Challenges and problems faced by Pilkington Company
In the beginning of the 1980s the Pilkington Brothers, a glass manufacturing company was operating under loss. This was as result of numerous problems which the company was experiencing from both internal and external environment. The Pilkington glass was faced with competition challenge from other companies.
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This saw the company market share drop from 80% to 50%. The emergence of new companies in the market reduced the monopoly the company was enjoying in the 1970s. Other than the challenges the company also experienced numerous problems that forced the company change its way of operations.
The major problem was the cost-production problem that was as a result of non competitive working practices and inefficiency in the company and the industry. The inefficiency was as a result of the model that the company operated using.
The company also had technological problems brought about by the new companies. To be on the same level as the competitors the company wanted an operating cost of six million dollars that was required to boost the capital base of the company.
Under the circumstances, the challenges and the problems it was going through this was too far beyond its reach. To realize the dream the company had to initiate capital investment, rationalize its plants and tighten its belt in terms of operations.
It was only left with the problem of cutting the employees costs as well as restructuring the management team. The economic recession that had hit the UK economy had spread across affecting the market industry.
The company found itself in this struggle where it had to survive until the recession ended. After the emergence of new companies in the market, Pilkington market share reduced.
This was further reduced by the decline of the British motor industry and the loss of government financial support for home insulation programmes (Starkey & McKinlay 1990, p.354). This reduced the market demand of its products making its market share worse off.
The company was also facing price wars and pressure from its competitors in the market. This forced the company to aggressively re-stimulate its price spiral with the aim of attaining more market share.
Aspects of Pilkington that were changed, and why
Because of the enormous losses and competition the company was facing it was decided that some aspects of the company be changed. The company decided to readjust the management practices with the aim of meeting the prevailing change in market conditions (Starkey & McKinlay 1990, p.354).
The management style was changed to accommodated the changes prevailed in the market. This was done on the operations departments where the personal directors made changes through negotiation of their personal needs. This was done to increase the collective bargaining power of the company.
The company decided to the working flexibility and the mobility of the employees. This geared towards the promotion of individual commitment in the company as well as ensuring that the product was of high quality. This would meet the market demand and be competitive enough.
The company was also able to restructure the jobs definitions with the aim of removing unnecessary job tittles. For instance the company got rid of craftsman assistants and replaced with the electrical/mechanical craftsman.
The change strategies used and why
The company introduced new managerial culture to reduce bureaucracy and the functions of the managers. This was triggered by the fact that the company believed in technical excellence only forgetting the business part of it.
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According to Starkey and McKinlay (1990, p.354) the business aspect in terms of entrepreneurship, operating on low costs and the sense of having business done was minimal. The management operations which were centralized were decentralized for easy operations.
Decentralizing of the operations was meant to achieve a collective bargaining power in its operations. Cut down the operation cost of the company. This was to be achieved through the restructuring of thee of the working practices, initiation of low cost structures in its major sites.the main aim of initiating the restructuring was come up with employment structures, working parties and systems that would increase the level of cost effectiveness (Starkey & McKinlay1990, p.356).
This targeted the human resources where it would eliminate any problems arising between the working groups. The restructuring was also aimed at improving the business identity and improve the quality of the relations in the industry though attitude change (Starkey & McKinlay1990, p.356)
Comment on the timing of the changes Strategies
The timing of adopting new strategies in the operation of the company was timely and mature. Being in a competitive market structure the company would have continued to make losses. It would also operate under the shutdown point where the total revenue would be equal to the total costs.
This would only enable the company operate in a short while waiting the market structure and conditions to change. In this situations this could not have happened, it would exit the market in the long run. But instead the company opted to strategies its operations.
It is evident that by the end of 1986 the company was able to make a profit of 3.8 million dollars from a loss of 3.5 million dollars. The restructuring brought about positive changes. It has also improved both internal and external understanding and reputations making the business come to its business feet.
Extent to which Pilkington could be said to be using a strategic approach in its human resource management
The Pilkington Company is the case study is taking a strategic approach in the management of its people. This can be explained through the following approaches theories and models. Grant (2005, p.25) notes that strategic approach is achieved through the top down process.
For example the Pilkington is moving from centralized management to decentralized management. The aim of having a strategy is to have huge returns on the invested capital achieved in the long run and when this does not occur the company has the duty of having it happen (Whittington 2001, p. 11).
Strategic fit models of HRM are aimed in matching the capabilities of the HR to the “resources of the opportunities available in the external environment” (Durai 2006, p.27). The strategic fit integrates the HR strategies together with the strategy of the business.
