Executive Summary
Change is inevitable in organizations; thus it is imperative for firms to be prepared to experience change and make wise decisions regarding the prevailing or impending changes. Unilever UK is focused in making grand changes in attempts to stay abreast of the highly competitive industry. There are certain key drivers to these changes and they impact on the process of making decisions in the said company.
Sustainability is has become pivotal in the way organizations are required to ensure their production methods are safe to the environment. There are claims that modern industrial processes cannot be sustainable, and yet customers continue demanding lower prices and augmented volumes of production. This dilemma can be solved by implementing innovative measures that reduce the overall cost of production, while increasing efficiency. Balanced scorecards have become useful in the measurement of performances in organizations. They have also proved to be useful tools in the process of making decisions.
Introduction
Organizations have to be prepared to deal with emerging and prevailing change. This preparation is necessary since change is inevitable and the changes can be generated by either internal or external forces. Internal forces can be under the control of the organization and examples include morale of the employees, technological capacity, organizational culture, management systems, and financial management among others. Consequently, external factors include the economy, the industry itself, political interference, competition and demographics among others. This paper will evaluate an organization undergoing significant change. It will also endeavor in identifying the main drivers for this change, and evaluate the nature of the impact these changes are impacting on the process of making decisions in the organization. The paper will also discuss sustainability and how the sustainability dilemma can be solved in organizations. Finally, it is going to discuss “balanced scorecard” management tool and how this tool is going to improve decision making.
Question 1 Change in the organization
Unilever Company in the UK has been experiencing growth and expansion. This growth and expansion has not been easy due to the level of competition in the region. The steady growth and development of Unilever UK has seen the achievement of sales growth of 6.5% worldwide in 2011 (Unilever 2012). This has been achieved despite the exigent economic conditions around the world. Heightened levels of competition and the urge to maintain the existing success level makes Unilever UK propose some radical changes. Unilever UK decided to make strategic changes in the undertaking of acquisitions in vital areas, in the organization. These changes are intended to ignite future growth and development. These changes according to Unilever (2012) have taken place as Unilever has made efforts to acquire such companies as Sara Lee department of personal care in 2010, as well as Alberto Culver in 2011.
In order to ensure Unilever achieves the desired growth and development, Unilever has integrated the two acquisitions into the organization, thereby maximizing the potential of these acquisitions (Unilever 2012). According to Lumby and Jones (2003), there are several advantages that an organization can gain from undertaking acquisitions. Some of these advantages include: permitting the organization to attain the required critical mass to expand the similar economies of scale to those of competitors; speedy implementation of strategies; permits the organization to support growth and development by offering new equity rather than by utilizing cash; and enables the organization to attain the hard assets, as well as the required intellectual capital.
The augmented levels of competition, which have reduced the number of customers is enough reason for Unilever to make strategic changes into the organization, in attempts to regain a hold on the market share. As the number of customers decrease, the anticipated return on investments on the organization is reduced. Acquiring the personal care section of Sara Lee and Alberto Culver is vital for Unilever UK in attaining similar levels of economies of scale to those of the competitors (Unilever 2012). Economies of scale are the augmentation of production efficiency to coincide with production (McEachern 2011). This is achieved when an organization attains lowering of the average per unit cost by the achievement of heightened production. Organizations promote the sharing of fixed costs over a high production of goods to attain economies of scale. In this case, it is evident the principal driver of change is competition, which is classified as an external driving force. As an external driving force, Unilever UK does not have any control over the competition and, therefore, Unilever UK has to deal with the force appropriately and quickly, lest it suffers mightily.
Additionally, Unilever is destined to focus on achieving unrivalled growth by creating fewer, but better hubs for generation of products and business services (Unilever 2012). This is geared towards ensuring Unilever UK is better placed to deal with non-constant consumer and customer preferences. This change can be attributed to both internal and external driving forces. Internal driving forces responsible for this change include the technological capabilities and organization of equipment at Unilever UK. From the reputation Unilever UK has been able to amass from its successful business transactions, the organization enjoys the technological capability to deal with such impending changes.
The need to increase its market share and continue amassing the critical mass required to achieve the stipulated economies of scale, leaves Unilever UK with the option of investing additional resources into technology, as a way to ensure it remains relevant (Unilever 2012). On the other hand, the industry appears competitive, which is an external driving force; hence Unilever UK has to shift its focus to ensure competition does not hold it down. This generates the urgency to invest in construction of hubs, which would make Unilever the unrivalled firm in the manufacture of such products as shampoos and gels. Since Unilever UK has plans of maintaining and increasing its lead in the industry, it intends to construct an expert IT center, to be located in Port Sunlight (Unilever 2012). This project is intended to ensure the firm uses the highest technology in responding to customer needs, as well as emerging developments in the market. These principal drivers of change have played significant roles in the prospective development of Unilever UK.
