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Human Resource Management - Bristol Compressors case study

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- Bristol Compressors case study -   

            Introduction

            Bristol Compressors, company with headquarters in Bristol (England), has become manufacturing and selling European leader in its category based on efficient management and successful acquisitions.

Bristol Compressors portfolio has 4 product families which were separated accordingly into 4 divisions:

1.                             AirCom, which manufactured portable and stationary air compressors used in powering pneumatic tools such as wrenches and drills

2.                             CleanCom, which made oil-free compressors that eliminated hazardous contaminants in the gas stream

3.                             FrigCom, which made condensing equipment used in large air conditioning units for apartment, commercial and industrial buildings

4.                             DrillCom, which develop, manufactured and marketed a range of pneumatic tools including jackhammers and mechanical boring machines used in rock drilling, tunnelling, quarrying and well-drilling.

Until the late 1980s the company efforts to expand outside Europe centred almost exclusively on North America.

In 1992 Stewart Egan, Bristol Compressors’ Chairman and the Managing Director decided to organize in Hong Kong the Asia-Pacific regional headquarter responsible for local company’s operations in India, Pakistan, Bangladesh, China, Taiwan, Japan, Korea, the Philippines, Vietnam, Indonesia, Malaysia, Thailand and Singapore.

In 1997, Trevor Woods, President of Bristol Compressors Asia-Pacific chaired a meeting of the Management Committee. Despite attractive markets in the region, Bristol Compressors growth in Asia-Pacific had not met expectations. A broad consensus had emerged among Management Committee members: lack of management depth was a major factor contributing to the company’s weak performance.

Entry Strategy

The decision to invest in Asia was a strategic one. Bristol Compressors could not afford to lose number of positions in worldwide compressors sales due to stronger and stronger competition coming from Asia.

Another reason was that letting competition to play alone on that market could generate strong individual competitors that might hurt Bristol Compressors’ market position in Europe and North America.

In order to set a final decision and the market penetration strategy, Bristol Compressors company ordered a market research. Based on its unrealistic conclusions, they made huge investments in offices and plant facilities plus join-ventures.

After months of getting experience, national marketing and sales stuff began to realize that the way portable compressors were purchased in the region was fundamentally different from Europe: professional users had limited influence in buying decisions.

Competition

While Bristol Compressors was successfully taking market share from competitors and was strengthening its leader position in Europe and North America, new competitors have installed and consolidated their position on Asia-Pacific market, being bound and determinate not to let this happen again in Asia.

On the top, Bristol Compressors was facing local competition with 25 – 35% of the market.



Another major issue faced by Bristol Compressors was that local laws allowed competition black strategies that would be against the law in most of Bristol Compressors traditional markets.

If we take into consideration the major prices cut in the last years: 20% in 1996 and another 15%, we understand major barriers for Bristol Compressors.

Alternatives for the Action Plan

            It was obvious that Bristol Compressors did not meet expectations. With a broad consensus, Management Committee members agreed that in order to increase sales and improve managerial processes Bristol Compressors – Asia-Pacific had to significantly increase both the number and the quality of managers in the region.

They considered three options: developing managers from within the company, hiring skilled local managers and increase number of expatriate managers in the Asia-Pacific. For each option there were brought to evidence pluses and minuses.

            Developing managers from within

            The main advantages for this option are: it is built on the natural strengths of the host country nationals. These were the people who knew the market, spoke the national language and had the necessary local connections. Margaret Reeve, Director of Marketing for China and Hong Kong supported this idea together with following argues: Bristol Compressors had an excellent track record in developing people plus the fact that local people wanted to work for a multinational company.

            The disadvantages of this option are: it takes too much time to develop local people. More than this, while Bristol Compressors company culture is to encourage people to develop themselves, in Asia the culture is: “tell me what to do”.

            Anthony Yip, Human Resources Training Manager in Asia-Pacific added to this the fact that job turnover is high because demand exceeds supply. Losing people is a very big problem to all levels of a company. Once trained, local managers were facing attractive opportunities outside the company.

            In my opinion, this option is not a realistic one for Bristol Compressors – Asia-Pacific at that time. Reason for the Management Committee meeting was immediate actions to strengthen company’s market position. Developing managers from within takes lot of time. If we take into consideration Anthony’s remarks we find that the risk to lose both time and money invested in those developed managers is quite high. More than this, knowing the very flat organizational structure, this was not a viable option.

