Answered: Critically analyse the extent to which…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Critically analyse the extent to which DAK’s organisation structure influenced its overall business strategy. Utilise relevant organisational structures to enhance your discussion.

Transcribed Image Text:Read the case study below and answer ALL the questions that follo THE DREAM DOOR FOR DAK Introduction It was a nice surry moming in Zach. CAK Europe's chairman gathered all of his board members around a large table and went straight to the point of this meeting todes and en desate at asasing recession and nurtuin nimes in the outomative edustry, our corporation managed not only to survive but to de quite well despre many ayfouties in our sector. However, we must not be complacent and continuously the about dar strategic development. We have plenty of opportunities for growth overseas and it is time that we stort acting upon them, want to are the expertoe we have developed in our area aksion and start dating DAK as a global enterprise. The purpose of today's meeting is to pare for this pose and our first step should be to form a team that would take the company forward towards becomes a gistal enterprise we have bore team of exponiste managers who worked with us for years. However, our recent experiences in our foreign stions such as GAR Polske rought us that we need to increase the level of sails and competencies of our expatriote monogers if we are to succeed in dramatically different ataracts such as China. West/want us to do today is to review our past experiences and draft plan jor jorming and developing a new generation of expatriate managers who will be reponsible for taking DAK to a new global level. DAX Corporation The history of DAR dates to 1897, when the oldest unit of the company was established in the USA. Through the years, the company acquired and incorporated many other car manufacturers and developed into a leading whide producer in the USA, The 1920s was the time of Da's expansion in Europe, including countries such as Germany and England in 1973, the Aramburg and enouing pasoline price increased to a rapid and unexpected re in sales of small Japanese built cars in the USA. This resulted in the beginning of a long-term cooperation between DAK and Japanese car manufacturers [Datamonitor, 2003) The history of the DAX Corporation is full of turmed and low as well as high points. Whilst in the late 1990s the company was making significant proffs and had gained market share in the previous decades, this was shortly followed by a pension and benefit fund crisis within the company in 2000 because of interest rate increases at the stock market DAK responded to this cribs with a broad restructuring plan in 2005 following a $10.5 billion in the same yur. Despite the company reporting some signals of the potive effects of restructuring an overall corporate performance, DAK's operating losses kept increasing and reached a quarterly loss of $15.5lion in 2008, the third biggest in the company's history To rescue the corporation from impending bankruptcy, various strategies were implemented 10 raise much needed fares and keep the company afloat through the economic crisis. For example, in 2008 DAK announced it would sell its 3 per cert stake in the Suzuki Motor Corp for $230 mln. In addition, the company received numerous lours from the American Government told the recovery of the struggling car maturer. DAC's global strategy centres on providing its consumers with a fleet of brands rather than streamlining its global 3 business around cre flagship brand like Fard for example Planer, 2008). As a result, the corporation manages a wast network of its subsidiaries in South Africa, both America and Europe. DAK Europe, the corporations division facilitating operations in eight Rurapean countries, was established in 1986. The core brands managed by CAK Europe were based in The UK and Germany in 2003 the corporation announced the acquisition of DAK Europe by a consortium consisting of a Canadian company (27.5 per cent) and a Russian bank (27.5 per cent). The remaining 10 per cent of company assets would land with DAK Europe employees and car dealers whils DA would keep a 35 per cent minority stake in the new company. The Gemas Government has backed the deal with a guarantee of e4.5 millon; however, support for the acquisition on the part of the European plants was mind The plan was expected to cast 10,000 jobs in burape with the potential closures of Antwerp and the UK plants (Gazeta Wyborcza, 2000). In addition, the existence of the Polish plant was threatened since the Russian bank's partner firm, producing old-fashioned cars for the Russian market, had high hopes for the incoming partnership with DAK Furope. This would move the production of CAK cars further towards the east of Europe. However, after sa months of negotiations, DAK backed out of the bid and decided to keep the ownership of DAS Europe claiming that this division and its brand was crucial to DAK's global strategy. As the industry was shiting away from large trucks and 9,5 toward more fuel-effident passenger cars, DAK needed its European subsidiaries' experie DAC Europe does