Alternative Ways Digital Board Could Have Addressed Deteriorating Company Financial and Market Share Performance

Based on Kravetz scrutiny the firm should decentralize decision making to make it more responsive to the local market conditions. His analysis revealed that the company decision making was at regional level as opposed to business unit level. This silo management was affecting the company in making crucial decision, especially due to rapid changes in the market environment. Kravetz observed that this decision making hampered customer segmentation, pricing strategy and decisions on product offering and thus accounted for deteriorating financial performance. As a result of the generalized decision making important facts on these three areas were often overlooked leading to poor business intelligence gathering process. As a result, the decisions made failed to help the local firm make critical decisions. Accordingly, there is need to decentralize some management functions to the local firms and only maintain at regional level those that cut across the entire block. Kravetz observed that the silo management approach was afflicting the profitability of individual unit and in extension that of the firm. This is because in so doing, the firm compromised its ability to focus on the market and its customer. Each business unit deserved some level of autonomy in implementing its plans with regard to marketing, sales, distribution strategies, and channel management.

A second alternative in reversing the poor firm profitability would be to use local reward systems in human resource management. According to Kravetz report, the firm’s performance was being compromised by its use of a reward system that reinforced the firm inefficient organization structure. Incentives provided by the firm to its sales and marketing employees were poorly informed by this structure. The firm’s financial rewards were not matching the corporate performance. Besides, the firm market conditions were changing rapidly driven by an upsurge in the number of competitors. Having a locally developed reward system that matches specific country, would help the firm to streamline these systems with performance, and also to motivate local staffs as not to lose strategic knowledge to upcoming competitors.

Besides, it is necessary for the firm to create effective performance appraisal systems that would identify flaws in remuneration, training needs, among others. Some regional managers in the company were receiving inflated financial remuneration than they deserved. A change in the process of performance appraisal would point out those who deserve higher pay and those who do not depending on their performance. The company also needed a training program to equip the workforce with skills to handle global marketing strategies. This should be in line with needs identified in the performance appraisal system. According to Kravetz there were serious flaws in certain countries business intelligence. This was due to poor marketing research on product line and analysis methods used. One of the reasons offered for this was due to absence of qualified employees. An effective performance appraisal program would point where staffs need training and also areas within the region where such skills are available. The firm can thus be in a position to plan exchange programs, considering the different cultural dimensions. This type of a plan would ensure the firm leverage on best practices and responds to local conditions where there is need. One area that Kravetz noted disparities and where the firm can infuse profitability by paying attention to, is in sales and marketing. In some emerging markets business units in particular countries were using similar techniques for promotion of commercial and consumer products. This is in spite of the fact that consumers purchasing these products categories base their decisions on different conditions. Through training the sales teams in these countries can be in a position to understand how to go about it. An efficient performance appraisal system is the only means the company could be able to identify which country’s sales team deserved training on these aspects.

Lastly, the company needed to decentralize human resource issues like training and recruitment. The success of the company depended on improvement in terms of accountability that was compromised by existence of centralized HR management. According to Kravetz analysis career planning and development for employees working as sales representative and international sales managers, fell under the country general managers. They were also responsible for setting performance measures depending on the targets provided by International division Senior Vice-President, Rober DeLeo. In this kind of structure the managers of specific business units had very little say in terms of employee motivations. When all decisions regarding employees career planning and development are left with country general managers and the head office manager for internationalization division very few potential employees would be attracted to work for the firm. It is extremely difficult for the company to identify employee able to add value to the firm. Decentralization would improve employee’s loyalty to the firm due to improved chances of career advancement and attract potential staffs to the company. Motivated employees would work harder to deliver the company mission and improves its market share and profitability.

Was the Evidence Enough?

To a great extent, the evidence presented by Kravetz was adequate to indicate the principal problem with the firm was organization architecture. In various business functions he points out how the company decision making and accountability were compromised by this highly centralized structure. He presented evidence showing that the company lack transparency in accountability with regard to performance. As a prove of this claim he shows how the failure to delegate authority to local business unit led to overlooking certain facts that would have improved customer segmentation, products pricing and range all of which had a significant impact on the firm profitability. He shows that delegation of authority to regional offices without similar delegation to individual business units led to poor function of business functions. It compromised management at the unit level and rather focused on managing a group.

Kravetz also presented evidence showing flaws in financial management and accounting techniques. He noted how organization structure of the business led to misguided practices in international management. He notes how authority delegation to the regional offices led to inaccurate costing of business units and in extension rendering product pricing inaccurate. This led to poor market command for the firm. He used the case of Digital European region to showcase how flawed accounting strategies employed by regional offices were at the detriment of the firm. According to him, allocation of cost based on revenue generated by a business unit as opposed to consumption led to uniformity in cost allocation. This in turn affected local decisions on product pricing. In extension, this affected the firm competitiveness and the total gross profit made across Europe. Kravetz shows how standardization in handling finance and accounting procedure was afflicting profitability by individual business unit and the firm in general.

Kravetz also notes with the centralized organization architecture there was emphasis on standardized planning, which impacted on the ability of business units across a country to incorporate variations. This includes variations in terms of economic assumptions in an industry and cost of capital. This compromised the firm profitability and performance. Though, there are no specific industries mentioned, this is a valid and well argued claim because we can see how it relates to business performance and profitability being subdued by use of an organization structure that is region focused as opposed to market oriented. Kravetz has pinpointed the danger of this arrangement with regard to individual business unit ability to respond to the market dynamics, which is common in International markets.

In addition, he also notes how this structure obstructed accountability of each business unit performance. First he finds flaws with the reporting structure for sales and marketing units. He present evidence that the sales and marketing unit reported to country general managers as opposed to individual business units. The country manager according to him was responsible for managing these units performance, allocation of support resources, developing pricing strategies, and handling bulk customers. Sales and marketing practices, strategies, policies, and operational decision for each business unit were made at the country level. The goal of running these affairs at the country level was to improve the aggregate profit. As a result, with this kind of organization structure we can see that each business unit could not be able to identify the challenges facing it. This centralized decision making denies a local business an opportunity to respond immediately to changes in the market. As a result, it makes the corporation to lose significantly to local competitors who are more likely to base their decision on local conditions. This is critical piece of information presented by Kravetz that if paid attention to could help the firm improve on its responsiveness and build a competitive advantage.

Kravetz, further notes flaws on operational strategies executed by regional and county general managers, which is as a product of the inefficient organization structure. According to his presentation these strategies negated the interest of each business unit. For instance, he gave an example of use of dealer network and distributorships that was favored by these managers because they allowed channel management, but to him certain business unit would not auger well with them. He notes that in certain business units’ use of these channels could compromise promotion, brand image enhancement and advertising. This of course indicates how an organization structure that emphasizes regional or county management can compromise performance of some business unit and that of the firm. Kravetz has documented very well how the firm stand to lose by continuing to use this form of organization structure. His emphasis is on the various ways that business units’ needs are compromised by concentrating on the current organization structure. Redesign or remodeling based on Kravetz idea can lead to a significant improvement in the firm’s profitability margin and performance. However, whereas his work present sufficient grounds to question efficiency of the organization structure, it does not indicate comprehensively all the areas that remodeling would have a greater impact. For instance, in this last point he does not suggest which business units are susceptible to poor choice of distributors as pointed out.