            As we discussed in the class, this alternative might generate cultural issues. There were major differences between local working people based on individual approach and the Bristol Compressors team work culture plus differences in communication style or delegation versus tightly guarded power at the top of the organization. In the class was agreed that time is needed to pass all of this managerial differences.

            Hiring skilled local managers

            Again, pluses and minuses were raised for this second option:

            In favour of this option was mentioned that the results will show up much faster plus the fact that a local manager will cost less than expatriates.

            Philip Dewer and Margaret Reeve complained against this option due to the fact that even when you pay serious money to hire someone, you often don’t get the experience you required plus that is hard to find talented people in the region.

            I agree that local talented managers are very cost effective and can bring immediate results. I also agree that it will be quite difficult to find someone with personal qualities to match company’s needs.

            It is true, as well, that lot of people are selling themselves in an excellent way, but in real life they can offer much less than necessary skills and experience.

            In my opinion, this is a very risky solution and I would not recommend it.

            On the top, in the class we agreed that company culture is not mandatory for a successful manager, but it helps increase managers’ retention. Someone from outside the company will pay more attention to the environment than being ready to sacrifice himself for the company.

            Flooding Bristol Compressors – Asia-Pacific with Expatriate Managers

            This last option was the most aggressive one. It consists of bringing additional 40 to 50 expatriates who will immediately and profoundly impact operations. In this scenario, all country general managers and virtually all of their direct reports will be expatriates. Local assistants would help in matters of cultural interpretations, language and cross-cultural negotiations.




            Although the advantages are obvious, this alternative faced lot of negative remarks.

            First one was that expatriates are highly expensive. In addition to this, it was a completely new strategy for Bristol Compressors. Another reason was that it would be difficult to find 40 – 50 quality people in either Europe or North America ready to move to Asia. 

Idea that detractors have mentioned was that expatriates need to understand local customers in order to be effective.

Last observation was that quality managers are necessary at home, so European and North-American operations will be affected if 40 – 50 managers are relocated.

Despite all these numerous reasons of “not to do it”, I would vote for this last solution, with following remarks:

I do agree with the number of 40 – 50 necessary managers. Bristol Compressors – Asia-Pacific has operations in 14 countries in the region. We can suppose that most of the General Managers are already expatriates in place, so due to the flat organizational structure active in the region, I estimate a real need of 20 expatriates to coordinate production and sales operations.

Why do I sustain this alternative? Because we should not forget that, after 5 years, results were dramatically under expectations and the company was still unable to estimate best alternative for the future. At the same time, competition was there and Bristol Compressors could not allow these companies increase in the Asian economies. Obviously, a “shock strategy” was the only acceptable solution in order to secure the present and create the future for Bristol Compressors – Asia-Pacific.

Another reason for me to vote this alternative is that for such a challenging mission (short term revitalizing) devoted people are mandatory. It’s impossible to find such feelings to local managers. Only expatriates are highly loyal employees.

As for the remark that “locals are far better at understanding customers”, I would say that expatriates are far better at understanding the industry, the sales process, marketing activities. More than this, the expatriates will be managers and will coordinate the sales force. They will not face directly and individually the customer. Knowing local culture that sales representatives “need to be told what to do”, having an expatriate to organize their job, their time will be highly effective and efficient, in my opinion.

Last but not least, the costs of expatriates:

It might be very expensive to bring big number of expatriates. Obviously, they will seriously increase local costs. Question: would it be cheaper to lose 5 years with very limited gains  and lot of question marks for the future? Another question: can Bristol Compressors – Asia-Pacific afford to let competition develop while they are still looking to solve Human Resources problems? The answer was offered by the Management Committee’s general view: “let’s first win the war”.

In my opinion, the critical point of this strategy is exactly the one we have discussed in class several times. What about the people involved? Even if we agree that this is the best approach, still we need to find these people ready to change their life style, to leave their homes and move into  a new world, to face the problems generated by their families in any case: if they decide to move together or if they remain in the native country.

As we agreed in the class, this is the major role of the Human Resources Manager and Department: to find the right persons and then to motivate them for maximum efficiency away from home.

We saw in the class that another issue that generally is not taken into consideration at the beginning will appear over time: find a place to return for the expatriates.

I would challenge the Human Resources Department to solve all these aspects and I would apply for flooding the Asia-Pacific region with expatriates.

In long term, if the case, we can look to educate local replacement for expatriates. Time would not be anymore main enemy. 









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