the bak engineering work globally for DAK's compact cars and midi twny secans. It would be difficult for Dak to quickly assemble its Furpean engineering know-how. With so much growth opportunity overseas, said then vice chainman, "I think we must look at DAK as a global enterprise" (Muller, 2009) DAK Europe clearly remained on the strategic map of the Corporation as an irreplaceable player in the development and implementation of its international strategy DAK Europe orga DAC Europe, which determines the shape of the plants, is centrally managed from Zurich where the pean "heart of the camawy is located. The headgasters-ITDC-a boin" responsible for engineering and technical decisions, is in Rasselsheim, Germany, where the central quality department is located. Thus, all quality managers from all plants in Europe report to the quality director in Musselshem. There are abic other units in Durage responsible for den for sample, the insurance centre in London and the barking centre in Brussel where DAK Polska reports). On top of this complex CAK Europe structure is DAK in the USA, where their governing body resides There is strong cooperation between the European plants, which is encouraged by a teamwork ethos ever present in DAK and mutual vaits to different plants are encouraged, which are especially intensive in the early stages of plant development. Knowledge exchange is supported by the company's insistence on creating a "DAK Family", a slogan often present during official events and speeches by top management. But the principle of a network of gants cooperating closely together, reinforcing each other strengths and potential does not always work perfectly in practise, according to the opinion of some employees. 4 The centralation of DAX determines the matrix company structure of European functional directors in a project centre, in either Russelsheim or Zurich. To ensure good cooperation between plants according to the central guidelines from the project centre, staff has been appointed as co-ordinators, who ensure that common systems for human resources, manufacturing, quality, and materials are applied in all the plants across the project. Due to the responsibilities and strategies assigned to the functional departments of the European DACharters, there is ofter friction when the local interests of plants complay. Since each factory in Europe has been built at a cifferent time, with German and Belgian plants being the oldest, car models for each factory are assigned centrally taking the plant's facilities into account. The newer and more modern the plant, the easier and cheaper it is to The note and adjust it to produce a new model for this reason, DAK Pelska often receives new models which sell in higher lures than older models. Receiving a new model for production is also associated with the creation of jobs in the plant. At the other end of the spectrum, the allocation of old models which are cestined to be phased out can mean the eventual closure of the plant. Such was the fate of the Antwerp plant which was too expensive to be modemised to produce new models DAK's globalisation strategy DAX Corporation is one of the largest automate producers in the world, it has been expanding operations consistently since the late 1890s and became one of the companies associated with the development and spread of globalisation in the world. As every global company, its efforts to operate on a truly global scale were not without problems or setbacks The story of acquisitions through which the company grew and its strategies to set up operations abroas, provide a fascinating lesson in the development of various expansion drategies that companies may adept in their efforts to grow Discussion on globalisation has now been running for years and it is equally fervent amongst akademics as it is with practitioners. There are three domirant views on gicbalisation, which have been termed global, traditionalist, and transformationalist perspectives (eld, 2000) Gbalsts take the view that globalisation is a real and tangle phenomenon, and its impact can be felk everywhere. Adhererts of this process, positive globalits, see it as a universal "best praction for doing business, which is the key to efficiency and effectiveness staffers unique opportunities, such as eceremy of scale and reduced costs The opposing group of pessimistic globalists, so-called traditionalists, perceive it as a standarded approach leading to homogenisation and marginalbadon of human diversity. They emphase the dominance of major economic and political interests, such as the USA and Western Europe, who can impose their own aganda on the world and resist all pressures for change. The third view by transformationalists describes globalisation as having some ptive effects contributing to the new shape of local cultural idavity and self-expression This way of approaching globalisasion rejects the polarity of the globalist and tracktionalit perspectives Transformationalis claim that globalisation's influence is not only limited to economy. It is a political, technological and cultural issue as well. It should be considered as a process of mutual influence rather than as a one-way practice.

