Introduction to Management (MB111) : Section B (Answers)

1. The global and domestic environment during 1996-99 for the polyester business had adversely impacted almost
every Indian manufacturer except Reliance Industries. Triggered by the Asian currency crisis, the prices of raw
materials fluctuated sharply during this period. Added to it was the Indian government’s skew towards the cotton
fibre industry (which continues till date) and its apathy towards polyester manufactures, which was manifested in
heavy import duty on raw material for polyester as well as the imposition of stiff excise duty. While excise duty
charged on cotton was 9.2 per cent, it was 36.8 per cent for polyester. Polyester was also perhaps the only industry
where the customs duty on raw materials was higher than the customs duty on finished products. In such a stifling
environment, the Indian polyester industry gasped for survival.
The year 1994-96 was a boom period for the polyester industry and Sturdy reaped a good harvest. But the boom
phase also saw the international prices of raw materials shoot up. Besides international price fluctuation, Sturdy
had also to fight major forces in the domestic market. Rival manufacturers, who had economies of scale, resorted
to slashing their prices, thereby forcing producers like Sturdy to follow suit. Consequently, margins came under
pressure. Sturdy, like many other companies, went into the red.
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2. Sturdy has emerged stronger, stable and better positioned to pursue a bold new strategy for growth and profit in
the future. Sturdy Synthetics (I) Ltd. had commenced production through spinning operations in 1989 from
Pithampur in Madhya Pradesh, with an initial capacity of 21,120 spindles, which soon increased to 122,880
spindles per year and Sturdy grew rapidly into one of India’s leading manufacturers and exporters of synthetic
blended yarn by 1992. The turning point came in 1993 when Sturdy undertook the strategic decision to integrate
backwards in the textiles value chain by setting up a Rs. 170 crore integrated polyester plant at Butibori, near
Nagpur. This saw the transformation of the company from that of a pure spun yarn company to emerge as India’s
second largest polyester player, with an installed capacity of 280,000 tons per annum. Sturdy also went for
technical collaborations with Du Pont of USA and Toyobo of Japan. Thus, Sturdy Synthetics, the country’s second
largest polyester manufacturer, achieved a remarkable turnaround after three tumultuous years in 2000-01.
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3. The success of Alice Thornton’s proposal to decentralize the rules and procedures of Cosmo Plastics will depend
how she determines the optimum amount of decentralization suitable for the organization, which is affected by the
following factors:
History of the organization: Decentralization of authority depends on the way the organization has been built up
over a period of time. An organization that has been primarily built up by an individual’s efforts tends to be a
highly centralized structure. In contrast, an organization that has grown through a number of mergers,
amalgamations, and consolidations will be forced to decentralize because of varied product lines.
Knowledge and experience of executives: The availability of competent managers is a crucial factor influencing
the decentralization of authority in an organization, because those who exercise authority must have the requisite
the competence to do so. When subordinates are skilled, trained, experienced, and sincere, the conditions are
conducive for decentralization. Decentralization, in turn, helps managers to develop their individual skills and
abilities, thus providing a training ground for good managers.
Size of the organization: As an organization grows in size, there is a tendency for decentralization to increase. In
a large organization, numerous decisions are to be taken at different places. In such cases, it becomes difficult for a
single authority to coordinate the functions of different departments. Managers at various levels have to be
consulted and this would require a lot of time due to the complexities of a large organization.
Geographical dispersion: Decentralization is beneficial to organizations operating from various locations. Top
executives often find it impossible to keep abreast of the details of operations in various locations. In such cases,
control exercised by the top management, from the headquarters, may prove to be ineffective, because they are not
likely to be aware of local conditions and problems.
Technical complexity of tasks: It is difficult for top management to keep abreast of all technological
developments and handle related issues without consulting a research scientist. An organization that continues to
take up highly technical projects has to inevitably delegate authority to the centers of knowledge.
Timeframe of decisions: When authority is decentralized, decisions are not required to be referred up through the
hierarchy. The decisions are made closer to the scene of action and therefore, are faster, accurate, and timely.
The importance of a decision: Generally, decisions involving costly actions are left to the top management,
while the decisions involving routine, monotonous, and minimal cost actions are delegated to the subordinates.
Planning and control procedures: To be effective, decentralization should be supported by a well-defined
system of control procedures on order to ensure that the performances at different levels in the organization are as
planned. The higher the degree of development and use of control techniques, the better is the prospect for
decentralization.
Views of subordinates: If the subordinates are dynamic and well-trained, they will accept ant authority delegated
to them and strive to make better use of their abilities to achieve the goals. But, if the subordinates are motivated
by security and psychological needs, they might perceive the additional responsibility as a threat, not a challenge.
