Management and Organizations in Global Environment Motor Industry

Question: Discuss about the Report for Management and Organizations in Global Environment of Motor Industry. Answer: Summary The motor vehicle industry has evolved incredibly since the past two or three decades. The world has witnessed iconic changes in the management and organization in this industry which has made this sector flourish and stand where it stands today. There are a few legendary personalities who are responsible for the growth and success of the motor vehicle industry. They have paved the way for excellent management and organizational practices, which professionals in this industry still follow. In this essay, the contribution of leaders like Henry Ford and Alfred P Sloan has been discussed. The world car concept and merges like Chrysler Mercedes-Benz and Nissan Renault have also been discussed in details. This will help in the deeper understanding as to how the motor vehicle has evolved in the age of globalization and what challenges lie ahead. With more than seventy-five million motor vehicles being sold in a year, the motor vehicle industry is undoubtedly one of the key industries around the globe (Cartwright 2012). In the years gone by, the labor system was rigid, which lead to the realization that there were various issues in the management and organization in the industry. However, with the wide spread of globalization, the people involved in the management and organization were able to employ flexible labor force and assembly lines that made mass production of customized products possible (Caputo 2012). Enhancement in the manufacturing flexibility also imposes new and unseen challenges on the management and organization in the industry. These challenges include not only keeping up with the design and style of the manufacturing systems, but also coordination of the logistics and the global supply chain. Effective scheduling and novel planning are also required to minimize the differences between the need to enhance the capital-incentive resources and the demand for product varieties. The increase in worldwide competition over the last ten years has also urged the motor vehicle industry to improve the efficiency and quality of its management and organization. Utilizing relevant management tools as per needs of the organization has become a crucial element to maintaining competitiveness in the contemporary business environment. Because of its comprehensive and global approach, management is characterized into various segments. If the management methodologies and organizational strategies are utilized in an appropriate manner, it ensures participation of the members that is aimed at improving the efficiency, functionality, and efficacy of the company (Cheng and Seeger 2012). The companies can improve their performances rapidly if they choose and apply the best management tools. This will also lead to a gain in market shares and increased customer satisfaction. The entire motor vehicle industry has embraced standard management and organization methods, but the challenge still lies in determining which practices will ensure stability and prosperity in the overall performance of the firm (Metzger and Berger 2012). Contemporarily, the whole of the motor vehicle industry is moving along the currents of globalization. There are certain distinctive features, which mark the changes in the automobile industry after the advent of globalization. Primarily, its structure is highly concentrated: a small group of powerful companies exerting pressure over the less powerful ones. Companies belonging to countries like Germany, USA and Japan dominate motor vehicle production globally. The automobile industry structured regionally compared to the other industries. There are many issues, which challenge the operation of the motor vehicle industry like striking the perfect balance between marketing and the short-term sales, understanding the future car culture, urbanization, competition, coordination with the other operating industries, etc. The automobile industry has been taking all these challenges in its stride. Effective management means converting challenges into opportunities (Weber and Yedidia Tarba 2012). There is a lot to learn from the organization and management of the automobile industry, which can prove to be a valuable lesson for those who want to be a part of this ever-growing industry (Becker et al. 2016). Henry Ford: Bringing the work to the worker: Henry Ford is a revolutionary personality which is responsible for creating the Ford Model T car in the year 1908 (Gill 2012). He also invented the assembly mode of production, which brought a metamorphic change in the motor vehicle industry and changed the way the industry operates forever. Henry Ford went on to sell millions of cars and became a famous personality who gained recognition all around the world (Nissan-global 2016). Fords philosophy reflected his respect towards the employees of the organization. According to him, the employee works backstage for the success of the company. The company is nothing without him, so it must take care of all the needs and requirements of the employee. The company must listen to what the employee has to say or contribute and must incorporate his suggestions in the management and organizational activities of the company. Henry Ford set a brilliant example for valuing the human work force (Nissan-global 2016). He believed that offering the emp loyees a rewarding salary and reasonable working hours would motivate them to work much harder towards the success of the company. He was a staunch