Black & Decker International Case Study Vinod Gandhi PGDMHR IMI

Black & Decker International

IMI PGDM HR 2011-13

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ORGANIZATION DESIGN AND DEVELOPMENT

CASE STUDY

BLACK AND DECKER INTERNATIONAL

Submitted to: Submitted by:

Dr. Richa Awasthy Vinod Gandhi

IMI, New Delhi 11PGDMHR59


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Table of Contents

Topic Page No

INTRODUCTION ............................................................................................................ 3

CASE-ANALYSIS ............................................................................................................. 5

Background ......................................................................................................................... 5

Organization Structure ......................................................................................................... 6

Black & Decker External Environment Analysis ..................................................................... 7 Opportunities ........................................................................................................................................... 7 Threats ..................................................................................................................................................... 7

QUESTIONS .................................................................................................................. 8

REFERENCES ................................................................................................................20


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INTRODUCTION

Black & Decker has been very successful in expanding its reach of core businesses across

the globe, but the acquisition of Emhart Corporation and its eight brands scattered

around the world presents a new set of product and organizational challenges to the

organization. Mr. Grunewald, vice president of product and market development for the

international group, is contemplating what organizational changes are required to align a

set of local operations into "global players."

The given case is a good example of how organization needs to be re-engineered with

global expansion plan. The case represents a brief review of Black & Decker's global

strategy. The concern is about making the organization work successful for Emhart. It

represents both- Restructuring the way the acquired companies went to market, as well as

Rethinking how the various parts of the businesses could be integrated on a global scale.

The analysis given in this document is in context to the scrutiny of the structure, processes,

people and the environment that is prevalent within the organization.


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CASE

ANALYSIS


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CASE-ANALYSIS

Background

Black & Decker was incorporated in 1917. Over the next 70 years, the company

established itself as dominant name in power tool and accessories, first in the United States

and then across a broad global front but particularly in Europe. It manufactured and sold a

wide line of electric and battery-powered power tools (and accessories), household

products, outdoor products, locks and hardware, plumbing products, and mechanical

fastening systems. It acquired Emhart Corporation in 1989.

Being a dominant player in power tools and accessories for many years, Black & Decker

realized that the industry was being mature, so they decided to change their strategy into a

diversified company. As per the case facts, the Product Life Cycle was at maturity where

further developments within the industry could result in little or no additional revenues. So

they decided to diversify the product to maintain the image as a leader in the power tool

industry. Mr. Nolan Archibald, the then CEO of black and Decker, had two key actions.

First, to develop a worldwide view toward the markets for the company‟s products and

Second, to reduce drastically the number of models needed to fulfill the global markets.

It is also given that there was decrease in earning as attributable to the acquisition; there

are things that have to be done in order to ascertain whether the acquisition may create

value for the shareholders, which is the CEO‟s primary responsibility.


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Hence, effort should have been concentrated on three essential tests

1. The attractiveness test

The industries chosen for diversification must be structurally attractive or capable of being

made attractive.

2. The cost-of-entry test

The cost of entry must not capitalize all the future profits.

3. The better-off test

Either the new unit must gain competitive advantage from its link with the corporation or

vice-versa.

Organization Structure

As given in case exhibit, the structure of the organization was a mixture of three forms -

functional units, product categories and geographical units. There were three group

presidents under the president & CEO of the company. Each group president leaded one of

the three divisions Power Tools & Home Improvement, Household Products and

Commercial and Industrial products. The power and Home improvement division had

further divisions divided on the basis of product and geography, each headed by an

individual president viz. U.S. Power tools, Europe, Hardware and home improvement,

International and Accessories & Fasteners. It is also given that the Europe division, in

addition to having full marketing and manufacturing facilities for power tools, was also

responsible for sales of households‟ products and for products of the hardware and home

improvement division and the power tools accessories division.

The international division had the accountability of two plants manufacturing household

products in Brazil and Mexico. It also took responsibility of the sales responsibilities for all

company products in the world outside of Europe and the United States.


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Black & Decker External Environment Analysis

Opportunities

To gain more market share by expansion across the globe. 21 percent growth rate

with much larger potential for the future.

