Question 2:

What do you see as the pros and cons of a new head- quarters international department to coordinate across geographic regions?

PLEASE ANSWER THE QUESTION MORE THEN A PARAGRAPH!

CASE FOR ANALYSIS Rhinebeck Industrial David Javier was reviewing the consulting firm's proposed During the 1990s, a new president of RI, Sean Rhine, changes in organization structure for Rhinebeck Industrial the grandson of the founder, took over the business and (RI). As Javier read the report, he wondered whether the adopted the strategy of focusing RI on three lines of changes recommended by the consultants would do more business-Industrial Products, Consumer Products, and harm than good for RI. Javier had been president of RI for Electronics. He led the acquisition of more international 18 months, and he was keenly aware of the organizational businesses that fit these three categories and divested a and coordination problems that needed to be corrected in few businesses that didn't fit. Each of the three divisions order for RI to improve profits and growth in its interna had manufacturing plants as well as marketing and distri- tional businesses. bution systems in North America, Asia, and Europe. The Industrial Products division included pipe, glass, industrial Company Background sealants and coatings, cleaning equipment, and truck parts. The Electronics division included specialty light bulbs, Rhinebeck Industrial was started in the 1950s in South for original equipment manufacturers. Consumer Products switchboards, computer chips, and resistors and capacitors ern Ontario, Canada, by Robert Rhine, an engineer included dishes and glassware, paper and envelopes, and who was an entrepreneur at heart. He started the busi: pencils and pens. ness by first making pipe and then glass for industrial uses. As soon as the initial business was established, however, he quickly branched into new areas such as Structure industrial sealants, coatings, and cleaners, and even into manufacturing mufflers and parts for the trucking indus- In 2010 David Javier replaced Sean Rhine as president. try. Much of this expansion occurred by acquiring small He was very concerned about whether a new organization firms in Canada and the United States during the 1960s. structure was needed for RI. The current structure was based RI had a conglomerate-type structure with rather diverse on three major geographic areas-North America, Asia, and subsidiaries scattered around North America, all reporting Europe-as illustrated in Exhibit 6.12. The various autono- directly to the Ontario headquarters. Each subsidiary was mous units within those regions reported to the office of the a complete local business and was allowed to operate inde regional vice president. When several units existed in a single pendently so long as it contributed profits to Ri. country, one of the subsidiary presidents was also responsi- During the 1970s and 1980s, the president at the time, ble for coordinating the various businesses in that country, Clifford Michaels, brought a strong international focus to but most coordination was done through the regional vice RI. His strategy was to acquire small companies worldwide president. Businesses were largely independent, which pro- with the belief that they could be formed into a cohesive vided flexibility and motivation for the subsidiary managers. unit that would bring RI synergies and profits through low The headquarters functional departments in Ontario cost of manufacturing and by serving businesses in interwere rather small. The three central departments national markets. Some of Ri's businesses were acquired Corporate Relations and Public Affairs, Finance and simply because they were available at a good price, and Acquisitions, and Legal and Administrative-served the RI found itself in new lines of business such as consumer corporate business worldwide. Other functions such as HR products (paper and envelopes) and electrical equipment management, new product development, marketing, and (switchboards, light bulbs, and security systems), in addi- manufacturing all existed within individual subsidiaries tion to its previous lines of business. Most of these prod and there was little coordination of these functions across ucts had local brand names or were manufactured for geographic regions. Each business devised its own way to major international companies such as General Electric or develop, manufacture, and market its products in its own Corning Glass country and region. Copyright 2001 Cem Auge Red Space where the party.ee Thurainwirew has doinil talam trainty titula stial 262 Part 3: Open System Design Elements EXHIBITS Rhinebeck Industrial Organization Chart President and CEO Corporate Relations and Public Affairs Finance and Acquisitions Lagal and Administrative Vice President Asia ce President North America Vice President Europe Asian Subsidiaries North American Subsidiaries European Subsidiaries Organizational Problems Third, there had been no transfer of technology, new product ideas, e other innovations within RI. For example, The problems Javier faced at Rl, which were confirmed cost-saving tochnology for manufacturing light bulbs in in the report on his desk, fell into three areas. First, cach Canada had been ignored in Asia and Europe. A technical subsidiary acted as an independent business, using its own innovation that provided homeowners with cell phone reporting systems and acting to maximize its own profits access to home security systems developed in Europe had This autonomy made it increasingly difficult to consolidate been ignored in North America. The report on Javier's desk financial reports worldwide and to gain the efficiencies of stressed that RI was failing to disperse important innova- uniform information and reporting