Risk Management in the Age of Globalization - Article Example

Risk Management in the Age of Globalization Assessment Portfolio of Current Issues in Risk Management Review No Source of article: Steve Jobs, Apple co-founder, dies USA Today Author’s Name: Jon Swarts and William M. Welch Date of Publication: October 6th 2011 Themes: Management Change, Leadership Commentary: 553 Brief Summary of Article: The death of Apple co-founder Steve Jobs was a shock to the company and the world. It is also a big loss considering that Jobs has been compared to Henry Ford and Walt Disney. It was in early August when Jobs decided to resign as CEO of Apple for reasons of health. Jobs has been hailed as a creative genius, the man who transformed technology into creative works of art. He was loved by many because of his technological innovation. His inventions include the iTune, iPhone, iPod and iPad. The iTunes alone allow consumers to purchase songs for a mere 99 cents. This was a revolutionary innovation to the music industry. According to Forbes magazine, Jobs’s fortune was estimated at $8.3 billion in 2011. The question that is hanging now in the air is: With the death of its founder, mentor and inventor, could Apple maintain the lead as the number one technology company in the world? Personal Commentary: The history of Apple is the life-story of Steve Jobs. No one can deny that it was Jobs who catapulted the company into what it is today. Through Jobs’ leadership, Apple is now one of the leading innovators in computer and emerging technologies. Awarded the Guinness world record for being the most popular technology marketplace in the world, the Apple Store is one of the most unique technology innovations in the twenty-first century. (International Business Times, 2011) This is in fact a success story of a technology only sci-fi movies would dare venture some years back. In 2007, Apple was Number 1, 3rd year in a row, in the Top 50 Innovative companies in the world. Apple retail stores had contributed about 20% of its total revenues. (Bernstein Research, 2011, p. 93) Apple’s performance in the PC market retailing had also been quite astonishing. Compared to Gateway’s performance, Apple’s unique style of marketing of PCs had made it a leader in the PC market. Apple had beaten Gateway and Best Buy, two competitors in electronic retail. It was believed that Sony would continue to dominate the electronics sector but Apple’s dominance in the mobile technologies would have been retained even after the economic crisis and when the U.S. had battled the Standard & Poor’s credit downgrade. (Bernstein Research, 2011) In 2009, Apple’s 275 stores around the world had a net operating income of $1.4 billion. The Apple Store has become the best place for anyone to experience what a computer can offer whether music, games, or video. Mac technology ignores viruses, while problems are handled by the Genius Bar. (Copeland, 2011) The success of Apple can be attributed to a clever and ingenious style of management and the creativity of Steve Jobs. As music, movies, and photography were becoming digital, Jobs introduced elegant and simple devices which attracted millions of customers, particularly the young. Apple also focused on counterculture themes. Apple now markets PCs, iPods, iPhones, iPad and mobile technologies, the latest technology in the twenty-first century. (Robertson, 2011) Apple products are so in demand nowadays. The iPad alone sold 300,000 units on its first launching, surpassing other competitors (Schermerhorn, 2011, p. 23). On the other hand, iPhones and iPods can download thousands of songs through the Internet. Apple mobile gadgets were also in demand but Apple kept the supply up while demand continued. It is not only because of the management style but also of the leadership that Jobs demonstrated while he led Apple in the new century. Although he was not a charismatic leader for many believed he was a demanding one, he transformed people (Bass and Riggio, 2006, p. 16). He was a leader and manager, the kind many would want to emulate or take as a role model. With the demise of Jobs, Apple is entering a new phase in technology history no one can tell. With Jobs, Apple was secure in entering a new and uncertain time. Without him, what is Apple’s future? For sure, Apple will not be the same again. Jobs had a unique style of management and a mind that was once compared to that of Einstein or Edison. No less than President Obama commented that Jobs had turned technology into joy for even the kids in the family (Snider, 2011). References: Bass, B. and Riggio, R., 2006. Transformational leadership, second edition. Mahwah, New Jersey: Lawrence Erlbaum Associates,Inc. Bernstein Research, 2011. Apple stores: clearly successful, but what is their real impact? Apple computer: not ready to bet on the unknown. Black Book – Apple Computer, 2007 Copeland, M., 2011. The Apple ecosystem. Fortune, 00158259, 11/23/2009, Vol. 160, Issue 10 International Business Times, 2011. Apple’s App store awarded the biggest App Store by Guinness World Records. Sun, 15 May 2011. Robertson, J., 2011. Jobs at Apple: master inventor, master marketer. Available at: http://news.yahoo.com/jobs-apple-master-inventor-master-marketer-004348760.html [Accessed 24 November 2011] Schermerhorn, J., 2011. Management. United States of America: John Wiley & Sons, Inc. Snider, M., 2011. Obama, Gates, Zuckerberg mourn loss of Steve Jobs. Available at: http://www.usatoday.com/tech/news/story/2011-10-06/reaction-to-steve-jobs-death/50674146/1 [Accessed 24 November 2011] Swartz, J. and Welch, W., 2011. Steve Jobs, Apple co-founder, dies. Available at: http://www.usatoday.com/tech/news/story/2011-09-22/steve-jobs-dies/50672498/1 [Accessed 24 November 2011] Student’s Name: Review No.: 2 Source of article: Toyota Motor Corporation The Guardian Author’s Name: Anonymous Date of Publication: November 8th 2011 Themes: Kaizen, Teamwork Commentary: 517 Brief Summary of Article: The year 2011 has been a test to the company Toyota. Third-quarter profits in 2011 were lower than expected due to the earthquake and tsunami, the downward trend of the yen and unavailability of auto parts from suppliers in Thailand. Sales were down to 4.8 percent which made overseas profits to reach only $1 billion. Previously, Toyota had a forecast of 390 billion yen for the year but it is now withdrawing its forecast because of the tsunami and the floods in Thailand, a source of Toyota parts. Toyota may now be lagging behind General Motors and Volkswagen which have recovered because of Toyota’s downward trend due to the natural disasters. How will Toyota recover from this slow performance? Personal Commentary Toyota Motors, a knowledge-based global firm, has been leading the world in the car manufacturing industry. It has branches worldwide and its type of management has been a mix of traditional and contemporary, fit to fight the forces of globalisation. Recently a controversy hounded its worldwide operations and colourful past, probably putting its leadership in the car industry in question. There were problems with the hybrid Prius which were associated with the brakes and gas pedals, forcing the company to recall millions of hybrid cars, many of them from the United States. Toyota has been on the forefront of car making because of an effective strategic and operational management coupled with an efficient and competitive workforce. Their strategies involve innovations in production, marketing, sales and promotions, and branding. But to top it all, it has been able to handle knowledge management like it is a part of ordinary business. In the 1950s Toyota was only a small company, averaging 18,000 vehicles per year. As years passed on, management perfected the so-called Toyota Production System – this is the Japanese way, a means of achieving mass production efficiencies with small volumes. (Lynch, 2008, p. 772) Management introduced kaizen which refers to a concept in production that actually connotes continuous improvement. They invented this approach to their operations where some stages are cut or shortened to save time and provide flexibility. (Gourlay, 1994, p7, cited in Lynch, 2008, p. 773) Toyota manufactured hybrid cars, such as Prius, a hybrid power vehicle whose engine can run on petrol and electricity (Toyota, 2011b). Toyota’s strategy has some semblance to Apple Inc.’s innovative techniques. Apple never ceases to apply innovations for its many products, though most of these products are emerging technologies. Toyota has survived through the years. Its programs, strategies, and plans of the future are as strong as ever. Its management is institutionalized as well as the personalities behind the founding and operations. Toyota has a long tradition of management from its original founder down to a long line of car builders and business innovators. Included in this success is its management of IT infrastructure and knowledge. (Toyota, 2011a) The Prius hybrid car, which created controversy because of accidents attributed to alleged factory defects, was a concept that Toyota developed into and from a knowledge-based technology. The controversy created an operational risk event with outcomes that put Toyota into the spotlight of new controversies. Risk management can be conducted during planning and design. Contractors and engineers are involved in risks in the engineering aspect. Management hires security personnel to counter theft, or install sophisticated burglar alarm systems. Insurance can also take care of company assets in case of natural calamities. But it is inevitable that profits are down during natural disasters like what happened in Japan. (Hansen and Millar, 1997, p. 260) Natural calamities are one of the unavoidable risks that organisations should be able to pre-empt before it happens. Toyota was hit by tsunami and the strong yen. But it has instituted measures by changing production methods and also introducing alliance strategies with Nissan Motors. (The New York Times, 2011b) References: Hansen, K. and Millar, J., 1997. Constructing reasonably believable edifices: lessons from software, implications for construction. In: K. Kähkönen and K. A. Artto (Eds.), Managing risks in projects, p. 260. London: Thomson Professional. Lynch, R., 2008. Global Automotive Vehicle - Strategy in a Mature Market and Toyota: What is its Strategy for World Leadership. In Strategic Management, 5th edition. Financial Times/ Prentice Hall. The New York Times, 2011a. Toyota Motor Corporation. Available at: http://topics.nytimes.com/top/news/business/companies/toyota_motor_corporation/index.html [Accessed 24 November 2011] The New York Times, 2011b. Automakers may flee strong yen. Available at: http://www.nytimes.com/2011/11/18/business/global/japans-automakers-may-flee-strong-yen.html?