It can also be deduced that Black and Decker‟s reputation for quality tools and

appliances has been decreasing. It requires the company to deal with its strategic

businesses.

Gain more market share with industrial market, by offering quantity-based deals

and advertising the quality of its products.

Economies of scale inhibit ease of entry creating an opportunity for a large

company like B&D

Threats

Need to cater to the different demands that different cultures place on quality and

attention to detail

Vast differences in distribution, branding preferences, and local-sourcing laws in

the various international markets.

Requires following regulations and customs of different nations.

Main product lines - losing to Asian global competitor and to strong local

competitors in all parts of the world.

Need to be aware of new items that the consumer can use and develop them before

the competitors launch the product.


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QUESTIONS

Question1

What do you think of Grunewald’s plan for creating a ‘global lock business’? What

factors favor this action? What factors stand in the way?

Black & Decker has been very successful in expanding its reach of core businesses across

the globe. The recent acquisition of Emhart Corporation could be projected as perfect

opportunity for dramatic changes in the organization and profit growth of the company. It

would direct the company towards an opportunity to gain more market share because of the

presence of Emhart Corporation around the world.

Mr. Grunewald puts forward the idea of including marketing managers, product managers

and a local champion (project manager) within each lock company and group product

manager as part of organization design for smoothing of activities. Besides, considering

Strategic, managerial and operational activities for global approach, Mr. Grunewald

believes that Emhart‟s acquisition would require black and Decker to restructure all the

companies under the Emhart name and the way they would present themselves in the

market.

Factors that support

Grunewald‟s plan for creating a „global lock business‟ seems appropriate as the product

life cycle was at maturity where further development within the industry could result in

little or no additional revenues.

The addition of new market segmentation would diversify the existing portfolio of the

company and will help the company to increase the market share.


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It can be well planned strategy for Economies of scale, Economies of scope and cheaper

production costs depending on Globalization Strategy, Export Strategy or multi-domestic

strategy.

There is also existing solid international base of the company, which could be used for

building a global base for housewares. There is huge potential growth for Black and

Decker in the international market as it has been growing at the fastest rate of 21%.

The door hardware product industry is bound by old and narrowly constructed traditions.

This can simply be a case of marketing myopia. These firms are very mainly focusing on

limited segmentation and criteria towards security, systems and technology. None of the

products offering relates to the entire market segments. Hence, the integration of the

companies would progress market knowledge along the dimensions of competition,

consumer segments and product requirements.

Financially, the integrated company could bring in around $15 billion world market ($5

billion in locksets alone). It will enable the company to enable a complacent distribution

system around the world. Moreover it will help in setting global quality standards which

will help in promoting product innovation and bring a unified force and credibility.

Factors that restrict

There are various factors that could come in the way of making a global lock business.

There could be problems in coordination between the management of the acquired entities

with the risk of alienating and losing some of the key managers.

This will require close coordination among firms (e.g., JIT systems) and information

sharing (open computer systems).There might also be issues in finishing marketing


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research, simplifying production design and engineering, rationalizing distribution

channels and overcoming regional differences.

As, each of the company working under Emhart‟s management had been operating as an

autonomous unit, with its own design, manufacturing, marketing and support functions;

there will be a challenge in bringing them together under a single concept so that all the

departments are linked together efficiently and effectively.

It may also be difficult to implement and conceptualize the global market of their products

in different regions of the world. The systematic global planning and review through a

process of strategic, managerial and operational activities need to be aligned to the

globalization.

Also, the companies under Emhart were thought of expanding only in terms of expanding

their narrow line abroad; this narrow approach had led to a weak overseas business in Asia,

Latin America, the Middle East and Africa. There is a need to turn around the culture and

this approach and to maintain a good and strong business in the above mentioned

continents.

This case could also lead to an example where mismanaged growth can bring

diversification away from core businesses and core competencies rarely creates value for

the shareholders; which relates to the importance of organization design alignment with the

new kind of requirements. This will hence require long term planning, forecasting and

predicting of the return on investment relative to cost with proper market study.

Without strategic planning and coordination, the kind of inherited debt and the

unanticipated market fluctuations and weak economy may result in collapse or possible

bankruptcy of the corporation. The association between Black & Decker and these

companies must construct synergy in order to justify such deliberate moves and

expansions.


