Bicycle Case

Case setup (facts offered by interviewer):
q Your client is a manufacturer of bicycles
q They have been in business for 25 years
q They manufacturer and sell three categories of bicycles:
Ø Racing bikes: High end, high performance bikes for sophisticated cyclists
Ø Mainstream bikes: Durable, but not overly complicated bikes for everyday riders
Ø Children’s bikes: Smaller, simpler versions of their mainstream bikes for children
q Profits at your client have decreased over the past five years

Question:
q What is driving the decline in overall profits?
q What recommendations might correct the situation?

Suggested solutions:
The first question is to determine what has caused overall profits to decrease. To accomplish this the candidate must first understand what has transpired in each of the three product categories over the past five years during which profitability has slipped. The following are questions and answers that would be provided in an interview scenario.

q What are the client’s margins for a bicycle in each of the three segments?
Racing: Cost = $600/unit, Profit=$300/unit
Mainstream: Cost = $250/unit, Profit = $75/unit
Children’s: Cost = $ 200/unit, Profit = $50/unit

q What has happened to the market size of each of the three segments over the past five years?
Racing: Has remained constant at its present size of $300MM
Mainstream: Has increased at 2% growth rate per year to its present size of $1.0B
Children’s: Has increased at 3% growth rate per year to its present size of $400MM

q What has happened to our client’s market share in each of these segments?
Racing: Market share has decreased from 60% to 30%
Mainstream: Market share has increased from 0% to 5%
Children’s: Market share has increased from 0% to 3%

q Who are the client’s major competitor’s in each market segment? What has happened to their market share in each segment over the past five years?

Racing: There is one main competitor and a host of small firms. Your main competitor has increased market share from 30% to 50%

Mainstream: There exist many, large competitors, none of which holds more than 10% of the market

Children’s: As in the mainstream segment, there are many competitors, none with more than 10% of the market

The above information provides enough information to put together a picture of why profits have decreased over the past five years : Your client, with a commanding position in a flat market segment (racing), expanded into new segments (mainstream and children’s). As this occurred, market share decreased dramatically in the most lucrative segment (racing), creating an unfavorable mix.

The extent to which profits have decreased can be deduced from some quick math : profits have slipped from $60MM five years ago (=60% x $300MM x 33% racing margin) to $44MM today ( = (30% x $300MM x 33% racing margin) + (5% x $1B x 23% mainstream margin) + (3% x $400MM x 20% children’s margin)).

The dramatic decrease in market share in the racing segment is at this point still unexplained. Questions that would help formulate an explanation include:

q Have there been any major changes in product quality in your client’s racing product? Or in its main competitor’s racing product?
No

q Have there been any major price changes in your client’s racing product? Or in its main competitor’s racing product?
No

q Have there been any major changes in distribution outlets for your client’s racing product? Or for its main competitor’s racing product?
Yes. Previously your client and its main competitor in the racing segment sold exclusively through small, specialty dealers. This remains unchanged for the competition. Your client, however, began to sell its racing bikes through mass distributors and discount stores (the distribution outlets for mainstream and children’s bikes) as it entered the mainstream and children’s segment.

q How do the mass distributors and discount stores price the racing bikes relative to the specialty stores?
Prices at these stores tend to be 15 to 20% less.

q What percent of your client’s racing sales occur in mass distributors and discount stores?
Effectively none. This attempt to sell through these distributors has failed

q How has the decision to sell through mass distributor’s and discount stores affected the image of the client’s racing product?
No studies have been done.

q How has the decision to sell through mass distributor’s and discount stores affected your client’s relationship with the specialty outlets?
Again, no formal analysis has been performed.

