1. Planning In the case that we are studying, Don Anglos and Pinnacle have to make the decision whether Pinnacle Machine Tool Co. should acquire Hoilman Inc. or not. Don Anglos, the CEO of Pinnacle Co, Jennifer Banks, services division head and Sam Lodge, CFO, are taking the steps to make the most appropriate decision. According to many economists (Anderson et al. , 2008), the steps in the decision making process are the following: 1. Identify and define the problem. 2. Determine the set of alternative solutions. 3. Determine the criteria that will be used to evaluate the alternative solutions.
Evaluate the alternative solutions. 5. Decide the most appropriate solution. Taking into consideration the above steps we will analyze the case study of the Pinnacle Machine Tools Co. First of all, Don Anglos has defined the problem, which is the decrease of the company’s profits. The company had tried to gain more market share through an aggressive price policy. This attempt was successful, but the lower prices had affected the profit margins. That is exactly the problem, which Don Anglos is about to solve: the increasing of the company’s profits.
Of course, in decision making process, the identification of the issue has to be more carefully analyzed. A more detailed study of the problem may emerge alternatives, which might have been ignored, otherwise. (Keeney & Howard, 1976) The solution, which Don Anglos suggests, is the acquisition of the Hoilman Inc. Such a diversifying strategic alliance, will give to the Pinnacle the opportunity to extend their business to the field of services. The disadvantage of Don Anglos’ suggestion is that it has only one alternative. A group of more than one solution, that could be evaluated and compared, would be more effective in such a case.
A multi-alternative project could prevent mistakes and reverse undesirable situations. (Tonn et al. , 2000) The criterion, through which Don Anglos will evaluate the alternative, is his instinct and his previous experience on acquiring. On the other hand CFO Sam Lodge has set financial criteria to assess the solution. In particular, he has studied the market development options and the market share that Pinnacle could have. The accurate setting of the criteria, on which the decision will be based, has been ignored by Don Anglos. That consist a hindrance to the transparency and stability of the final decision. Hammond et al. , 1999) Considering the latter, the evaluation of the one and only alternative could not be proper as the criteria have not been set. Despite that, Don Anglos evaluated its own solution based on the criteria of Sam Lodge and he rejected it. At the same time, if he should follow his instinct, he has to accept the alternative. Furthermore, accepting the Sam Lodge’s argument means that he has to search for another solution to suggest instead of the rejected one. (Noorderhaven, 1995) Finally, Don Anglos has concluded to follow his instinct and accept the acquirement of Hoilman Inc.
He has not taken into account any rational criteria, but he has estimated the solution through his own preferences and ideas. This is not rare to many cases. CEOs prefer to bypass the evaluation process or not taking it in to consideration. The majority of the decisions have been taking with some or no influence of the estimating step. (Kornov & Thissen, 2000) 2. Organizing Nowadays, information technology has already permeated to the organizations and its effects are obvious. Of course, digital development affects on all levels of an organization in many ways.
To be more specific, internet has become an integral part of every organization in various levels, which depend on the nature of the corporation. First of all, we have to make a brief reference on the two different types of organizations that are most implicated with the internet. These are two definitions of e-commerce and e-business as the UK’s government has given: E-commerce is the exchange of information across electronic networks, at any stage in the supply chain whether within an organization, between businesses, between businesses and consumers, or between the public and privet sector, whether paid or unpaid. CabinetOffice, 2004) E-business is the integration of all the activities with the internal processes of an organization through information and communications technologies. (CabinetOffice, 2004) It is obvious that organizations such as General Electric belong to the first type of internet-based businesses, whereas organizations such as eBay belong to the second one. The main structure of an internet-involved organization remains the same. The departments’ operations such as financial, marketing, production, supplies and services still exist in the e-business and e-commerce.
Nevertheless, there are many areas of the organization that are influenced by its implication with the internet. Corporations such as e-bay, have to deal with the supply chains and e-services issues, whereas businesses like General Electric usually have to focus on the b-to-b exchanges through internet. (Basu & Kumar, 2002) As far as the supply chains, the most important issue is the maximization of the effectiveness of the e-supply chain. Of course internet gives more freedom and variety to the design of the supply chain, but an effective supply management still remains very important. Basu et al. , 1997) On the other hand, e-service is a crucial issue, because it consists one of the basic parts of competition in e-businesses and e-commerce. Service could be done through internet, as far as it is possible and effective.