Nature of impact of these changes on decision making
There are several ways the process of decision making is going to be affected in Unilever UK. The acquiring of Sara Lee and Alberto Culver is going to have a significant impact on the process of decision making. According to Gennard and Judge (2005) the process of decision making requires extensive consultations, and well stipulated channels of communication. The way an organization deals with the process of making decisions would certainly be affected by the post-acquisition process. The combination of two firms will require changes in the process of making decisions, whereby, roles have to be shared between the two firms. Bearing in mind that the overall shareholder value is affected after the acquisition process, the process of making decisions may take longer as the two parties consult to reach an agreement (Hubbard 1999).
Decisions have to be made regarding such factors as organizational culture. Since there is a high probability of the two firms having different organizational cultures, there may be conflicts in the running of the new firm, which would be torn between two organizational cultures (Abraham, Glynn, & Murphy 2008). The new firm has to make strategic decisions that may affect the workers, who have been working with the acquired firm, and who may have been conversant with a different organizational structure and culture. The decisions to be made will not affect Unilever alone, but will have an impact on Sara Lee and Alberto Culver too.
Question 2- Sustainability
There have been numerous campaigns intended to ensure organizations achieve sustainability in their business activities. There are numerous definitions that have emerged regarding sustainability and there are those who feel sustainability has not been achieved effectively, by modern industrial practices.
This is despite the fact that consumers continue demanding augmented products and service volumes that attract lower prices. Sustainability can be defined as a way of producing products and services using innovative methods that will not endanger the environment for the future generations (Dresner 2008). This means the activities of an organization should not be harmful to the environment, in a way that would endanger the peaceful and healthy existence of future generations. This is easier said than done since it involves the utilization of innovative mechanisms that make work easier while saving the environment, and ensuring the price of the final products or services is kept at a minimal low. Using innovative methods in the production process, while being unable to manage the overall cost of production, would affect the final selling price of products and services. This raised price would affect the return on investments of a company’s anticipated volume of growth, putting the existence of such an organization at risk. With increased costs of productions, the selling prices of products or services would augments, which may scare away the existing and potential customers. Therefore, sustainability is a tricky agenda that organizations have to deal with in order to ensure they follow the stipulated sustainability rules while maintaining reasonable selling prices of their products and services to attract and maintain customers.
Additionally, Dunphy (2000) feels sustainability is the use of innovative ways to achieve excellence, and maintaining that excellence throughout. This is because of the evident, excellent performances of some firms in one year, for them to fail dismally the next year. This inconsistent performance of firms should be controlled, such that firms achieve and maintain a consistent order of performance throughout their existence, and it is only when they have maintained a consistent performance of excellence that firms can be termed as sustainable.
There are claims that the modern industrial practices are non-sustainable. This definition fits with the example of firms performing extremely well in one year, only for the same firms to portray dismal performance the next year. For firms to achieve excellent results continuously, the top management of such firms must have thorough knowledge about the industry and market environment in which they are operating. This includes thorough knowledge of the requirements in that industry, competitors’ plans and other factors that may affect the operation of business in that industry. This necessitates the investment of a firm’s resources in extensive research and development. Firms have to ensure they conduct research and development in order to get the best innovative methods that can reduce the costs of operation. This is while adding value to the products and services and reducing the overall selling price. Competition in the marketing fields demands innovative methods that increase efficiency, speed in reacting to changes in customer demands and preferences while maintaining affordable selling prices.
According to the Financial Times (2013), sustainability is a process used by companies so as to manage their social, financial, and environment risks. This includes arising opportunities and obligations. From these different definitions of sustainability, it is possible to see why there are fears that modern industrial practices cannot be sustainable. This is in regard to the management of financial, environmental and social risks, opportunities and obligations. In the modern industrial practices, the ultimate goal for organizations is the maximization of profits. This has been brought about by heightened levels of competition and the need to keep ahead of the competition. Since sustainability calls for the utilization of innovative ways geared towards increasing efficiency, there are high chances of affecting the selling price of products and services.
Companies ensure customers rely on companies so as to ensure they produce products at lower prices while the companies have to invest in research and technology to identify new methods of undertaking their tasks. In the modern industrial practices, there are such factors as a wobbling international economy, which makes it hard for companies to deal effectively with sustainability. There are such factors as the constantly changing international oil prices, which affect the running of companies around the world. When these oil prices continue fluctuating, the overall performance and objectives of an organization are affected, which in turn affect the attainment of sustainability (Mankiw 2008). These effects do not stop customers from demanding low priced products while expecting augmented volumes of products and services from the same companies. Thus, it is nearly impossible for companies to maintain this delicate balance of achieving sustainability while recognizing and meeting the needs of customers. Yet, there has to be ways to solve this dilemma.