Although some analysis and/or survey should be performed to answer more conclusively the last two questions, a possible story can be put together. There has been no appreciable change in either quality or price (or any other tangible factor) of your client’s racing product relative to its competition. It is not the product that is the problem, but rather its image. As your client came out with lower end, mainstream and children’s products and began to push their racing segment through mass distributors and discount outlets, their reputation was compromised. Additionally, the presence of the racing products in the discount outlets has put your historic racing distributor (the specialty shops) in a precarious position. The specialty shops must now lower price to compete, thereby cutting their own profits. Instead, they are likely to push the competition’s product. Remember, your client has no direct salesforce at the retail outlets. The specialty shops essentially serve as your client’s sales force.

The above analysis offers an explanation of what has affected the top side of the profitability problem. Still to be examined is the cost, or bottom side, of the profitability issue. Questions to uncover cost issues would include:

q How does the client account for its costs?
The client has a single manufacturing and assembly plant. They have separate lines in this facility to produce racing, mainstream and children’s products. They divide their costs into the following categories: labor, material and overhead. Overall costs have been increasing at a fairly hefty rate of 10% per year.

q What is the current breakdown of costs along these categories for each product segment?
Racing: Labor = 30%, Material = 40%, Overhead = 30%
Mainstream: Labor = 25%, Material = 40%, Overhead = 35%
Children’s: Labor = 25%, Material = 40%, Overhead = 35%

q How has this mix of expenses changed over the past five years?
In all segments, labor is an increasing percentage of the costs.

q Does the basic approach to manufacturing (i.e. the mix of labor and technology) reflect that of its competition?
Your client tells you that there is a continuing movement to automate and utilize technology to improve efficiency throughout the industry, but it is his/her opinion that their approach, maintaining the “human touch”, is what differentiates them from the competition. (Unfortunately, he’s right!!)

q Is the workforce unionized?
Yes

q What is the average age of the workforce?
52 and climbing. There is very little turnover in the workforce.

q What is the present throughput rating? How has it changed over the past five years?
Presently the plant is producing at about 80% of capacity. This has been decreasing steadily over the last several years.

q What is the typical reason for equipment shutdown?
Emergency repair

q Describe the preventive maintenance program in effect at the client’s facility?
Preventive maintenance is performed informally based on the knowledge of senior technicians.

q How often has equipment been replaced? Is this consistent with the original equipment manufacturer’s recommendations?
The client feels that most OEM recommendations are very conservative. They have followed a philosophy of maximizing the life of their equipment and have generally doubled OEM recommendations.

The above information is sufficient to add some understanding to the cost side of the equation. Your client has an aging workforce and plant that is behind the times in terms of technology and innovation. This has contributed to excessive breakdowns, decreased throughput, increased labor rates (wages increase with seniority) and greater labor hours (overtime to fix broken machines).

In proposing recommendations to improve the client’s situation, there is no single correct approach. There are a number of approaches that might be explored and recommended. The following are some possibilities:

q Abandon the mainstream and children’s segment to recover leadership in the racing segment
Issues to consider in this approach:
Ø How much of the racing segment is “recoverable”?
Ø What are the expected growth rates of each segment?
Ø How badly damaged is the relationship with the specialty outlets?
Ø Are there alternative outlets to the specialty shops such as internet sales?
Ø How will this move affect overall utilization of the operating facilities?

q Maintain the mainstream and children’s segment, but sell under a different name
Issues to consider in this approach:
Ø Is there demand among the mass and discount distributors for bicycles under their name?
Ø What additional advertising and promotions costs might be incurred?
Ø What are the expected growth rates of each segment?
Ø What is driving the buying habits of the mainstream and children’s market?

q Reduce costs through automation and innovation
Issues to be considered:
Ø What technological improvements are to be made?
Ø What are the required investments?
Ø What are the expected returns on those investments?
Ø How will these investments affect throughput?
Ø To which lines are these investments appropriate?
Ø Are the mainstream and children’s segments potentially “over-engineered”?
Ø What impact will this have on the required workforce levels?
Ø If layoffs are required to achieve the benefits, what impact will this have on labor relations?

q Reduce costs through establishing a formal preventive maintenance program
Issues to be considered:
Ø What organizational changes will be required?
Ø What analysis will be performed to determine the appropriate amount of PM?
Ø What training is required of the workforce?
Ø What technical or system changes are required?
Ø How will the unionized workforce respond?

