The History of the Management in Business - Essay Example

A.1. Evaluate Kao’s strategic environment using appropriate models Having survived 100 years1 since starting as a soap company in 1890, Kao’s profitability until the 1980s prove they are getting correct answers to the strategic questions: Where are we? Where are we going? How do we get there? But Kao faces a strategic problem: how to grow sales in western markets. Solving this problem begins by evaluating Kao’s strategic environment using appropriate strategic planning approaches: SWOT-PEST, Porter’s 5-force model and Generic Strategy, and Resource-based View (RBV). Using the SWOT2 approach, Kao’s strategic environment is as follows: External Environment Opportunities: growth potential in western markets Threats: strong competitors (P&G, Unilever, L’Oreal) Internal Resources Strengths: creative R&D; efficient/effective management information/Hansha, learning, marketing, and decision-making systems; long-term perspective; management leadership; dominance in domestic/Asian markets. Weaknesses: lacks people with an innovative and aggressive culture; lacks (western) knowledge and experience; cultural gap and linguistic difficulties; distance from Japan to western markets; transition to big company size. From these, we conclude that Kao’s strengths (management leadership and efficient systems) position it to overcome weaknesses (manage the transition and attract good workers). This will help Kao capitalise on the opportunity to grow and compete. We then use the PEST approach3, a framework for identifying and analysing four environment factors outside the organisation: Political, Economic, Social (e.g., Kao’s ignorance of differences in western bathing habits), and Technological. Kao’s social weakness can be overcome through training and market research, including this input in future research and training program designs. We can enhance the SWOT-PEST analyses by using three other models. Porter’s Five Force model4 is a set of analytic techniques to develop strategy by looking at five competitive forces to position an organisation and its activities so that its product or service is different and cannot be imitated by rivals or potential rivals. Of these, three forces are acting on Kao’s failure to grow its Western markets: bargaining power of buyers (Kao’s cheap image and reputation as a novice), threat of substitutes (similar products familiar to the market), and intensity of rivalry (competitors better at marketing high-end/high priced products). Porter then recommends that an organisation choose one of three generic strategies – over-all cost leadership, differentiation, or focus – so it can compete and achieve sustainable profitability. How can we explain Kao’s success in cost leadership and differentiation? An explanation is its value chain, a framework introduced by Porter5 to analyse an organisation’s internal capability to support and reinforce a chosen generic strategy. Kao’s internal capabilities and competences (as we shall next see) helped it succeed in two generic strategies, although its failure to make buyers want its product means that it needs to make adjustments. Kao can satisfy the buyer’s bargaining power by improving its image through advertising and marketing, minimise threat of substitutes by introducing quality but lower-priced products using its cost leadership and product differentiation advantages, and match the intensity of rivalry by deploying trained managers who know the culture to market products in the west. Using the so-called RBV (resource-based view) of strategy, which proposes that competitive advantage can stem from firm-specific skills and resources6, we see Kao as a collection7 of productive resources8 (brand name, quality products, employee loyalty), capabilities9 (unique combination of cross-functional business processes, Hansha information system, the way its workers interact, and how its management leads by example), and competences10 (intuitive learning environment and long-term focus). Kao must use these resources, capabilities, and competences in developing strategic objectives to increase sales in its western markets. We summarize Kao’s strategic environment as follows: it is an organisation with a clear business vision (to be one of three survivors by increasing sales in its western markets), robust resources (creative R&D, marketing information systems, and loyal workers), strong capabilities (mastery of technology and a strong corporate culture), and unique core competences (focus, long-term view, and kangyo ichijo or internalised intuition). Kao’s next step will be to consider all these as inputs in the review of its strategic objectives, making necessary adjustments in their action plans. For example, it must include culture and language training for its workers, incorporate knowledge of cultural differences in their R&D and product visions, and find a way to install a Hansha information system for its western markets in the soonest possible time. A.2 Analyse and evaluate Kao’s processes of strategy formulation Kao’s strategy formulation process can be hinted from the words of President Maruta: “Past wisdom must not be a constraint, but something to be challenged. Yesterday's success for­mula is often today's obsolete dogma. We must con­tinuously challenge the past so that we can renew ourselves each day.” These words show that Kao (its management, researchers, and all other workers) are constantly challenging, questioning, and improving itself, growing and sharing its wisdom with others in and out (distributors and venture partners). It is not afraid to try new things, to fail and make mistakes, because it can learn from them. Kao is like a strong, intelligent, child, strengthening its muscles (resources, capabilities, and competences), daring to play in and test the environment, not afraid to join the “enemy” (in partnerships and acquisitions, sometimes partnering with companies that are