Management in an Organization - Essay Example

Design management Customer Inserts His/Her Name Here 15th January, 2011 Outline Introduction Strategy & Planning Organizational Structure Finances Human Resources Communication Research and Development Conclusion Introduction Design management in an organization is very important, since it affects and involves all levels of a business unit. The processes of design management are undertaken to suit the potential customers’ demands, maintain organizational strategy and create a competitive edge for an organization. Design management involves important aspects that take into account strategy, planning, organizational structure, finances, human resources, information, communication, research and development. For an organization to gain competitive edge it has to design and manage all processes related to its products through use of human resources from the highest to the lowest level in the organization. In this research paper we are going to compare three companies namely: Wal-Mart, Starbucks and Nike due to their global presence and rich history in using different strategies to become leading companies in their segments. Proper design management is vital for any business today because its processes focus on business strategy, finances and communication for proper co-ordination of human resources within the organization (Mozota, 2003). This report will focus on the key aspects of design management and how it they have been implemented by firms such as Wal-Mart and Nike in the running of these global entities. Strategy and Planning All organizations have a plan and strategy on how to achieve their goals and objectives. Plans and strategies are usually made up of policies and approaches that are to position a company either to gain, maintain or increase either market share or revenues. In terms of strategy, Wal-Mart has used several strategies to position itself as the largest retailer in the world. The most important strategy that Wal-Mart employs today is that of sustainability, in the recent past Wal-Mart has implemented policies which is aimed at reducing environmental and social impacts (Best, 2006). Increased competition from retailers such as Carrefour and Target Corporation mitigated the need for Wal-Mart to improvise approaches that are meant at reducing costs, increasing revenue and value to customers. Strategies such as aligning itself with suppliers who practice energy efficient production methods and sourcing sustainable products such as organic foods which are expensive at a high demand thereby reducing the costs to the consumer. Through sustainability, Wal-Mart aims at improving its internal operations by increasing its trucks efficiency by about 25% hence improving supply efficiency and saving the company $ 300 million. The sustainability strategies according to experts will open up markets for Wal-Mart in markets such as India, China and the emerging world (Harper, 2000). On the other hand, Starbucks Corporation has implemented a number of strategies in the past and currently. Some of the strategies include the marketing of coffee through an experience known as the Starbucks experience. This strategy has been employed for many years and it involves adjusting its retail stores to suit their customers’ lifestyle. Another strategy that helped Starbucks capture a global presence is through the company opening many stores in areas they operate. Therefore they spend less on advertisement at rates of about 1% far less than other organizations which spend around 10% of finances on advertising. By opening up stores in nearly every block, Starbucks made it convenient for its consumers not wait up in lines for their coffee and consequently increasing demand which led to increased sales (Kulakowski, 2006). By creating good ambience for consumers at their store, Starbucks has been able to maintain its strategy of selling premium coffee at high prices contributing to its growth globally. In further attracting consumers who are not coffee drinkers, Starbucks has designed new drinks with coffee flavor in collaboration with Pepsi and other manufacturers in a bid to market its coffee brands and sell more coffee in other formats to consumers. Nike is another major global brand that has cemented its position as the leading footwear and apparel maker in the world. Nike’s success lies with its strategies and plans laid down over the years it has been in business. Manufacturing of high performance goods is the hallmark of Nike’s strategy. Nike insistence on performance as a core strategy has seen it use cutting edge technology and highly skilled workforce to produce high quality goods. Nike manufactures high performance footwear products as opposed to fashionable products; this plan has separated it from the pack of other footwear manufacturers. Nike main strategy of performance is meant to benchmark its products as the best globally and therefore attracting more sales leading to expansion of its market reach. Of late, Nike has been buying up smaller firms in takeover bids in a move meant to enhance its product range (Grant, 2005). Sponsorship and endorsements deals signed with top athletes have made Nike gain a lot of acceptance from its consumers for its performance enhanced products. Nike’s strategy of performance is backed up by factors such as innovation, research and hiring of highly creative employees who are able to chart the direction the firm in the future. Nike has one of the most excellent branding and marketing strategy and its Swoosh logo being easily recognizable by many consumers globally. Its tactic of sponsoring sports events and endorsing top performing athletes has earned the company respect among consumers leading to increased sales volumes over the years. Organizational Structure The organizational structure of any organization is basically defined as the way a firm is organized in making decisions and the specified roles of different people in the organization. Large corporations such as Nike are made up of many departments located around