Case Analysis- Kent Chemicals 3f6x31

CASE ANALYSIS- KENT CHEMICALS INTRODUCTION Kent Chemical was founded in USA in the year 1917 as a rubber producing company. Fisher family owned 10% of the stock and was one of the largest shareholders. The company had 2 major divisions – namely Kent Chemical International (KCI) and Kent Chemical Products (K) and 3 core business lines were identified for Kent Chemicals - consumer products, fire protection products and medical plastic in domestic and global market. Kent Chemicals grew gradually and began enjoying excellent sales of their products in regions other than USA. Hence the president realized that the organizational re-structuring was required to control all the regions from the US Headquarters. For many years, Kent’s overseas operations was regarded as a source of incremental sales through exports, licensing agreements, and minority t ventures (JVs). But, this view changed in 1998, when Ben Fisher, K’s newly appointed CEO, announced that a more focused strategic approach to global expansion would be his top priority: According to the Harvard Business Review (2012) Ben Fisher, Ks CEO had said “Our goal is to remake Kent from a U.S. company dabbling in international markets to one that develops, manufactures, and sells worldwide.” PROBLEM Kent Chemicals was very successful in the beginning, but it was encountering some challenges due to the speedy growth of the business in regions other than the US headquarters. 1. As the international business grew, the company president Morales realized that his company could not manage changing pressures and demands.

2. Secondly, Morales was worried about the "self-protection" of the overseas subsidiaries' managers as they had a long history of independent operations and had not experienced

centralized operations.

3. Thirdly, Morales was concerned that the regional organizations (branch locations

overseas) who could not deal with the coordinating issues of global implications. Finally Morales, the President embarked on a “Restructuring” programme for Kent Chemicals. The program basically had the following issues to tackle:1. The new system implemented by Kent Chemicals forced people to follow common procedure in financial reports, target setting, capital allocation etc. 2. They decided to have independence of subsidiaries, so that they could manage their business in their own style for a long period of time. 3. Coordination of local issues – specific to each branch and headquarter. To Each local wing (branch) managed their issues based on their know-how. As a result, the staff working in the local branch was hesitant to communicate with their global office and the inter-companies.

INITIAL SOLUTIONS – two types of solutions were offered. First the Global Board Director’s (GBDs) setup in 2006 and secondly the World Board (WB) established as a restructuring exercise in 2007. A) Solution by GBDs and its failure:Morales, the President of Kent Chemicals, diagnosed the problem and enlightened the GBD’s which comprised of three directors who were deputed to improve communication between the global office (headquarter in the US) and local branch offices. Challenges and Failure of GBD - The President expected that each director from the GBDs group would improve communication levels in three core business areas, encourage local offices to follow global operations strategy. GBDs were authorized to manage each business sector in their region, but due to dearth of local knowledge, they could not perform efficiently. The management conducted a exercise whereby they asked the local staff to opt for centralized style, but the GBD’s were faltering in adopting this style. The GBD finally failed. There were several reasons for its failure such as lack of local knowledge, communication problems and interfering the local operations. B) Solution by World Boards and its failure:Subsequent to the worst lessons learnt by Kent Chemicals from the GBD’s flaws, they established the World Boards to GBDs to learn the local knowledge. The World Board (WB) included experts from local branches. However, due to the adverse image developed by the locals for GBDs, the local managers at Kent Chemicals were quite hesitant to suggest ideas to the WBs. FINAL SOLUTION - In next year of that failure, Kent Chemicals decided to employ a consultant because it was vital to strengthen the organizational structure. Solutions given by

Sterling Partners (Kent’s Consultants) - As the business of Kent Chemicals had serious management issues and was displaying low performance, their consulting firm, Sterling Partners analyzed the scenario and launched a reorganization programme. In the programme, a matrix organization was setup to realign communication effortlessly and efficiently, and would blend global instructions and local requirement together. Another major change they embarked on was the operation area of each business line would change. For instance, the consumer products division had run their business based on customer needs; as Kent Chemicals had to conform to fire protection laws of each country of operation, hence the fire protection products were localized, and the lastly the medical plastic division would be managed by merging global and local operations since their main clients were multinational companies which were able to supply the products globally. All these restructuring and reorganizing still could not contain the most pressing and challenging issue faced by the company – Control of the Global Headquarters on the branch locations. CONCLUSION The consultants analyzed that KCI's main problem was caused by their structure and strategy like a small company. They gave three advises to strategize:1. KCI should introduce - local and regional istration, 2. medical plastics business should be coordinated globally, and 3. fire control products should be managed regionally since the country regulations differ in every country. They also recommended to use "decision matrix" to outline their decision process and address their ownership issues clearly. ANALSIS, SUGGESTED SOLUTIONS and CONCLUSION QUESTIONS:

1. What were the international market entry approaches pursued by Kent until Fisher took over as a CEO? Why did they pursue these options? Use the following table format to respond to this question. What are the pros and cons of each option (use a table format to respond)? Why did Fisher want to make Kent a global company? Answer 1) Kent Business (e.g. Fire Protections products, Consumer products, etc.)

