Crisis Management for Corporate Self-Defense - Case Study Example

Introduction Coordination and organization of various activities in an organization is done according to certain policies and with an aim of achievement of defined organizational objectives. Management in any organization is considered as an essential factor of production in addition to others factors such as money and various resources. The basic management tasks include innovation and marketing and as a discipline, management involves combination of different functions meant for formulation of the policy of the corporate and planning, controlling, organizing and directing the resources in an organization in order to achieve the objectives according to the policy. Being a small or a large organization, the formulation and implementation of policy is the key to the success of the organization and the quality and experience of the managers are very important for the future worth of the organization. According to Watson (2001), managers’ experience in managerial skills is learned through their previous responsibilities in the setting of an organization. Most of experiences from the managers does not come from class but through exposure to the already present management knowledge then the application of the knowledge is different from different managers as it is not so much relied on what is known but how this is applied in managerial practices. Thus, in any organization, what might be very essential for the manager is the practical theory. While the success of managers may be dependent on technical knowledge exploitation and concepts of management, the success also comes from a feel and an understanding of various factors which include the organizational culture and politics, selling and presentation of ideas, external environment and the ability of the manager to delegate duties. Through this way the success suggests an approach that is prescriptive about the development of skills and competencies which can be impacted to various individuals in order to improve their abilities and styles in management. In the modern world, management and leadership are acquired in a way that the more one learns about management, the more the knowledge on management and the better one becomes as a leader. The success of the managers also lies more in their ability to employ tacit knowledge than updating or gaining of explicit knowledge (Smith, 2001). In real world, those who have been in management of various organizations have realized that a success in an organization is not final as the process of maintaining your organization in the top of a heap that is competitive seems to be more difficult than getting to the competitive heap. Management of an organization or an enterprise may seem challenging as with no time what the organization is counting to be its success and precious assets may turn into liabilities which may neutralize the powerful competitive advantage of the organization through shifting of the business environment structure. In the study of the companies’ changing fortunes over quite a period of time, we may be forced to reach to a conclusion that there may be no final answer or a solution that is permanent to the long term growth and survival problems for organizations. The skills in management can make a significant difference but at times the tide may turn against your business. Thus the success of a business is turning out to be a more of riding wave’s circumstances. That is, anticipating and capitalizing changes that are fundamental in the environment of the business which with no time, they can create new winners and turn winners to losers. Financial crisis can be categorized as one of the variations in the business environment (Albrecht 1996). Thus, the tendency of seeing management task as long-term thinking that is carefully considered may be very challenging to the success of the organization. This shows the need for organizations to operate on the basis of short horizons in order to cope with the environmental changes in the business environment. Illustrations First, we look at various illustrations of the events and trends in business environment which can change in a radical way the success formula of different lines of business. All the giant banks in Japan went faced with financial crisis at almost the same time as it was evidenced that their lending binge planned for five years led to creation of various unprecedented unrecoverable and ill-advised loans. The banking crisis domino effect lead to a shortage in credit that resulted to crippling of other firms that were capital dependent which includes exporters and others who wanted to grow their operations. This led to a near melt down of the great economy of Japan creating the worst experienced recession in a period of 50 years. In Indonesia, the same crisis in banking was experienced but this was worse due to mismanagement and waste of capital by a few people who lacked skills and knowledge in management (BIS 2001). In the health sector, as US based horizon health corporation which was a leading provider of rehab and mental services through outsourcing of contracts to various hospitals lost its footing at the time when the federal government of the united states changed its policies in an abrupt manner for reimbursement of client hospitals for the firm for provision of such services. A lot of mangers for these hospitals made decision that it was not feasible to continue giving their services and in turn they started cancelling their contracts and also stopped renewing them. This led to radical decline in the company’s revenues, crushing of the profit margins, chopping of share price to nearly a third of its peak (Albrecht, 1996). Applied magnetic corporation, one of high technology sector and leading producers of read-write heads used in computer hard drives was also caught unaware due to the shift of technology used for making these products. This made the company to suddenly lose its value in magnetic technology as a new technology known as magneto-resistive became a concept that was preferred with a few months. The revenues in the firms dropped drastically over a half which made the company to embark on a crash program for one year in retooling and heavy investment in order to refocus the company’s products. In addition, the shareholders of the company experienced a drop in market price of their certificates from 27 to 4 dollars per share (latimes, 1997). Hayes Corporation, the pioneers of electronic modem used in sending of data by personal computers through the telephone lines experienced trouble in modernizing its product line. Within no time, other companies copied this firm’s products, made improvements on them within a short time and left the firm behind. The firm later filed for protection of bankruptcy and then closed its doors at a debt that amounted to $40 million. During the time of closure, it was the time when the sales of modem set new records (Free library 2012). In America, Boeing aircraft who are the largest single exporters had found themselves in a condition of losing