- 10 Marks
Question
Davidson Ltd is an automobile company based in Aba, Nigeria. It has been in
existence for nearly eighty years. The company originally began by supplying
components for small vehicles and was producing equipment during the Second
World War. However, in the nineties, it underwent rapid transformation under
the founder‟s son, Tony. Tony has diversified the company into supplying tricycle
components and spare parts to the Nigerian market. The company now employs
some 500 staff around the country and is well known for the quality of its
workmanship. The company operates under three divisions. One division is
concerned with the manufacture of tricycle components, a second division with
spare parts and the third division undertakes specific one–off work in automobile
and automobile design. The tricycle component division is by far the biggest and
accounts for seventy per cent of the total turnover. The smaller specialist
automobile design division is by far the most profitable in terms of return on
capital employed and it relies a great deal on a senior engineer, Emmanuel, who
has been with the company for more than twenty years.
Recently, the company was invited to send sample components to a Japanese car
manufacturer who is keen to commence operations in Nigeria. These components
are needed within eight months. However, Mr. Tony is concerned that his
company may not be able to meet the strict standard imposed by the Japanese
manufacturer. The deal, if it is sealed, would establish Davidson Ltd as an
important auto component supplier in South East Asia, thus, opening up the
potential for exports. Tony realises that the export potential is great and that any
initiative towards exports would get full backing from the government. While,
this is happening, the spare parts division is also showing signs of growth.
Recent reforms in part of North Africa has made companies in that region to be
very keen to modernise and innovate their old manufacturing processes and
Davidson had received business enquiries from the region.
Tony faces a dilemma. He knows that the opportunities that have presented
themselves would give the company a global presence. At the same time, he
knows that the company is solely under his management as chief executive.
Tony holds eighty percent of the shares. The other two directors hold ten percent
each. Although the other divisions have managing directors, they rely on him for
decision making. The current managing directors are family members. One is a brother in-law and the other a cousin. Their knowledge of the industry and its
workings is generally poor. He made these appointments to please his father so
that he could be left to run the company as he deems fit. Tony knows that to
satisfy the Japanese auto manufacturer, he needs to reorganise the automobile
design division and consider issues of Total Quality Management (TQM). This will
take time and requires that he delegates responsibilities to other divisions.
However, he feels uncomfortable doing this.
The company is at crossroads. The three divisions are doing well, but could do
even better, if their old, bureaucratic and hierarchical systems are reviewed.
Indeed, some of the younger managers and engineers would prefer a more open,
flexible management structure. Some of them have studied both engineering and
management in Holland and the United States, and are keen to see key
innovations in place. While Tony knows that these opportunities highlighted
above should not be missed, he has to ensure that they are handled successfully
so that the future is secured for Davidson Ltd. This requires that he takes some
tough decisions in restructuring the company within a few months.
Required:
Write a report to the Chief Executive of Davidson Ltd addressing the following issues:
a.
i. The key resources and implementation issues facing Davidson Ltd in the scenario above. (15 Marks)
ii. How the key resources will affect strategic choices. (7 Marks)
iii. How implementation issues will affect strategic choices. (8 Marks)
b. How should Tony restructure the company? (10 Marks)
Answer
DAVIDSON LTD: STRATEGIC DIRECTION
To: Tony
From: [Examiner’s Identity]
Date: May 4, 2021
Subject: Strategy Implementation Issues
Key Resources and Implementation Issues:
- Human Resources:
- The automobile design division heavily relies on Emmanuel, a senior engineer whose potential exit could impact operations.
- Management:
- Centralized decision-making and a lack of skilled board members hinder efficient strategy execution, particularly in international expansion.
- Non-current Assets:
- Concerns over quality control reflect challenges in meeting overseas standards, likely due to production limitations.
- Intangible Resources:
- Davidson has a strong reputation in local markets, which supports customer goodwill but may require enhancement for international competitiveness.
- Internal Control and Organisation:
- The divisional structure is effective but suffers from bureaucratic bottlenecks that could delay strategic shifts.
(ii) Impact of Key Resources on Strategic Choices:
- Limited skilled personnel like Emmanuel constrain diversification efforts, particularly as they impact the design division. Without strategic expansion in human resources, Davidson’s ability to penetrate international markets and adopt a TQM approach will be restricted.
(iii) Impact of Implementation Issues on Strategic Choices:
- Bureaucratic and centralized decision-making limit Davidson’s agility in pursuing international opportunities. Addressing these structural limitations is critical to implementing TQM and meeting potential Japanese standards.
b. Restructuring of Davidson should centre on addressing the identified
resource issues:
i. The company currently possesses a pool of young and qualified talents
that if provided needed training and opportunity, could fill Davidson‟s
identified talents gap that can succeed Mr. Emmanuel.
- This skills gap can also be addressed through appropriate
recruitment strategy.
ii. Management: Management restructuring is essential for Davidson to
achieve success in its growth and corporate level strategies. This can
be achieved through: - Expansion of board membership to allow for improved
management effectiveness through the appointment of outside
directors. - The firm could consider leveraging on the current pool of qualified
young talents in its possession. - Training and development of board members to improve their skills
and competence levels. - Decentralisation will bring decision making closer to the points of
activity. This is in line with the philosophy of TQM which it plans to
adopt. - Removal of bureaucratic bottlenecks in decision making process.
iii. Non-current assets: production process improvement could be achieved
through adoption of TQM philosophy or other appropriate quality
improvement management philosophies. This may lead to improved
product quality.
- Tags: Delegation, Implementation, Restructuring, Strategic Resources, TQM
- Level: Level 2
- Topic: Strategic Implementation
- Series: MAY 2021
- Uploader: Kwame Aikins