Business Matrix and Organizational Continuity for WL Gore and Associates - Research Proposal Example

Risk Management and Organizational Continuity of the of the Background In the seminal research work, Banasiewicz (2009) defined risk as “possible loss or injury” while the scholar traced origin of the term back to 13th century. In such context, Botha and Von Solms (2004) pointed out that risk management is relatively new term that has enormous amount of importance from business leaders and management scholars. Botha and Von Solms (2004) suggested that when it comes to business context, two terms such as “risk” and “uncertainty” should be analyzed through separate measurement indices because these two aspects create different impact on organizational continuity or business continuity. However, Banasiewicz (2009) found the functionality of the differential cluster between risk and uncertainty in organizational continuity is no less than a complex enigma. Due to such complexity surrounding the topic, the researcher has decided to shed light on functionality of risk management in ensuring organizational continuity with respect to a real life organization. In such context, the study has selected WL gore & associates (UK) ltd as sample organization for putting more depth in the discussion. Before going to the main discussion, the study will briefly describe business matrix and organizational continuity for WL gore & associates (UK) ltd. WL gore & associates (UK) ltd- Business Overview W. L. Gore & Associates, Inc was founded by Wilbert L. (Bill) and Genevieve (Vieve) Gore in 1958 (Gore, 2013). In the last 55 years, the company has established its name as market leader in industrial and retail polymer manufacturing across UK and USA. The company caters demand of both retail and industrial customers through product portfolios like fluoropolymer, versatile polymer, polytetrafluoroethylene (PTFE) and large scale industrial polymer items (Gore, 2013). In order to mitigate business risks regarding fluctuating retail customer demand and short life cycle of particular trend, W. L. Gore & Associates focuses more on industrial customers and deploy significant amount of resource capabilities to develop industrial products. From retail selling perspective, polytetrafluoroethylene (PTFE) products of the company to develop surfboard surface, medical implants, signal transmission, robotics, laminates and waterproof costumes (Gore, 2013). In recent times, in order to decrease threat of substitute and avoid risk of getting obsolete, research and development division of the company has developed polytetrafluoroethylene (PTFE) as substitutes of traditional ortho silica and hydro fluro-silica based polymers. With the help of new invention, the polymer manufacturing giant has introduced durable but light polymer items that can be used for manufacturing costumes, protective measures and adventure sports equipments (Gore, 2013). As part of organization continuity (OC) and business continuity management (BCM), W. L. Gore & Associates recalibrated its value chain in periodic manner in order to decrease risk elements in the process. In the later part of the essay, the study will discuss risk management and organization continuity process in W. L. Gore & Associates in more detailed manner. Before going to the main discussion, the study will consider the difference between risk and uncertainty in order to develop functional background of further discussion. Risk and Uncertainty Banasiewicz (2009) and Lavastre, Gunasekaran & Spalanzani (2012) conducted research on risk management but they considered two different industries while highlighting the difference between risk and uncertainties. Lavastre, Gunasekaran & Spalanzani (2012) stressed on risk management procedures in supply chain companies while ignoring or keeping uncertainty variables constant. On the other hand, Banasiewicz (2009) considered dynamic relationship between both the models. For sake of comprehensiveness, the essay will use Banasiewicz’s (2009) work regarding risk and uncertainties. According to Banasiewicz (2009), risk refers to conditional probability or Bayesian probability for future loss outcome while uncertainty refers to general equilibrium state of ambiguity regarding a particular phenomenon. Therefore, risk and uncertainty are being considered as two different phenomenons. In simple words, risk or deterministic conditional probability can be applied for known event but uncertainty deals with non-specific insecurity or unknown event. Knight’s (1921, p. 37) research work on risk and uncertainty is being considered one of the most valued and early contribution on the topic. Knight (1921) drawn conclusion that “... Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated”. However, Knight (1921) never tried to discuss difference between risk and uncertainties on the basis of their characteristics and therefore Knight’s (1921) work lacks the simplicity. In such context, Banasiewicz (2009) pointed out that risk and uncertainty has irreversible relationship because risk always implies uncertainty but vice versa is not true. In business context, demarcation between risk and uncertainty can be defined in the following manner. Table 1: Risk versus Uncertainty Uncertainty Risk Definition Possibility of multiple outcomes & true" outcome is not known. An uncertain phase where outcome (such as loss, catastrophe or any other negative events) is known previously. Measurement Judgmental probability is being assigned to particular event. Bayesian probability is being used for measurement. (Source: Banasiewicz, 2009) In such context, organizational continuity is being determined whether the company can address business risks and uncertainties in proper manner or not. In such context, Banasiewicz (2009) used the term “Bowman Paradox” to state functionalities of positive risk-return relationship and negative risk-return relationship in companies. However, consideration of research works of Lindstrom, Samuelson & Hagerfors (2010) and Banasiewicz (2009) reveals the fact that business is more concerned about risks that can be measured or predicted in contrast to uncertainty that might not be predicted or calculated. For example, risk exposure can be