Management & Organisation Theory - Essay Example

Management and Organizational Theory Executive Summary The main purpose of the paper was to focus on the management theories and models which are required in the modern day management as it assist the companies to select the employees with appropriate capabilities necessitate for every job. It analyses the case of L’Oreal Thailand by focusing on its internal and external capabilities as well as its challenge and threats. It further highlights on the fact that which of the theories and model could be adopted by the company in order to retain their employees and to attain sustainability in the market. Table of Contents 1.0 Introduction 3 2.0 Mission, Goal and Products of L’Oreal 3 3.0 SWOT Analysis 4 4.0 Organizational Theory and Model 5 4.1 Scientific Management Theory of Frederick Winslow Taylor 5 4.1.1 Criticism of Taylor’s Scientific Management Theory 5 4.1.2 Application of theory in L’Oreal Thailand case 5 4.2 McKinsey 7S Model 6 4.2.1 Application of McKinsey 7S Model in L’Oreal case 6 4.3 Total Quality Management 8 4.3.1 Application of Total Quality Management in L’Oreal case 8 5.0 Organization as a Network 10 6.0 Conclusion and Recommendation 11 7.0 Reference List 12 8.0 Appendices 15 8.1 Appendix 1 15 1.0 Introduction The development of the modern management thoughts starts in the 19th century and prospers during the 20th. The 20th century has observed an insurgency in the theories of management ranging from scientific management theory to contingency theory (Hartman, n.d). The management theory prevailing today is the consequence of the extraordinary efforts of several people (Koontz and O’Donnell, 1984). The management and organization theories are employed to help boost the productivity of organization and also its service quality (Dibben et al, n.d.). Managers make use of various theories depending on their workplace, function and workforce (Walonick, 1993). The case here is about L’Oreal products which have been circulated in Thailand during the early fifties by the neighbouring agents. It is the biggest beauty and cosmetics products Company. In Thailand, the main challenge for L’Oreal has been the consequence of the Asian Crisis of 1997 triggered by undue investment of fixed asset. It has primarily targeted the women between the age group of 20-44 years. Thai customers who frequently bought the products of L’Oreal were situated in urban regions of Thailand and Greater Bangkok. The overall business of the company ranks number four in terms of Thai beauty industry turnover. The main competitors were Unilever and Procter & Gamble who were main players in non-beauty and beauty sections such as personal hygiene, food and detergent, whereas, L’Oreal focused only on beauty industry. At present L’Oreal offers it’s following products in Netherlands such as Recital and Plenitude under the brand name of L’Oreal and Ambre Solaire under the brand name of Garnier Institute (Ubalt, n.d). The main purpose of this paper is to utilize suitable theories and models of management and organization in the context of L’Oreal. 2.0 Mission, Goal and Products of L’Oreal For centuries L’Oreal has dedicated itself entirely to the business of beauty and it enables the individuals to convey their persona, attain self-possession and open towards others. The mission of the Company is to offer all men and women the best cosmetics in terms of usefulness, quality and safety. L’Oreal pursues this objective through meeting the vast diversity of the beauty requirements and desires throughout the world (Loreal, 2014). The aims and purpose of the company is to offer superior quality products, to be helpful and friendly towards the staffs and customers and to treat everybody equal. Its product range encompasses hair colour, fragrances and perfumes, skin care, styling and make up products. Their products are generally made for professional and individual customers (Loreal, 2014). The business of L’Oreal is much about the brand management. Four of its brand resulted for 80% of their business in the Thailand. Among the fourteen brands, Biotherm, Kerastase, Lancome and Helena Rubinstein cover the end market; L’Oreal Professional and L’Oreal Paris also cover the high end market; and Garnier and Maybelline covers the mass market. All these offers hair care, make-up and skin care products. Garnier and Maybelline were cheaper than other products of L’Oreal and therefore it is for the mass market. 3.0 SWOT Analysis The SWOT analysis includes the investigation of weaknesses, strengths, threats and opportunities and therefore it investigates both the external and internal as well as positive and negative issues of a company (Pahl and Richter, 2009). By doing the SWOT analysis, a Company can formulate the marketing strategy by using its strengths and avoiding the weaknesses to enable it to gain from future prospects with regard of potential risks (Bohm, 2009; McDonald, Rogers and Woodburn, 2000). Strengths: The main strength of L’Oreal lies in the continuous innovations and research in its beauty segment and that’s why it always offers best to its customers. In the competitive market, L’Oreal is the leader in the field of cosmetics and beauty for its researching strategy (Ubalt, n.d). Weaknesses: The decentralized organizational construction of the company is one of its weaknesses. Due to several subdivisions it is not possible to operate as well as control all the subdivisions. Therefore, because of this reason the production and manufacturing process of the company is getting slow. They do not have an apparent positioning in customers mind and also have a support of limited media. Opportunities: The constant demand for the beauty products provides opportunity for L’Oreal to maintain their focus into their specific field, particularly on the cosmetics, hair colour and styling, and also the skin cares (Ubalt, n.d). Threats: L’Oreal is facing stiff competition from other brands of cosmetics. Because of constant addition in its product line, there is the risk that other brand could take the earnings of L’Oreal (Ubalt, n.d). 