The integrative approach is used to support the HR practices development like industrial relations, evaluations, training, and compensations among others. The strategic fit model is divided into vertical and horizontal fit models (Kazmi 2006, p.435; Durai 2010, p. 27).
The vertical fit is concerned with the alignment of the HR strategies components with the business strategy essential elements. The horizontal fit deals with the alignment of the various HR strategy components in an organizations.
According to Pattanayak (2005, p.34) strategic human resource management is aimed in achieving the changes that are associated with the changing market conditions. The combination of these two types pg fit model ensures that competiveness is realized through various HR policy areas.
Through the evaluation of its performance in the market the company applied the BCG (Boston Consulting Group) matrix. According to Griffin (2008, p. 218), the BCG matrix is used to provide a framework from which the performance of the company can be evaluated based on the diversification of the organization.
The matrix uses two dimensions in evaluating the business set. Griffin (2008, p217) notes that the two dimensions used are market share of the business and “the growth rate of a particular market”.
This can be traced in the Pilkington Company where it has to restructure and manage its image to the outside world. After the decline in the market share the company used strategies to get back its market share.
The BCG matrix classifies business as star, dog, question mark or cash cows (Berkowitz 2011, p.62; Kurtz Mackenzie & snow 2009, p. 65). The Pilkington Company started to gain market share but at a low rate after initiating the strategic plans.
This could classify the company using the BCG matrix as a questions market, because it’s making low profits. Competition and strategy are inseparable Blyton & Turnbull (1992, p.136), this is because competition in the market necessitate the adoption of a strategy to counter.
The human resource department in the Pilkington Company has introduced performance management. According to Gratton1999, p.61) performance management approach necessitates the contribution of an employee in an organization.
This is seen through the training of employees and allowing career development. It can also be achieved through labour management (Bratton &Gold 2001, p.46), through policies that are followed by the organization. In the Pilkington the company has introduced multi union discussion plan.
This would ensure that the voice of the employees is heard.. The SLAP model “involves strategic decision making on the part of HR managers” (Durai 2010, p.27).
This is witnessed in the Pilkington Company where managers’ job descriptions and decision making process are restructured. The SLAP model ensures interdependence among the organizational changes, business strategy, and the HR strategies.
Because of the increased cost of production, the company decided to be cost effective. Becker, Huselid & Ulrich (2001, p.80) notes that the importance of cost benefit analysis as a strategy is to aim achieve the operational goals. This was achieved through cost effective leadership that aimed in increasing efficiency and output.
According to Porter (1998, p.12) cost leadership approach is a strategy used by companies with the aim of becoming low cost producers. This is achieved through the use of economies of scale and adopting new technology. Porter (1998, p.13) notes that cost leader should be able to achieve parity with its competitors.
This is evident in the Pilkington Company where it tries to gain parity with its competitors. Schermerhorn (2010, p.223) cost leadership structures allows profits making. The company initiates company capability which according to Phadtare (n.d, p.56) involves the coordination of company’s resources towards productive use.
This is first achieved through the restructure of an organization so as to fit in the company capability model. The organizational capability factors range from marketing to infrastructure.
Phadtare (n.d, p.8) adds that for strategy to be of success it should be well designed. Daft (2010, 69) notes that the essence of cost leadership strategy is “to increase market share by keeping low compared to competitors”
Mudra (2006, p. 51) notes that restructuring of a business operations is aimed at achieving long term solutions to problems being faced. This can be applied to Pilkington which is restructuring its operations after experiencing problems.
According to Winterton & winterton (199, p.53) through rational planning and efficiency and profit maximization s are achieved in long run. Through job structure planning Grant 1989, 2), and analysis a company is able to increase its production. This is seen in the Pilkington Company where it introduces job structure and planning.
Through the initiative of accountability a company can ensure that work by employees is well done.Price (2007, p, 606) adds that leaders should be willing to be accountable in the work place s means of ensuring prosperity. Cartwright (2005, p.45) observes that reorganization through downsizing makes the working relevant.
This enables the organization survive as it cut down its costs. So it can be concluded that the Pilkington Company indeed used strategic approach in its operations.
The company had to build a relationship between the employee groups and the industry itself. This according to Pattanayak (2005, p.34) is achieved through the human resource planning effectiveness and the integrative process through contemporary approach.
It applies work flexibility and mobility and incorporation of skills development programs. The contemporary approach is concerned with the individual goals as well as those of the company (Pattanayak 2005, p.34).
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