believer of Bringing the work to the worker Selling the best products at the lowest cost would ensure prosperity for the company and hence the worker will get more appealing work opportunities. Henry Ford had a high emotional quotient. He was sensitive towards the needs of his employees (Aoyama 2012). He used to take actions to respond to their needs, and they were enough to express that he cared. He encouraged the work-life balance of the employees and always appreciated and acknowledged their work. If required, he would also increase their wage rates, time to time. According to him, success lies in the ability of the management to get the employee's point of view and try to look at things from that angle as well as their own. The work force of the organization must never be ignored for they are the backbone of the company. Ford believed that the responsibility of the company's management is not only limited to coming up with ideas concerning the working of the company (Aoyama 2012). They must commit to their ideas and make sure that they are incorporated efficiently into the activities of the business. Any organization must be acquainted with the market within which it is operating. This will help the management in establishing the company as a leader in the industry. A company will never flourish unless it decides upon the category or the target audience it wishes to serve. After Henry Ford was sure about the product he was to manufacture, he spent a long time deciding customer base. He knew it would be a great idea to save time and money by zeroing in on a certain target audience and solving their problem that they did not even know if it exists. The lesson to be taken is clear and concise: Perform research, and identify if there is any interest of the audience in your product and devise it accordingly. Promotion is also a vital part, which the management should not ignore. If the customers do not come to know if your product exists, they will never buy your product. Reputation is one virtue that cannot be compromised at the cost of anything. Reputation and recognition do not come overnight. The company must be consistent in its quality of services so that the experience remains the same with each customer. This will lead to promotion through word of mouth. The customers will talk about how pleasantly the company deals with its clients, and it will carve a fine image of the company on the minds of its customers (Pavlnek 2012). Henry Ford taught this industry the importance of maintaining reputation. If the customers do not think highly of the company, no management efforts of the organization will be of any use eventually. There is no better example of a company being respected by the people across the globe than Ford Motor Company. Henry Ford set a practical example for the future members of the industry to follow (Ene and ztrk 2012). Fordism is a concept named after Henry Ford. Fordism advocates a standard and efficient form of mass production. Henry Ford had realized that he could achieve the maximum output by ensuring a premium level of efficiency among the workforce. He ensured this through offering the employees of the company better wages and lessened work pressure so that they could strike a perfect work-life balance. Henry Ford has taught the management how to move towards the goals of the company (Well and Nieuwenhuis 2012). The management should always keep an eye over its competitors so that they know what goals they have to set and how do they have to achieve them. Ford always encouraged his people to learn and keep on with this process of learning until the end of time. Learning will help in brainstorming new ideas, and help the management in realizing their company objectives (Weiss 2014). Ford taught the people of the motor vehicle industry and the people all around the world, never to be afraid of being the different one. It is always good to experiment, for a person will never learn if he does not venture into new things. Ford encouraged people not to focus on innovation just for the sake of it. He asked people to indulge in introspection and ask themselves questions like why they want to invent the product, how innovative should they be, etc. Setting goals is always important because it keeps a person motivated and focused to achieve his or her dreams (Dyrud 2016). Irrespective of what the goal was, the employees of Henry Ford were united by the fact that they gave up their unrewarding jobs to maintain a better work-life balance where there was scope for high earnings with more free time for social life (Mayyas et al. 2012). Henry Fords contribution to the motor vehicle industry is undeniable. He has made an impact on the industry both practically and theoretically, where he has taught the people hundreds of management and organization lessons. His farsightedness and determination to succeed still inspire all the entrepreneurs and business owners even today. Alfred P Sloan; Cost Centre philosophy: In order to comprehend how the famous American business executive in the motor vehicle industry, Alfred P Sloan influenced the entire corporate system, through the invention of a technique called cost center, it is important to understand clearly, what this concept actually means and what its scope is. A cost center is that department of an organization, which does not, adds to the profitability, but costs the company finance and capital to operate (Olugu and Wong 2012). On one hand, profit center directly contributes to the profits earned by the company; cost center does the same, but in an indirect manner. During the phase of