Key takeaways:
This case can prove to be lengthy and very involved. It is not expected that a candidate would cover all of the above topics, but rather work through selected topics in a logical fashion. It is important that the candidate pursue a solution that considers both revenue and cost issues to impact profit. Additionally, a conadidate’s ability to work comfortably with the quantitative side of this case is important. The above recommendations for improving profitability are just a few among many. The candidate may come with their own ideas.

Beauty Asia: Cosmetics Case

Cosmetics Case

Situation:

BeautyAsia (BA) is a health and beauty consumer products company headquartered in Malaysia. It manufactures and sells a line of cosmetic products ideally suited for the Malaysian marketplace. Although it has been a successful company for over twenty years, it has been losing money for the past two years and its market share has declined. The CEO has asked you to assist in diagnosing the problem and generating a few possible solutions.


Question:

What should BeautyAsia do to restore its profitability?


Suggested Frameworks:

Given the client’s decline in market share, the 3Cs model (i.e., Competition, Competencies, Customers) is an effective framework.


Key Facts (to be shared as the case progresses):

Company
· Market share declined from 90% to 60% in the past two years.
· Manufacturing is excellent
· Inventory management systems are unsophisticated and ineffective, resulting in excess inventory and order fulfillment problems
· Brands are widely recognized throughout Malaysia
· No new products have been launched in the past eight years
· BA sells its health and beauty products primarily through local mom and pop shops (i.e., convenience stores)
· Management considered selling its current products outside Malaysia, but has been distracted by problems in its home country


Competitors
· Several large multinational manufacturers have entered the market
· Competitors have flooded the market with new products
· Multinational competitors sell their products through supermarkets

Consumers
· As a result of multinational competitors entering the market, consumers have been exposed to new types of products and their health and beauty product tastes have become broadened and become more sophisticated

Products
· BA has multiple product lines ranging from lipstick to skin creams
· BA’s products appeal to price-conscious consumers
· The health and beauty products industry is growing approximately 15% per year

Channels
· BA products are currently sold through small proprietary shops
· Supermarkets are becoming increasingly popular in Malaysia
· Supermarkets have high order fulfillment and stocking requirements


Good Conclusions:

· Multinational competitors are creating a new distribution channel for health and beauty products. The channel shift is causing BA to lose market share. BA needs to update its inventory systems to compete in the new channel and reduce its costs.
· Competitors are driving changes in consumer tastes toward greater product variety and quality. BA has not kept pace with new product introductions. BA needs to improve its marketing/market research.


Excellent Conclusions:

· BA’s manufacturing expertise gives it an opportunity to sell high quality private label products at a discount to current prices in the supermarkets.
· There is danger in challenging multinational competitors by offering a wider assortment of products in the supermarket channel. Alternatives for BA include: strengthening its position in the local shop channel; focusing on profitable customer niches (premium, low price, etc.); targeting only certain product categories like lipstick and blush for distribution through supermarkets.
The cost to BA of regaining its lost market share is extremely high. BA may be better off preventing further loss in market share and focusing on improving its current profitability instead

Supplies Mate, Office Supplies Distributor Case

Situation:

Supplies Mate (SM), a distributor of office supplies in Central London, has experienced declining profitability over the past five years.
Question:

How can the distributor address this profitability trend?
Suggested Frameworks:

Profitability model with emphasis on understanding fixed vs. variable operating costs.


Key Facts (to be shared as the case progresses):
Company
· Profitability has slipped from 12% to 8% over the past five years
· Revenues have grown by 15% over the past five years
· SM distributes from one central warehouse in downtown London that it has owned for 20 years
· SM has built a reputation for customer service, “Personal on-time delivery and support every time.”

Customers
· Large businesses (60%), medium-sized business (20%), small businesses (20%)
· Many of the medium-sized and most of the small business accounts were acquired recently and are located on the perimeter of the city (not to be given unless asked for specifically).