the globe thus they have a complex structure which is ultimately headed by a Chief Executive Officer (CEO) or a Chairman. The similarities between the three firms of Nike, Starbucks and Wal-Mart are that they were founded by three different people who steered the companies into what they are today. Wal-Mart being a large retail company is comprised of more than 4,000 retail stores globally. Wal-Mart’s selling and distribution structure is divided into three namely: Wal-Mart Stores (US), Sam’s Club (US) and International Stores. The divisions are meant to focus its efforts on specific goals such as product, service or customers. Each of these three divisions are headed by a president who reports directly to the CEO, the top tier management is made up of important divisions such as supply chain, sales and marketing, finance, Corporate and legal affairs. At Wal-Mart each store is headed by a manager who co-ordinates with sales and marketing mangers and supply chain employees to ensure the store operates within its set limits and consumers are satisfied (Grant, 2005). Nike’s organizational structure is not centralized but most heads of division and the company’s top tier management operate from the United States of America where it sales are very strong. The research and development unit of Nike which is responsible for all of its designs is based at its headquarters in Oregon, United States near a pace called Beaverton. Nike is headed by a CEO who is responsible for all heads of division under the guidance of the Chairman, Mr. Phil Knight who founded Nike. All division heads such as the European president for sales come up with strategies on increasing sales in their region with a go ahead from the firm’s CEO and departmental heads. The research and development section of Nike is independent in the fact that they design all the company’s products and they rely on communication from different regions in order to tailor products suited for different market segments. Regional heads operating for Nike are independent in the decisions they carry out since they act as overall management in these markets. All major decisions are made by the company’s top management who sit in the board, the make these decisions based on information from other employees and through advice of departmental/regional heads. The organizational structure of Starbucks is that of three tier structure at the management level. It is comprised of the CEO at the very top tier and he/she is involved in overseeing the affairs of the top management. The second tier is made up of heads of different organs of the firm including: North America retail, International retail, Finance, supply chain and others. Starbucks exclusively deals with selling coffee; therefore the firm’s supply chain has a great responsibility of procuring the coffee beans from farmers in different countries and also it ahs the duty of distributing roasted coffee to its different location stores (Mozota, 2003). Starbucks operations are mainly based in the United States and therefore most of the organization’s staff operates there and its store locations cater for about 30,000 clients per every store. Each store is headed by a store manger who works closely with marketing, retail heads and supply chain operations in exchange of ideas and implementation of company strategies (Best, 2006). Major decisions within the firm are made by the top tier management and all employees are given a chance to participate in these decisions. Employees’ ideas are forwarded to store mangers during their open forum sessions and thus this communication is forwarded to regional heads before making its way to the top management. Finances The finances of large organizations in this report run into billions of US dollars and they are mainly drawn from their sales or revenues tied to their operation. Wal-Mart has over the years maintained the leading position as the largest company in terms of revenue and sales. In the year 2009, its sales/revenue amounted to about $ 400 billion, with the United States division contributing a bulk of the sales amounting to $ 258 billion. Wal-Mart’s assets stood at $ 170 billon in the year 2010 and an equity base of $ 70 billion in the same year. Wal-Mart operating income is admirable at the level of $ 24 billion while its net operating income stood at $ 14 billion. Wal-Mart’s overall person in charge of finance is the Chief Financial Officer (CFO) who overlooks over all the finances at Wal-Mart (Harper, 2000). In the recent late, Wal-Mart has made quite a number of plans that are aimed at spending over $ 500 million in sustainable programs aimed at enhancing energy use and reducing environmental impact through their operations. Some of the strategies are aimed at increasing fuel efficiency in the fleet of trucks and through elimination of excess packing at their toy stores saved the firm about $ 2.4 million in shipping costs at the same time saving 3,800 trees and one million barrels of oil. An electricity generation firm started by Wal-Mart in Texas will save it around $ 15 million in energy costs while its price reduction scheme saved its consumers over $ 297 in savings (Culley, 2001). Wal-Mart’s increased sales contributed to a rise in its net income thereby boosting its share price boosting shareholder confidence. Wal-Mart contribution to staff was in form of paying bonuses of $ 933 million and a profit sharing scheme hat saw its employees pocketing $ 788 million. Nike on the other hand has experienced phenomenal growth that has seen its revenue increase tremendously to reach a level of about $ 19 billion during the year 2010. Most of Nike’s revenue was sourced from the United States where the company controls around 80% of the market share. Nike’s operating income for the period of 2009 was $ 1.82 billion representing approximately 10% of the total sales for that period. The net operating income for the period of 2009 was $ 1.4 billion while Nike’s total assets grew to stand at $ 13 billion. Nike’s total equity stood at a figure of $ 8.5 billion in the year 