up the recommendations made by the consultants and periodically review the progress to ascertain that it is working. He should provide the required resources regarding finances and personnel. Kent will succeed once its management aligns its strategies to the needs of its consumers, and market.