Competitors
· Fragmented industry
· Client is one of the largest and most successful distributors
· Category killer OfficeMax has just entered the market, but the client’s revenues have grown due to its focus on customer service

Products
· Sells a full-line of office supplies (e.g., paper, pens, toner), “All your office supply needs. “

Order Fulfillment
· Most orders take over the phone and processed by data entry specialists, some large customers transmit order electronically
· Orders appear on terminals as individual line items, several line items may comprise an order
· Stock pickers take an order, pick all the items and send the completed order to packaging, staging and distribution
· Trucks are stocked each morning with deliveries for that day
· Company-employed drivers deliver to clients

Costs
· Industry standard costs as office supplies are commodities
· Typical fix costs are property, plant and equipment, technology infrastructure and some portion of labor are utilities
· Typical variable costs are supplies, labor, fuel, etc.
· Cost are comparable to competitors using the same data entry and order picking methods
· Sixty percent of order fulfillment costs are fixed
Good Conclusions:

Conclusions will address cost problems. The order picking system and delivery systems can be rationalized to lower costs. Orders can be grouped and picked simultaneously by one picker or some kind of “assembly line” picking system can be proposed. Alternative delivery systems (i.e., Federal Express or the like) can be proposed, but likely at the expense of personal customer service. All these options are possible, but would likely lead to minimal cost reductions.

Excellent Conclusions:

Conclusion will recognize this as a revenue problem. The company has been growing revenue by adding unprofitable accounts. Many of the newly acquired small and medium-sized accounts have the same order fulfillment and customer service costs as larger accounts, but do not generate an adequate volume and are therefore, unprofitable to service under the existing business model. Additionally, smaller businesses often make a large number of smaller orders. Rationalizing the client list or offering a reduced level of service to small and medium-sized clients can yield immediate gains in profitability. Candidates should offer creative solutions to servicing smaller clients profitably.

Case Summary: Proctor & Gamble: Organization 2005 (A)

Harvard Business School Case Summary of Proctor & Gamble: Organization 2005 (A) by MikolajPiskorski and Alessandro L. Spadini

Problem : Durk Jager , had introduced a restructuring program named “Organization 2005” – designed to accelerate sales and innovations. In past P&G chain of formal command put geography first, followed by product and function. In new design, P&G was structured as 3 interdependent global organizations, one organized by product category, one by geography and one by business process.

Lack of immediate results, job reductions, reduced employee morale led to reduced profits and stock price reduced to half in last six months.

Organizational Structure: Two different models for US and Europe were adopted, as US market was more homogenous, a nationwide brand and product division management was adopted. Western Europe is a heterogeneous market with different languages, culture and laws therefore a decentralized model was adopted.

United States

The organizational model was developed on two key dimensions: functions and brand. Brand manager has responsibility for profitability and matching company strategy with product category. Brand manager has access to strong divisional functions. It was more product centric and costlier. There was competition within brand managers and this was the era when max product innovation took place.

In 1987 structure was changed and functional units were centralized. Brands would be managed as components of category portfolios by category general manager, to whom both brand and functional managers would report. Each business unit has it’s own sales, product development, manufacturing and finance functions. To retain the functional strength a matrix reporting structure was set up whereby functional leaders report directly to their business leader and also have reporting relationship to their functional leadership. Again product managers were more powerful and responsible for profit and loss, matrix structure create ambiguity as man can’t serve two masters. Interdivision communication improved.

Western Europe

P&G organizational model developed along three key dimensions: Geography , function , brand. The result was a portfolio of self- sufficient subsidiaries led by country GM with local market expertise. New technologies were sourced from US , tested in local R&D and manufactured in each country. there was high product launch time and sometimes it was as high as 14 years !

In 1963 , the European Technical Center (ETC) in Brussels was establish to act as centralized R&D and process-engineering unit. ETC develop products and manufacturing process that country managers could choose to adapt and launch in their own countries.