Transcribed Image Text:DAK's strategy of entering new markets such as Eastern Europe and China is now moving towards the transformationalists' approach. The company experienced some failed attempts. to transfer their knowledge using the "best practice" approach as advocated by globalists which proved to be problematic. They often led to unsuccessful attempts to implement various management philosophies, for example a failed effort to introduce total quality management in the UK. As a result, the company is now abandoning this strategy. However, the move towards the transformationalist approach requires the development of new management techniques and philosophy. Since this approach is based on the "invasion" of local contexts but without destroying them, the management know-how required to achieve this is dramatically different from the traditional autocratic, one-way communication style. DAK, as other global companies willing to pursue the transformationalist strategy, face a challenge of training their fleet of managers responsible for setting up and monitoring their operations abroad. If performed successfully, this will not only help the corporation to successfully grow and expand; it can also create an advantage of developing their expertise in the new locations and create new economic and cultural zones within and across nations. This can potentially lead to reverse colonisation" when non-Western countries influence call potentially developments in the West. This case study presents an illustration of such effort by DAK in Poland. However, with the DAK's plans to open its factories in China, where culture and socioeconomic context is dramatically different, how can the company prepare its managers for this new challenge? Dreams come true: the maturing of DAK Polska It took only three years for DAK Polska to become a fully developed mature car plant. The English managers call it "the best plant DAK has got", a benchmark for Europe. The changes that DAK Polska has gone through since 1998 are enormous - from a green field to the leading DAK' car manufacturer in Europe. The workforce employed in DAK Polska was relatively young and inexperienced, with unrealistic expectations for their future work in car manufacture with DAK: These people may have excessive expectations of the company. Their parents' generation looked on the DAK or DAK brand as an impossible dream, a magical token of life elsewhere; and now this dream has been realised here, and people still have these excessive expectations. of what this firm, in all its imagined opulence, can do for them (Polish Manager 7 (DAK Polska)). The dream of Japanese automation seen on TV was replaced by the reality of hard manual machine-paced production. People learned that the work of producing cars is harder and more complex than they expected. They became disillusioned about the miracle success of large organisations like DAK and found out what really lies behind that big name. From initially being inexperienced, young people became well-trained, skilled professionals. During the initial few years of the DAK Polska operation, there was no first line management, only first line supervision by "ex-pat" managers, which created a deliberate gap in the management structure. The creation of this gap enabled the best people from the local teams to be 6 promoted to fill these positions. Those who were promoted were high caliber people with excellent communication skills who replaced foreign managers who had left DAK Polska. This, however, creates a new challenge: to maintain the motivation levels and enthusiasm of the employees who have no chance of further promotion. The managers are aware that they may lose many employees due to the lack of prospects for their future development. The economic development of Poland has significantly contributed to the changing expectations of DAK Polska employees. First, the national unemployment rate has steadily decreased from over 18 per cent in 2001 to 13.8 per cent in 2006 and 11.8 per cent in September 2011 (GUS, 2011). The region of Gliwice has also transformed from those with higher than national average unemployment to significantly lower. In 2009 unemployment rate in Gliwice was as low as 8.3 per cent in 2007 and 6.6 per cent in 2011 (GUS, 2011) with average wages in the region exceeding the national average (Gliwice City Hall Web site, 2011). The region's economic and industrial development coupled with Poland's European Union membership, created significant employment raise in the Silesia region as well as entrepreneurship opportunities. Headhunters eagerly search for DAK Polska employees, who know that they have greater chances of changing their jobs due to their experience in a multinational corporation which many locals lack. DAK Polska management is aware of these issues and intends to keep motivation levels high by creating new challenges, such as new targets, or the introduction and mastering of new processes. But some consider this insufficient and criticise management for underestimating the issues that might lead to people leaving the plant. The strategic position of DAK Polska on DAK's global map remains strong despite the scare following DAK Europe's failed takeover bid in 2009. The decision of DAK to pull out of the deal improves the chances of the DAK plant in Gliwice and averts the risk of transferring Polish DAK production to Russia (Poland Autos Report, Q4, 2011). Despite these positive strategic developments within DAK Europe, DAK Polska needs to remain wary of the volatile nature of the car industry in Europe. Although DAK reported its first annual sales gain in the USA since 1999, 2010 offered mixed success for the corporation. After successful restructuring, DAK in North America made a profit of US$5.75 billion in 2010. In the same year, the corporation also reported its first full year profit as a global company since 2004. However, its European subsidiaries continued to struggle with overall DAK Europe losses reported at US$1.76 billion in 2010. Industry experts believe that despite these current losses, the European division will break even in 2011 due to its strategy of increasing exports from Germany. This view is supported by a positive outlook for vehicle sales in 2011 compared to previous years. However, for the industry to return to its pre-crisis level of demand, more years of success are needed (Emerging Europe Automotives Insight, 2011). Poland represents a potentially good market for DAK vehicles sales since car ownership in Poland remains relatively low (Poland Autos Report, Q4, 2011). In addition, the Polish economy successfully survived the global economic crisis and was not affected as strongly as other countries. Nevertheless, global trends and events make DAK as vulnerable as any car producer in the international arena. For example, the ongoing tensions in Libya lead to ongoing concerns regarding rising oil prices. DAK remains vigilant and has already started devising a strategy in

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