downsizing, departments like cost centers are usually are first ones to be on the target list. However, the nature and importance of this department should never be underestimated. A cost center can also be explained as a division in a business organization, which is entirely financed by the profit margin. This adds to the cost of the company and yet contribut es to its profitability either through direct or indirect means (Killing 2012). There are numerous examples of cost centers that relate to human resources, research and development (RD) and marketing (Shaheen and Cohen 2013). Alfred P Sloan used this particular concept and surpassed Henry Ford totally. Sloan used the cost center technique along with his brilliant leader ship style and made GM the world's biggest Industrial Corporation (Khler 2012). Sloan used cost center to change the management system entirely in General Motors and for good. As a result, General Motors Corporation was transformed into an organization, which had multiple divisions, with each of them having a set of departments. These departments were responsible for various business activities of General Motors (Olugu and Wong 2012). These departments were evaluated for their performance level from an efficiency and sales point of view. These measures act as an indication for tracking the financial performance of the company. There were various measuring devices and indicators such as ROI. However, the capital measure came to be the most effective way of measuring the performance level of the cost center. Alfred Sloans management system formed the base of all the contemporary corporations with the multidivisional system since the year 1920 (Lindsay and Berridge 2012). The influence and relevance of cost center cannot be underestimated even after so many years. The companies all around the world use Alfred Sloan's concept of cost center to head towards success. It broke down and divided the responsibilities of the corporate within each of its departments. This helped each division of the General Motors to concentrate on its daily operations. The general managers of the respective departments were responsible for monitoring the profit and loss the division was incurring (Simes et al. 2016). Sloan realized that to convert the corporate management into a real-time profession; he must put the interest of the organization above all interests. Each department strived for achieving economies of scale and made its unique contribution towards the success of the enterprise (Webel and Canis 2012). These departments worked within a given budget handed out to them. This often resulted in the reduction of the inventory and lowered costs. The model of the cost center is subjected to some drastic changes in the contemporary times. If we use the model in its organic form to handle the current business practices, the outcomes can be very different. It was the failure of Henry Ford in managing his systems, which inspired Alfred Sloan to come up with a business structure of his own. That system would be free from the caprices of one man. This is the reason behind General Motors decentralized nature, with its divisions being handled autonomously handled (Hoffmann 2013). Its system of command is rigid and strict, with every business operation being planned very carefully. The system is also vertically integrated because General Motors nearly made all the parts that went into the manufacturing of cars (Beynon 2016). The rigid use of the cost center method resulted in the management of General Motors giving up this method totally in later years of operation. The fashion of various departments in an organization competing against each other has died (Aggoud and Bourgeois 2012). With each of the divisions of General Motors like marketing and engineering operating independently, gave rise to unnecessary overhead costs. As the world started welcoming free trade, Alfred Sloans concept of cost center was not competitive (Middlebrook 2016). When Peter Drucker invented his management theory in the 1940s, he chose General Motors as his subject of the case study. In his study titled, "The concept of Corporation", he appreciated Alfred Sloan's concept of cost center and as well as decentralized departments in an organization (Hoffmann 2013). Numerous national and multinational companies in the motor vehicle industries have embraced this concept and are witnessing effectiveness and efficiency in their busine ss operations. Sloan gifted all the giant corporations of the world a tool that is widely used, even now. The concept of cost center enjoys popularity even after decades since it was devised. Numerous multidivisional companies are using this concept to leverage their business operations. General Motors reached new heights under the leadership of Alfred P Sloan. His concept of cost center had helped the company calculate its financial statistics and equity (Doz and Prahalad 2013). Benefits of Alfred P Sloans cost center theory: The following are the benefits of Alfred P Sloans cost center: It improves the performance measurement; Helps the managers of the company in decision making and operating their departments on strict vigilance; The quality of the decisions and their outcome is also improved; Monitoring of investment returns is improved; Management information on profitability is improved; Monitoring of expenditure and cost was also improved. Alfred P Sloan revolutionized the face of the corporate sector in America. His brilliant approach towards leadership, managing customers and dealing with employees is groundbreaking (Olugu and Wong 2012). Alfred P Sloan's principles