Problems in Europe: Corporate R&D were completely disconnected from US operations. European functional organizations were also in isolation from US counterparts. Un standardized , sub-scale production was expensive and unreliable. Country R&D were expensive to maintain.

By early 1980s , An attempted was made to promote cross-border cooperation and focus was shifted from country management to product-category management. Headquarters at Brussels encouraged formation of regional committees and eliminate needless product variations. The strategy was successful and Entire Europe was divided into three sub regions, whose leaders were given secondary responsibility for coordinating particular product category across the entire continent. Country GMs were replaced with multiple country product-category GMs who report to the division VPs.

Global Matrix

In late 1980s, expansion opportunities in Japan and other parts of world led P&G to develop globalization model. Corporate functions in Brussels still lacked direct control of country functional activities. P&G started migrating to a global matrix structure, country functions were consolidated into continental functions reporting through functional leadership and direct reporting through the regional business manager. All country category GMs had reporting to their global category president. The global category presidents and R&D VPs developed product category platform technologies that could be applied to global branding strategies. In 1995 this structure was extended to rest of the world through creation of four regions – North America , Latin America , Europe /Middle East/Africa and Asia.

Regionally managed product supply groups could extract massive savings by consolidating country manufacturing plants and distribution centers into high scale regional facilities.

Global Matrix Problem

Strong regional functions produced extraordinary advantages,but in mid 1990s created grid lock. Most functions nominally had straight line reporting through regional management and also reporting through functional management, the function retained a high degree of de-facto control. They develop their own strategic agenda, maximize power, do not coordinate with other functions and business units. Regional managers were responsible for profit and loss statement, they often hesitate to launch a particular product even if it made sense for the company strategically because it could weaken their upcoming profit and loss statement. As regional managers were responsible for profit and loss they were hesitate to launch new product.

Organization 2005

In 1998 , P&G started a 6 years restructuring program – organization 2005.

• Voluntary separations of 15000 employees by 2001
• 45% job separations from global product-supply consolidation.
• 25% from exploitation of scale benefits arising from standardized business process.
• Eliminate 6 management layers , reducing the total from 13 to 7
• Dismentaling matrix organization and replacing with interdependent organizations: Global Business Units, Market Development , and a Global Business Services managing internal business process.

Analysis of Organization 2005

• Focus was more on rolling out new products at faster rate. Implementation of 3M concept i.e product launched in last 3 year should make up certain percentage of total turnover.
• Previously organization was more decentralized and centralization coupled with separations and negative growth rate has weaken moral of employees
• Jager decided that P&G would sell its products under the same name all around the world. So in Germany, the name of its dishwashing liquid suddenly changed from Fairy to Dawn
• Large level of transfers (2000 from Europe to Geneva ) and relocation led to moral and behavioral changes.

Paradoxical Twins: Acme and Omega Electronics

Case Symmary for "Paradoxical Twins: Acme and Omega Electronics" by John F. Veiga as discussed and presented in class

After Technological Product was sold out it’s two plants under electronic division become two firms Acme and Omega Electronics. Both of the firms are competitor if each other , Acme had annual sales of $10 million and 550 employees and Omega had annual sale of $8 million and 480 employees. Acme is consistently more effective and achieve greater net profits.

Organizational differences between Acme and Omega

Acme

• Retained original management and promoted GM to president.(Mr John)
• Well defined organizational structure
• Decisions taken by top management without consulting manufacturing dept.
• Well defined job responsibilities

Omega

• Hired new president and upgraded several existing personnel within plant.(Mr. Jim)
• Organizational chart seems like artificial barrier.
• Filling people who could not contribute to solution (participative management)
• No well defined job specification

Both of these firm competed for a major photocopier manufacturer’s project. Photocopier firm gave 2 weeks time to manufacture 100 prototypes each. Based on the prototype photocopier manufacture will award the final order.