2009, over the recent past the firm undertook financial expenditures by buying out other footwear and apparel firms such as Umbro and Converse. During the year 2003, Nike bought out Converse for a financial figure of $ 305 million and in the year 2008 it spent around $ 600 million for the acquisition of Umbro Sports of England. A huge percentage of Nike’s expenditure is spent in marketing, branding, research and development. To stay ahead of competition, Nike has been spending a lot of money in endorsement deals to athletes and in coming up with innovate products (Grant, 2005). For instance, Nike spent around $ 100 million sponsoring the 2010 World Cup and it has spent more monies in sponsoring major sports events such as Olympics. Starbucks is a large corporation with a large balance sheet and a huge financial muscle. The firm is listed in the NASDAQ bourse in New York, the company’s revenue for the year 2010 peaked at a figure of approximately $ 11 billion with operating income netting the company $ 1.4 billion. Starbucks had a net operating income of about $ 900 million in the year 2010 and the total assets of the company at the end of the year 2010 stood at $ 6.3 billion. The total equity of the company stood at approximately $ 3.5 billion. Most of the revenue and income generated by Starbucks is spent on maintaining the stores they operate and the firm has a policy of owning all the stores in which the company operates on. Therefore around 65% of the firm’s revenues are used as operating costs, Starbucks spends very less on marketing and advertising with figures of around 1% being spent on this end (Harper, 2000). Starbucks through its finances has done some acquisitions including the purchase of Tazo tea in 1999 for a sum of $ 8 million, other acquisitions included the buying of Seattle’s Best Coffee. Starbucks also spent a lot of money in training its staff and through plans such employee stock options which cost the company to a tune of $ 150 million. Human Resources Human resources are comprised of persons who work for an organization to achieve certain set goals and objectives. Companies which operate globally such as Wal-Mart, Nike and Starbucks employ thousands of people with different skills in thousands of their stores worldwide. Wal-Mart is in fact the largest private employer, employing approximately 2 million associates worldwide. The potential for growth in employee numbers for Wal-Mart could be attributed to increase in number of its stores worldwide. Wal-Mart also employs millions of people indirectly who work with their suppliers and partners or part time employees employed by the firm. Wal-Mart has a long standing relationship with veterans in the US military, whereby Wal-Mart offers employment to veterans and therefore they are able to support loyal US citizens (Grant, 2005). Agreements with other minority groups such as employee movements representing Hispanic people has enabled Wal-Mart to reach certain consumer targets and to uplift some of the neglected communities in the United States. Staff welfare is very important to Wal-Mart and they have designed processes such as employee ownership, bonuses and profit sharing schemes. These schemes are aimed at rewarding employees for their hard work and create a system employees feel appreciated as also being owners of the firm and as a result they are motivated to work for Wal-Mart. Starbucks has a sizeable amount of employees working within more than 4,000 stores operated by the firm. As per last year, Starbucks employee numbers stood at 137,000 people employed with different skills working with the company. With its expansion strategy, Starbucks is likely to increase hiring more employees in its new units in India and the Middle East. Starbucks also employs many more thousand people and farmers indirectly who have purchase agreements with their factories in their mother countries. Starbucks for long has had a strategy of employing young people and maintaining them to produce high performance. Through open forums, Starbucks employees are given opportunity to air their grievances and these forums are held thrice a year and it gives an opportunity to management to learn more about its workforce. Starbucks also implemented awarding of healthcare benefits to part time workers thus they are able to be absorbed into the firm as permanent employees easily with no need of training and as a strategy of winning employee confidence. Starbucks stock option plan for its employees encouraged employees to own the firm’s shares at discount prices. Another initiative that encouraged employee confidence was the training offered to employees and the fact that Howard Schultz considered employees of Starbucks as partners. Nike’s employee number is terms of scope and size of the firm compared to other firms with global presence. Most of Nike’s employees work as their retail stores globally and within its headquarters in the United States. Nike does not directly manufacture their footwear and apparel products as they sub-contract other manufactures to produce goods on their behalf while they participate in selling and marketing. Due to these factors, Nike current employee figures stand at around 31,000 employees, which is small compared to other large corporations (Kulakowski, 2006). Most of Nike’s employees are involved in marketing, research and development. Design management is very important to Nike because it helps the firm understand their customers more, for instance the research and development team relies on communication from the market to design products that suit their consumers (Culley, 2001). The research and development team of Nike is responsible for designing its footwear products the division was headed by Phil Knight till recently. Nike employs mainly young people who are responsible for design and marketing, the reason for this is the fact that young people understand the footwear and apparel market which is dominated by young people. Nike has recently unveiled a plan to spend around $ 80 million in boosting its employee training