Management Methods and Tools Toolkit Design Exercise - Case Study Example

Introduction: 2 Company Overview: 2 History: 2 Recommendation: 5 The Balance Score Card: 5 Business Process Reengineering: 9 Conclusion: 10 References: 12 Bibliography: 14 Introduction: The pinch of the recession of the late 2008 that cast its spell globally has been felt most by the automobile industry particularly The Big Three which are General Motors, Ford and Chrysler. It was argued that the more than the recession it was the bad business practice that these companies followed which led to their bankruptcy. The companies have made massive improvements and toiled hard to bring back the companies into profit mode. With the markets showing positive signs of improvement and a gradual increase in demand the automobile companies are fighting back. General Motors has been able to repay back a significant portion of the loan to the government and has replaced Toyota to take the number one position. Opel is the European division of General Motors. In the recent past Opel has been facing problems which have lead to a decline in sales of its vehicles. The report tries to analyze the reasons for the fall in sales and to come up with a suitable action plan which could help Opel increase its sales. The tool used for finding solution is the Balance Score Card. Company Overview: History: In Europe, General Motors runs its business under the brand name of Opel. Opel is on one of the largest automakers of Europe and was founded in 1862 by Adam Opel in Russelsheim, Germany. It has 13 plants across 8 countries and employs almost 47000 people.Vauxhall is the sister brand of Opel in UK with a presence across 35 countries in Europe. (Opel, n.d.). Current Situation: Competition: At a point of time when Opel is trying to save itself from bankruptcy problems, and labor problems in Germany its competitors are moving ahead in the race by launching several models. For example, Volkswagen has launched a new car Golf and Ford is planning to launch Focus which would give strong competition to Astra hatchback which is already suffering from a poor brand image (The Economist, 2010). Focus on low cost countries: Opel unlike other companies has its production facilities in few countries. More than 50 % of its vehicles are manufactured in Europe. In comparison companies like Volkswagen, Renault and Fiat has been extremely dynamic in identifying buying new brands and companies in low cost countries. For example Volkswagen bought Skoda based in Czech Republic and Spain based SEAT, Renault bought a car manufacturer in Rumania and Fiat is planning to take over Chrysler. Labor Unrest: General Motors had announced last year that it was planning to sell of its Opel/Vauxhall unit in an attempt to consolidate its operations because of the worldwide collapse of the auto market. Opel was supposed to be taken over by Magna which is a Canadian auto parts maker and Sberbank which is one of the largest retail banks in Russia. However General Motors which is the parent company of Opel to everyone’s surprise backed off from the deal and planned to restructure Opel. Thousands of workers organized mass rallies outside Opel’s plant at Ruesselsheim-the companies headquarter to appeal against the sell of Opel’s European operations. General Motors planned to cut almost 10000 jobs in an effort to restructure Opel’s European operations and this was highly opposed by the workers. The head of Opel’s employee council Klaus Franz said that, “Our trust [in GM] is now zero, and that is the heart of the problem"(BBC News, 2009). Moreover Opel’s operation in Germany is being headed by a Brit Nick Reilly which adds to the unrest of the workers (Flint, 2010). Finances: The German government highly favored the deal between Opel and Magna and assured finances worth billions of dollars to Magna. However with the deal getting cancelled the German officials have become a bit apprehensive and noncommittal about the financial support that it had earlier planned. They wanted details regarding the amount of financing that General Motors would itself provide in order to save Opel. The governor of the Hesse state said, “We expect the management now to say what they can (contribute) alone," (The Associated Press, 2009). . On January 4, General Motors provided $935 million to Opel to fund the restructuring. In Nov, 2009, General Motors had paid 600 million Euros to payback a short term loan it had taken from the German government. It is also in talks with labor unions to save 265 million Euros from workers compensations (Reiter, 2010). Global Presence: Ford mainly focuses in the European market. It has a limited presence in Asian countries which is growing at a very rapid pace. On the other hand its competitors like Fiat have a big presence in Brazil and Volkswagen has a major presence in China. Commercial Vehicles, trucks and vans: Opel has only been into manufacturing of cars. It does not manufacture commercial vehicles, trucks and vans unlike its competitor Ford which has earned huge profits in the past from commercial vehicles. Recommendation: The Balance Score Card: The Balanced Scorecard developed by Drs. Robert Kaplan