records on its customers’ record orders. This dilemma was created by a combination of factors which include high expenses in its operations due to a production system that was out of date and required re-engineering, provision of deep discounts in biggest orders acquirement, decline in Asian markets demand, and the previously secure customers’ order were cutback. The company had to adopt a massive layoffs and cutbacks in production in addition to revamping the company’s production systems. This also affected various firms that supplied materials to this company such as Northrop Grumman whose revenues from Boeing alone was amounting to 12 % (Albrecht, 1996). Callaway, which was a leading producer of prestige and high performance golf equipment, experienced a drop in its impressive growth in sales as a result of double-barred effects which include decline of Asian markets demand and cut of prices by its more aggressive competitors. This led to the destruction of Callaway’s profit which was mainly caused by overcapacity, falling demand and price wars. The earning of the firm dropped to zero and the price of its share also fell to a third of its peak. Motorola Corporation which was once Wall Street darling ended up being an outlier when it delayed its plans to switch to its cellular phones new digital technology. This cost the firm the firm a major chunk in terms of market share (CBS News 2012). Smith Corona is a corporation that also held a dominant market position in typewriters for various decades. Later in 1995, this company filed for bankruptcy which left a lot of industry observers with questions. This was because the company failed to quickly transform its business by adapting to the age of personal computers through changing from typewriters to printer markets (Albrecht, 1996). These illustrations with more others shows the need for the organizations to be more watchful for trends, events, and various forces in the organizations’ business environment that serves as a significant threat to the existence of the organization. From these illustrations, it is evident that taking the management task as long-term thinking will put the organization to a threat as the unexpected changes in environment will affect its existence. This calls for adapting very short horizons to cope with rapid changes in business environment. This means that the managers have to scan the horizons of the business on daily basis in order to detect any sign of significant change. This will maintain the competitive advantage of the firms as well as maintaining or increasing their profitability (Grove 1996). Management of the blind side While managers turn their sensitivity to the trends and events in the environment of the business, they should be diverse in a way that they should not only overlook the organizations’ obvious threats. It is not only the competitors or customers that are unpredictable that can cause harm to the organization. There are a lot of other ways in which organizations may lose money and these ways are not the managers’ first thought. As the managers may turn towards focusing on gaining significant market share, labor may also prove to be a significant threat as lack of proper management may cause a substantial damage on the organizations profit. Management of people is very essential and it is repeatedly spotted by the managers as very essential aspect and very demanding aspect on the management. Unlike any other factor in production such as technology and materials, the human beings can be said to willful and also comparatively unpredictable. The creative power of human is very crucial in the operations of the organization and these human can also frustrate rather than facilitating what the organization requires them to do. Thus, the organizational behavior has emerged as a very essential body of knowledge which is required in management in order to identify, explore and suggest frequently the methods of empowering or controlling tricky dimension of people of organizing and managing. Through adoption of organizational behavior, organization design, leadership and motivation are enhanced. Thus, organizational behavior is essential in management according to the demand in the nature management and organizing of people (Knights and Willmott 2006). Event such as poisoning of food in the food market is one of the blind side episodes that can cause a serious damage in the brand image of the organization and can be well managed through employment of the organizational behavior. Thus, the management in a firm may be concentrating so much on competitors, customers, issues of technology and economic trends while overlooking the potential threats that are just under the management noses. This means that no matter the type of service or product an organization may be selling and no matter the type of market or the industry for the organization, the manager should be aware that the organization may face a crucial corporate emergency in the near future at some point. The managers should have adequate knowledge and skills to tackle any kind of emergency as even if there are no modern disasters in the organization, it does not necessarily mean that they are not happening around the organization. Thus, the managers in every organization should be aware of the unlimited possibility of numbers of threats that may occur in the business environment. This calls for scanning of business environment such as inclusion of various possibilities in addition of the issues that are more common. In order to succeed in these unexpected changes in business environment, the organization must employ operations based on very short horizons (Watson, 1999). The corporate radar In comparison to a business enterprise as a ship plowing through the seas, the crew must keep the ship on course when it is following the right one and have the knowledge on how and when to rethink about the in case there are changes in circumstances. The key to the correct course is to understanding what’s ahead of the ship. This is made effective by use of radar systems. This can also be applied in the management of organizations where the organization requires figurative radar rather than the physical one for the ship. In management, the organization radar is studying, investigating, analyzing and putting in mind about different dimension of the organization’s business environment. This means the organization’s radar must always be on and scanning the business environment full time. This requires reaction of various changes in the business environment in the right time in order to ensure the success of the firm (Warhurst, 2011). The managers in various organizations requires adequate skills as it is becoming more necessary for them to analyze and define the key trends, events and any forces within the business environment which will dictate the choice tactics. This does not only require the managers to be swift in management of the resources but also to see and react to the threats that are immediate in a simultaneous way with detection of changes that are mid-term and are not so obvious but