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Question 2

What are the organizational implications of this strategy? What kind of structure,

culture, and systems are necessary to make it work? What would be your action plan

for implementation?

The integration will require close coordination among firms (e.g., JIT systems) and

information sharing (open computer systems). The very first implication will be to fit the

former Emhart‟s entities into a consolidated operation. The above mentioned External

Environment analysis represents some of the organizational implications of this strategy.

Referring Org. theory by Richard L. Draft, there are three main components of the

organizational structure

1. It should designate formal reporting relationships of the managers and supervisors

along with the number of levels in their hierarchy and the level of control.

2. There should be proper distribution of individuals into different departments and the

departments into the organization.

3. There should be effective communication, coordination and integration across all

departments.

There is a need for managers to design organization for a complex international

environment, since the company is developing overseas operations to take advantage of

global markets. It typically evolves through four stages, beginning with a domestic

orientation, shifting to an international orientation, then changing to a multinational

orientation, and finally moving to a global orientation that sees the whole world as a

potential market. Structure dictates the relationship of roles in an organization, and

therefore, how people function. An outdated structure can result in unnecessary ambiguity

and confusion and often a lack of accountability.


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The common ways to address the problem of integration and knowledge transfer are

through global teams, stronger headquarters planning and control, and specific

coordination roles.

Hence, the organizational structure should be designed to provide both vertical and

horizontal information flow. Vertical flow is necessary as there are so many companies and

departments which will help in enabling control within the organization. There should be

centralized decision making within the organization. Some horizontal linkage is required

within the different departments in order to improve communication and coordination.

As there would be a great need of coordination among product managers at the same levels

in the organization but in different groups in different parts of the world; if there will be

some horizontal linkage, there will be more sharing of information and ideas among

managers which would help in reaching organizational goals more effectively. There

should be a functional horizontal linkage structure within the organization.

Some important considerations in designing an effective organizational structure

· Clarity

The structure of the organization should be such that there is no confusion about people's

goals, tasks, style of functioning, reporting relationship and sources of information.

· Understanding

The structure of an organization should provide people with a clear picture of how their

work fits into the organization.


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· De-centralization

The design of an organization should compel discussions and decisions at the lowest

possible level.

· Stability and adaptability

While the organizational structure should be adaptable to environmental changes, it should

remain steady during unfavorable conditions.

Culture

Organizational culture plays a vital role in improving the organization‟s effectiveness. It is

defined as a set of values, rules and regulations that control the attitude, behavior and

interactions between members of the organization. The diverse national and cultural values

also influence the organization‟s approach to coordination and control. Three varied

national approaches are the centralized coordination and control, a decentralized approach,

and the formalization approach. Organization culture should reinforce the strategy and

structure that the organization needs to be successful in its environment.

Black and Decker should develop a culture referring to the model “Relationship of

Environment and Strategy to Corporate Culture” – Depending on the needs of the external

environment and the organization‟s strategic focus; the four categories (Adaptability

Culture, Mission Culture, Clan Culture, and Bureaucratic Culture) relate to the fit among

cultural values, strategy, structure and the environment. It would be a unique combination

of its management philosophy, management practices, associated relationships and the

approach of dealing with the external environment changes.


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As there is acquisition of other companies, it becomes vital to develop sense of belonging

to the existing employees towards Black and Decker, so that there will be generation of

effective and efficient operations. This should further be imparted to all of its companies

across the world, for that, the culture needs to be corporate keeping the priority – values of

all the employees. Moreover, the employees should be enthusiastic to expand their

commitments beyond their employment contractual duties and timings. To provide loyalty,

conventions and teamwork, the company must develop a Clan Culture.

More than any other, this culture focuses on the needs of employees as the route to high

performance. It further creates involvement and participation, thus a sense of responsibility

and ownership and, hence, greater commitment to the organization.

Corporate Culture has a significant impact on employee experience and therefore business

performance


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Action plan includes taking care of employees and making sure they have whatever they

need to help them be satisfied as well as productive. Paying good wages, sending

employees on learning trips, cultural trainings, are few ways to maintain employee

commitment and satisfaction in such case. Employee should be empowered to use their

own initiative and creativity in serving customers.

