Strategic Leadership of the Emerson Electric Company - Case Study Example

STRATEGIC LEADERSHIP Introduction       The Emerson Electric Company belonged to the of Fortune 100 companies and had a diversified base of 50 autonomous industries operating under it. It showed a stable and profitable position for a period of 29 years. The period of 1980 resulted in the decline in exports and an increase in dollar. The Company took the advantage of the position and went on incrementing the expenditure on Engineering and Development for a span of eight years. It led the Engineering and Development expenditure to touch 3.1 percent to the total sales from an average of 2 percent. The Electric Company bent on capturing the global market for which it started making some strategic moves like developing and innovating activities on its product lines. (Emerson Electric Company ACP Division, 2001) The paper discusses the strategic initiatives taken by the company as well as analyses the strategic moves of individuals and groups in taking up the world market. A. Effective Strategic Leadership of Emerson Electric Company       Emerson Electric Company showed exhibits of Strategic Leadership in mainly four areas. The strategic initiatives taken by the company were centered on lowering of the production costs and widening its base in the world market. They are proper elucidated in this section. The Emerson Electric Company in the light of declining exports and increase in dollars increased its Engineering and Development expenditure on a manifold basis. It initiated the development of existing products side by side carried on innovation on new product lines. The company envisaged the sales of its new products to contribute to 20 percent of the total sales by the beginning of 1990. This is one of the strategic moves taken by the company in capturing the global market. (Emerson Electric Company ACP Division, 2001, p.1).       The Company reflected stringent cost cutting programs to retain its profitable position for 29 long years. It is found that the company in order to retain its position in the global market have either closed down or consolidated over 40 production centers. Further, it engaged in activities in diminishing wage and salary expenses and even killed low-performing performing product categories to about $100 million. (Emerson Electric Company ACP Division, 2001, p.2).       The third strategic initiative taken by the company is in creating its Air Comfort Products Division’s market base through price penetration activities. The Air Comfort Products Division of Emerson Electric Company fell in the consumer products division and essentially had two brand names adhered to it viz. Northwind and 1895. In regards to capturing the global market of fans, the company had engaged an independent vendor in Taiwan to assemble the fans. After being assembled, the fans were dispatched over to the distribution division of Air Comfort Products situated in Western Kentucky. Even the several accessories for the Northwind brand fans were collected from several vendors in American and Taiwan markets. All these helped in the lowering of the production cost of fans for which it was easy penetrating the market with a low price strategy. The accessory packs, which were purchased from vendors in American and Taiwan markets and dispatched to the assembly centers of Air Comfort Products in kits, were referred to as “subpack”. (Emerson Electric Company ACP Division, 2001, p.3).       The fourth strategic initiative taken by the company revolved around choosing the most effective vendor in terms of cost. The Air Comfort Products division of Emerson Electric Company made a vendor selection in terms of the cost of delivering the accessories from the vendor’s end to the Air Comfort Products assembly plants. The estimation of delivery cost encompassed the cost of the products, shipping costs and other insurance and import finances. (Emerson Electric Company ACP Division, 2001, p.4). B. Organizational Resource       In the first case of strategic leadership shown by Emerson Electric Company the existence of money as an organizational resource triggered its way in making huge expenditures in Engineering and Development activities. The firm in order to capture the market started spending heavily on Engineering and Development to produce newer products and develop the existing lines. (Emerson Electric Company ACP Division, 2001, p.1).       The second case reflects Emerson Electric Company’s stringent practices on closing down sick production units and in cutting down expenditures on wage and salary. This evidently affects the human resource part of the organization where large numbers of people suffer from retrenchment activities and suffer financial losses owing to wage cuts. (Emerson Electric Company ACP Division, 2001, p.2).       In regards to the third case, the Emerson Electric Company showed evidence of a strong knowhow or knowledge as to the procedure of reducing production cost. It showed the use of knowledge of Core Competence where the skills of several vendor firms from America and Taiwan were used for assembling and manufacture of accessories. This in turn helped in reduction of the production cost and saved time. (Emerson Electric Company ACP Division: The Fan Subpack Sourcing Decision, 2001, p.3).       The final case of strategic leadership of Emerson Electric Company is based on strong information networks of the company as regards to sighting cost effective vendors. The information collected for cost effective vendors constituted gathering of information as regards to low delivery costs, low insurance and similar other financing information. (Emerson Electric Company ACP Division, 2001, p.4).  C. Individual and Group Role in providing Strategic Leadership at Emerson Electric Company    1. Case of Charles Knight        Charles Knight the Chief Executive Officer of Emerson Electric Company envisaged a “pay-as-you-go” principle in the light of reducing costs of the company. Knight in the event of a department’s non-compliance to the annual growth standards of 15 percent started with stringent cost cutting practices. It included shutting down of non-productive units and heavy reduction in salary compensation. (Emerson Electric Company ACP Division, 2001, p.2).  2. Case of Ken Powers          Ken Powers’s association with Emerson Electric Company began with his internship training in the Foreign Operations Area of the company. He was a business school of the Mid-Atlantic region. In regards to the 1895 models of Air Comfort Products, division of Emerson Electric Company Ken made some useful recommendations. Firstly, he suggested moving with the existing vendor located in Taichung for its vicinity to the international harbor in Keelung. Secondly, he also made a suggestion for the company to seek an alternative vendor in regards to the availability of tooling equipments to the accessories. The tooling equipments were unavailable as regards to the Taichung vendor and had to be purchased by the company. In the third point Ken suggested of moving the assembly operations to America. It was because he found that the Air Comfort Product plant in Tennessee had enough space left unused. He roughly estimated that assembling costs would decline if the entire sourcing of accessories were made from America. Finally, he also gave a recommendation of shifting the sourcing activities of ‘subpacks’ to Mexico. He had given the recommendation in the light of low labor costs in the assembly plants in Mexico. (Emerson Electric Company ACP Division, 2001, pp.5-9) 3. ACP Division Management Team        The Air Comforts Production management team showed group strategic efforts in promoting the two brands Northwind and 1895 in the consumer market segment. The Northwind model was pushed in the market through price penetration strategy. This was made enable for choosing vendors who would make the needed assembly in low costs. The 1895 model targeted the premium segment of consumer markets. In regards to reducing costs for the venture, components were bought from markets of Taiwan and Hongkong. The components bought were packed in small kits to be dispatched to the assembly centers. (Emerson Electric Company ACP Division, 2001, p.3).  Conclusion       The case of Emerson Electric Company reflects strategic leadership in different avenues of its business in the consumer market segment. The management reflected some stringent cost cutting practices yet it helped the company to stand the test of times in regards to profitability. Further, it focused on practices of economies of scale by using the concept of ‘Core Competence’ in selection of vendors to do the assembly functions of the company. Reference Emerson Electric Company ACP Division, (2001), McGraw Hill Read More