Factors Contributing to Organisational Success during Financial Crisis Company Kuwait - Case Study Example

Factors Contributing to Organisational Success during Financial Crisis – The Case of Global Investment Company Kuwait” Introduction: In 2007 – 2008,the property mortgage sector of United States collapsed when demand for property units fell due to inflation that resulted from an unprecedented increase in international oil and commodity prices. The financial institutions such as retail commercial banks, insurance companies, pension funds, investment bankers and private groups in United States have already made huge investments in property sector in anticipation for higher prices. However, the skyrocketing oil (that peaked $147) and food prices in global markets increased the import costs and aggravated trade deficits thereby putting downward pressure on US currency. The household budget of consumers in world’s largest economy got disturbed, and they in turn tighten their belts and reduced / postponed their purchase decisions for products with highly elastic demand such as luxuries. It must be highlighted that prices of housing units went down since the property mortgage payments take a large portion of consumer’s income that was now reluctant to acquire any property in the short run. (Shah, 2009) and (Brondolo, 2009) In simple words, this steep fall in property demand followed by failure of buyers to pay back their mortgage installments to their respective financial institutions adversely impacted their financial position and strength. Indeed, these institutions observed severe credit crunch and shortfall situation because of lesser circulation of money and diminishing trend in inflows. As a result, various leading financial institutions such as Lehman Brothers collapsed followed by closure of many manufacturing related industries and services organisations. In short, this further aggravated the situation and led to immense unemployment. The decrease in aggregate demand of goods and services in USA in turn adversely affected both emerging or developed economies (these are heavily dependent for exports on USA and other developed world) as well as advance economies where total output and productivity reduced sharply due to economic contraction, turmoil and downturn. (Brondolo, 2009) The business macro-environment became toughest and most challenging as claimed by officials employed at many leading businesses such as GM, Nike, Starbucks, Toyota, Tesco, Wal-Mart etc. Indeed, many business enterprises and organisations found it extremely difficult to ensure their survival, growth and sustainability. Indeed, today consumers demand more value for exchange of their hard-earn money as well as prefer to purchase top quality products at lowest possible prices. The growth of low cost carriers in airline industry in past few years is an evidence of above mentioned statement. This paper is an attempt to throw light over how businesses can grapple with prevailing tough economic conditions and how they could ensure their survival, growth and success. Indeed, there are various techniques as adopted by profit-maximising organisations such as restructuring / reorganisation / reengineering, team-building, enterprising, Managerial Resources Provisioning, Complexity Management, managing diversity, leadership role, shared values and organisational culture, cost control measures, motivational tools and techniques, total quality management (such as benchmarking, continuous learning and improvement, experimentation, six sigma, quality circles etc.), product and process innovation etc. in order to attain internal strength and gain competitive advantage over rivals. It is worthwhile to mention that external factors such as global economic recession and meltdown are beyond the control of entities so they have realised the fact that they have to pay special attention to their internal environment such as suppliers / partners, employees, customers and competitors to restore their competitiveness and ensure growth and sustainability. (Fleck, 2009, p. 85) The case study that the researcher has chosen for this purpose is on “Global Investment House Kuwait”, which is a global investment advisor that offers financial products and services to its potential customers such as private investors, groups, governments and institutions etc. all across the world. The researcher will first discuss the research methodology adopted for this project followed by literature review, case study, data analysis and findings. The paper will end up on conclusions drawn upon from research and will demonstrate the scope of research question. 2. Research Methodology: In fact, the best way to commence research is collect pertinent information from already published secondary sources as they are easily accessible in shorter time period. Indeed, the research will be qualitative in nature and the researcher will use scholarly journals, articles, company’s press releases and financial reports, reports by leading financial institutions such as IMF, World Bank etc., authentic newspapers, credible web sources and analysts’ reviews etc. to gain relevant information that would be then analysed to draw upon conclusions. However, in order to eradicate any weaknesses in research and to improve its scope, some primary research (basically the face-to-face interviews with company’s executives) will also be conducted. 