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Giuseppe Soda
(protocollo n 3680)
Giuseppe Soda
Final Products
FBT
DY
SMT
Ignition coil
Consumer Electronic
Components
Basic
Products
Automotive
Components
Wrapping competence
General
Manager
Personnel &
Organization
Finance &
Control
Administration
General
Services
Production
Sales
Production
Engineering
Purchasing
Production
Planning
Research
Area 1
Area 2
Plant
Italy
Quality
Logistics
Area 3
Plant
Turkey
Plant
Slovakia
There are many elements that Eldor must maintain control over:
the process and functional dimension, in order to maintain and strengthen its identity and historic reputation for technical excellence;
the products dimension, in order to consider the specific needs and characteristics of both business areas;
the geographic dimension, in order to continue to pursue internationalisation policies effectively;
the customers dimension, because it is on the customers needs that the product is conceived.
To the different relevant dimensions considered above, must be added the plurality and the heterogeneity of
the variables that characterise some of these dimensions.
In particular, families of products are different from one another -- the Automotive sector is in an early
phase compared to the traditional Consumer Electronic sector, where high volumes must be produced in order to take advantage of economies of scale. European and Asian markets show relevant differences in culture, customers requests, ways of working, laws, and so on. Customers (at least the most important ones)
require customisation of products and different types of relationships (e.g., some of them have a more traditional style and are interested only in the product adaptation and development, other ones are proper partners
and are involved since the research phase).
Eldors General Manager, when asked which was the most important dimension in the companys strategies,
answered:
Weve thought for a long time about this problem and we can now affirm that a hierarchy of importance
does exist for the dimensions: the most important for us is the dimension of products. My organisational
problem is that Im not sure that the decision of transforming the organisation structure through a divisionalisation is the best one for solving the problem of an effective defence of our products. A consultant told me
Copyright 2005 SDA Bocconi, Milano
that if we choose the product as the most important dimension, then we must move to a divisional form. Im
not convinced, I think its too expensive. (exhibit 2: Products)
Considering functions and activities, the two business areas show some links.
Comments made by the Directors of the different functions are reported in the following interviews:
1.
Director of Purchasing : In the purchasing of raw materials, the link between the two products
can clearly be observed. The reason for this is simple: final markets are different, but the two products
come from the same basic technical competence and the raw materials needed for producing them are,
for a great portion, similar. 80% of suppliers sell materials used in both families of products. From
the point of view of the purchasing process, the real difference between suppliers doesnt concern products but the nature of the raw material to be purchased (mechanical, electronic, etc.)
2.
Director of Production Planning : Because the manufacturing equipment is the same, with
the exception of a small phase of the process, when I plan I must obviously input the orders coming from
both families of products. Very often conflicts arise, especially when the Automotive Sales Director, who
has low bargaining power over the assemblers (i.e., is dependent on them), asks for a sudden change for
tomorrows production plan.
3.
4.
Director of Plant : All our plants, with the exception of the one in Turkey, produce simultaneously
for Consumer Electronics and Automotive. When I plan workers shifts, at least in Italy, I make sure
that the best technicians and workers are assigned to the Automotive production process, because thats
where the greatest quality problems arise. Logistics and plant quality are the same for the two families
of products. To test product quality (a conformity test), we have technicians who operate under my control and are specialised either in Automotive or Consumer Electronics. This happens also because
Automotive customers have asked for direct monitoring. Today, if we decided to produce for the Automotive sector only in Italy, we wouldnt be able to take advantage of the whole production capacity. Besides, a reduction of the production capacity would lead to unavoidable layoffs, which would be damaging for the company and wouldnt allow us to amortise the profitable investments we have made in the
past.
5.
Director of Sales : It is our task to ensure the efficacy of sales activities through product, market
and customer management. Now that Ive made this introduction, I would divide our activity in some
sub-processes:
Customer contact and area marketing: Customers for the two families of products are different. Usually the Automotive customers are a few assemblers. The problem that we wanted to solve was how to
approach a potential customer. We decided to assign this task -- lets call it an intelligence activity -to the person in that country who was already in charge of Consumer Electronics products. The reasons
were their knowledge of the country and their existing contacts there. So we now make customer contact
and area marketing (especially marketing researches) jointly for the two products. When a contact is
created in the area, we put a Research and Development technician specialised in Automotive at the
side of the salesperson.
Customers management: Sales (strictly speaking) are at the moment assigned to the same salespeople
for the two families of products. Now the problem is that customers are totally different and the logic by
which they must be managed are exactly the opposite from one another. Besides, I have to co-ordinate
ten different geographical areas in which salespeople specialised in both products must operate. Sometimes I feel like Im losing control.
6.
Director of Research and Development : At the beginning, our research was dedicated
to the development of products that had the same scientific and technological soul. This allowed us to
enter the Automotive sector. The problem today is that we have technicians who are essentially, but not
officially, specialised in the two families of products. There is a sort of parallel management of research. When I choose the members of the teams, I try to optimise their competencies, but I dont always
succeed. To continue to be excellent, we must do better than now. Nowadays interdependencies between
products in research are weaker and weaker; I dont see many synergies
Question 1.
Analyse the problem and explain which one among the four alternatives solutions you think is the best
and why. Your discussion could also include a comparison between your choice and the other possible
ones.
Question 2.
Based on the choice youve made among the four possible solutions, make a proposal for the performance appraisal of one of the following roles:
The Director of Plant and Director of Research and Development (if you chose Alternative 1);
The Product Manager for Automotive and Product Manager for Consumer Electronic (if you
chose Alternative 2);
The Director of Automotive Division and Director of Consumer Electronic Division (if you chose
Alternative 3 or 4).
EXHIBIT 1: FIGURE 1
The two business areas
Development rate
Consumer
Electronic
Automotive
Efficiency
needs effii
Growth needs