4.0 Organizational Theory and Model 4.1 Scientific Management Theory of Frederick Winslow Taylor Scientific Management Theory is proposed by Frederick Winslow Taylor who considered management logically to determine the most proficient method i.e. “one best method” to perform a job (Rahman, 2012). The main purpose of his approach is to maximize the wealth for every employee (Taylor, 2006). His four major ideologies are: scientifically guide, choose, and build up every employee rather than inactively leaving them to guide themselves and guidance must be done methodically by experimentation as well as observation; substitute rule-of-thumb method which rely on a scientific learning of the job; split work evenly between the employees and the supervisors, so that the workers would actually do the task and the supervisors follow the values of scientific management in order to arrange the work; and the fourth ideology is to work together with the workers to make sure that the developed practices are being pursued (Martinich, 1997). 4.1.1 Criticism of Taylor’s Scientific Management Theory The Scientific Management approach of Taylor has been criticised for several reasons. Researchers identified that his view of appealing the workers were inadequate and even did not recognize the variation among the individuals. Theorist also disagreed on the matter that his approach did not appreciate the social perspective of work and also the greater necessity of workers besides ignoring their proposal for any suggestions. Taylor’s approach is not helpful in order to deal with teams and is also not acknowledged in the work environment which is prevailing today (Griffin and Moorhead, 2009). 4.1.2 Application of theory in L’Oreal Thailand case It is observed that L’Oreal has adopted the scientific management theory of Taylor’s in the initial stage because their view of motivating their workers was narrow and inadequate and they also did not spot the difference between the efforts of the workers. Managers did not appreciate the greater necessity of workers besides ignoring their proposal for any suggestions. The remuneration system was also not up to the mark and the ideas of the workers are ignored by the supervisors. The decision of the top management is only taken into consideration and also they lack in the efficiency of motivating their workers. For all these reasons, the employees were not able to give their best performance and the company is also facing some challenges in case of production and promotion. The challenges which are faced by the Company are that none of their brands except L’Oreal Professional and Kerastase is making actual money. Overall, their sales are declining and their cash flow is also negative. They have been also cutting on the marketing expenses in order to pick up the bottom line. However, this decision is not regarded as healthy choice for them for their long term operations. 4.2 McKinsey 7S Model The 7S framework of McKinsey addresses the requirement to construct a stiff strategic fit among organizational structure, strategy, and five other components of the organizational effectiveness (Fleisher and Bensoussan, 2008). It is also defined as the value-based organization model which is used in ascertaining that all elements of business work in synchronization (Smith and Siguaw, 2011). The framework was constructed to assist the companies to assess and improve their performance (Hill, 2012). The seven elements of the model were discussed below: 4.2.1 Application of McKinsey 7S Model in L’Oreal case Structure: The structure of the organization is the combination of human capital and the processes to fulfil the strategic objectives of the enterprise (Malan, 2003). L’Oreal Thailand encompasses the human capital and the processes to fulfil the strategic objectives. Strategy: The strategy is described as the rationale of the course of action which is to be pursued to achieve the position, vision and the desired goal (Josehp and Mohapatra, 2009). The strategy of L’Oreal thailand is to develop advanced products for Garnier and L’Oreal for achieving the position, vision and the desired goal of offering superior quality products in terms of usefulness, quality and safety. Systems: Systems includes the flow of secondary as well as primary activities that are significant to the daily functioning of the firm. Both activities are also accountable for the success of the company (Kale, 2014). At L’Oreal Thailand, there is mutual understanding among the members of the organization and the managers and employees together are responsible for the daily functioning of the business. It has been scrutinized that the Lancome and the L’Oreal Paris together signifies the bulk of their business in the Thailand and therefore considered as the clear precedence of the turnaround. Two main drug stores, three department shops, as well as five main food chains were accountable for 70% of their turnover. Style: Company style is considered as a fusion of the control