Strategic and Organization Change at Black & Decker - Case Study Example

Strategic and Organization Change at Black & Decker Question 1: Using the strategic approaches described in CAPSIM, how would you characterize Black & Decker’s international expansion during the 1950’s and 1960’s? What strategy was the company pursuing? What was the key feature of the international organization structure that Black & Decker operated with at this time? Do you think Black & Decker’s strategy and structure make sense, given the competition at that time? Black & Decker’s international expansion strategy during the 1950’s and 1960’s can be characterized as a multi-domestic strategy. From the case study it becomes known that at that period the company grew rapidly due to its strong brand name and near monopoly share of its products. The company’s management decided that in order to enter new markets and develop its business successfully it was necessary to customize the products to local markets, rather than to provide universal products for all markets. For this strategic approach, Black & Decker observed customization strategy more effective than globalization strategy. Therefore, Black & Decker’s international growth approach was characterized by the key features that were common for multi-domestic strategy, including: decentralized organizational structure; wholly owned subsidiaries in each country with a freedom to develop, manufacture, and market the company’s products; and customization of marketing, engineering, manufacturing, etc. to local markets (Lymbersky, 30). Undoubtedly, during the 1950’s and 1960’s, Black & Decker’s strategy and structure made sense, given the competition at that time. Considering the fact that at that period Black & Decker was almost a monopolist in consumer and professional power tools markets, the company was enabled to set the prices for its products not looking for the economies of scales. Focusing mainly on international expansion through local customization, the company did not pay much attention to its pricing strategy. Question 2: How did the competitive environment confronting Black & Decker change during the 1980’s and 1990’s? What changes did Black and Decker make in its strategy and structure to compete more effectively in this new environment? During the 1980’s the competitive environment in power tools industry became very tough. There emerged new competitors in the power tool business, such as Panasonic, Bosh, and Makita (Case study, 1). In result, Black & Decker was not a monopolist in its industry anymore. So as customization of distribution, production and marketing did not allow achieving economies of scale, the company could not lower its prices, and thus be highly competitive on the market (Ireland, Hoskisson, Hitt, 155). In response to the tough competitive environment, the company decided to change its international strategy, because it was loosing its competitive positions. Pursuing the strategy of rationalization, the company decided to close its factories and to consolidate its production in fewer, more efficient production facilities (Case study, 1). While the company targeted the worldwide market, it pursued transnational strategy. The key changes that Black & Decker did in its strategy and organizational structure in order to compete more effectively in new environment were: decreased number of basic R&D centers from 8 to 2; decreased autonomy of individual factories; internal competition among the factories; decision making by the top management of the corporate headquarters; and relative degree of autonomy of national subsidiaries (Case study, 2). All these changes indicated that the company pursued the transnational strategy at a corporate level (Lymbersky, 31). Even though major decisions about where to produce products and to serve world markets were made by manager at the corporate level, national subsidiaries still maintained a fair degree of autonomy (Case study, 2). This was a part of transnational strategy aimed at achieving not only global efficiency, but also local responsiveness (Lymbersky, 31). By 1990’s Black & Decker shut down several more factories, and started to shift production to new facilities in China and Mexico (Case study, 2). Obviously, with the development of global integration, Black & Decker decided to outsource its manufacturing to the countries with cheap labor force and thus to save its operational costs. Situation on a corporate level became excessively aggressive and competitive. Question 3: By the 2000’s, what strategy was Black & Decker pursuing in the global marketplace? How would you characterize its structure? Do you think the structure fit the strategy and environment? By the 2000’s power tools’ company announced another restructuring initiative (Case study, 2). Seeking to lower its costs, Black & Decker reduced its workforce significantly and shut down the factories in Britain and the United States (Case study, 2). Later the company reorganized its business into two separate global divisions and empowered its design and R&D centers in the United States and Britain to develop new products for the global market (Case study, 2). Considering these facts, it may be assumed the company adopted global strategy at corporate level. Global strategy is characterized mainly by: major R&D center; standardization of all products across national markets; centralized organizational structure; interdependence of wholly owned subsidiaries; economies of scale (Lymbersky, 31). Thus, by adopting global strategy, the company has reorganized its organizational structure to centralized structure, in which decision making process occurs solely by top management in the head-office. In my opinion, the structure fits both the strategy and environment. So as Black & Decker’s did not produce the products that required local adaptation (such as food, cosmetics, etc.), its global approach was quite suitable for the power tools industry. Besides, it enabled the company to emphasize economies of scale and thus to provide consumers with more loyal pricing strategy. Question 4: Why do you think it took two decades for Black & Decker to effect a change in strategy and structure? Could a balanced scorecard approach have helped Black & Decker? In my opinion, the company failed to develop appropriate strategy for its global expansion. It took much time for Black and Decker to effect a change in strategy and structure, because the company has not developed a strategy map. When it was necessary to consider all aspects of the business and to develop financial, customer, internal, and learning and growth strategies, the company focused mainly on financial initiatives. Undoubtedly, a balanced scorecard approach could have helped Black & Decker to develop and implement its strategic goals, measures, targets and initiatives. Thus, for example, the company could avoid such activities as: reducing the workforce by 700; competitive and aggressive corporate climate; etc. By analyzing financial perspective, Black & Decker could set real financial targets that could have been achieved not just through shutting down the factories and reducing the workforce, but through manufacturing optimization (internal perspective), employees’ trainings (learning and growth perspective), etc. The company could increase its market share by analyzing the behavior and needs of the customers (customers perspective). Thus, BSC could help the company to develop explicit strategy in a chain of cause-and-effect logic, connecting the desired outcomes from the strategy with the drivers leading to strategic outcomes (Norton & Kaplan, 69-70). By applying BSC approach, Black & Decker could develop a strategy map and thus to provide the foundation for the management system for implementing strategy rapidly and effectively (Norton & Kaplan, 77). Works Cited: Case study: Strategic and Organizational change at Black & Decker. N.d. Ireland, Hoskisson, Hitt. Understanding business strategy: Concepts and cases. 2nd ed. USA: South-Western Cengage Learning, 2008. Print. Kaplan Robert, and Norton David. The strategy-focused organization: how balanced scorecard companies thrive in the new business environment. USA: Harvard Business School Press, 2001. Print. Lymbersky, Christoph. Market Entry Strategies: Text, Cases and Readings in Market Entry Management. Hamburg: Management Laboratory Press, 2008. Print. Read More