Over the years, scholars in management have agreed on the importance of centralized planning in enhancing greater objectivity and therefore dividing the needed mechanism for achieving them.According to Oosten (2008, p.49), centralized planning facilitates the ability to gauge the existing market forces against the organization’s capacity to address them.
As indicated by porter’s five forces, through a centralized planning system, managers can easily create the impetus for change by either acting as the elements for change, or facilitating its understanding by their subjects.
A highly decentralized planning system was cited to be the major cause of Royal Dutch Shell Group dropping its market share in the wake of oil crisis and emergence of new competitors. To address this consideration, the group sought to centralize its planning system by reducing the number of corporate units while establishing a business sector based management structure to replace the geographically based ones (Grant, 2008. P. 122). In his view, William (2009, p.
41) points out that centralization of planning enhances the chances of harmonizing the major business objectives in the management level by subjecting all the viewpoints to a small management unit. In his view, a centralized planning system generates higher levels of flexibility for a business unit thereby limiting the number of consulting individuals and providing the needed guideline with authority. Donald (2009, pp. 69-70) points out that international organizations are indeed very complex and therefore requires overhead analysis for clearer decision making.
Due to the efficacy of their centralized planning, Grant (2008, pp. 121-122) points out that Royal Dutch Shell Group competitors such as Mobil and Exxon were easily arriving at the correct decisions to address emergent market forces. As a result of this realization, the Royal Dutch Shell Group assimilated a new business sector based management that would be easier to generate and guide new decisions for addressing the emerging competition. Application of centralized planning is on the other hand highly perilous in that a few leaders’ mistakes can have great impacts to a whole company.
The Guanxi theory indicates that organizations should articulate the necessary cultural viewpoint in generating key conclusions and recommendations on different issues. From this view point therefore, Michael (2008, pp. 61-62) argues that most of the managers at the top lack the necessary checks and balances from the lower level and regional units. World Bank (2005, pp. 16-17) indicates that a centralized planning system acts as a closed system where most at the lower level consider themselves to be recipients as opposed to important components of an organization unit.
Therefore, it often fails to invoke the needed creativity and innovation especially from the lower levels which are very critical for alternatives generation and implementation. Besides, lack of this identity as Azhar (2002, pp. 78-79) postulates, can invoke key resistance to the established management decisions. b) Local initiatives According to World Bank (2005, pp. 19-20) multinationals form some of the most complex organizations to create and maintain focus due to their extended outlook. Local initiatives therefore form an important standpoint for generating and maintaining the needed information for the main multinationals’ management.
After its formation, and indeed the first half of the 20th century, Royal Dutch Shell Group increased its local initiatives and units through covering all the geographical areas in the globe (Grant, 2008. pp. 122-123). This made it to become an internationally renowned giant in the petroleum industry. Local initiatives act as the extended business points and therefore provide further analysis on emerging forces and how to address them. According to the Porters five forces on competitors, information on new areas and competitors is very critical to maintain a leading share in the market (Thomas and Worley, 2008, p.
45). Notably, local initiatives often lack the necessary capacity to make the correct decisions in guiding the market for the different multinationals globe. Oosten (2008, p. 102) indicates that multinationals often concentrate their management at the top of their structure which they consider to have the needed ability for analyzing the market through other aspects such as the media. Indeed, due to the large distance often maintained between them and the mother organizations, they are hard to supervise and control and indicate additional costs.
Notably, despite the Royal Dutch Shell Group maintaining strong local initiatives, they were unable to effectively cite and come up with mechanism to address the fast rising competition that culminated to emerging of new players and the great restructuring (Grant, 2008, p. 122-123). c) Transnational Networks In his view, Azhar (2002, pp. 80-81) explains that transnational networks forms one of the most effective mechanism for maintaining an extended outset for gathering the needed information in multinationals. By maintaining transnational networks, an organization manages to get highly synthesized information for its external market.
Peter, Marion and Allen (2008, P. 102) explain that taking into consideration that most of the networking occurs at the same level (managers to managers) and information assimilated do not require extended analysis compared to that from local initiatives. Following the understanding of the efficacy attached to transnational networks, Royal Dutch Shell competitors easily came up with new strategies to counter the fast changing business environment in the petroleum industry (Grant, pp. 121-122). Besides, Michael et al (2008, p.
103) indicate that transnational networks form the best platform upon which organizations create new progression ideologies on specific issues. Therefore, they facilitate an expanded thinking consideration for managers in an open system. Particularly, the managers are subjected to varied industries’ decisions and their execution mechanisms; a consideration that Laurie (2007, p. 79) credits for invoking the need for continuous improvement. According to Chase (2006, p. 31), transitional networks are highly perilous in that they expose multinational organizations’ management strategies to other companies.