(Reference: Deloitte Consulting Presentation 2007)

Systems

Organizations are often treated as systems. Black & Decker represents open system

approach. Scott (2003) defines it as “congeries of interdependent flows and activities

linking shifting coalitions of participants embedded in wider material resource and

institutional environments”.


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1. Self-maintenance: Agents in the system take resources from the environment to survive

2. Protection: Systems do not have to protect from the environment, they have to use it as a

source of information

3. Boundaries: Open systems do have boundaries, which are difficult to define

4. Sub-systems: Systems have subsystems that are linked in dynamic interaction

5. Negentropy: Energy that turns into work (opposite of entropy which never turns into

work). Open systems take the energy from the environment and they recreate themselves

As per understanding of this case, the organization needs to constantly interact with its

environments. Hence, this open-system organization is not passive. Black & Decker org.

system approach is to reach out, draws energy from the environment, and tries to shape the

environment.


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Open-system organizations usually follow a simple cybernetic model of input --

throughput -- output, with special emphasis on throughput (how to change the inputs or

alter and use the energy imported) and output (recurrent cycles of quality service to

consumers).

(Referring Organization Design & Development: Concepts & Applications by Ph.D B. K.

Srivastava) Black and Decker should mainly focus on these three subsystems. A value and

goals sub-system (culture, philosophy, overall organizational goals, group goals and

individual goals), decision and control subsystem (goal setting, planning, organizing,

implementing and controlling) and Social sub-system (communication, interpersonal

relations and human resources).

Focusing on these subsystems can improve in various ways including

More Effective Problem Solving

More Effective Leadership

More Effective Communication

More Effective Planning

More Effective Design of Projects, Products and Services

More Effective Organizational Results

Avoid Founder‟s Syndrome

Question 3

Assume you were Grunewald’s OD consultant. What coaching advice would you have

for him in executing the strategic change?


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As on OD consultant I would suggest him to follow the Lewin’s planned change model and

force field model persistently incorporating SYSTEM model design (most of the action

plan and recommendations I have briefly described in above part of analysis.)

Aligning the related differences in the behavior of the M&A employees, can be done by

introducing information that shows discrepancies between behaviors desired by

organizational members and those which are currently shown by the members.

As there will be changes taking place in Black and Decker in terms of structure and

processes, Mr. Grunewald should focus on this stage for the change in behavior and

attitude of the employees in sync with the organizational goals and objectives.


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Additionally, I would recommend some of the analysis as

1. Proper learning and development environment :

Existing head in-charge of lock factories could be trained for job profile of liaison role.

Also, Training is very important for bringing out the new culture in the organization to

make employees work with existing and new management.

2. As Japanese sales personnel would directly report to the group product manager; it may

result in conflict between the other marketing managers and sales personnel. As and when

required, for effective work flow, the marketing manager for Japanese operations could

also be introduced.

3. Effective technology integration will be must requirement (example: effective MIS) as

there will be need of supply chain management. It will result in better forecasting, planning

and coordination activities among managers.

Based on the opportunities for growth in these three lines, it is also recommended

On the Corporate Level: Consider the overall environment and the present growth in

foreign markets, horizontal integration accompanied with a focused diversification could

be the best strategy.

On the Business Level: B&D should continue to pursue a differentiation strategy

throughout its businesses. Some considerations should also be given to developing more

overall low-cost provider products in each of its business as well, as in present in its

security hardware business.


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Continue to pursue a related diversification strategy by leveraging distribution synergies

between the business units

Create synergies by marketing the professional tool line

A high degree of strategy control must be in place

Regular Evaluation on : Sales growth percentage, market share and time

The additional manpower shall be added to the project for the specialized processes

Last but not the least, I suggest them to do consider PLAN-B for the safe escape

REFERENCES

1. Org. Theory, Change, and Design by Richard L. Draft

2. Deloitte Consulting Presentation on cultural fit 2007

3. http://managementhelp.org/misc/open-systems-benefits.pdf

4. Organization Design & Development: Concepts & Applications by B. K. Srivastava

http://managementhelp.org/misc/open-systems-benefits.pdf

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Black & Decker International Case Study Vinod Gandhi PGDMHR IMI

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