Prototype Development at Acme

Mr John president of Acme , issued a memo to purchase department , drafting department, Industrial Engineering dept. and all heads and executives indicating time constrains.

Purchase dept. notice that a component could not be purchased for next 2 weeks. Acme decided to built the prototype except for the one component and add component later.

In haste to make things going production foreman ignored the normal procedure of contacting the methods engineers and set up assembly line and started assembly.

Method engineers complained to head industrial engineer, who immediately complaint to plant manager. Plant manager ignored the complaint.

Later , a design error was identified and photocopier manufacture instructed Acme to rectify the problem. The alteration in design , lead to disassembly and unsoldering of several connections.

After design error was rectified missing components were installed by again disassembly. This increased the time of production and final prototype was sent without inspection.

Prototype Development at Omega

A meeting was called with all head of the departments , criticality of issue was explained and department heads agreed to start process at their end.

Purchase dept. notice that a component could not be purchased for next 2 weeks. Head of the engineer suggested for substitution. Head of mechanical department stated that in absence of the component assembly time and cost will increase.

Electrical department inspected the design and came up with substitute.

While building the unit they discover the error in design, Error was corrected and changes were approved from photocopier manufacturing firm.

They developed the prototype before the deadline and final prototype was sent after inspection.

Result

Acme had delivery delays. Acme’s 10 /100 units were found defective. Omega’s all prototype were passed. The final contract was split between the two firms. Acme reduced its unit cost by 20 percent and was ultimately awarded the total contract.

Case Analysis

Acme had a well defined organizational structure but was information flow was unidirectional. Direct contact between management and technical experts was lacking. As one of the employee has mentioned that, “ I wish I had a little more information about what is going on”. Interdepartmental communication was only possible at management level.

In case of Omega , It’s president was from a research laboratory and thus respect input of every one. Organizational structure and work allocation was not clear. Departmental communication was strong, when purchase department raise concern for delay in a particular component there was prompt response from electrical department for substitution and mechanical department told that without this particular component cost and assembly time will increase. Information was flowing in both directions without routing it from president. This enabled Omega to manufacture at time.

In long run, as we know that Acme was more successful than Omega. This could be attributed to the fact that job allocation was not clear. Moreover information flow was better in Omega but sometimes such information flow also create hindrance by creating interference in each other’s domain.

HBS: Executive Decision Making at General Motors

In 1908, entrepreneur and visionary Billy Durant had created the first automotive conglomerate and the industry’s first vertically integrated company through a series of mergers and acquisitions. There were 25 automobile manufactures , suppliers and others who operated independently and report directly to Durant. There were duplication , internal competition and high cost of production. By 1920 due to poor management and economic recession , Durant lost control of the company to the Dupont family. The Doponts appointed Alfred P. Sloan to reorganize GM’s structure and management processes to be line with Dupont strategy

Sloan Strategy
Three major strategies
Ingenious Marketing policy : Pricing of various different cars from economic class to deluxe. Within the company there would be no duplication in the price fields. GM had car for every purse and purpose which gave competitive advantage from its competitors.
Commitment to innovation: Innovation includes annual vehicle change, high compression , over head valves , V-8 engines, automatic transmissions they also include financial innovations like credit financing facilities.
International Diversification: GM began exporting of cars in 1925 and the purchased British vehicle firm Vauxhall in 1925, German operation Opel in 1929 and Australian Holden in 1931.

Structure
Sloan devised a multidivisional structure to replace Durant’s loose management system. The system was known as “decentralization with coordinate control”. A General Manager run each car division, which contain assembly, production, engineering and sales. General Motor’s subsidiary and many assembly plants in 15 counties operated independently. Divisions were aggregated in group and each group was headed by group executive. This role reduced number of direct reports to CEO. Assisting CEO in his role was a Management Committee. Members of this committee included president , chairman , CEO, CFO, any vice – chairs and executive vice presidents. Group executives did not serve on Management Committee. There was a policy group which had responsibility for supporting Management Committee. The Heads of each staff area such as finance, purchase, personnel , engineering chaired the policy group.