and guidelines on the managing of companies has stood the test of time and acts as a building block for efficient managerial leadership in business organizations no matter big or small. He demonstrated to the world how his principles should be put into use in todays times (Kalaignanam et al. 2013). The World Car Concept: World car is used to explain an automobile designed aimed to achieve worldwide sales using the same components and platform which comes in varied styles and designs. It is important to mention the history or background of world car. In the primitive days of the automobile industry, automobiles were mainly manufactured for local market wherein the manufacturer was based in (Zenkevich and Koroleva 2014). The prominent instance in this regard could be Ford T Model which was created to cope with the rural means and rugged terrain that most automobile customers were subjected to in the United States. The factual reality is this model arguably one of the first world cars with immense popularity across the globe. To be precise, Ford and its compatriot General Motors were mainly focused on being expansionist on a global platform (Gill 2012). In the year 1933, Ford introduced their first product which was designed to cater to the European needs and wants. The car failed to generate interest in the US market. However, the Ford Model Y developed by Ford Britain and also manufactured by the companys unit in Germany as Ford Koln. General Motors engaged in a rivalry with Ford by introducing Opel which was developed by General Motors in the US. However, the model was exclusively built in Europe and entirely sold in the European market. This initiated the advent of both the giants subsidiaries which aimed to create vehicles which match European culture and would be unlike to the automobiles designed by their parent organizations for the US market. Later, vehicles in the US were advancing wi th being larger and faster thereby benefiting from the suitable infrastructure of roads, reasonably priced fuel and lack of horsepower tax and displacement tax and duties that various European nations had (Hope 2016). The Volkswagen Beetle is another instance which has assumed worldwide success due to its economy and affordability. This could be construed to be the first mainstream vehicle post Model T which attracted immense attention across the globe (Hoffmann 2013). On the other hand, Nissan Sunny and Toyota Corolla followed what Beetles did became the first passenger cars in Japan. The success of these two models was dependent on economy and durability. On the other hand, the 1970s saw energy crisis sweeping across United States which propelled the US car manufacturers pursuing manufacturing of large vehicles with an increase of quality concerns surfacing in the midst. This created opportunities for European and Japanese car makers to make inroads in the US market. Later in the 1980s, Beetle evolved into C-segment which featured models such as Ford Escort and Volkswagen Golf (van Tuijl and Carvalho 2014). The Opel Corsa and Fiat also deserve special mention in this regard. These prove to be leading segment amongst the European car industry till date. On the other hand, Japanese vehicles were mostly focused on either luxury or performance. Nissan Laurel and Toyota Soarer are the two exorbitant brands which feature in the list. Based on the success of import of vehicles, Volkswagen initiated operations in Pennsylvania by establishing their first plant in 1978 (George 2015). Car makers like Nissan, Honda, and Toyota would get into a joint venture by establishing plants across the US. Slowly the Japanese counterparts followed the suit with automobile makers like, Mitsubishi Motors and Suzuki who would partner with American affiliates. Chrysler, General Motors, and Ford joined hand to form a joint venture which made a mark in the North American market (Hitosugi and Matsui 2015). The Volkswagen Rabbit is one such model which has its roots in North America was one of the primary foreign vehicles to be assembled domestically for the entire US market. The company made certain changes by installing trim materials in an attempt that turned out to be futile to market the product in American buyers who specifically were interested to buy the product because they longed for a European experience in driving. Honda Accord was the first model hailing from an overseas brand that became top-selling car in the US (Timmer et al. 2015). Henceforth, Japanese carmakers brought modifications in their products by designing midsize sedans that would impel the sale of lucrative sedan sector based in the United States having their sales in Japan. Toyota launched Camry model which helped them to supersede the popularity of both Ford Accord and Taurus in the category of best-selling vehicle in the United States. Likewise, Honda launched Accord model aimed to capture the North American market base which was not sold in the European or Japanese market. Towards the end of 1980, the concept of SUV or Sports Utility Vehicle became popular in North America (Hoffmann 2013). The reason for this success was low gas prices, high profitable options to automakers and likable design (George 2015). Over the years, world car has undergone significant changes in its manufacturing. The Ford Mondeo is an interesting proposition that was particularly designed to be successful in the European and US markets and was fittingly termed as a World Car which surpassed Ford Sierra and Tempo in Europe and North America markets respectively (Olugu and Wong 2012). Notwithstanding of being a global design, in the beginning, world