_r=1&ref=toyotamotorcorporation [Accessed 25 November 2011] Toyota, 2011. 7 Seat Prius+. Available at: http://www.toyota.co.uk/cgi-bin/toyota/bv/frame_start.jsp?id=ConceptCars-priusplus [Accessed 25 November 2011] Student’s Name: Review No.: 3 Source of article: Japan’s nuclear disaster towns hold remote local elections The Guardian Author’s Name: Justin McCurry Date of Publication: November 20th 2011 Themes: Leadership, nuclear risk Commentary: 434 Brief Summary of Article: The Fukushima Daiichi nuclear power accident hit badly the towns of Okuma and Futaba right after the tsunami which was triggered by a 9.0 magnitude earthquake. The once inhabitants of these two towns are now scattered in areas far from it which made it almost impossible to hold elections, for they do need to elect new leaders. Civic life has to go on with the scattered inhabitants. There were no candidates holding election campaigns, or delivering speeches on railway stations and atop campaign vehicles. Residents are living in other prefectures. The campaign could not go on normally because of the decontamination efforts. Financial aid has also been needed for the thousands of people who are still suffering from the twin calamities – the tsunami and nuclear accident. The campaign platform revolved around total phase out of the nuclear power plant. Election turnout was below 13%. Surveys also found that 27% of people said that they did not want to return home for fears of nuclear contamination. Personal Commentary The nuclear accident in Japan put thousands of lives on hold – they need help, finances, new homes, and new life while their own towns are still in the process of decontamination. The elections that were held have shown that the Japanese people wanted to go back to normal life after the nightmare. The way they handled the accident showed the kind of leadership they had in the face of mounting pressures from the people and the government. Leadership allows a group of people to deal with the uncertainties in life. This was demonstrated in the aftermath of the accident. The article emphasizes on the return of civic life after a nuclear accident. They were in the process of choosing a leader, someone who could lead them at a time when they were scattered. Rost (1991 cited in Cardona, 2000) defined leadership through the concept of exchange relationship which emphasizes relationship between leader and followers, but not on the qualities of a leader. Transformational leadership emphasizes on the qualities and behaviour of a leader. Subordinates trust their leader because of the qualities and behaviour of that leader. Leaders of these two towns were real leaders, helping their people against adversities. They showed it and the people were also united. But unity is still to be demonstrated in that they are scattered in other prefectures. Now another question hangs on the balance: how to go back and live normally in their towns which are still under decontamination? What should they do with the government’s nuclear program? Will the government heed to their call of abandoning the nuclear plant in their town? A nuclear accident is one of the reasons that many countries around the world have not considered installing nuclear plants despite the low cost of energy generation. This happened in the past like the 1986 Chernobyl accident which killed workers and endangered the health of the people living in the area (World Nuclear Association, 2011). The people in Okuma and Futaba do not want the nuclear power plant to continue operations. It is a great risk since Japan lies on a fault and has experienced earthquakes all throughout its existence as a nation. This is risk identification. (Tchankova, 2002, p. 290) Risk identification is one of the easiest ways of minimizing risks when it comes to natural accidents. The Japan experience can aid risk managers identify risks because of the natural circumstance – that it lies on an earthquake fault. But risk managers may have ignored it. The government which has the responsibility of identifying risks did not have political will to stop the plant operations. References: Cardona, P., 2000. Transformational leadership, 2nd ed. United States of America: Routledge. McCurry, J. 2011. Japan’s nuclear disaster towns hold remote local elections. The Guardian. Available at: http://www.guardian.co.uk/world/2011/nov/20/japan-nuclear-disaster-towns-elections [Accessed 24 November 2011]. Tchankova, L., 2002. Risk identification – basic stage in risk management. Environmental Management and health, Vol. 13 No. 3, 2002, pp. 290-297. DOI: 10.1108/09566160210431088. World Nuclear Associaton, 2011. Chernobyl Accident 1986. Available at: www.world-nuclear.org/info/chernobyl/info7.html [Accessed 21 November 2011] Student’s Name: Review No.: 4 Source of article: Ford Motor Company The New York Times Author’s Name: Anonymous Date of Publication: October 26th 2011 Themes: Recession, Labor Commentary: 550 Brief Summary of Article: In its report in October, Ford announced that profits were down 2 percent. It also announced that the company and the United Automobile Workers Union had signed a contract that would provide dividend to shareholders. Ford’s profits mostly came from North America. In 2010 and this year, Ford suffered losses in Europe, about 26 percent equivalent to $306 million. Ford’s agreement with the union was to provide 12,000 more jobs and investments worth $6.2 billion in its manufacturing plants throughout the United States. Another automaker, General Motors, did the same pattern of concessions with their workers’ union by adding more benefits to workers and providing more jobs by opening up an assembly plant in Tennessee. Ford’s total investment up to year 2015 will amount to $16 billion. Personal Commentary: Automobile industries around the world play a great role in countries’ gross national product. These industries have evolved and encountered many changes over the years. Quality of a firm’s products suffers due to economic imperatives. Ford Motors was once the world’s leader in the vehicle manufacturing but with the recent global recession, its leadership is now in question. Recently, Ford Moors needed government bailout in order to survive and stay in the competition. The automobile industry is a labor-intensive industry and if one automobile company closes down, it will have a great impact in the economy. Ford has a reputation of high sales in new light vehicles, but its leadership has been threatened by the increase in competition by Asian companies, the Tata Motors from India, and the merged companies in China. There is also a shift from the large SUV to smaller crossover utility vehicles (CUVs). In 2008, Ford has to introduce its own CUVs. In 2010, Ford has diversified some of its vehicle designs, such as the CUVs. (Beckford, 2002, p. 6) With market shares down, Ford started to restructure plans so that it could lower down the costs of production and operations. Ford made a shabby performance for its corporate strategy in 2008-2009. The reason for this is that it received some obligations out of its partnership with Visteon Corporation, the parts manufacturing firm to whom Ford had some obligations that had to be ironed out. (Standard & Poor’s, 2009, p. 211) It had to face additional expenses at a time when it was struggling to reduce costs of production and operations. Out of these transactions, Ford acquired 23 manufacturing plants from Visteon which were considered additional obligations and not real assets. Standard & Poor’s (2009) says they were money-losing plants delivered to them by Visteon Corporation. Ford had to provide financial assistance to this company in exchange for warrants for company shares of Visteon. It was not a good deal after all. Quality is as important to the company as to the community and the loyal customers of Ford Motors. In some countries, public services particularly the transportation sector is being held by government-controlled corporations. There is discontent and lack of quality in this kind of service. Governments are trying to decentralize or liberalize transportation to infuse quality in public service. (Beckford, 2002, p. 6) During the initial period of the 2009 recession, Ford’s products were becoming less in demand; it needed successful products to be on the competition again. This is one of the most important needs for Ford. According to Standard & Poor’s (2009, p. 211), Ford lost market shares in 2008, the problem, quality. The level of operational management has reduced the quality of Ford’s cars and vehicles. This is also affected by the processes of supply chain that Ford has practiced all through the years. In the Asia Pacific Region, Thailand is one of the center points or the source of Ford cars. Cars are assembled in the Philippines and shipped to Thailand. (Business in Asia.com, 2010) Ford also has a problem of dealing with labour unions, and this is one big challenge in the years ahead. The automobile industry is one of the most labour-intensive industries in the world. Labour unions have to be dealt with squarely and provided affordable benefits. References: The New York Times, 2011. Ford Motor Company. Available at: http://topics.nytimes.com/top/news/business/companies/ford_motor_company/index.html [Accessed 24 November 2011] Beckord, J., 2002. Quality: a critical introduction. London; New York: Routledge. Business in Asia.com, 2010. Ford to make Asia a focus: and Thailand to be central pillar of Ford’s Asian strategy. Available from: http://www.business-in-asia.com/ford_thailand.htm [Accessed 21 May 2011]. Ford, 2010. The Ford story. Available from: http://www.thefordstory.com/ [Accessed 21 May 2011. Standard & Poor’s, 2009. Standard & Poor’s 500 guide 2009 edition: America’s most watched companies. United States of America: The McGraw-Hill Companies, Inc. Student’s Name: Review No.: 5 Source of article: Darden Concepts, Inc. Orlando Sentinel Author’s Name: Anonymous Date of Publication: November 20th 2011 Themes: Restaurant management Commentary: 554 Brief Summary of Article: The story of Darden Restaurants Inc. is a story of risks