Policy group met monthly to set standards and policies and to make recommendation to the Management Committee. Policy group had no funding authority. Executive would review proposals with General Manager and would then take proposal to the monthly meeting of policy group. That policy group would then decide on the matter or make a recommendation to the management Committee.

GM sales were large to cover costs of plants dedicated to single model of car, and to absorb the duplication of functions , processes and competitive inside the organization.

Problems Started 1960s to 1990s
Competition increased from inside and outside, divisions were competing with each other for market share, there was brand confusion in market, new car manufacturers have entered market with low cost cars, and govt. tightened regulation and standards for environment and safety. Unlike its foreign competitors GM was not able to respond quickly to market changes and duplication, confusion and resistance continued in GM.

In 1960s and 1970s, cost and product proliferation consideration led to a limited consolidation of some of the assembly/manufacturing operations into a more centralized assembly division. More focus was given towards costs than on revenue. North American operations were restructured into a new organization with two car groups. The Buick, Oldsmobile, Cadillac (BOC) group making large cars and Chevrolet, Pontiac , and Canada (CPC) group focused on making small cars.

Despite change in organizational and external environment, the management committee and Policy Group stayed roughly the same. The reorganization of 1980s slows down decision making. It added one more layer of required reviews on top of divisional management review. Senior management becomes more internally focused. Policy Group staff shifted their focus from recommendation to gathering of data to support particular position. There were pre-meeting to avoid surprises at regular meetings and lining up of votes before meeting.

By 1990s there was fear for its survival, amid rumors of bankruptcy.

Restructure 1992
In 1992 , board of directors acted and then chairman was replaced with Jack Smith. Jack Smith reduced overlapping of product lines by eliminating similar competing models, developed common systems for product development, and eliminated two vehicle group structure and policy group.

Established North American Operation Board to manage North America and globally combine remaining regions into a General Motors International Operations organization at Zurich. Subsidiaries outside US like Opel and Holden continue to operate as independent organization.

In 1998, Single Automotive Strategy Board (ASB) was established, chaired by COO. Smith eliminated GM International Operation organization and strategy Board. Leaders of critical global processes in now report directly to CEO.

Matrix organization was introduced. Four regional presidents formed the vertical columns. The horizontal rows were made up of Global Process Leaders, representing the critical functions. Staff in each region reported directly to both the global process leader of their function and to the region president.

Policy and decision making
The four regional Presidents and their strategic board was responsible for developing , reviewing and approving regional operating budget and business plans. Decisions were taken at regional level and “Notice of Decision” were sent to the ASB to keep it informed.

Global process Leaders were responsible for their functions across the entire company. They had their own council which met monthly or quarterly.

Regions were initially given dominating role in the matrix. Salaries and other expanses for functions were included in or allocated to the regional budget. The CEO and CFO set profit targets and allocated capital and engineering budgets to the four regions. Functions with only a few exceptions, did not have capital budget.

Automotive Strategy Board
The regional strategy board and the global process councils came together at ASB, which along with GM’s board of directors made the major decisions for the company.

was responsible for the company’s over all strategic direction.
made decisions about financial commitments and resource allocation.
ASB review and approve corporate budget
Global process Leaders propose new policies to ASB and policy was formulated

ASB staff was required to make pre-meeting preparation. ASB staff open their secure website where all planned presentation were posted. ASB member was expected to review and comment on material and vote on them. Voting helped to eliminate topics where there might already be agreement and to focus the discussion on remaining topics.
They were required to funnel questions to appropriate presenter who were expected to focus their time in the meeting on those questions.

Supporting Matrix
The regional presidents had to take responsibility of geographic activities and global process leader. This gives better sense of balance. Each ASB member was given individual objective with one week to respond. To make ASB meeting run smoothly and ensure good interaction ground rules and guidelines were established. ASB director was responsible for managing agenda and maintaining action –items and approval list.