and David Norton is a strategic tool used by companies and organizations worldwide for aligning its business strategies, communications (both internal and external) and organizational performance in accordance with the companies goals and vision. It is shown in the figure below: [Source: Balance Score Card Institute] The Learning and Growth Perspective: This refers to training of employees and the corporate culture which leads to improvement of the employee as well as the company. Training of the employees are required to keep them updated about the latest technologies, management processes to improve efficiency of employees and other developments which adds value to the organization. What should Opel do? In case of Opel, training and development forms a crucial part because it involves manufacture of cars which requires a high level of technical sophistication. Engineers need to be extremely familiar and updated about new technologies and quality improvement tools like 6-sigma to minimize quality problems. Opel has been facing labor problems since it started restructuring. The managers must be trained and should be competent to deal with labor unrest. The Business Process Perspective: This refers to the internal processes within the organization and how well they are aligned to serve the customers in the best possible way. What should Opel do? Opel should design its business processes in a way that allows it to take care of the workers unrest as well as increase profitability. This can be done by entering into an agreement with the workers that the work which could be done by one worker earlier would now be shared by three workers and the wages would accordingly be divided among them. The workers must be assured that once the company starts earning profits, the workers would again be given the facilities they have enjoyed before. They must be explained the loss the company is suffering because of recession and global decline of car sales. This would help the company to ease the labor unrest as well as cut its operational costs. The company must look for a win-win situation. The Customer Perspective: Customers now have a wide variety of choices and easy access to information. The company should be clear about the kind of customers it is targeting and the need of this customer segment. What should Opel do? Opel has been falling behind its competitors in terms of customer orientation. It has a very limited product line compared to its competitors which is not sufficient for meeting the needs of the customers. Hence it needs to develop new products which can compete with competitor’s brands at each segment. Moreover Opel does not have a good geographical presence unlike its competitors. In case of automobile companies geographical segmentation is an important base of segmentation. Opel should try to enter or expand in the developing economies like China and India with a wider product line. Financial Perspective: Companies should have a mechanism to take care of the financial aspects like sourcing of funds, processing of funds, availability of funds with the company and so on. Opel has been facing problems regarding sources of funds as mentioned above. It has been facing problems to get financial support from the European government. However the parent company General Motors has been able to pay a significant amount of the debts it had taken from the US government for bailing it out. What should Opel do? General Motors needs to pump in money from its operations in other countries into Opel. It should convince the European government to help it raise finances easily. Challenges: From business process perspective, Opel is going to face a major challenge in convincing the workers to conform to the wage schemes that it is planning to implement. From the customer’s perspective, the challenge for Opel lies in developing the supply chain to penetrate new geographical markets. Secondly it also needs to develop a new car which in itself is a big challenge. Although there are challenges, yet if Opel is able to implement the changes it would significantly benefit it in the long run and help it in becoming more competitive and increase its profits. Strengths and Weakness of Balance Score Card: Balance Score Card is a tool which looks at a problem from the customers, learning and growth and the business process perspective. It links these factors with the financial performance of the company. It provides a framework to the organization of the things it needs to measure to achieve its financial targets. The weakness of the balance score card lies in the fact that it takes a long time to record and monitor the data, it does not take into account employee’s acceptance and supplier’s contribution. A lot of time is spent in gathering data rather than is analysis. It does not provide a strategy for the top management. Business Process Reengineering: Business Process Reengineering is the process of focusing on the core processes and adding value to the customers. It requires a fundamental rethinking of the business processes. Global warming and a rising interest of people in protecting the environment has become important constraints for car