program; it also involves using innovative technology in product manufacturing aimed enhancing design management within Nike. Communication, Research and Development When you are running a global company, communication is very important in establishing control and sustaining the existence of the company. Communication forms a vital focus in the design, management and processes control of an organization. Research and development has over the years evolved to become a major part of any large organization, most firms these days have a dedicated Research and Development section for purposes of enhancing the firm’s capability through research. Wal-Mart being the largest company in terms of revenue in the world works round the clock to ensure that communication and research help it maintain market leadership position. Wal-Mart strategy towards research and development has seen it lead to introducing sustainability as a goal of survival. Wal-Mart conducted research and found out that by reducing its energy needs and implementing environmental friendly strategies then they would be able to cut down on costs and help in reducing carbon footprint in the world. Wal-Mart operations spans more than 8,000 retail stores and over 2 million employees therefore efficient communication is an important tool that will ensure management can control and efficiently implement its strategies. Research and development within Wal-Mart help the firm to design strategies that help n expand globally and aid the firm in dealing with design management issues (Best, 2006). Starbucks through its employees have made a communication plan whereby they take time to listen to their consumers and the employees suggest to management where changes are necessary. In order for Starbucks to expand into new markets and territories they need to conduct research on the beverages trends of the people in that particular area. Research is conducted in order for the firm to develop coffee beverages for the targeted market. Research and development processes are important in any organization since they help the organization to access its capabilities and to what extent are the strategies that are necessary for implementation of design management. For instance, Starbucks failed to capture the Australian market since they entered the region prematurely without understanding the customer needs. The move cost the company a lot of money and had proper research and communication been conducted, Starbucks would have saved time and financial resources (Harper, 2000). Communication also plays a strategic part in Starbucks operations because the firm spends very little in advertising since they rely on communication between its employees and customers to attract more consumers. Research and development within Starbucks has led to innovative beverages which have captured the market and eventually lifting the company towards better revenues. Nike’s core strategies of branding and marketing to maintain market leadership position in the footwear and apparel markets is built on research and development. Nike spends a lot of money in research and development while communication is core in implementing research as the company relies on information from the regions where they operate. Communication is a very important factor for Nike as it relies on communication from its employees operating in different regions; these communications are usually turned into strategies and used in research to develop new products. The footwear and apparel industry is an industry that evolves very quickly therefore there is need for the firm to conduct extensive research and develop strategies that will enable the firm to remain a market leader (Culley, 2001). Design management process in Nike is conducted though various channels, the company collect communication from its employees based in different regions concerning its products or strategies. The collected information is analyzed by the research and development section of the firm and then they come up with designs or strategies which they will use in selling its products. For research and development to be successful, proper communication between the firm and its consumers is necessary as it determines the right timing to release a product and the prices at which the products should be sold for. Conclusion The process of designing management in any organization is very important in that it helps management and other employees within an organization to focus on organizing processes and coordinating management. Design management mainly focuses on how an organization manages information sourced from the market, its consumers and how to usefully put gathered information in production of goods. Research and development are important factors that are usually considered in design management, because before implementation or designing of any product someone has to first get to know the market, taste and preferences of different consumers and how to reach these targeted markets. Large organizations such as Wal-Mart, Starbucks and Nike have mastered the art of design management and how to implement procedures and processes which make up design management (Mozota, 2003). Strategies, finances, goals and objectives are important in implementing design management as witnessed by the operations of Wal-Mart, Nike and Starbucks in this report. References: Best, K., 2006. Design management: managing design strategy, process and implementation. London: AVA Publishing. Culley, S., 2001. Design Management: Process and Information Issues. California: John Wiley and Sons. Grant, R., 2005. Contemporary strategy analysis. Boston, MA: Wiley-Blackwell. Harper, R., Randall D. and Rouncefield, M., 2000. Organizational change and retail finance: an ethnographic perspective. Austin, TX: Routledge. Kulakowski, E. and Chronister, L., 2006. Research administration and management. Chicago, IL: Jones & Bartlett Learning. Mozota, B., 2003. Design management: using design to build brand value and corporate innovation. New York: Allworth Communications. Read More