Rhodes Industries: Analysis of a Failing Company

Summary of facts

Rhodes industries were a company started by Robert Rhodes and they commenced their business way back in the year 1950 in Canada Robert Rhodes. He promoted the business by manufacturing pipes and glasses for industrial use. Later on, he began diversifying his business by acquiring small firms that were into industrial sealants coatings, cleaners, mufflers and parts for the trucking industry. RI acquired these small business units and thus entered into new business areas apart from its original line of business. The company manufactured for some international clients such as general electric or corning glass. Their business structure was based on three major geographical areas- North America, Asia and Europe. Later on, Rhodes adopted a strategy of focusing on three lines of business namely industrial products, consumer products and electronics. After categorizing the products under these three heads the company started acquiring more international business units.

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Analysis of the problem

However subsequently they faced some organizational problems mainly due to its organizational structure, and the problems were arising mainly at its subsidiary units. Here, the main issue was that the subsidiary units acted as independent units and they concentrated more on making profits for their units. So, the company faced some challenges, and this case study deals with the problems, the recommendations for overcoming the problems and its analysis. Since the business of Rhodes is spread across the three geographic locations, namely North America, Europe, and Asia, they face many international challenges (case study for student attachment copy).

This case study also strives to analyze the reasons for the failure of the company and the challenges of its business environment. The Rhodes industries have no provisions to exchange manufacturing ideas or not given any focus on modernization within the organization. There is no doubt that in order to become successful in its operation any organization has to develop production or marketing policies and strategies and implement the ideas in the organization

An organizational structure defines the hierarchy of command and control within an organization. The structure will show the level of authority with a board of directors and CEO at the top with the workers at the bottom. The managers and departmental heads will come between these two. The structure will depend on many factors like the type of business and the strategy adopted by the company.

A graphical representation of the structure will give a clear picture of the chain of command within any organization. It will give a clear picture of the different departments, the type of managers, the roles within departments, etc. For proper functioning, every organization should have a clearly defined structure with roles and responsibilities allotted to every manager, director, and employee. If such a clearly defined structure is not followed, there will be problems and a company can fail in such circumstances. This might not be a major problem for very small companies, but once it gets bigger, the structure becomes very important. It appears from the case study that Rhodes had problems with its structure. This will be studied in more detail below.

The Rhodes industries had a diversified business scattered mainly around three geographical locations. They are North America, Asia, and Europe. The headquarters functioned in Ontario. And each subunit was given full freedom to work independently. This organization functions with three central departments namely, corporate relations and public affairs, finance and acquisition, legal and administrative. These three functional areas coordinated the entire international business. Also, they had the Vice President head the subsidiaries of each geographical area. The subsidiaries reported to this Vice President of each location.

They did not have separate departments to coordinate their international business in the areas of marketing, human resource management, manufacturing, etc in order to gain efficiency of the uniform reporting system. This organization’s product structure and company structure were very huge and operations were complicated. The organization adopted a marketing technology that was not suitable to attract customers. The main aim of organizing is to create a structure of roles to help a company perform efficiently. (Wilson, 2002, p.2).

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An organizational structure can be implemented effectively only if the members of the organization understand thoroughly. In such a case the organization will change the decision in regional or local interest.

Since this organization is spread in different countries, the home country adopted different organizational structures in different countries because the people are living in different geographical cultures and values. (Schein, 2004, p.3).

We can see that that the organization adopted cost-saving technology for manufacturing light bulbs. Rhodes industries were adopting this method for manufacturing and marketing. The problem of this business unit started right from the subsidiary level. The problems that this business unit faced can be brought under three heads. One of the problems that this organization was facing was that, since the business is scattered around the globe, they had many subsidiary units. Each subsidiary unit was having ahead. He was responsible for reporting the data timely to the vice president. But these subsidiary heads did not report, also they worked as separate business units and devised strategies to increase their own profit rather than the business, as a result, they faced some difficulties in consolidating the reports worldwide to gain efficiency. This problem arose because they did not have a separate unit to coordinate the activities of subsidiary units.

Another problem faced was that the subsidiaries made some strategic decisions that were beneficial for that individual unit or for that region. However, this was not beneficial to the business as a whole.

Another problem that this company faced was that since the subsidiaries were given the freedom to function as separate units, no innovations, transfer of technology, transfer of knowledge took place. With this structure, they are facing many challenges. Nowadays the businesses are undergoing huge competition even in the domestic market and in the international market. In order to cope up with the rising challenges, the companies need to develop some crucial strategies to withstand the competition.

Recommendations for solutions

Since this business enterprise is purely a conglomerate one, which is distributed around the globe, the management needs to devise a certain strategy that can be applied throughout the business units. The company experts recommended two options. The first option was to create a new international department at the headquarters that will be responsible to coordinate marketing, technology transfer, product manufacturing worldwide. This will be headed by a director, for each major product line.

The second recommendation that was given by the company experts was to recognize worldwide product structure. And they opinioned that all those subsidiaries associated with a business line would have to report to the respective product line business manager. The managers and staff would be responsible for developing the business strategies and for coordinating all their manufacturing capability and new product development worldwide for each product line. If at all the company is adopting these strategies recommended by the company experts they would excel in their endeavor.

