Principal Functions of Management - Essay Example

Lincoln Electric Question From the case of Lincoln Electric, the four methods used to gain competitive advantage over their rivals include the following: strengthening production, to reduce the costs of production – then passing the savings to the customer – thus a reduction in prices; capitalizing on adequate incentives and competition to develop the potential of the employees, thus increased innovation and production of rewarding products; the development and the nurture of a strong, knowledgeable, experienced sales team; the integrated manufacturing and sales strategy, which builds on the company’s existing relationships with customers and distributors. Why they used these strategies, is because; from reducing the costs of production – product prices to the customers would reduce, thus, they would acquire a bigger share of the market. From developing the potential of employees, their production quality would increase, thus realize an increased customer confidence in their produce. The knowledgeable sales team could outwit that of the competitors, thus an increased sales level. From capitalizing on existing relationships with customers and distributors, increased sales and coverage of their produce would be realized, thus increased earnings levels (Sabo). Question 2 Four principal functions of management at Lincoln Electric in establishing the culture, mission, vision, and company strategy. Planning was laid down in establishing these, causing change where necessary, for example streamlining to the production of welding products. In organizing, the company plans the work of the employees, and then leaves the execution of duties to them, rewarding any increase in performance. In leading, the company’s management has established close relationships with the workers, thus increased cooperation. In controlling, the company has established a strictly no-nonsense atmosphere, at every area within the company’s premises – including the gate area, to the parking lots, to the working areas. Question 3 Lincoln’s approach to organizing and motivating their employees, as based on the ideas of early behaviorism: the company has capitalized on the basic behavioral traits of employees – of wanting to see their contribution recognized and rewarded – to motivate and encourage the productivity of their employees. This is evident from the views of Jorge Espinoza, who argues that they drive their own gain, cultivate their input through creativity – which contributes to increased income. Question 4 The approach in question 3, which is that of capitalizing on the creativity and fulfillment of the behavioral inclinations of employees, has been vital to their success, as all the contacted employees argue that they have performed beyond the company expectations – mainly because they are anticipating increased earnings. This has greatly impacted on production and sales, but other greatly felt factors include reducing product costs, and production of quality products. However, these – greatly borrow from the first strategy, as the quality of production is dependent on it, and the products sold by the sales team are produced from the behaviorist strategy. Also, the increased production from the strategy is vital in meeting the increased demand from the lowered costs; therefore, the behaviorist strategy is more central than the others. Question 5 The classical viewpoint of management in relation to scientific management and how it applies to Lincoln’s manufacturing operations can be traced to the company’s strategy. These are evident in improving economic efficiency by reducing the cost of production – which is passed on to the customer as price reduction, and increased labor productivity, as seen from the reward system, which fosters increased per-employee-production, by fostering creativity, self-supervision and per-production-rewarding system. Question 6 Lincoln’s total quality management, quality assurance and quality control is evidently guided by the needs of the customers, as seen from their shift to the production of welding products only. From such a shift, they registered an increased demand for their superiority of production – which is based on the per-worker contribution, through creativity and innovation. This can be proven from the reward system, where workers are remunerated for increased production and quality, cost reduction insights, and personal contribution to the company’s output. Therefore, it is evident that the TQM and quality management can be traced to each employees input, therefore must be reflected in the entirety of the venture. Question 7 The six forces contributing to the success of the Lincoln’s are discussed next: product cost reduction, as it resulted in increased demand for their products; increasing the quality of products, as it led to increased preference as opposed to those produced by competitors; and responding to customer needs – for example the demand for welding products, as the company capitalized on what their customers wanted, thus increased sales. The favorable incentive system – based employee input, also contributed to the success, as the employees sought to deliver more – as it meant better earning; cultivation of ideas and creativity among each worker, as this led to increased quality of production and cost reduction; as well as the favorable relationship between management and the workers, as this enhanced the deliberation for change in production and company systems in adjusting to increasing success. Question 8 Other factors – outside and inside the company that promoted the success of the company include the closure of competitors’ businesses, as this left the market to Lincoln’s coverage. Sophisticated competition, thus creating an edge for success, amidst competition, the attention given to every individual within the company, as it cultivated their level of importance at the company; and the increase in the demand for welding products, which the company capitalized on. The preference of the clients – for their better quality and lower priced products also promoted the success of the company. The no-nonsense climate cultivated at the company also promoted the success of the company greatly. Question 9 On the basis of the Porter’s five forces of competition, building a strategy to counter the power of suppliers is important, as the cases cites a case of low quality steel, which affected the production of the company. They should build a strategy to counter the threat of new entrants – which can be done by promoting the demand of their products, therefore eliminate the threat of new entrants on their success. The company should continue improving on the quality of produce, so that they can eliminate the threat of substitute products. Due to the high buyer product knowledge, the company should work hard to earn more customer confidence, as that will help the company capitalize on the power of the consumers. In countering the competition among the players within the market – the company should formulate a strategy to counter the competition, as it has done through reducing product costs – thus the need for more of such strategies. Question 10 The company is already using four of the strategies in Porters model, these including: the intensity of competitive rivalry, as some competitors have already left the