Business pressures

Kent Approach

Consumer Products

Demand in local markets were very high, and company achieved increasing sales from the local industry

Introduce local and regional management (istration). But, the company will use "decision matrix" to outline their decision process and address their ownership issues clearly.

Medicals Plastic Business

Demand was good and competition was strong globally.

To be coordinated and controlled globally

Fire Protection Products

Had to be customized to regional.

fire control products should be managed regionally since the country regulation differs in every country.

2. What were the problems facing Luis Morales as he began implementing Ben Fisher’s international expansion strategy? Categorize these problems in the following table and briefly discuss at least 3 problems Answer 2) Kent Chemicals CEO -Fishers global expansion vision proved difficult. The International Division President Luis Morales had to face the following problems in laying out Fishers international expansion strategy:Strategic

Structural/systems

Interpersonal

1. Threats of new entrants

Needed the final reorganization to resolve the global economic threats that Kent was facing. Consulting Sterling Partners called to help.

Coordinate a good team of professionals

2.

Bargaining power over customers

Handing customers international needed a strong customer management skills

Implement CRM policies

3.

Products

Kent sold products in 100 countries

Needed good control

Unsuccessful in many countries -Threats of Substitute products & services

and coordination.

4.

Supply Chain Bargaining power of supplies

Kent operated 30 manufacturing facilities in 13 countries and supplies in each country had to be handled well regionally and globally

Strong networked system and strong control over suppliers was required.

5.

Growth and Demand Industry position

Kent’s international side did not align with the domestic side.

Had to create a bridging system for domestic

amongst current competition 6.

Lack of Communication in all Kent Divisions – Set up new system

and international side to link with each other strongly Kent’s managers were not updated and lacked knowledge in their area of operations and financial status of the company

Kent should set up a new communication system.

Morales Strategic Approach:- The 3 main issues :1. Growth and the Demands in Kent Chemicals a) Increased their global market impact by acquiring foreign companies. b) Managers of Kent Chemical Products used the independence of overseas subsidiaries for their vested interests

c) Regional organization having difficulties dealing with issues within global markets with Kent Chemical International. d) Country managers were asked to work for the benefit of both organization and not one specific organization 2. Products unsuccessful in some countries a) The fire protection products did well in one country and did not do well in other countries. b) Hence this product had to comply with each countries specific regulation’s and should be handled very carefully. 3. Lack of Communication between Kent International and other Kent Chemical Divisions. a) Management of subsidiary companies were allowed to continue to operate in their own old habits and operating procedures. This posed a lot of issues in smooth operations of Kent globally. b) Kent Chemical Products Management were not involved in decisions being made by the international subsidiaries, and remained in dark. Their control on subsidiary companies was very poor. c) Many changes were made at the subsidiary facilities without much regard on how it will affect the company globally.

3. How would you evaluate the organizational changes he made in response to those problems> Why were they unsuccessful? Ans 4) Kent Chemicals needed to implement the following changes in response to the above given problems, but were unsuccessful:- President Murales led the re-organizations strategy that did not align the international side and the domestic side of operations.

- It had difficulty implementing re-organization in its 30 manufacturing facilties in 13 countries as country knowledge and different rules and regulations were difficult to manage by Kent Chemicals. - Kent used to sell its consumer products in more than 100 countries, and this was a vast area to hanldle without an organized system. - It needed the final re-organization strategy to resolve the global economic threats that it faced. It should continue the services of an outside consulting form - like Sterling Partners who could craft a matrix for Kent Chemicals to follow both International and US operations. - A strong, focused strategic approach was required to become global and withstand the issues as a team. 4. What do you think of the Sterling Partners recommendations? What did Kent get for the $1.8 million fee? What should Morales recommend? What should Chairman Ben Fisher decide? Ans 4) Sterling Partners recommendations would be beneficial to Kent Chemicals as they brought it team effort and cohesiveness in the company. Sterling had recommended the following, and Kent got useful benefits on paying the fee for worth $18 million, as the implementations of the following strategies would definitely be useful in achieving international growth and remove all barriers cited earlier in conducting smooth operations.:1. Kent should adopt a “Decision Matrix” model 2. Internet linked communications 3. ability 4. Decentralization with knowledge of ownership. 5. Shared vision and planning efforts by the headquarter and subsidiary groups. 6. Company should apply the Porter’s Five Forces Model. 7. Porter’s National Diamond Clustering Theory was to be adopted to get maximum mileage on addressing supply-chain issues and demand for their products in various market.

8. SWOT Analysis should be done. Internal and external. 9. De Kluyer’s Five stages of Globalization. 10. Value Creation and Corporate Global Success. References Barlett C.A. & Wing. L. (2012), Kent Chemical: Organizing for International Growth. Retrieved from Harvard Business School Brief Cases. Retrieved from http:\\hbr.org/product/kent-chemical-organizing-for.../an/4409-PDF-ENG. Cusac, J. Estes. M, & Khan, R (2013), Kent Chemical. Siena Heights University. Retrieved from http:// www.sienaheights.edu . Porter , M.I. (2008). The Five Competitive Forces that Shapes Strategy. The Harvard Business Review. Retrieved from http://hbr.org/2008/01/the-five-competitive-forcesthat-shape-strategy/.

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