Quatrostar is a worldwide electronics company that manufactures a wide portfolio of products, ranging from computers, peripherals and other office machinery to telecommunications equipment. It has subsidiaries in 37 different countries and these are grouped into five geographic regions: North America, South America, Europe, the Middle East and the Far East, which embraces Australia. In some countries subsidiaries are only engaged in marketing and distribution, but each geographic region has a number of manufacturing plants. The company has its headquarters in West Germany and commenced its process of international expansion in the early 1980s, first by exporting its products, and eventually by acquiring overseas subsidiaries to replicate the manufacture of products made for home markets. This pattern has been followed up to the present time. However, while most goods made abroad are still designed and developed in Germany, many of them are subject to some degree of customising to meet local market requirements.
Company headquarters assumes responsibility for formulating corporate strategy, which is then relayed to the regions. Each region is headed by its own managing director and team of functional directors. However, there is little collaboration or trade between regions. Without exception, senior personnel and, until recently, most middle managers in overseas subsidiaries were appointed by headquarters, traditionally from people who have made their long-term career with the company. For the last five years, however, the organisation has gradually increased the proportion of local nationals who occupy certain middle management posts, for example in human resource management, accounts, marketing and production.
A number of problems have recently appeared. First, the organisation has seen a significant decline in profitability. Worldwide sales volumes have decreased and competitors seem to have no difficulty in undercutting Quatrostar's prices. Second, the organisation is slow to keep pace with the competition in terms of getting new and innovative product lines into the market. Third, communication between headquarters and subsidiaries is becoming increasingly difficult to handle and a large number of misunderstandings seem to occur. Finally, subsidiaries
are slow to put the new policies of headquarters in place, particularly those concerning the management of human resources.
1.How does someone account for these problems?
Case study: Quatrostar - Further Developments
In view of its declining profitability and competitive performance, nine months ago Quatrostar formed a task force of senior directors to examine its position and remedy the situation. To aid its deliberations, the task force commissioned a consultancy study from the business school of a prestigious American university and one month ago the consultant's report was presented to the board of Quatrostar. Its main conclusions were:
• The electronics industry is one that is characterised by a rapid rate of technical development, which results in very short product life cycles.
• For this reason, the key to success in the industry is a focus on standardised products that can be sold worldwide, but with (mainly cosmetic) modifications to customise them to local market conditions.
• Quatrostar's major competitors all operate as globalised organisations, which gives them significant advantages in terms of costs, flexibility, rapid response to market conditions and the ability to assimilate new technology and incorporate it into products.
• Unless Quatrostar effects a radical shift in the way it is organised (i.e. to become a globalised organisation) it faces a bleak future.
On receiving this news, the managing director was dumbfounded and said, 'What on earth does this mean? We operate in 37 different countries around the world, and if that is not being a globalised organisation, I really don't know what is.'
Using the information above, together with that given in previous Case Study Quatrostar, answer the questions below, giving reasons for your answers.
1. If Quatrostar is not a globalised organisation, what sort of an organisation is it?
2. What steps would Quatrostar need to take to transform itself into a globalised organisation?
3. How difficult do you think it would be to make this transformation and, in particular, what structural changes would be needed?