Harvard Case Study: Bausch & Lomb: Regional Organization

Harvard Case Study: Bausch & Lomb: Regional Organization

Case Overview

The Daniel Gill, the chairman and CEO faces the possibility of changing the organizational structure of Europe, Asia/Pacific, and the Western Hemisphere. The current organization includes an International Division which oversees production and marketing for countries outside the United States. The goal of changing the organizational structure of these three regions is to increase sales growth internationally and decentralize responsibility away from headquarters to field operations.

Case Synopsis

Company Background: The company was originally started in 1853 by John Bausch in Rochester, New York. The small store excelled because Bausch discovered Vulcanite, a hard rubber substance, which replaced the frames of many standard optical products. By the 1920s, the company grew to several different capacities: producing microscopes, binoculars, telescopes, and eventually Ray-Ban sunglasses. Market capabilities were furthered with the buyouts of several small companies, and the company grew to sales exceeding $100 million in 1966.

Another significant accomplishment came occurred with the creation of the soft contact lens and solutions. In 1981, Gill became CEO, opted out of the eyeglass and industrial instrumentation industries, and focused more on the company's development internationally.

The International Division: In 1983, Bausch and Lomb had subsidiaries in 23 countries and classified its organization into four categories: professional eye care products, personal products, consumer products, and instruments. These organizations were located in Rochester, New York and were responsible for procurement, manufacturing, and R&D globally.

Countries experienced organizational ineffectiveness because the international subsidiaries did not have a quality management system that prioritized business opportunities. The American headquarters could not give adequate attention to their global markets, and the long decision-making process over global programs slowed the company's growth.

As a result, in 1984, Bausch & Lomb shifted operations abroad by forming the International Division. This created a stronger country manager that was responsible for all business in their country. As a result, management became much more efficient, and by 1992, the ID accounted for nearly 50% of all revenues. Also, production facilities were increased, local markets were responded to faster, and new markets were penetrated that were previously overlooked.

The Situation in 1992: By 1992, Bausch & Lomb concentrated its focus on two particular business areas, Healthcare and Optics. The international products fell into the two categories of eyewear (sunglasses) and vision care (contact lenses and lens care products).

The eyewear industry grew mainly because of the success of Ray-Ban sunglasses and the growing consumer need for fashion products. Production facilities for Ray-Ban grew outside the U.S. making them more available to the international market.

Also, B&L obtained a significant portion of the world market for vision care products. Several solutions and contact brands emerged and started growing through Europe, Asia, and Latin America. Since the vision care industry produces products that are complimentary to each other, B&L marketed professional eye care kits. Production grew outside the U.S. into Europe and hopefully into Asia in the near future.

By 1992, there were many positives within the organization. There was a growing success in technology, quality, reducing production time, and world market sales. In addition, the company became more decentralized and focused on change, which were goals set in place by Gill. Also, they gained success using push rather than pull marketing. They focused on intermediaries such as professionals for advertising, which is the strongest form of advertising.

However, problems arose because the U.S. domestic divisions and the ID made different marketing decisions with products in the eyewear and vision care segments. The two divisions were often on different pages and experienced communication challenges. This created several pricing difficulties making it even harder to globally market the products. To further the problem, the ID felt as though their R&D received less than sufficient manufacturing resources, which limited the ability to forecast the global market.

Difficulties in communication slowed R&D, decision making, and required a major change in the organizational structure. Gill decided to increase the capabilities of the ID and give specific regions more power in the decision making process.

Regionalization: New structures were formed in order to approach the ID problems. The organizational reconstruction focused on speed of results, process to be driven by B&L executives, and input from as many B&L employees as possible. A significant amount of time and money was dedicated to creating a task force that was goal was to evaluate organizational structure. They concluded that it was necessary for a fine-tuning of the current organization structure, a regional structure, a product-region matrix, and a global product structure.

Eventually the idea regionalization was adopted by the Advisory Committee. The ID was to be dissolved and replaced by headquarters in Europe, Middle East and Africa, Asia-Pacific, and the Western Hemisphere. Jobs in the ID were reallocated to different divisions and new products were developed according to align with the region's needs. In order to coordinate activities between regions, committees and networks were created. This helped reduce many of the communication difficulties.

The benefits of this restructure included increased capabilities and entrepreneurship to local markets. Also, operations were closer to the customer, so their needs were met quicker. In addition, an experienced group of global grew that could lead the company in the future. Also, communication and growth were expected to grow with the implementation of regionalization and the committees.

On the other hand, the organization's new structure might not completely address the underlying communication problem. Communication with the U.S. and the regions would occur on an individual basis, which may make decision-making more complex. The committees carried the intense burden of coordinating strategies, so much of the company's success directly rested on their shoulders. There were also culture clashes between these committees, which made the load more burdensome. This makes quick decision making a problem, especially since country subsidiaries continued