Case Analysis – Rhodes Industries

Rhodes Industry was founded in 1950`s by Robert Rhodes in Southern Ontario, Canada and has been in existence since then. It started by producing pipes and glass, but ventured into new areas producing industrial sealants, coatings and cleaners in the 1960`s, and expanding to the United States and North America. With the headquarters in Ontario, the subsidiaries operated independently contributing profits to Rhodes Industries following a conglomerate type of structure. In the 1970`s and 1980`s, new business lines were acquired which included consumer products and electrical equipment. In 1990`s, Rhodes industries adopted three lines of operations structured as divisions. These are:
* Industrial products division producing pipes, glasses, industrial sealants and coatings, cleaning equipment, and truck parts.
* Electronics division producing light bulbs, switchboards, computer chips, and resistors and capacitors and
* Consumer products division which produces dishes, glassware, paper, envelopes, pencils and pens.
The three divisions had manufacturing plants, marketing and distribution systems in North America, Asia and Europe. Each subsidiary devised its own way of developing, manufacturing and marketing products with little horizontal coordination of these functions. These resulted into three problems:
* It was difficult to consolidate worldwide financial reports due to the autonomous operations of the subsidiaries
* Strategic decisions made were biased towards benefiting regional businesses hence resource allocations ended up not benefiting Rhodes industries on a global footing.
* Sharing of technology, new product ideas and other innovations within the divisions of the industry was not there.
A report from consultants indicated that once these problems are addressed, then the industry would reduce costs by 7% and increase market potential by 10% annually. The report also made two recommendations:
* That an international department be created at the headquarters to coordinate worldwide transfer of technology, product manufacturing innovations and marketing. The head of the department would be the product director.
* A worldwide product structure is adopted where each business line is headed by the business manager who would be responsible for developing business strategies and coordinating manufacturing efficiency in the business line worldwide.
David Javier is currently the president of Rhodes Industries since 2004 and he favors the second recommendation. However, he needs to be clear on how the industry will implement the changes and feels that answers to the following questions would enable him to jumpstart the process.
1. Would the subsidiaries still be competitive and adaptive in local markets if forced to coordinate with other subsidiaries around the world?
Subsidiaries can maintain and even increase their levels of competitiveness when coordinating with others worldwide. Rhodes industry is at a point where initiating economies of scale, economies of scope and low cost production factors on its products will actually increase profitability. The industry is already on a multinational scale producing a variety of products in a variety of regions, and it should now move towards implementing a global structure. This will improve the market power and subsidiaries will remain competitive. Products of the organization can be tailored to meet economic, social and cultural needs of the local customer consequently increasing revenue at the local market. Research and development would be carried out to standardize activities across countries and remove autonomous decisions which would hinder global expansion.
2. Would business managers be able to change the habits of subsidiary managers toward more global behaviors?
Behavior is an aspect of life that can be learned. The world is rapidly becoming a global field which every manager must play from with a global mind. One of the steps in changing the behavior towards a global one is for Rhodes industries to address cultural differences within its regions of operation, and devote more time and resources towards changing employee attitudes, goals and work orientations. Global coordination and cooperation is necessary especially in sharing information and making decisions. Business managers need to delegate responsibilities and some decision making activities to subsidiary managers for them to succeed in changing the behavior of the organization. The learning process is important and a learning model like the double- loop model proposed by Chris Argyris would be ideal. It is important to get feedbacks from all decisions that have been made in order to effectively acquire new globally oriented behavior.
3. Would it be a better idea to appoint Product Director Coordinators as a first step or jump to the Business Manager Product Structure right away?
Appointing Product Director Coordinators would be good since it will ensure a focused transition towards the global market. Managers can focus on international operations as they allow coordinators or integrators to coordinate information, activities and new developments, in their localities and with sister units in other countries. Decision making on their own divisions` unique set of global problems or opportunities would improve relationships within the organization and develop a wider corporate culture. The coordinators will find ways to share facilities and improve production and delivery across all product lines sold in their regions. Customization of products to meet specific needs can be worked on by the product coordinators so as to improve market power. The Business Manager Product Structure can then be implemented after the activities of the coordinators or integrators.
Rhodes industries must adapt to the prevailing organizational environmental conditions for it to continue surviving on the global market, and Javier is moving in the right direction.
Argyris, C. (1976, October 8). Single-Loop and Double-Loop Models in Research on Decision Making. Administrative Science Quarterly, Vol.21 No.3, 363-375.
Daft, R. L. (2012). Organization Theory & Design. Cengage Learning, Inc.