in business and in food. Darden is Orlando-based but it has now more than 1,700 branches in North America with more than 180,000 employees. In 1938, Bill Darden founded the restaurant, first as a 25-seater until it grew with many branches in many parts of the world. It became a subsidiary of General Mills when its main transferred to Orlando. The restaurant brands Red Lobster and Olive Garden multiplied due to good management and the menus they offered. Red Lobster specializes in seafood. Personal Commentary: Darden Restaurants Inc. is now the number one company whose strategy is casual dining. It is a publicly held organization with an estimated $5.2 billion in annual sales and with about 1,860 restaurants in almost all states across the United States and Canada. Darden restaurants have unique food specialties. Darden does not allow franchising to its hundreds of restaurants. They do partner with local restaurant companies in other countries. With respect to earnings, the management has promised to increase earnings per share (EPS) and new methods in their restaurants to increase profits. One of these methods is diversification. (The New York Times, 2011) Restaurant business is a competitive business. There are young and sprouting restaurants in every place available because people love food. Darden Restaurants’ competitors include Carlson Restaurants Worldwide (CRW), a subsidiary of conglomerate Carlson Companies, which, like Darden, also strategizes on casual dining and has hundreds of restaurants across the United States and in more than 60 countries around the world. CRW’s seafood business is becoming popular and is a threat to Red Lobster restaurants. (Hoovers, 2011) Restaurant business is complicated business that has to be applied with almost all sorts of strategies in the marketing mix, like advertising and promotion, product mix, prices, and places. It is management- and capital-intensive and brings along with it high capital requirements. Company’s strategy emphasizes value-added chains, a product of innovation and corporate strategy. Sea-food suppliers across the United States and other countries have been briefed on such concepts of value-added chain that includes food quality and consistency which requires little amount of kitchen preparations. (William, 2007, p.149) Team building is one of its strategies. Teams are formed as the situation and opportunities demand. Each team is given leeway and freedom and the members are allowed to function at their own free will, but each member is responsible to the team. This has made the company strong; it is an innovative way of direct personal contact with low-rank employees. (Reuters, 2010) Darden’s strength comes from its brands, which means the restaurants. Olive Garden is based on Italian casual dining, and it is one of the major sources of profits for the company. In 2010, it generated $3.32 billion in average sales. Red Lobster is Darden’s original restaurant which has hundreds of branches all throughout the United States and Canada. Darden has to focus on menus. This is because people are concerned now of what they put into their mouths. Various ‘new’ illnesses that have plagued humanity in the new millennium are caused by food intake. Diabetes, high-blood pressure, obesity are caused by fatty foods and high-calories. Cause-oriented groups including politicians are campaigning against fatty food and have urged restaurants to reduce calories in their various menus. U.S. First Lady Michelle Obama and Darden have agreed to make an appeal to restaurants to reduce the calories in their menus. (The Guardian, 2011) Restaurants are not private business; they have a responsibility to the world by producing healthy products. (Harris, 2000, p. 142) Will changing the menus and opt for less calories reduce Darden sales? Darden has done this before and is determined to follow the green movement and reduce global warming. Darden’s top management has argued that to deal with risks, the best way is to apply green supply chain management (Fortes, 2009, p. 2). References: Fortes, J. 2009. Green Supply Chain Management: A Literature Review. Otago Management Graduate Review, vol. 7 Harris, A., 2000. Risk management in practice: how are we managing? British Journal of Clinical Governance, Volume 5, No. 3, 2000, pp. 142-149. Hoovers, 2011. Carlson Restaurants Worldwide, Inc. http://www.hoovers.com/company/Carlson_Restaurants_Worldwide_Inc/jrftri-1-1njg4g.html [Accessed 27 November 2011] New York Times. Darden Restaurants Inc. Available at: http://topics.nytimes.com/topics/news/business/companies/darden_restaurants/index.html [Accessed 27 November 2011] The Guardian, 2011. First Lady chips away at food industry, restaurants in effort to help America slim down. Available at: http://www.theguardian.pe.ca/Canada---World/Society/2011-09-15/article-2749366/First-lady-chips-away-at-food-industry%2C-restaurants-in-effort-to-help-America-slim-down/1 [Accessed 27 November 2011] William, G., 2007. Value-added Seafood: Opportunities and Challenges – a United States Restaurant Chain Perspective. In Global Trade Conference on Aquaculture, edited by Richard Arthur and Jochen Nierentz, 149-150. Rome, Italy: Food and Agriculture Organization. Read More