they have an effect on the new term that nears (Weatherbee, 2008). In management, the managers must put in mind the existence of the points of inflection where changes that are slight but weighty begin to be felt in the lifespan of the firm. Failure to view any of the key point of inflection will dictate the survival or failure of the business. Thus, the key role and responsibility of the managers in every organization is to study and have a clear view of the business environment then assist the other people to interpret the messages on business environment. This will provide the organization with a shared concept on its likely future and evaluation of various choices or alternatives in matters of their likelihood in success. Thus, this cannot be based on perception of the as long-term thinking but adopting short horizons in management in order to react rapidly to any change of business environment (Dianne, et al. 2011). The organization future One way that the managers will understand the future of the organization is viewing it in terms of the opportunities and problems. As a manager, you should stand back and view the organization in the position of a potential buyer or an investor in the business. Then ask yourself how you would decide that this organization will be a good type of investment over a period of few years and what key factors that will drive the organization’s profitability and growth. Environmental scan is a process of searching the environment of the business. It is essential for managers at all levels to scan the business environment then transform the discoveries from as a result of environmental scan to actions and policies. It is also essential to put into consideration the internal which include the knowledge and talent of managers and teams of executives that are well qualified (Cacioppe, 1997). However, some externals may overshadow the quality of management and they include market takeover by deep-pocket competitors, technological change and steady decline in demand of a service or a product. Management skill is very important but in consideration of all the key factors, it is may not be decisive in organization’s prediction of success. Thus, the executives needs to put into consideration environmental forces in which they have little control and then prepare the organization in order to adapt these forces. It is also very important to understand the primary parameters of the business such as total market demand, the competition structure, the competitors favored by industry’s capital strength, structure, brand power and access to consumers (Weick, 2001). Thus, managers must be aware of events and issues that affect their business especially being coherent about the business environment. In order to do so, they have to be very sensitive about any unexpected change in the business environment. This means that they have to work under very short horizon to adapt to any change of the business environment. Conclusion Management in any organization is considered as an essential factor of production. Success in an organization is not final because the process of maintaining your organization in the top of a heap that is competitive seems to be more difficult than getting to the competitive heap. Organizations need to be more watchful for trends, events, and various forces in the business environment as they serve as significant threat to the existence of the organization. From various examples, it is evident that taking the management task as long-term thinking will put the organization to a threat because the unexpected changes in environment will affect its existence. As managers turn their sensitivity to the trends and events in the business environment, they should be diverse in a way that they should not only overlook the organizations’ obvious threats. This is because there are a lot of other ways in which organizations may lose money where the managers do not have the first thought about them. Addressing these threats is referred to as management of the blind side. This is one way of addressing the ever changing business environment which is enhanced through operating the business with short horizons. Management of people is very essential and it is repeatedly spotted by the managers as very essential aspect and very demanding aspect on the management. Management of people is enhanced through organizational behavior that has emerged to be a very essential body of knowledge which is required in management in order to identify, explore and suggest frequently the methods of empowering or controlling tricky dimension of people through organization and management. In addition to management skills, the executives needs to put into consideration environmental forces in which they have little or no control. Thus the operation of the organizations should be based on very short horizons in order to cope with business environment that is ever changing. References Albrecht, S. 1996. Crisis Management for Corporate Self-Defense. New York: AMACOM, pp. 13. Baumard, P. 1999. Tacit Knowledge in Organizations, London: Sage. BIS 2001. The financial crisis in Japan during the 1990s: how the Bank of Japan responded and the lessons learnt. Accessed on 3 May 2012 from: http://www.bis.org/publ/bppdf/bispap06.htm Cacioppe, R. 1997. Leadership by the moment! In Leadership and Organization Development Journal, vol. 18, pp. 335-345. Dianne W., Gareth R. J. & Jennifer M. G. 2011. Contemporary management (2nd ed), McGraw-Hill: Australia. CBS News 2012. Callaway Golf 4Q loss widens as sales drop. Accessed on 3 May 2012 from: http://www.cbsnews.com/8301-505245_162-57365558/callaway-golf-4q-loss-widens-as-sales-drop/ Free library 2012. Hayes Corporation Announces Voluntary Bankruptcy Filing. Accessed on 3 May 2012 from: http://www.thefreelibrary.com/Hayes+Corporation+Announces+Voluntary+Bankruptcy+Filing.-a053069115 Grove, A. S. 1996. Only the Paranoid Survive: How to Exploit the Crisis Points that Challenge Every Company and Career. New York: Doubleday. Knights and Willmott 2006. Management and Leadership: Introducing Organizational Behavior and Management, London: Thompson. Latimes 1997. Read-Rite Rejects Takeover Bid From Applied Magnetics. Accessed on 3 May 2012 from: http://articles.latimes.com/1997-03-04/business/fi-34575_1_applied-magnetics-corp Smith, P. A. C. 2001. Action Learning and Reflective Practice in Project Environments that are related to Leadership Development, in Management Learning, vol. 32, pp. 31-48. Warhurst, R. 2011. Managers’ practice and managers’ learning as identity formation: Reassessing the MBA contribution. Management Learning, vol. 42, Pp. 261-278. Weatherbee, T., Dye, K. & Mills, A. J. 2008. There's nothing as good as a practical theory: The paradox of management education Management & Organizational History, vol. 3, Pp. 147-160. Watson, T. 2001. The Emergent Manager and Processes of Management Pre-Learning" Management Learning, Vol.32, No.2, 221-235 Watson, T. J. and Harris, P (1999) The Emergent Manager London: Sage Weick, K. 2001. Making Sense of the Organization, Oxford: Blackwell Read More