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But in the second recommendation, the experts opinioned that they need to recognize worldwide product structure. That would be possible if the managers at the subsidiary levels are committed to the work they are assigned, and if the product line managers are capable enough to make their subordinates performs well.

Since the organizations’ product structure and company structure were very huge, the employees might have faced difficulties in proper communication. I.e. they may not know to whom they have to report and another problem is that, since the organizational operations were complicated, they faced difficulties in coordinating various managerial functions throughout the subsidiaries. For this, they think of introducing a proper communication channel. Also, they can think of bringing out a separate department in each subsidiary unit, which enables them to handle employee grievances and their issues.

Another thing is that since this organization is working at different geographic locations, many people from different countries with different cultural backgrounds might be working here. So that they can think of appointing a manager who could train the employees about the difference in culture. The organization adopted a marketing technology that was not suitable to attract customers worldwide. In order to change this condition, they can introduce a separate marketing channel that suits well to each geographic location.

We know that we are in the era of globalization. I.e. the whole world can be brought under a single umbrella. So they could perform their business without any trade restriction. Since they are in three geographical locations namely North America, Asia, and Europe, they could diversify their business to other parts of the globe. Many companies move into less developed countries to take advantage of the favorable aspects of those countries. Like that, this company could move to other countries to take the advantage of those countries in which they are lacking.

The company must ensure timely reporting by these business managers so that the business could ensure uniform reporting to increase economies of scale throughout the business. Apart from that, they could develop some strategies to meet the local requirements of each subsidiary unit. Also, they can motivate the employees to work towards the attainment of the goals of each subsidiary unit.

As before, they can give power to each subsidiary unit to work as independent business units, so that they can maximize their profit at the individual level and would be able to contribute to other business units. As a result, they can reduce their cost on new product development, innovation, marketing, etc. and improve the economies of scale.

They can appoint marketing personnel in each country so that they could focus their attention on marketing their new products even at the international level. In order to compete in the international level, they need to focus on bringing out those products that match customer taste around the globe rather than acquiring many business units. Moreover, they could start producing products under their own brand name, rather than giving them local names for the products so that they could compete with other private label products. The business-level managers must be able to influence the subsidiary managers in carrying out their business functions. If at all the subsidiary managers are not doing their work timely, they must adopt some strict measures to bring them into track. In order to manage these subsidiary managers, they could follow an authoritative or bureaucratic leadership style. Sometimes much power need not be exercised at some subsidiary units.

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The business line managers can motivate each subsidiary level manager to carry out their function effectively and efficiently. The Top-level executives must make the managers understand the need to coordinate their business internationally. The subsidiary managers could motivate their staff by giving them timely guidance and proper motivation. The organization is now in the phase of marketing myopia. In order to prosper the business in the long term, they need to devise an even better strategy. It would be better for them to appoint business-level managers for each product line to ensure the effective growth structure of each product line.

In order to make their business flourish, they need to start from the scrap. i.e. they have to focus right from the subsidiary units located in each geographical area. If the organization is following the structure that is recommended by the experts, they would be benefiting maybe for the short term but, later on, they have to introduce strategies that are beneficial for each subsidiary and for the whole business unit in the long run. If at all a subsidiary under a product line fails to meet the requirement of the company, the other subsidiaries can contribute those resources that they are lacking, maybe in terms of knowledge, technology, or an idea about the product.

Another area that the businesses need to concentrate on is marketing and managerial functions from the subsidiary level. Earlier, the managers were not focusing internationally. They only concentrated in their business units. The top-level managers must be much more efficient to make their subordinates work. They can even think of recreational activities for the employees, which in turn increase the employee morale towards the organization. At present they are following a horizontal structure. They can even think of expanding that structure that could match the various functions of their organization. Being in the horizontal structure it could be possible for them to minimize the gap between each function so that it becomes easy for the top managers to coordinate their work in the best possible manner

Implications

We know that globalization is not a new concept. It was there before many years. Rhodes industries were started way back in 1950 in Canada. They were in the business of manufacturing glasses and pipes, having their business diversified in Europe, North America, and Asia. The main problem that they faced was regarding the organizational structure that they were following. The experts of the company had developed certain structures for the organization to deal with this problem.

If they are adopting these they could resolve 60% of the problem that they are facing. The managers of each subsidiary must be much more specific about their roles and responsibility. And they must work towards the achievement of the organizational goals. Since this is the era of globalization, they could conduct their business in the best possible manner if they have the best supervision.

The organization must be able to integrate all ideas that they get from each subunit to create an international strategy. Also in order to retain the employees, they first need to satisfy them. The managers should be able to bridge the gap between where they want to be and what they are at present. i.e. they have to execute their duties effectively and efficiently. If they are able to study lessons from their failure, then they could excel in the rest of their duties and can compete at the international level. In today’s highly competitive and globalized environment, companies have to be very careful with regard to their operations and structure. Unless companies remain highly competitive, they cannot survive.

References

  1. Schein, Edgar, H. (2004). Organizational culture and leadership. John Wiley and Sons. 3. Web.
  2. Wilson, Alan. (2002). Asset maintenance management. Industrial Press. 2. Web.
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