Taking into consideration that most of the transnational networking is not legally binding, competitors can easily capitalize on them to understand and therefore establish counter strategies for an organization management. Besides, transnational networks applications are limited to only regions and companies that have similar interests (Nigel, Stuart and Robert, 2007, p.27). As a result, the companies may limit their exploration and access to new markets in areas without effective networking. 4) “The royal Dutch Shell Group ———– is the world’s biggest and oldest joint venture” (Case p. 122).
What can be learnt from this case about the effectiveness of different strategies for managing the paradox of competition and cooperation within international joint venture? Joint venture initiatives as Oosten (2008, p. 104) indicates, have remained some of the most important organizations to scholars in that they demand peculiar management that cuts across social economic and political forces which defines their ability to grow and maintain the needed objectivity. The following factors bring out the key lessons learnt on the effectiveness of managing international joint ventures in managing the paradox of competition.
i) The importance of strategic focus in their formation and management In his view, Donald (2009, pp. 99-100) indicates that strategic management indicates that joint venture organizations at the international level must be able to create a strategic focus during their formation and maintaining objectivity in their operations. During its formation, (Grant, 208, p. 122) indicates that Royal Dutch Shell Group lacked an effective strategic focus to steer head its key operations throughout the century.
As Grant continues to say, the Royal Dutch Shell Group continues to maintain separate identities for the mother companies (pp. 126-127). This was cited to be highly perilous especially in the 21st century by creating divergent viewpoints on the common objectivity. Management of joint ventures through strategic planning facilitates easier analysis of internal and external forces and evaluating the most effective alternatives to not only addressing the problems, but further curving the need for improvements.
According to Peter et al (2008, p. 86), the porter’s five forces application in strategic management facilitates the need for a long term derived mission for guiding it to profitability. Joint ventures at the international level should further seek to facilitate cohesion through constant strategic objectives evaluation for their objectives to generate the need for addressing new challenges (Harold and Heinz, 2006, p. 52). ii) Enrichment of an organization’s culture at all levels According to Tsoukas and Robert (2002, pp.
33-34), organizations must seek to develop their unique cultures that define and facilitate objectivity. International joint ventures should seek to enrich and harmonize their cultures in tandem with their key objectives while reflecting the social economic and political outset in the countries they operate in. Due to lack of this cultural flexibility, Royal Dutch Shell Group got under increasing threat from its competitors (Grant, 2008, pp. 121-122). As Hofstede cultural model indicates, Alan (2009, p.
77) notes that organizations should seek to facilitate new ideologies and inculcate them towards increasing their market preferences. The management model that defined Royal Dutch Shell Group had to be changed for the company to assimilate a new outlook, revitalize it operations, and therefore increase its profits sustainably (Grants, p. 121). iii) Assimilation of change as an element of continuous improvement Grant (2008, p. 121) presents a critical viewpoint that international joint ventures are often faced with at one time or another.
The need for change in the modern organization management is the only permanent aspect that can be used to generate the needed readjustments to colonize new markets and therefore maintain greater lead compared to its competitors. Following the fast shifting international pressures in the petroleum industry, Royal Dutch Shell Group competitors assimilated change and therefore restructured its systems and therefore revitalized their objectives in harmony with market orientation (Grant, 2008, p. 128).
Following this reorganization, these new forces were able to emerge as a key threat to the existing giant (Royal Dutch Shell Group) which appeared rigid to assimilate and implement change. However, sensing the fast approaching loss in the market share control, Grant, indicates that Royal Dutch Shell Group had to change its structure and therefore its holistic approach in addressing the new market forces Grant (2008, P. 121). Pointing at the need to generate a new system that is acceptable to all, Alan (2009, p.
85) points out that all units in an organization should be effectively represented and their contribution factored in making the needed improvement in the company. iv) The need for a centralized and highly responsive structure One of the most evident aspects from this study is the need for direct control and effective analysis of the management propositions in the international joint ventures. After its formation, the new Royal Dutch Shell Group had the sky being the only limiting force for growth and development.
Grant indicates that the highly decentralized method appeared to work effectively due to reduced competition (2008, P. 126-127). However, joint ventures should avoid such arrangements in that they are not sustainable and cannot resist forces of the market effectively. After the Second World War, the emergence of the national oils and new competitors became a riddle and therefore threatened it with losing its world market share. As Grant (2008, p. 123) indicates, the immediate competitors had highly centralized system which they employed to get a better grip of the market.
Conclusion It is from the above discussion that this paper concludes by supporting the thesis statement, “the ability of an organization to re-evaluate its systems and restructures its operations in tandem with changing market forces acts as the most important aspect in facilitating its continued market dominance and sustainability”. As it was evidenced by the Royal Dutch Shell Group, organizations should be able to effectively reevaluate the demands of the market in tandem with the prevailing forces and act with speed to prevent losing their market share.
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