3. Research Questions and Hypotheses: 1) “Women employees and executives are more relationship-oriented compared to their male counterparts who are more result-oriented; therefore, Global Investment House that is run by a woman Chairperson and Managing Director Mrs. Maha Al-Ghunaim has developed a unique organisational culture that motivates employees and increases their normative commitment thereby reducing financial burden on top management.” 2) “Global Investment House (GIH) has also initiated a restructuring programme to restore its competitiveness and regain cost-efficiency in an extremely challenging business environment. This programme has greatly benefited GIH in strengthening its financial position and enhancing its performance. 3) “Global Investment House has now greater focus on relationship building especially with partners, employees, shareholders, customers and other stakeholders to retain their loyalty and commitment with the organisation. In turn, this will lead to higher productivity and efficiency while also result in long-run consumer perceived value.” 4) Greater attention towards formulating and implementing a strong Risk Management system to avert mammoth losses (that were incurred in 2009) in upcoming future. 4. Literature Review: In simple words, organisation success refers to accomplishment of goals and objectives that are defined by strategic planners. Indeed, when a business enterprise achieves it financial and sales targets through effective implementation of its formulated strategies and policies, it could be called as successful. In contrast, organisational failure, as pinpointed by Mellahi & Wilkinson (2004) and summarised by Fleck (2009, p. 79), refers to “organisational death, organizational mortality, organizational death, organizational exit, bankruptcy, decline, retrenchment and downsizing”. In simple words, when a business enterprise starts losing money and observes the decline in sales, monetary goals, failure of organisational policies and their viability, it contracts its operations and dismisses redundant employees. This further reduces employees’ morale as well as their normative commitment with their company. Quite unequivocally, they lose interest to use their energy, education and skills to assist their company in coming out of crises. (Fleck, 2009, p. 79) However, it must not be forgotten that failure and success is not only a result of external factors such as recession that are beyond control of top management and decision-makers rather they can also be internal such as poor management, lack of proper communication, coordination and cooperation among employees and employees, frequent employee – employer conflicts and disputes, unrealistic expectations from workers and unrealistic goals setting, weaknesses in strategy formulation and implementation, minimal use of technology and records management and finally lack of real entrepreneurial spirit, vision and critical thinking. Fleck (2009, p. 79) quoted Whetten (1980) that there are two types of decline including ‘decline-as-stagnation’ that refers to business stagnation and fall in market share against rivals and ‘decline-as-cutback’ that refers to negative growth and contraction due to uncontrollable external factors. It must be pointed out that an enterprise also observes organisational failure due to an external factor such as recession even if it runs on sound management and administrative principles and adapt to market changes. For example, multinational and supranational organisations adapt to new workplace changes and usually maintain an excellent management and information-sharing system to sustain their position and gain a competitive edge over their competitors. However, they are also among the affectees that observed negative business growth during financial crisis. In this scenario, the top management redefines organisational goals, its mission, vision and values. It is worthwhile to mention that organisational policy makers mainly focus on restructuring and reengineering so that they could bring in-line their demand or products with available resources. Since, they observe a ‘decline-as-cutback’ situation, they pay greater attention to minimise their existing internal weaknesses such as inventory management problems, record keeping, information sharing, lesser experimentation, innovation and upgrading so that they could enhance their productivity that in turn increase efficiency, effectiveness and performance. Indeed, the changes come from within, therefore special attention is paid to improve employee – employer relationships and to instill a real we-feeling. In simple words, managers opt to ensure socio-emotional and instrumental cohesiveness that in turn increases workers’ normative commitment and morale while simultaneously reduces turn over rates (employee