cars needs to incorporate specific changes as per the law of the land, or for that matter diverse cultural differences and taste of the consumers. For instance, in Brazil ethanol vehicles are popular or in the United States where petrol is inexpensive and larger engines are popular (Dumas and Sanchez-Burks 2015). The merger of Nissan-Renault: The Nissan-Renault merger was materialized in the year 1999 which took the world by storm. While mergers and acquisitions were prevalent in the automobile world, a strategic merger between two diverse entities proved to be path breaking in the entire business domain. The relationship involves joint development, cross-holding, joint production, and collaboration of best practices and components. The merger enabled Nissan and Renault in the reduction of cost and time in production, increase competitiveness and augment profitability. Before delving in the wide array of aspects of the merger, it is imperative to mention a brief background of both the entities (Zenkevich and Koroleva 2014). A brief history of Nissan: Nissan was founded primarily as Kwaishinsha Motor Car Works in Japan in 1911. Later the company was rechristened as Nissan Motor Co. Ltd in the year 1934. The organization witnessed various intricacies while functioning as a unit. The firm made collaborations with various entities namely, Austin Motors and others to better its production and increase the base regarding sales and profitability. The firms performance perked up since 1972, with the total production scaling beyond ten million figures (www.nissan-global.com 2016). A brief history of Renault: Whereas, Renaults origin may be traced back to 1898 when the founder of the company formed the organization during the World War in France. Post the World War; Renault resumed production. During the late 1980s and early 1990s, the company increased its profitability with the introduction of the total quality concept in its ranks (Zenkevich and Koroleva 2014). The era of the 2000s witnessed the firm introducing modern concepts and mechanisms in its operations which were aimed to make its presence felt across the rest of the world, mainly outside Europe. The objective of Nissan-Renault alliance or merger: Alliance and mergers surfaced in the mid-1990s to the late of the decade. This was mainly done to explore openings in prospective markets. Also, the aim meant for reduction of costs and acquiring new technology. The Nissan-Renault came into existence when Nissan was in bad shape in financial terms. The automakers stake was near about 34 percent in 1974 but suffered a decline by 1999. In the year 1999, the company recorded huge loss approximately, 684 billion. In 1999, the CEOs of both the organizations came forward to sign an agreement which followed with the merging of both the entities (Olugu and Wong 2012). This resulted in Renault acquiring around thirty percent of Nissans shares worth 5.5 billion USD. The lackluster performance of Nissan prompted a change of CEO who initiated Nissan Revival scheme along with a host of reforms to rescue the organization from debt-ridden state and bring that back to profitability and growth. The top brass of the organization promulgated a plan with entailed over closing down of factories and nonperforming outlets, reduction of some vehicle platforms, investment in technology and setting up a proficient production system. However, the primary objectives are to return to net profitability, achieving minimum operating income to sales margin of nearly 4.5 percent and finally a reduction in consolidated debt to a minimum amount of 700 billion (Olugu and Wong 2012). The management foresaw that the company should be able to meet all the desired goals and cut down the purchasing cost by twenty percent which in turn would contribute to the overall organizational efficacy (Nissan-global 2016). Formation of Nissan-Renault merger: The merger was established with an aim to develop synergies while keeping the cultures of both the entities intact. The merger aimed to restore quality and value of both the organizations including profitability and transfer of technology. The capital structure of Nissan was formulated with Renault holding nearly 44 percent of stake in Nissan while Nissan is holding as much as 15 percent of Renault (Zenkevich and Koroleva 2014). The merger aimed to create Renault-Nissan Purchasing Organization which was to make joint purchases for both the entities. Nissan-Renault team hired professionals who assumed important positions in purchasing, emission business, global logistics and others (Weiss 2014). Effects of the Merger: The merger provided a plethora of benefits for both the organizations. The merger helped both the firm to eliminate wastes, improvement in the competitiveness of both the firms and efficiency in global operations. It is important to note that efficient global production was achieved by incorporating flexibility and optimizing utilization ratio. Improvement of plant competitiveness was achieved by benchmarking and efforts were made to improve logistics and equipment efficiency. The merger acted a buffer to protect against the economic crisis and accelerated the momentum of growth of both the company in some of the worlds fastest growing economies. The merger helped the brands to accentuate sales by almost 1 percent since 2014. Also, it captured nearly ten percent of the entire global market in the preceding year. In the quest to save cost and improve competitiveness Nissan and Renault focused on technologies and integrated these technologies in both the models. For example, Nissan provided