Acme and Omega Electronics - Case Study Example

The Paradoxical Twins: Acme and Omega Electronics Name: Instructors Name: Course title: Institution: Date: Introduction In the current times, competition between businesses operating in similar industries is on the rise. This is due to the great urge to increase turnovers, which in most cases translates to higher profitability levels. Hitt (2010) indicates that, a strong competition between businesses leads to delivery of high quality products and services at a reduced cost. In the field of consumers’ electronics, competition between major players has been fierce as the companies concerned seek to have an increased market niche. However, in countries, such as the United States, competition between various electronics companies can be dated back to the 1950s, when the country experienced an increased need of electronic equipments owing to raised technological development. This paper will carefully evaluate the organisation structures of Omega and Acme Electronics after they became separate business entities in 1955. A. The issues Background on Omega and Acme Electronics After reading the case of “the Paradoxical Twins Acme and Omega Electronics” I have clearly understood that both firms produce same products as well as services. Initially, the two firms were owned by Technological Products of Erie, situated in Pennsylvania. The firm was later sold to Cleveland manufactures that did not have any interest in electronic divisions of the Technological Product, hence sold the two plants to different investors. One plant was renamed as Omega Electronics, while the other as Acme Electronics. The two become close competitors, owing to the fact that, they operated in the same region and had approximately the same capital base. From the case study, one can see that John Tyle, the president of Acme Electronics was an extremely tough going person and is portrayed as an autocratic person because Acme only has one communication channel. Contrary to this, Jim Rawls, the president of Omega electronics, highly believed in consolations, on any given issue, thus making sure that the views of all employees were taken into account (Cartwright, 2006). As a result of this, teamwork was evident in Omega, an aspect that saved on time and resources of this company. From the case study, it’s clear that both firms had the same organisational structures, prior to being sold to different investors, which forced the two companies to develop their own policies and procedures to maximize their output. After separation, Acme retained the original management as well as promoted the general manager to become the firm’s president. The firm has a well-defined organisation structures and decisions regarding the company’s progress are taken by the top management, which does not consult the manufacturing departments. The figure below indicates the organisational structure of Acme Electronics. President Vice President Vice President Controller Vice President Marketing Operations Personnel Plant Manager Production Industrial Mechanical Electrical Drafting Purchasing Shipping & Engineering Engineering Engineering Quality Control (Daft, 2009) From the figure one can conclude that the management of Acme has a well-defined authority and responsibilities. On the other hand, Omega hired a new president as well as upgraded the existing personnel within the firm. The firm lacks an organisational structure, as they believe that organisational chart is an artificial barrier to effective communication channels within the business. Therefore, they have adopted a participative style of leadership and lacks a clear job responsibilities and authorities (Rogers, 2000). B. The Analysis Organic Versus Mechanistic Structure Repenning (2002) indicates that firms needs to opt for various kinds of structures in order to effectively control their activities. This will allow the firms to react and adapt to uncertainties and changes in the environment. Environmental changes can be analyzed through PESTEL analysis, where factors established through the PESTEL analysis can either destabilize or stabilize the environments in which the firms operates. For those companies facing dynamics as well as uncertainties in their environments, there is need to adapt and maintain an organic organisational structure (Daft, 1999). On the other hand, organisations operating in stable environments can adopt mechanistic organisational structure. The main reason for this is the fact that organic structure is able to process and distribute knowledge and information faster within the firm. This results to increased abilities to react or respond to changes taking place in the environment. However, the mechanistic structures can act as an efficient and effective organisational structure for organisations operating in certain and stable organisations. The following table indicates some notable differences between organic and mechanistic structure of leadership. Mechanistic Organic There is individual specialization .the employees specializes in one individual task and works separately Joint specialization, where employees coordinate tasks and works together Simple integration mechanisms: Hierarchy of the authority is well-defined Complex integrating mechanisms :teams and task forces are the main integrating mechanisms Centralization: Decision making is kept high as possible, thus making communication to be vertical Decentralization: Authority control tasks are delegated. Most communications are lateral Standardization: Standard operating procedures and wide use of the made rules Mutual adjustment: Face to face contacts for coordination’s, where work processes tend to be very unpredictable. Much written communications Much verbal communications Information status in organisation based on the size of empires Informal status based on the perceived brilliance Organisation is the network positions that correspond to tasks. Typically, every person corresponds to one task. Organisation is the network of teams or persons. People work in various capabilities together and over a period. (Ash, 2002) Organic and Mechanistic Structures in Omega and Acme Electronics Respectively The Paradoxical Twins illustrates two organisations Omega and Acme electronics, which are competing for a similar contract in the manufacture of memory units to be used in photocopiers. Omega electronics, which had an organics structure in its management, wins the race because they are managed to produce memory units of higher quality. On the other hand Acme Electronics, which adopted a mechanised structure in its management, seems to be less reliable and competent, thus delivering low quality products to the clients. Omega even noticed design error in the initial blue print, thus improving the quality of the output. Finally, both companies are given half of the order, and encouraged to find ways in which they can reduce on cost. As a result of this, Acme discovers ways of reducing cost by at least 20%, hence awarded the whole contract (Yanouzas, 1999). From the case above, one can see that the mechanistic structure of the firm foster cost reduction and technical efficiency in its manufacturing environment. It is clear that the mechanistic structure of management helped Acme Electronics to easily win the tender, due to reduced period of decision making as well as the ability to reduce the manufacturing costs. Acme and Omega Organizational technology It is important