Organizations have to rely on production methods that will not fluctuate and hence, affect their production costs. A way companies have to ensure production costs are maintained at affordable minimums is by the utilization of green energy. This is energy that is cheap to run while making it easier to achieve the desired results. Green energy can be achieved through the use of solar or wind energy, as sources of power. These sources of energy may require substantial amounts of money to set up, but would reduce the costs of maintenance. The use of either solar or wind sources of energy would contribute significantly to the achievement of a safer environment. This is because of the less emission of carbon into the atmosphere.
These sources of energy cannot be affected by the ever fluctuating prices of oil, which has contributed to the continued variance in prices of products, and which goes against the expectations of the consumers.
The Toyota Company is an example of a business organization geared towards solving the emerging dilemma. Toyota Company is determined to increase its volume of production and maintaining fair prices of its products (Toyota Motor Corporation 2012). This company intends to achieve this by introducing grouping development. This is the synchronized planning and expansion of numerous models of cars that sanction the homogeneity of parts and chief modules across an assortment of car models and plummeting costs by collaborating with the suppliers. This contributes to the reduction of the final selling prices, which could be well beyond the reach of many customers if the company does not come up with such methods.
Question 3 –Balanced Scorecard
A balanced scorecard can be termed as a method used in strategic management, to aid in the identification and improvement of various internal functions and their resulting external outcomes. This scorecard is intended to assist organizations in the provision of quality feedback, for the proper assistance in the implementation of strategies and objectives (Valiris, Chytas, & Glykas 2005). The balanced scorecard provides feedback on such areas as learning and growth, customers, business processes, and finance. With the proper feedback on these areas, the concerned organization is better placed to make any changes necessary to in order to attain its stipulated goals and objectives. Niven (2010) believes many organizations are not satisfied with the efforts they use to undertake the balanced scorecard on their firms. This is attributed to the flawed systems used to capture, scrutinize and share performance information in the organizations.
The balanced scorecard can be used as a tool to improve decision making. Since the balanced scorecard offers an evaluation and offers feedback on such areas as learning and growth, customers, business processes, and finance, this information can be used as guidelines in the process of making decisions (Blokdijk 2008). The information contained in the balanced scorecards permits an organization to evaluate what has to be done to achieve highly, elevated goals. When this information is critically assessed and compared to information regarding operations of the organization, the organization becomes aware of its overall performance, and therefore can utilize this information to make choices that would propel the organization to greater heights. The executive has to use the information on the balanced scorecards to interpret the organization’s strategy into operational terms. This is done by weighing comparing actions and the perceived impacts on the organization, through the performance indicators derived from the balanced scorecard. All this information equips the top management with management information, which acts as guidelines in the process of making decisions. The ability of the balanced scorecard to link performance measures makes it a possible tool to aid in the process of making decisions. All decisions to be made regarding the organization on terms of its goals and objectives have to be levied on the performance measures. Areas that the organization has achieved outstanding performance are evident, as well as those that require much effort to ensure the organizational goals and objectives are achieved. The four areas regarding financial, innovative and learning, customer and internal perspectives are compared between the goals and the performance measures achieved. This comparison reveals the measures that appear critical in the management of the organization and, therefore, the process of making decisions has to rely on the critical emerging issues that affect the business. Decisions are left on the most critical issues, which impact on the organization, whereas less critical issues are dropped. Since time is vital in the process of making decisions, the balanced score card offers an opportunity to save time, since the areas requiring changes are visible from the balanced scorecard results. It is evident the balanced scorecard provides an organization with a single management report containing disparate elements of an organization’s competitive agenda. This makes the organization to shorten the response time of decisions while endeavoring to improve quality and promote teamwork. These are necessary tools in the process of decision making; hence the balanced scorecard is a useful tool that assists in the process of making decisions.
Conclusion
In conclusion, it is evident organizations undergo changes and these changes can be contributed by either internal or external driving forces. Unilever UK is determined to undergo changes to remain abreast of the intensive competition. Sustainability is crucial in the meeting of customer’s demands of low priced, and yet high production needs. Toyota Company has embarked on strategies to meet customer demands by production of quality and efficient vehicles at affordable prices. Balanced scorecards have emerged as essential tools, not only in the measurement of performance, but in the process of making decisions too.
Appendix
Balanced scorecard for Capital One Company
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