philosophy of the executive board, the internal business culture created, and also the orientation the company espouses to its competitors, markets, employees and customers (Michalski, 2011). The managers of L’Oreal Thailand revisited the remuneration system which they called ‘Cultural Revolution’. The Company did not have much profit in hand so they could not raise salaries of all employees overnight but they considered spreading the wage enhancement over time. They employed more workers who are brilliant and obedient than actually is necessary in order to replace those people who have already resigned. Staff: The staff component comprises both remuneration and motivational considerations as they are the valuable asset of the company (Boll, 2012). It has been analyzed that the human resources are the most valuable asset of L’Oreal Thailand. By paying attention to the suggestions of their employees and retailers, they were capable to design the tailor-made approaches for each product segment. For example, the drug shops required to form an environment where the customers would find the highly emotional as well as rational benefits from the beauty products. These drug stores were situated close towards the food store chains and therefore the drug shops had to contend with the food chains through merchandising and unique product innovations. The employees at L’Oreal Thailand get motivational consideration as well as reward for their excellent contribution for the product development. Skills: The unique characteristics of the employees add towards the success of the organization (Doherty and Horne, 2002). Through motivation, training and directing, the worth of new recruits improved dramatically who are also prepared to grow their carriers by way of overseas assignments and inter-divisional relocation. Therefore, the unique characteristics of the employees of L’Oreal add towards the success of the company. Shared values: These are the concepts which the organization utilizes in order to drive in the direction of common objective through a familiar value set (Plant, 2000). Through the common set of value the company seemed to be achieving the objective of offering all men and women the best cosmetics. L’Oreal pursues this objective through meeting the vast diversity of the beauty requirements and desires throughout the world. 4.3 Total Quality Management It is defined as a constant method of development for the whole organization. What makes it different from other processes of management is the strong focus on the continuous improvement (Kanji and Asher, 1996). The Companies adopts Total Quality Management approach which includes employee involvement, continuous improvement, customer focus and benchmarking towards improving its operations (Kaynak and Rogers, 2013). 4.3.1 Application of Total Quality Management in L’Oreal case Employee Involvement: It refers to the overall participation of employees in quality improvement and quality control (Kaynak and Rogers, 2013). Initially, L’Oreal adopted the scientific management approach which states that the decision of only the managers are taken into consideration but after facing some challenges, they began including the suggestions of their employees towards improving the quality of the product. Customer Focus: Instead of focusing on the features of products which is important for the business, the company should focus more on the needs of the customers and should attempt to meet the requirements as well as expectations of the customers (Kaynak and Rogers, 2013). L’Oreal case study reflects that initially they didn’t focus on the needs of customers and there communications were also unconvincing, such as in the skin care segment they didn’t have the high-quality whitening products. After analysing the fact L’Oreal focused on the requirements of customers and made improvements in their products in order to meet the expectations of the customers. Continuous Improvement: The companies which focus on its total quality management are not pleased with their own performance; however they constantly strive to act better (Bounds, 1994). For L’Oreal, employee engagement is considered as a paradigm move in comparison to the scientific management approach where the management only take initiative for the improvement. The small modifications are simple to implement as they are identified and commended by the workers and these changes do not involve drastic amendment to the current work conditions. Benchmarking: The companies are continuously viewing the top companies in the industry to recognize those areas where the changes can be made. They also find the finest method of assimilating improvements and modifications. Benchmarking is considered as outward looking and is also a paradigm change in contrast to the scientific management approach that were regarded as inward looking for constructing any modification and improvements (Bounds, 1994). L’Oreal chose the finest elements of their marketing teams and previous sales and also recruited extra talents. In order to capture more customers they started doing advertisement of their products in the magazines such as Praew and Dichan. The goal of the Company was to get relieve from the semi-delivery method. They lessen the stock coverage on the counters and as a consequence cash flow of operation department significantly improved. They also restructured their fragrance brand in order to better support them with the restricted market size. After starting the ‘Cultural Revolution’ the company achieved a great result. For ten years L’Oreal Thailand accounted for losses but after making modification in their products and by starting Cultural Revolution, they generate possible profits and cash flows for the year 2001. In the same year, L’Oreal Thailand has employed more workers than actually is necessary in order to replace those people who have already resigned. They also rebuilt the groups, greatly decreasing the stress which is caused through under-manning because of the previously high employee turnover. L’Oreal Thailand was also ready to launch their fourth division i.e. active cosmetics by the middle of 2001. 