measured by taking into account three components such as, 1- upside or downside type of risks, 2- likelihood or chance of risk occurrence and 3- severity or relative impact of the risk. On contrary, no certain measurement technique or predictive analytics tool is available to measure organizational exposure to external and internal uncertainties. This is the reason why organizations are more concerned about analyzing and managing risk in contrast to predicting uncertainties. Discussion Risks: WL Gore & associates (UK) ltd According to Franco, Song, Tarazi & Varma (2003), financial profitability and revenue of WL Gore & associates (UK) ltd has been stagnated for last couple of years due to three reasons, 1- lack of up gradation of production of production system, 2- absence of performance parameters to improvise new products and 3- rise of low cost competitors. In such context, exposure to risk for the company is “losing market share and poor revenue growth”. Parameter 1- this is downside risk because decrease of market share might decrease exposure of the company to additional revenue sources or negatively affect liquidity of the company. Parameter 2- likelihood of the risk is high because Franco, Song, Tarazi & Varma (2003) analyzed 5% annual reduction of market share WL Gore & associates (UK) ltd due to emergence of Chinese polytetrafluoroethylene (PTFE) and fluoropolymer manufacturers who are manufacturing the output in 20% low cost structure. Following model can be used to show process variance in WL Gore & associates which is causing additional cost and decreasing scope for product differentiation. Figure 1: Process Variance in W L Gore & Associates (Source: Franco, Song, Tarazi & Varma, 2003) It is evident from the above figure that greater than 2 standard deviation variance is root cause for high operational cost for the company. Using statistical concept of maximum likelihood estimation (MLE), it can be shown that probability of risk occurrence can touch maximum value of 0.4 or there is 40% chance that the existing operational method of the company would incur extra cost or saturation in terms of product differentiation (Franco, Song, Tarazi & Varma, 2003). Parameter 3- severity of the risk occurrence can be of great importance for WL Gore & associates (UK) ltd. In terms of manpower and resource capabilities, the company still uses selective approach hence losing market share or decreasing profitability would directly impact resource capabilities of WL Gore & associates. From resource based view (RBV) perspective, it can be said that occurrence of above mentioned risks can negatively affect competitive position of the polymer manufacturing giant. These threats are being considered as risks due to three specific reasons, 1- outcome of losing market share and poor revenue growth is known or one can gather such knowledge by reviewing previous events, 2- Bayesian probability can be used to estimate the chance of occurrence of the risk and 3- type of the risk can be estimated by using financial calculations or can check annual reports of WL Gore & associates to assess previous trends. Due to such factors, phenomenon of losing market share and poor revenue growth has been considered as risk for WL gore & associates (UK) ltd. Uncertainty: WL Gore & associates (UK) ltd It has been already mentioned that uncertainties cannot be calculate or predicted in actual sense due absence of knowledge regarding the outcome. In case of WL gore & associates (UK) ltd, uncertainties in business can be caused by the intervention of macro environmental elements like economic fluctuation, political pressure, legal proceedings, environmental hazards etc. Any one of these external parameters can create non-probabilistic uncertainties for WL gore & associates (UK) ltd. In case of WL gore & associates (UK) ltd, uncertainty can be attributed to new product launch for the company. In order to achieve product differentiation, the company decided to transform its value chain so that it can achieve better control over ePTFE membrane products. Value chain of the company can be diagnosed in the following manner. Figure 2: Value Chain of W L Gore & Associates (Source: Franco, Song, Tarazi & Varma, 2003) Launching ePTFE membrane products in the market can be considered as uncertainty instead of risk due to three reasons. Reason 1- the product was new in the market and no previous competitors had launched similar kind of products in the market. Therefore, it was not possible for the company to predict customer response or market attractiveness of the product. Reason 2- the company was needed to do adjustment of value chain functions because under new product launch, the company was needed to integrate retail distribution to manufacturing process. Before launch of new product, the company had never done such type of value chain integration or recalibration hence outcome was unknown to the company. Reason 3- WL gores & associates (UK) ltd authority had no idea about probability of success or financial return on investment regarding the product launch. Due to these three reasons, level of ambiguity regarding the ePTFE membrane products launch was pretty high. Therefore, ePTFE membrane products launch of the company has been regarded as uncertainty instead of risks. References Banasiewicz, A. D. (2009). Risk profiling of organizations: Estimating the impact of risk on earnings. Boston: Erudite Systems LLC. Botha, J., & Von Solms, R. (2004). A Cyclic Approach to Business Continuity Planning. Information Management & Computer Security, 12(4), 328-337. Franco, F. H., Song, Y. J., Tarazi, P., & Varma, G. (2003). The Rise and Rise of Gore-Tex. Retrieved from http://faculty.insead.edu/adner/projects/JanFeb04FinalProject/GoreTex.pdf. Gore. (2013). About Gore: Gore at a Glance. Retrieved from http://www.gore.com/en_gb/aboutus/fastfacts/index.html. Knight, F. H. (1921). Risk, Uncertainty and Profit. New York: Sentry Press. Lavastre, O., Gunasekaran, A., & Spalanzani, A. (2012), Supply chain risk management in French companies. Decision Support Systems, 52, 828–838. Lindstrom, J., Samuelson, S., & Hagerfors, A. (2010). Business continuity planning Methodology. Disaster Prevention and Management, 19(2), pp. 243-255. Read More