to note that, these two organisations were effective when their different types of technology well matched their organisational structures. Repenning (2002) notes that, for small batch productions, organisation structures are best since production of the custom items need healthy deal of informal adaptation and communications. Organisations using mass technology are more effective when they employ mechanistic structure. The reason is that repetitive and complex processes can be exerted by regulations and principles. When continuous process technologies are adopted in an organic structure, it becomes more effective, thus becoming more productive. To measure the effectiveness of organisation technology, there are three important aspects to be considered. These include centralization, formalization and complexity that may be combined to two broad as well as descriptive categories of the organic and mechanistic approaches. Mechanistic organisations may be seen to use machines, whereas organisational structure depends on expertise relevant rather than formal job positions (Jones, 2009). The need for Merger between Acme and Omega Electronics In the recent times, the business environment has continuously become hard to operate in especially for the small emerging businesses. As a result of this, new businesses hardly survive the fifth year after establishment, due to low sales volume brought about by the dominant companies in the market (Straub, 2007). To minimize these problems many companies have started to merge to be able to survive due to the economies of scale enjoyed there after the merger. Some of the major notable mergers include that of the United Airlines with Continental Airlines. The merger was worth US $3 billion. United Airlines had larger market shares in Asia while Continental Airlines had a big market share in Europe and in Latin America (Shanas, 2009). After the merger, the two companies continued to trade under brand name United Airlines, thus higher profitability. For, Acme and Omega Electronics, there is need to merge, in order to face the high competition in the market. After the merger, the two firms will benefit in the following notable areas. Economies of scale Mergers allow companies to enjoy technical economies of scale. After the merger, the new firm always has reduced average costs compared to the high fixed costs experienced by the individual company. Further, the companies are able to benefit from larger quantity discounts offered by the suppliers allowing them to cut on the overheads. Other economical benefits include reduced organizational costs and better interest rates offered by financial institution to the new organization (Daft, 1999). Increased Investments on research and development When resources are pulled together, more funds can be set aside for research and development. For example, Paliwoda (2007) argues that through merger, most organizations are able to invest higher amounts of their resources to research and development, thus improving on their productivity as well as customer service management. Improved efficiency After the merger, firms are able to offer excellent services to its customers. Only staffs that are well experienced are left, thus making them offer fast and efficient services to its customers. Secondly, the new company is able to dispose assets whose book value is low, thus cutting down on the cost of maintenance brought about by the old assets (Jones, 2009). Possible Disadvantages of Merger between Acme and Omega Electronics Stakeholders and consumers draw back In most cases mergers within the two competing companies contributes to oligopoly markets situations. These have resulted to raised pricing powers due to reduction in competition. Ultimately the consumers suffers financially .Customers may also suffer due to reduced innovation while the stake holders suffers due to declined investment value and equity pricing. Other disadvantages of mergers include diseconomies of scale, especially if the business becomes larger leading to higher unit costs. There is also the chances of cultural clash between the firms concerned, thus reducing effectiveness of integrations. For instances, in case of merger between Acme and Omega Electronics, the chances of cultural clash due to the varied methods of leaderships cannot be underestimated. Recommendations As indicated above, for Acme and Omega to survive, both in the short and long run, there is an urgent need for the two firms to merge. It is notable that each firm has something they can share with the other firm. For instance, merging Omega will benefit with necessary skills in cross-functional coordination, while Acme will be able to control the operational costs. Further, the firms will be able to reduce on their operational costs, invest more on research and development, hence raised productivity and efficient services to the customers. The other recommendation is for the two firms to simultaneously adopt organic and mechanistic approach of organisational structure. As the velocity of changes in the industry increases, Acme should coordinate between the firm functions better as well as raise integration through establishment of cross-functional teams. This will speed up product manufacturing and development, thus growth of the firm. On the other hand, Omega Electronics need to realize the fact that too much integration reduces the pace of decisions making and increases operational costs. Conclusion Conclusively there’s need for organisations to simultaneously adopt organic and mechanistic structure in their leaderships. This way they are able to improve on the communication channels, reduce o the operational costs, which translates to improved customer services. For Acme and Omega Electronics, the firms should consider merging as a matter of priority. Consequently, their bargaining power will increase, as competition between the two firms will be reduced translating to more profitability both in the short and in the long run. References Ash, G. (2002). Cultural Contexts and Scientific Change in Psychology. American Psychologist, 47(2), 198–207. Cartwright, R. (2006).Thirty Years of Mergers and Acquisitions Research: Recent Advances and Future Opportunities. British Journal of Management 44(6), 220–239. Daft, R. (1999). Leadership: theory and practice: Texas: Dryden Press. Daft, R. (2009). Organization Theory and Design. Texas: Cengage Learning. Hitt, M. (2010). Strategic Management: Competitiveness & Globalization, Concepts. CA: Cengage Learning Jones, G. (2009). Organizational Theory, Design, and Change. New York: Prentice Hall. Paliwoda, S. (2007). Back to first principles. International Marketing: Modern and Classic. Paris Pearson Prentice Hall. Repenning, N. (2002). A Simulation-Based Approach to Understanding the Dynamics of Innovation Implementation. Organization Science, 13(2), 109-127. Robey, D. (2006). Designing organizations. New Delhi: Indiana University. Rogers, C. (2000). Barriers and gateways to communication. Boston: Harvard Business Review. Shanas, E. (2009). The American Journal of Sociology Through Fifty Years. American Journal of Sociology (Chicago: University of Chicago Press) 50 (6), 522–533. Straub, T. (2007). Reasons for frequent failure in Mergers and Acquisitions: A comprehensive analysis. Wiesbaden: Deutscher Universitätsverlag. Yanouzas, J. (1999). The Dynamics of organization theory: gaining a macro perspective. Los Vegas: West Pub. Co. Read More