manufacturers. Opel needs to manufacture new cars which are small and eco friendly. With prices of gasoline sky rocketing, it is important that Opel manufactures cars with hybrid technology. What should Opel do? In order to implement all these changes Opel has to undertake a business process reengineering. BPR starts with an in depth analysis of the organization’s mission and vision, the strategic goals, current processes and customer needs. Opel needs to reexamine its current processes, linking those processes which are identical, identifying gaps in the current processes, developing new processes that would help it become more customer centric and finally implementing the changes. For example, in order to develop new cars Opel can use its existing supply chain for procuring raw materials and also for use its well established distribution channel for selling its cars. It can select the best engineers and the best workers from its existing pool of human resources in order to develop new cars which are eco friendly. It would help Opel become more lean and profitable. Challenges: The challenges that Opel would face is from employees. The employees and workers are used to a certain way of doing things. They have a fixed routine and it may be difficult for Opel to change their mindset. It may also face problems from its suppliers who may not have the new raw materials that would be required for manufacturing new cars. Implementation of BPR is a time consuming process and it may be long before the company is able to see the real benefits of BPR. However in the long run BPR is extremely crucial for the company to be competitive. Strength and Weakness of BPR: The strength of BPR is that it would help Opel to become more resulted oriented than task oriented. The weakness of BPR is that it talks about total transformation of the current processes. However in reality in most organizations transformation takes place only in few departments which defeats the entire essence of BPR. Conclusion: The report shows that the decline in sales of Opel can be attributed to various causes. Opel has been going through a very rough patch in the recent past especially due to General Motors unexpected move not to sell the brand to Magna-the Canadian auto parts maker and to restructure the company by itself. This has resulted in strikes by workers in various plants located in Europe. Opel has to come up with a win-win solution for the workers and the company. Opel also falls behind its competitors in terms of product lines and geographical coverage. Opel needs to make sure that it develops new cars for each segment. It needs to follow a market development and product development strategy. With customers becoming more aware about environmental hazards, Opel needs to manufacture cars which are environmental friendly. A business process reengineering which focuses on adding developing products which can add more value to the customers is needed in order to achieve these goals. Finally for the entire restructuring operations, Opel needs to manage its finances. In addition to loans granted by the US Opel also needs to work out a feasible plan with the European government. References: Balance Scorecard Institute. No date. Balanced Scorecard Basics. What is the Balanced Scorecard. [Online]. Available at: http://www.balancedscorecard.org/bscresources/aboutthebalancedscorecard/tabid/55/default.aspx [Accessed on May 25, 2010]. BBC News. November 5, 2009. Opel workers in Germany are attending a mass rally outside US parent company General Motors' (GM) headquarters. Opel U-turn sparks German strikes. [Online]. Available at: http://news.bbc.co.uk/2/hi/8343934.stm [Accessed on May 24, 2010]. Flint, J. Jan 18, 2010. GM's German unit is so important that the automaker's board defied the government and its own president to keep it. But it needs fixing. Here's how. What's Wrong With Opel. [Online]. Available at: http://www.forbes.com/2010/01/18/opel-general-motors-business-autos-jerry-flint.html [Accessed on May 24, 2010]. Opel. No Date. Opel. Wir leben Autos. [Online]. Available at: http://www.wirlebenautos.com/ [Accessed on May 25, 2010]. Reiter, C. Jan 15, 2010. GM Injects 650 Million Euros Into Opel, Revamps Management. Bloomberg Business Week. [Online]. Available at: http://www.businessweek.com/news/2010-01-15/gm-injects-650-million-euros-into-opel-revamps-management.html [Accessed on May 24, 2010]. The Economist. March 3, 2010. Under pressure, GM is now putting up half the money needed to rescue Opel. Paying up. [Online]. Available at: http://www.economist.com/business-finance/displaystory.cfm?story_id=15603238 [Accessed on May 24, 2010]. The Associated Press. Nov 5, 2009, German workers protest GM's Opel reversal. thestar. [Online]. Available at: http://www.thestar.com/business/article/721658--german-workers-protest-gm-s-opel-reversal [Accessed on May 24, 2010]. Bibliography: Woods,A. Joyce, P. 2001. Strategic management: a fresh approach to developing skills, knowledge and creativity Kogan Page Series. Kogan Page Publishers. Davis, M.W.R. 1999. General Motors: A Photographic History: Images of motoring, Images of America Series. Arcadia Publishing. Read More