retention). (Carrigan, 2009, pp. 1-3) and (Lansbury, 2009) Next, there has been a greater focus on adaptability and flexibility to macro environmental changes. The managers at organisations opt to ‘promote teamwork’ and ensure a shared value based organisational culture that motivates employees to collaborate and work harder during tough economic conditions (Cacioppe, 1999) and (Carrigan, 2009, pp. 1-3). Another factor that contributes to organisational success during financial crisis is Positive Thinking that refers to the fact that an entity will survive and grow even in turbulent times if effective measures are taken and most feasible strategies are implemented throughout Restructuring and Change Management process. Indeed, the strategic planners are first required to correctly / accurately identify their weak areas and then opt to develop alternatives and solutions. Indeed, this is the point where they have to “redefine the mission, vision, and leadership” (Carrigan, 2009, p.5). The outcome of above mentioned measures is that they reduce overall costs of business thereby reducing financial burden on top management. (Lansbury, 2009) 5. Case Study Global Investment House Kuwait: Global Investment House, a Kuwait based business venture, was formed in 1998 and has been involved in offering financial products and services including Asset and Wealth Management. It is worthwhile to mention that company provides financial consultation and assistance to business corporations, local, state and federal governments, other financial institutions and private investors regarding profitable and highly lucrative ventures for investments. The company has already been listed on the Kuwait, Dubai, Bahrain and London Stock Exchanges. Indeed, the company has expanded its operations to emerging economies and has successfully established its local presence in Kuwait, Saudi Arabia, UAE, Bahrain, Oman, Qatar, Jordan, Egypt, Tunisia, Sudan, Yemen, Turkey, Pakistan, Hong Kong, China and India. (Arabian Business, 2010) and (Annual Report, 2009) The company has a mission to become world’s leading financial services and consultation providers having operations and local presence in all major emerging and advance or developed economies to reap long run financial benefits. The company focuses on offering high quality and consumer-preferred financial products and services that would entice customers and in turn create business opportunities for the group thereby maximising shareholders’ wealth. It is worthwhile to mention that Global Investment House’s have received consumer acceptance, worldwide popularity, authenticity and credibility as “recognised by several regional and international renowned institutions on corporate, product and management levels.” (Web: Globalinv.net) and (Annual Report, 2009) 6. Data Analysis and Findings: The dissertation will include an in-depth research on Global Investment House’s case, based on which the author will determine the scope of research questions and confirmation of hypotheses. This section will critically analyse the research findings from case in the light of relevant literature and theoretical concepts. 7. Conclusions: This section will summarise the findings and will provide any possible recommendations that could be followed for greater financial well-being. The paper will determine whether concepts such as restructuring / reorganisation / reengineering, team-building, enterprising, Managerial Resources Provisioning, Complexity Management, managing diversity, leadership role, shared values and organisational culture, cost control measures, motivational tools and techniques, total quality management (such as benchmarking, continuous learning and improvement, experimentation, six sigma, quality circles etc.), product and process innovation are implemented by Global Investment House and how they have benefited the institution in becoming successful during financial crisis. Sources: No author (2010) “Global Investment House – Kuwait” Arabian Business Available at http://www.arabianbusiness.com/financial-markets/companies/60/profile Ulf Laessing (2010) “Kuwaits Global Investment defaults as crisis bites” Reuters.com Available at http://www.reuters.com/article/idUSL812387920090108 “UPDATE 2-Kuwaits Global Investment House Q1 loss narrows” Reuters.com Available at http://www.reuters.com/article/idUSLDE6360MD20100517 Global News (2010) “Global acts as the Regional Lead Advisor for one of the largest transactions in the world worth USD 10.7 billion.” Issue No. 31 Available at http://www.globalinv.net/pdfs/newsletter/Newsletter_31_E_Apr2010.pdf Company report (2009) “Annual Report 2009” Available at http://www.globalinv.net/pdfs/AnnualReport/GlobalAnnualReport2009E.pdf Global Investment Report (2009) “Global and the International Financial Crisis 2008-2009” Available at http://www.globalinv.net/pdfs/newsletter/Global&InternationlFinalCrisisBrochureEnglish.pdf Shah, Anup (2009) “Global Financial Crisis” Global Issues Available at http://www.globalissues.org/article/768/global-financial-crisis Denise L. 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