industry; bargaining power of the clients, as it has nurtured preference for their products among the customers; threat of substitute commodities, as the company has built a reputation for its brands; and the threat of new competition, as the company has earned good will – thus not threatened by new entrants. The area not addressed well, is that of the bargaining power of suppliers, as the report cites a case the company was supplied with poor quality steel. Question 11 The five key success areas in the management – which have promoted the success of Lincoln’s, are discussed next. The equality of employees in management, as it promotes the sense of need among the employees, thus their effort to produce more. Open and frank communication – as it has promoted communication of strategy, planning, ideas and quality promotion from top to bottom as well as bottom to top. The issues brought up at board meetings were resolved immediately, thus any problems or concerns in question solved immediately, towards embracing further success. The close communication of discussion issues and immediate solutions across the different employee levels promoted confidence in the company, thus more success. The close acquaintance of the management with the activities of the department and the different employees, for example the case of the bereaved man promoted the success of the company. Question 12 The cultural variations that were a hindrance to Lincoln’s foreign investment are enumerated next: in Canada and Australia the workers rejected unionization, as they felt that it would act as a way of victimizing the workers. The need to offer sick pay, vacation and holiday by industry norms and legal provisions at France, thus the need to provide for these, which meant less work and more, spending. The absence of appropriate acquisition models at Venezuela and Japan, as this created a need for the creation of such models. The illegal nature of piece work at Germany and the bonus payment models at Brazil, as the company had to adjust to the culturally established standards there – which took time and sacrifice for adjustment. European mangers insistence on vacation time, as opposed to the American socialized way of doing things also impacted on the company, as it created the need to adjust to the change in work schedules, the need to adjust work schedules and income creation models. Question 13 The importance of using acquisition strategies over the green field venture approach to expansion in foreign markets helped Lincoln’s benefit from the economies of scale, the sharing of technology and resources, and cultural education from the foreign ventures – as it helped them adjust them to the cultural changes faster and better. They benefited from established distributor and supplier networks, as well as the established communication and decision making models. From these benefits, the venture did not engage in a trial and error way of doing things and a trying stage – especially with cultural and other variations. Question 14 The problems that the Lincoln’s management system created include, that the close communication of bottom employees with the top managers: Irang and Willis, created a problem of flow of ideas, and work implementation – as it led to the situation, where middle managers who have a vital role in the management of the company were overlooked. There was also the inability of the management to adapt to changing times and employee needs, for example the case of the 40 year old worker who yelled at Willie for a pay rise, after working at the company for 40 years; not given a work change – due to his advancing age. Question 15 The Lincoln compensation system can work at other companies, especially – those within the service economy, and production centers where the units produced can be quantified, for example health, financial services, and education – where the work can be quantified, thus paid as a unit. It would work in such a case, as the work performed can be paid as-per-unit work or per hourly billing. The system would fail in companies like those falling under public sector and NGOs work. An example here is social work, which cannot be quantified to the per work payment offered. Question 16 Lincoln’s experience of motivation model is in line with Herzberg’s motivation model – as it places emphasis on recognition, achievement, advancement, and responsibility, which are given focus in Lincoln’s case. However, the factors that lead to dissatisfaction are not given attention in the case of Lincoln electronics, these including work conditions and the challenges at work. Therefore, the model of Lincoln does not contradict Herzberg’s model, but features less variables regarding the satisfaction of employees. Question 17 Lincoln’s failure to make profits in foreign markets was based on their inability to break the domination of local companies at markets like Indonesia, as the consumers, also, preferred dealing with their own countrymen as producers. Due to the preference in local products and work systems, the company was obligated to revising the pay system, so as to compete with the local investors, thus the significant reduction in profitability. Question 18 The Lincoln’s would better not invest in the Indonesian market, especially due to the economic and political risks that they would be exposed to, the domination of local producers and the usage of stick consumables. However, the fact that SSHJ had introduced their products into the Indonesian market would favor their entry. The payment model to be used at the Indonesian market would have to take the legally accepted model of minimum wage pay, and then introduce benefits for increased production – so as to motivate the workers. Question 19 The reasons for Lincoln’s consistent success include the endowed skills-base of the workers, adjustment to customer needs and demand; acceptance of government expansion calls, and the cultivation of employee involvement. The reason why their strategies work at certain markets and not others, include the high demand for their products in certain markets and not others. For example, there was insignificant demand for their products at Indonesia, where most of the customers use stick consumables. Their failure cases may be traced to the domination of local producers, cultural and political non-favorability and the preference of local products at many of the foreign markets. Question 20 Recommendation to Lincoln Electric regarding overall management, include that the company should focus on the satisfaction of each worker – bearing in mind the inherent need-differences among them. For example the case of the 40 year old that had grown too old to work at the lifting section and the need for a pay rises. There is also, the need for the establishment a favorable bureaucratic model – as the middle level managers are overlooked. The management should also embrace technological development, in the areas of communication, advertising, sales, production and the creation of more markets. Of significance in this area would include the usage of the internet to reach more customers, to plan entry into foreign markets and to better manage the company, especially with its wide coverage. Works Cited Sabo, Richard. “The Lincoln Electric Company (Rev).” Harvard Business School Publication 29 July 1983. Web. 2 May 2012. Read More