Rhodes Industries

1. Case Overview:

Company background:

Rhodes Industries (RI): Established by Robert Rhodes in 1950s in Southern Ontario, Canada

The business of RI:

- developed pipes and glasses for industrial uses

- gradually branched out into new areas such as Sealants, coatings and cleaners and parts for trucking industry

- expanded by acquiring small firms in Canada and the United States during the 1960s

- was a conglomerate structure with subsidiaries across NA reporting directly to headquarters at Ontario, Canada.

- consisted of independent local business units

1970s and 1980s, the president at that time, Clifford Michaels, brought a strong international focus to RI and adopted a strategy of acquiring small companies worldwide. RI ventured into new lines of business such as consumer products and electrical equipments, in addition to its previous line of business. This strategy was adopted with the belief of forming cohesive units that would bring RI synergies and profits. Most of these products had local brand name.

During 1990s, RI changed its strategy and focused more on three lines of businesses viz. Industrial products, Consumer products, and Electronics. Sean Rhodes led the acquisition of more international business related to these three categories and divested business not related to the above three categories.

Current Organisational Structure:

2004: The current structure is based on 3 major geographical areas viz. North America, Asia and Europe. The various autonomous units within those regions report to the office of the regional Vice President. Businesses are largely independent which provides flexibility and motivation for subsidiary managers.

3 central departments: Corporate Relations and Public Affairs, Finance and Acquisitions and Legal & Administrative serve the Corporate Business worldwide.

If a country had several units, a subsidiary president was responsible for coordinating the various businesses in that country. But most of the coordination was done through the regional vice president.

Other functions such as HR management, new product development, marketing, and manufacturing existed within individual subsidiaries. However, there was little or no coordination of these functions across geographical regions

Rhodes Industries Organization Chart

Current Scenario:

RI changed its strategy and focused more on three lines of businesses viz. Industrial products, Consumer products, and Electronics.

Most of the products in various product lines do not need localised customisation and technology used for the manufacturing process is very mature. In terms of environmental uncertainty, we can infer that they operate in a complex but stable environment.

With regard to the stage of international evolution, it fits into the "Multinational" bill since it is operating in various countries.

The current structure is a Global geographic structure, which encourages product design, assembly, and marketing strategies that are specific to the needs of each country

2. Problem Identification:

Organizational problems:

Ð'* Each subsidiary acts as an independent business using its own reporting systems and tries to maximise its own profits. Autonomy makes it difficult to consolidate financial reports worldwide and gain efficiencies of uniform information and reporting systems.

Ð'* Major strategic decisions were made to benefit individual businesses or for a country's or region's local interests. Local projects and profits received more time and resources than did projects that benefitted RI worldwide.

Ð'* There is no transfer of technology, new product ideas or other innovations within RI. As a result, RI is getting deprived to important information that it could leverage for its overall growth.

For eg., an Electronics manufacturer in Singapore refused to increase production of chips and capacitors for sale in the UK because it would hurt bottom line of the Singapore operations. However, economies of scale in Singapore would more than offset shipping costs to the UK and would enable RI to close expensive manufacturing facilities in Europe, thereby increasing RI's efficiency and profits.

Again, a cost saving technology for manufacturing Light bulbs in Canada, had been ignored in Asia and Europe.

A technical innovation that provided home owners with cell phone access to home security systems developed in Europe has been ignored in NA.

3. Applying Theories of Organizational Behavior and recommending alternatives:

Model to fit Org. Structure to International Advantages

When organizations venture into international domain, a coherent global strategy should be formulated that provides synergy among worldwide operations. The main problem managers face here is to choose between emphasizing on global standardization or national responsiveness. Managers must decide whether each global affiliate should act autonomously or whether activity should be standardized across countries. Thus arises the decision to make a choice between globalization and a multi domestic strategy.

a. Globalization strategy: It means that product design, manufacturing and marketing strategy are standardized throughout the world. Example Ð'- Coca Cola. But recently companies have begun shifting away from strict globalization strategy due to economic and social changes.

b. Multi-domestic strategy: It means that the competition in each country is handled independently of competition in other countries, thus encouraging product design, assembly and marketing tailored to the specific needs of the country

First Recommended Structure:

Ð'* Create a new international department at Headquarters