Service management should design and organize a customer-based service structure. (Grefen et al. , 2000) In addition with the latter, an organization which uses the internet for business-to-business commerce has to adapt its structure to the e-hubs. E-hubs are electronic vertical markets where businesses meet through internet to make transactions. Kaplan & Sawhney, 2000) Finally, the first, and most important structure, management should deal with is the infrastructure. Infrastructure is the hardware, the software, and the telecommunications that the organization must have to build the basis of the e-business and e-commerce. (Dutta, 1997) 3. Leading The CEO turnover, consequently CEO tenure too, is related with the nature, the industry and the internal issues of the organization. Kaplan and Minton (2008) consider two types of CEO turnover: the internal and the external one. The internal (or standard) turnover, that has to do with the internal issues of the organization.
It could happen after the rejection or the retirement of the former CEO or after management’s demand. On the other hand, the external turnover is due to changes to the nature of the organization or the market. It is the result of bankruptcy or strategic alliances. In the same study, there are analyzed five factors that contribute to the variety of CEO tenures. (Kaplan & Minton, 2008) The first factor is the stability of the market structure. The more secure is the organization, the more is the average tenure of CEO. The rate of external CEO turnovers is increased, as acquisitions and takeovers are taking place in the industry.
In addition, internal turnover is related with the performance of the industry. That is because the industry performance is tightly associated with the organization performance. The demands of the stakeholders about the CEO skills are adapted to the circumstances of the industry and competition. A third factor is the business revenues. CEO turnover could be regarded as a penalty for his unprofitable finance policy. Moreover, if CEO has a personal relationship with the foundation and the development of the firm, it is obvious that its tenure could be long-term. Finally, another factor is the forced CEO turnover.
Such a turnover and has to do with barely internal issues of the organization, which are irrelevant with financial issues. According to a recent research (Jenter & Kanaan, forthcoming) for CEO turnovers in USA between 1993 and 2001, forced turnovers are about the 20% of total internal turnovers. 4. Controlling In a globalized environment, managers have to take seriously into consideration the national culture of their employees and to design controlling systems based on that culture. Hofstede (1991) have analyzed five dimensions in which cultures differ. Management of controlling systems can be designed based on these dimensions.
Power distance is the first dimension. According to Hofstede, power distance is a rate that shows the tolerance of employees to be controlled by a centralized power. Cultures with large power distance, accept centralized controlling, whereas cultures with small power distance are more intolerant to such controlling systems. Countries in European Union, USA and Israel have low power distance, on the other hand countries in Asia and South America have high power distance. Lincolns’ decentralized controlling system with the participation of all the levels in the decision making process would be more effective in Europe and USA.
The second dimension of Hofstede is: individualism / collectivism. An individualistic organization mostly focus on the individual, which is the basic union of the work. Managers hire individuals who acting according to their own perspectives. On the other hand in collectivistic organizations the group is the centre of the work. Each individual is acting according to the group interests. Countries such as USA, Canada and UK are more individualistic than countries in South America, Middle East and Asia. A system with individual-level rewards and individual training will not work in such collectivistic countries.
Gender roles are the third dimension of culturing differences. At the masculine end, there is a tendency to be the gender roles clearly differenced. On the other hand, at feminine end, gender roles are common. UK, USA, Austria and Japan are more at masculine end, whereas Sweden, Norway and Denmark are more at the feminine end. Uncertainty avoidance is regarded as the fourth dimension. This dimension explains how tolerant the people to uncertainty and ambiguity are. In countries such as Greece and Portugal or in Asia and South America, uncertainty avoidance is low. People are more familiar to the changes of the environment.
In countries like USA, North Europe and Japan uncertainty avoidance is very low. In such countries managers should establish a system with many rules to make the decision making process in every problem less inconvenient. Such a rule-oriented system would not work at all in the first type of cultures. Last but not least, is the dimension of Confucian dynamism. Here we have two types: long-term oriented and short-term oriented. The difference lays on the easiness that any culture can be justified to any change. USA is an example of short-term orientation, whereas Hong Kong, Japan and South Korea are long-term oriented.
To conclude with, it is obvious that a single controlling system could not work with the same effectiveness to all these different types of cultures. Managers should study the culture through these five dimensions and re-design the controlling system for every country.
References
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