various inputs for the development of Renaults first cross-over, Renault Koleos which was manufactured by Renault Samsung Motors in Korea. Nissan used Renaults Curitiba plant to find firm footing in Brazil and other parts of Latin America which is one of the largest automobile markets in the region (Weiss 2014). Both the brands partnered to reduce costs and derive benefits from various economies of scale. The model helped the merger to account for more than fifty percent of worldwide sales of the entities. The Nissan-Renault merger is deemed to be a success. The unique structure helped the partners to take advantage of synergies in keeping with separate branding and identities. Collaboration between Nissan and Renault focuses over capital intensive research projects mainly, zero-emission transportation models, sustainability and development of automobile manufacturing in parts of Russia and Brazil. The firms invested substantially in research, engineering, and production of state-of-the-art vehicles. The two entities executed joint development, production in emerging markets and Research and Development which propelled the firm to assume the position of market leader in the business domain. The merger helped Nissan and Renault to do better than historic rivals thereby elevating both the entities in an elite position. Challenges ahead: In spite of the technology sharing and cost advantages, Renault and Nissans market share took a severe hit in recent years and is yet to match the competence of Volkswagen Group and Toyota Motor Corporation which were centrally managed and closely managed. Volkswagen group is slowly consolidating its position to be the number one player in Europe. The merger is vulnerable to internal challenges also. Before the merger, Nissans organization was mostly close-minded and homogeneous. With the inclusion of Renault, various issues cropped up regarding the composition of the workforce. Both being separate entities, they ceased to have a common CEO. It is imperative for the alliance to resolve the stumbling blocks which in turn would help the entire operation to be a smooth affair. The aforementioned exhaustive discussion lays the foundation to key factors that are responsible for making automobile industry a sustainable domain. Merger and strategic alliance are undoubtedly complex because it entails over a host of complicated aspects. Nissan partnered with Renault to regain the lost footing in the automobile industry. In the last century or so, dynamic changes have occurred in the automotive industry of the world. The automobile industry in Europe and the United States assumed to be the market leaders in the domain. On the other hand, Japan lagged in growth in the initial years but slowly perked up growth in no time. The importance of the automotive industry is immense for the entire globe. There are approximately 180 manufacturers and vehicles which provide around 10 million employments with a significant proportion of skilled labor in the world (Olugu and Wong 2012). The above discussion coherently explains various trends which have helped the industry to flourish and prosper in best possible manner. Fords theory and cost center analysis paved the way for the development of robust automobile industry which became a force to reckon with. Further, the world car phenomena gripped the entire world and globalized the industry to a large extent. In fine, it may be concluded that the management should be abreast of the shortcomings and global facets so that it could sustain growth and development in the organization. The summary of the entire proposition is mentioned as follows. The motor vehicle industry has undergone a radical change since inception. Various management philosophies made its presence felt while defining the nuances of the automobile industry. Henry Ford is a significant personality who introduced the management philosophy of bringing the work to the workers. Resources or employees form an integral part of the organization. Henry Ford set a brilliant example for valuing the human work force which ultimately plays a key role in shaping the destiny of the organization. Other firms followed Ford's management philosophy which helped them to gain profitability. Ford was successful in initiating innovative management techniques in his firm which was later imitated by various companies across the world. However, Alfred P Sloan went a step higher and initiated cost center theory (Dumas and Sanchez-Burks 2015). The companies all around the world use Alfred Sloan's concept of cost center t o head towards success. It broke down and divided the responsibilities of the corporate within each of its departments. Various mergers and strategic alliance occurred in automobile industry over the years. One of the most remarkable strategic alliances was between Nissan and Renault which took the world by storm. The partnership enabled both the firms to gain a competitive advantage in the business domain and helped Nissan to gain the lost footing. It is important to note that the merger ranks higher than Chrysler and Mercedes-Benz. Meanwhile, with the advent of the concept of World Car, the automobile industry witnessed a paradigm shift in the entire domain (Zenkevich and Koroleva 2014). The World Car meant that firms could formulate various models and assemble them in separate geographies and eventually trade them in different markets (Zenkevich and Koroleva 2014). The factual reality is World Car perception is a proponent of merger and strategic partnership that followed in days to come. 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