5.0 Organization as a Network The organization is a system which encompasses various factors which effects its functioning. It includes legal, social, political, technological, economical, and environmental, cultural, ethical, and demographic factors; as well as also comprises of customers, suppliers, unions, regulatory agencies, partners and competitors (See Appendix 2). Political factors: The political factors which have an effect on L’Oreal are that the company need to stick to the government policies such as employment laws as well as taxation policies and foreign trade rule; in the international regions of activity. Social factors: The social commitment of L’Oreal includes its global corporate program especially for women. The Company contribute to the projects which assist the community in the form of partnerships and long term funding (Soares and Silva, 2012). Economic factors: The economic factors states that the consolidated group sales of the cosmetic products remain constant even throughout the economic recession and it significantly grows during the period of 1996-2000. The increased sales of its cosmetics products are the result of its technological advancement. Environmental factors: In terms of its environmental issues, it is noted that L’Oreal started using natural components in its procedures of making products. It is viewed as one of the most sustainable companies of the world by the survey of “Global 100” and also listed on Dow Jones Sustainability Index (L’Oreal 2014). Technological factors: The main potency of the Company lies in the continuous innovations and research in its beauty segment. With the innovation of their products, L’Oreal reported a huge growth rate. The employees get the incentives in order of their performance and the workers also take initiatives in order to support innovation in the existing products. In terms of the beauty segment, Thailand was considered as the main innovation center. Cultural and ethical factors: All workers are treated fairly and the system of remuneration is also fair which is based on their performance. Competitors: The main competitors were Unilever and Procter & Gamble who were main players in non-beauty and beauty sections. Both the competitors were ahead of L’Oreal in terms of skin care products but in case of make-up, colouration and fragrance, L’Oreal acquires the greater percentage. Customers: Customers are regarded as the main aspects of every business. The target customers of L’Oreal were the girls and women between the age group of 20-44 years. 6.0 Conclusion and Recommendation The organizational theories and models are needed in the day to day management because it helps the companies to select the most appropriate employees and also to do continuous improvements in their products to attract more customers and also to attain success. The paper focuses different theories and models which is suitable for L’Oreal Thailand. The SWOT analysis has been carried out to know the strength and weakness and also to observe what opportunities they have in the market. It is observed that after making modification in their products they generate possible profits and cash flows. It is recommended that L’Oreal must pursue the decentralised approach so that the complexity availing in their business operations would decrease. They can also make use of enhanced visual display in their stores so that the product would look more fashionable and it will also attract more customers. 7.0 Reference List Bohm, A., 2009. The SWOT Analysis. Germany: GRIN Verlag Publication. Boll, A.S., 2012. Applying the McKinsey’s 7S Model to Assess the State of St. Camillus’s New Employee Orientation Process. New York: Utica College. Bounds, G.M., 1994. Beyond Total Quality Management: Toward the Emerging Paradigm. New York: McGraw-Hill Education. Dibben, M., Freeman, R.D., Griseri, P. and Schipper, F., n.d. Philosophy of Management. 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Ltd. Soares, T.D. and Silva, B.B.L., 2012. Assessing the Strategy of Firms That Compete Globally in Alliances in the Cosmetics Industry. Corporate Ownership & Control, 9(4), p.21. Singla, R.K., 2009. Business Studies. New Delhi: V.K. Enterprises. Smith, R.A. and Siguaw, J., 2011. Strategic Hospitality Leadership: The Asian Initiative. New Delhi: John Wiley & Sons, Inc. Taylor, F.W., 2006. The Principles of Scientific Management. New York: Harper & Brothers. Tripathi, P.C. and Reddy, P.N., 2008. Principles of Management. New York: McGraw-Hill Education. Ubalt, n.d. L’Oreal Netherland B.V.: Introduction of Products from the Garnier Institute of L’Oreal. [pdf] Available at: < http://home.ubalt.edu/ntsbpitt/lorealfinalmktplan.pdf> [Accessed 10 Dec 2014]. Walonick, D.S., 1993. Organizational Theory and Behaviour. [online] Available at: < http://www.statpac.org/walonick/organizational-theory.htm> [Accessed 10 Dec 2014]. 8.0 Appendices 8.1 Appendix 1 Organization as a Network Read More