Allentown

Problems faced by Allentown -

Problems due to Internal Factors -

Organization Structure вЂ"

In general terms, the organizational structure of the Electronic Products Division of Allentown follows the same structure of the other divisions. Under the General Manager there is a controller, a product development manager, a manufacturing manager (with three plants treated as three different profit centers), a sales manager and a marketing manager. The last two may be the major difference regarding the general structure of the company, since sales and marketing are usually combined in one single department. The breakdown in two departments has been made by the general manager, reasoning that the sales division should be concerned about short-term actions, while the marketing one should take care of pricing policies and strategic plan.

However, this vision generates an overlapping problem between the marketing department and the product development department. The marketing department, among other duties, is responsible for the identification of new opportunities and also to assure the development of new products. Unless these activities are extremely well coordinated with the product development department, there will be misalignment in the strategy of the EPD. Ultimately, this misalignment will affect a third department, i.e. the manufacturing department, since it is directly involved in the product development process.

The organizational design, especially the particularity mentioned above, is generating a considerable amount of tension. There is a constant exchange of accusations between the two departments; marketing is critical to the product development department’s responsiveness, its time-to-market and its priorities. The counter-part was in the form of heavy critics regarding the understanding of the product development process. The constant tension only increased the rivalry and the distance between the two departments, while both should have been working as close as possible.

There is no surprise that this kind of internal dispute is taking place at EDP. The composition of both departments is a good example of the problem that the separation is causing, since the profile of the employees is considerably different. The marketing department is mainly a spin-off of the sales department; most of its employees are sales people and are more used to understand the market instead of product development process itself. As a vicious cycle, this leads to a lower level of trust, less interaction and higher distance among them.

Communication and Trust -

Allentown’s EDP department faces a slow down in its sales and profit margins not only due to external factors, but also internal. The current organizational structure demands highly interdependent and collective work in order to cope with the increasingly competitive environment. This means that the main drive for growth is exploration and exploitation of innovative products that will be delivered on time and will ensure the specifications and quality needed from the clients, which can only be achieved through constant information flow and harmonic cooperation between the departments.

Rogers made the move of separating Sales and Marketing, which was made due to external and technical reasons, but failed to address the rapid changes that the industry is undergoing. Miscommunication between the two departments failed to effectively service the increasing demands of key clients, resulting in dissatisfied customers who would easily switch to substitutes in the competitive marketplace. Mutual mistrust between these two departments, also Manufacturing and Product Development, lead to failure in understanding the next products that would make the difference and boost sales and in turn profits. Signals from the market and the clients would be bootlegged in either of these departments with clients being ultimately neglected.

Moreover, plant managers were evaluated based on their profits without actually having any influence in price making, when the actual price makers, the Marketing department, were not being evaluated on marginal profits but on revenues. This misalignment of objectives was even more reinforced from the fact that the company was always more R&D and manufacturing focused, having a comparatively weak marketing and sales department. In turn, further lack of confidence and communication hindered the necessary quick response needed for the market and therefore technology development. In general, apart from the mistrust being created between the departments (because their evaluation criteria were contradicting), the expected growth and profit were not in line with the business and there was no possibility of active cost cutting and control.

Problems due to External Factors вЂ"

In the early 1990’s though the commercial markets for the Electronics Products Division products was growing, buyers were becoming more price sensitive. This prompted increased and often fierce competition among a number of component suppliers. As suppliers competed for large-volume contracts from major OEM’s, prices fell sharply, putting pressure on costs.

In addition, there was continual pressure on component manufacturers to extend existing product lines as OEM’s developed new end-use products for their growing products. Thus added to the price competition for large contracts was a need to respond to customers with new product extensions that met their unique specifications. A component manufacturer could not bid on a contract until its product had passed rigorous tests conducted in its own and the customer’s laboratories. Responding to customer needs with new product extensions was a competitive necessity because new products commanded higher prices in their early stages of development and thereby offered an opportunity for growth.

Competition was primarily hinged on price but quality and service was becoming important now. Customers were giving special consideration to manufacturers that could assure short delivery lead times (usually no more than four weeks) while efficiency in manufacturing operations demanded longer lead times. Stricter quality standards were also being demanded because poor quality often shut down an OEM production operation.

Suggested Corrective Actions вЂ"

1) Re-implement the Management and Organization Developmental Program to complete the final phase which addresses interfunctional