competitors like Beiersdorf and Colgate-Palmolive) to gain knowledge and experience, and then attacks with all its might (overpaying if need be) when the time is ripe. These characteristics summarise Kao’s strategic formulation process as follows: Continuous and dynamic: strategic planning is ongoing, with every experience (success or failure) an input to the knowing process. Informal and individual: everyone in the company participates in the process, questioning everything. Transparent and focused: everyone in the company is guided by a common mission and vision of giving customers the products they need. Flexible: moves not by following an advance plan based on previous experience, but by learning from present actual experience. Thorough long-term view: collective decision-making (tataki-dai) to achieve a common perspective or view (zoawase). This process conforms to the incrementalist view of strategy, more behavioural than analytical, able to adjust to the real world while moving forward, as opposed to the hierarchical, deliberate, and analytical approach.11 Kao’s flat structure and workspace design support its unique incrementalist strategy formulation process, because information can flow fast across all functions. This avoids the problem of strategic drift that suffered by other organisations where the message gets lost as it travels down the hierarchy. Kao’s flexibility and adaptability to changing conditions give it speed in execution as the whole organisation moves together in the same direction. So why is it having problems growing in international markets? The reasons are the weaknesses inherent in the strategic formulation process. First, collective decision-making takes time, affected by the distance between the source of information (western markets) and Kao’s deposit of wisdom (Japan). Of what use is wisdom if it cannot be accessed in real-time, as Kao does well at home? By the time decisions are made, the market has moved on. The other reason is the absence of the formidable and established Hansha information system that has been in place in Japan since 1966. Perhaps, Kao are adapting a similar system for its western markets, but its absence in 1990, and its lack of mastery of the language and the ways of its markets (both important parts of the system), contributed to failure. B.1 How can knowledge of the history of management thought assist in analysing strategic decisions made today? Over time, models developed by different schools of management to help solve problems in the past have added to our over-all knowledge of management. When we face a management problem today, like the need to make a strategic decision, the abundance of ideas and concepts to choose from, many of which are still relevant and applicable today, makes having a broad knowledge of management, its history and concepts, important. These concepts did not emerge logically or incrementally over time. Some even appear opposites to each other. Where should organisations focus its efforts? Porter’s answer (the external environment) is opposite Prahalad and Hamel’s (internal core competences). How should workers be viewed? Is he social (human relation school) or economic (scientific management school)? Are organisations a purely social system (Human Relations School of System Theory, where every part functions for the good of the whole and where a change in one part affects the whole), a socio-technical system (Tavistock Institute) constantly interacting with the environment, or there is no best way (Contingency Theory argues that organisations can’t be seen only as a social system or economic system)? Different answers lead to different decisions and actions. Managers have reached similar crossroads when looking for solutions, not only to strategic issues but also on day-to-day matters. Take as an example the application to business of the concept of strategy, a legacy of military thinking common in 19th century Europe, and how business adopted similar military concepts like chain of command (organisational structure) and battleground tactics (competition to increase market share). Several models developed by the scientific management school continue to be useful today, like Max Weber’s rationalism (strategic decisions need to be supported by facts and studies and not based on feelings and emotions) and bureaucracy (meritocracy, organisational hierarchy, and division of labour). The Gantt Chart (formulated in the early 1900s by a follower of F.W. Taylor, founder of Scientific Management) was used by Microsoft to develop a successful software product, Microsoft Project. Management history is helpful in knowing how to manage people. Knowing about Maslow’s Hierarchy of Needs, Herzberg’s hygiene and motivational factors, and the Hawthorne experiments can help managers improve worker productivity, and avoid the mistake of adopting measures similar to McGregor’s Theory X and Theory Y, deeply rooted in scientific management but not fully applicable in today’s post-modernist world. Various strategy models developed based on events in the past continue to be useful today. The wave of diversification and expansion after the oil crisis gave rise to problems of managing diverse businesses, which Porter’s Five Forces, BCG’s Matrix on portfolio analysis addressed by helping firms decide which industries to enter or exit. The need to understand risk and uncertainty resulted in Shell’s Scenario Planning System to avoid future oil crises from affecting the company, later adopted by many organisations for other applications. These and many other tools are still relevant today. Just because they were developed almost a century ago doesn’t mean they are irrelevant today. Knowing which ones worked, and which ones didn’t, and why, will save managers from becoming victims of the latest management fad, a “fool with tools” using obsolete concepts, or someone who will waste considerable time reinventing the wheel. Footnotes: Read More