systems tions throughout the organization. These ignored innovations Second, major strategic decisions were made to ben could provide significant improvements in both manufactur efit individual businesses or for a country's or regioning and marketing worldwide. The report said, "No one at local interests. Local projects and profits received more Rl understands all the products and locations in a way that time and resources than did projects that benefited RI allows Rl to capitalize on manufacturing improvements worldwide. For example, an electronics manufacturer in and new product opportunities. The report also said that Singapore refused to increase production of chips and better worldwide coordination would reduce RN costs by capacitors for sale in the United Kingdom because it seven percent each year and increase market potential by 10 would hurt the bottom line of the Singapore operation.percmt. These numbers were too big to ignore However, the economies of scale in Singapore would more than offset shipping costs to the United Kingdom Recommended Structure and would enable RI to close expensive manufactur ing facilities in Europe, increasing Rl's efficiency and The report from the consultant recommended that I profits. try one of two options for improving its structure. The Chapter 6: Designing Organizations for the International Environment first alternative was to create a new international depart for developing business strategies and for coordinating ment at headquarters with the responsibility to coordiall manufacturing efficiencies and product developments mate technology transfer and product manufacturing and worldwide for its product line. marketing worldwide (Exhibit 6.13). This department This worldwide product structure would be a huge would have a product director for each major product change for RI. Many questions came to Javier's mind. line-Industrial, Consumes, and Electronics-who would Would the subsidiaries still be competitive and adaptive have authority to coordinate activities and innovations in local markets if forced to coordinate with other sub worldwide. Each product director would have a team sidiaries around the world? Would business managers be that would travel to each region and carry information able to change the habits of subsidiary managers toward on innovations and improvements to subsidiaries in other more global behavior? Would it be a better idea to appoint parts of the world. product director coordinators as a first step or jump to The second recommendation was to reorganize into the business manager product structure right away?Javier a worldwide product structure, as shown in Exhibit 6.14. had a hunch that the move to worldwide product coor All subsidiaries worldwide associated with a product dination made sense, but he wanted to think through all line would report to the product line business manager . the potential problems and how I would implement the The business manager and staff would be responsible changes. EXHIBITS Proposed Product Director Structure President and CED International Product Directors Corporate Relations and Public Affairs Finance and Acquisition Legal and Administrative Ania North America Europe Vice President Asia Vice President North America Vice President Europe Asian Subsidiaries North American Subsidiaries European Subsidiaries www 264 Part 3: Open System Design Elements EXHIBITO.ID Proposed Worldwide Business Manager Structure President and CEO Corporate Relations and Public Affairs Finance and Acquisitions Legal and Administrative Worldwide Business Manager Industrial Products Worldwide Business Manager Consumer Products Worldwide Business Manager Electronic Products Industrial Products Subsidiaries Worldwide Consumer Products Subsidiaries Worldwide Electronic Products Subsidiaries Worldwide Questions 1. Which of the three organizational problems-separate reporting systems, business self-interest, no technology transfer-would you address first? Explain. 2. What do you see as the pros and cons of a new head. quarters international department to coordinate across geographic regions? 3. Do you support the proposal to reorganize into a worldwide product structure? What implementation challenges do you foreseed Explain. ENDNOTES 1 Brian Pearson, "German Lessons: What Walmart Could Have Learned from Lidl, and Vice Versa," Forbes, February 5, 2018, https://www.forbes.com/sites/beyanpearson/2018/02/05! german-lessons-what-walmart could have learned-from-lidl- and-vice-versa/17bd1291387 accessed April 22, 2019) and "Passport Revoked: When Brands Fail Internationally, CBC Radio, January 18, 2017, http/www.che.ca/radio/ undertheinfluence passport-revoked when brands fail internationally. 1.3942237 (accessed April 22, 2019) 2 Reported in Pearson, "German Lessons." 3 Paul Sonne and Peter Evans, "The $1.6 Billion Grocery Flop: Tesco Poised to Quit US," The Wall Street Journal December 5, 2012, https//onlinews.comews/articles/5810 001424127887324640104578160514192695162 accessed December 6, 2012, and Samantha Yodes, John K. Visich, and Haathek Rustambekov, "Lessons Learned from International Expansion Failures and successes Business Horizon 59 (2016), 233-243 4 Julie Wernau and Yoko Kubota, "Amazon's E-Commerce Adventure in China l'roved Too Much of a Jungle." The Wall Street Journal, April 18, 2019, herpelwww.ws.com/articles for-amazon-chinas-e-commerce-market-proved-too-much-of- -jungle-11555576769 accessed April 26, 2019). 5 Bob Tita, "Deere Enhances Focus on Russia, The Wall Street Journal, March 24, 2011, httpolionline.wsj.com/article/81 0001424052748704604704576220684003808072.hamil accessed August 9, 2011). 6 Christopher Mims, "The Global Tech Backlash Is Just Beginning." The Wall Street Journal October 26, 2018, httpswww.wsj.com/articles Cipeline te www.the