Environmental influences: Decentralized structures are more adaptive, and therefore, more suitable to firms
operating in unstable environments. Thus, organizations characterized by fast growth and a dynamic environment
tend to need a greater degree of decentralization.
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4. The following factors will affect delegation of authority in Cosmo Plastics:
The factors affecting delegation of authority can be studied from three aspects. These are:
The delegator’s (superior’s) aspect
The delegatee’s (subordinate’s) aspect
The organizational aspect
The delegator’s aspect: The following characteristics of the superior play a vital role in delegation of authority.
Love for authority
Fear of subordinates
Fear of exposure
Attitude towards subordinates
Superior’s personal traits and experiences
The delegatee’s aspect: The following characteristics of the subordinate also play a vital role in delegation of
authority.
Fear of criticism
Lack of information and resources
Lack of self-confidence
Rewards and incentives
Organizational factors: Organizational factors that affect the delegation of authority at various levels include:
The policy centralization or decentralization
Availability of managerial personnel
Control techniques
The management philosophy etc.
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5. The management of New England Arts Project can very well adopt organization development to improve
productivity. OD aims to achieve the following objectives:
􀂃 Deepening the sense of organizational purpose and make individuals reconcile with that purpose.
􀂃 Encouraging a problem-solving rather than a problem-avoiding approach to organizational problems.
􀂃 Strengthening interpersonal trust, cooperation, communication, and support.
􀂃 Increasing individual responsibility for planning and implementing.
􀂃 Developing a satisfying work experience capable of enhancing enthusiasm.
􀂃 Supplementing formal authority with authority based on personal knowledge and skill.
􀂃 Encouraging personal willingness to change.
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6. The employees of New England Arts Project have offered resistance to the introduction of computers due to the
following factors:
Habit: As human beings, individuals are creatures of habit. Life is complex enough; individuals do not need to
consider the full range of options for the innumerable decisions they may have to make everyday. To cope with
this complexity, they all rely on habits or programmed responses. When confronted with change, this tendency to
respond in their own accustomed ways becomes a source of resistance.
Security: Individuals with a high need for security are likely to resist change because it threatens their feelings of
safety.
Economic factors: Changes in established work routines or job tasks can arouse economic fears, if people are
concerned that they will not be able to perform the new tasks or routines to their previous standards, especially
when their pay is based on their productivity.
Fear of the unknown: Changes substitute uncertainty and ambiguity for the known. When faced with change in
production techniques for instance, employees may fear they will be unable to learn the new techniques and
perform. They may, therefore, develop a negative attitude toward the change and behave dysfunctionally.
Self-interest: Though employees can and do identify with their organizations, they are also concerned about
themselves. In return for doing a job, they expect adequate pay, job security, satisfactory working conditions, and
certain amounts of appreciation, power, and prestige. When change occurs, employees face a potentially
uncomfortable period of adjustment as they settle into a redesigned job or a new organizational structure.
Selective information processing: Individuals shape their world through their perceptions. Once they have
created this world, it resists change. Individuals selectively process information in order to keep their perceptions
intact. They hear what they want to hear and ignore information that challenges the world they have created.
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7. Martin Welk can take the measures to overcome resistance to change:
Education and communication: This involves explaining the need for and the logic of change to individuals. In
other words, it involves providing adequate information and making sure that the change is clearly communicated
to those it will affect. This strategy basically assumes that the source of resistance lies in misinformation or poor
communication, and if employees are made aware of all the facts and misunderstandings cleared up, resistance will
subside. Communication can be achieved through face-to-face discussions, formal group presentations, or special
reports or publications.
This method is commonly used when there is lack of information or inadequate information and analysis. Using
this method to overcome resistance to change can be advantageous in the sense that, once persuaded, people will
often help implement the change. However, this method can be very time consuming if many people are involved.
Participation and involvement: Resistance tends to be less pronounced when the individuals who will be
affected by a change are allowed to participate in planning and implementing it. Personal involvement through
participation tends to diffuse both rational and irrational fears about change. This strategy is used when the
initiators do not have all the information they need to design the change, and others have considerable power to
resist.
Assuming that the participants have the necessary expertise to make a meaningful contribution, their involvement
can reduce resistance, obtain commitment, and improve the quality of the change decision. However, against the
advantages are the negatives: great time consumption and potential for a poor solution.
Facilitation and support: when fear and anxiety are responsible for resistance to doing things in a new and
different way, encouragement and support from the management in he form of special training, job stress
counseling, and compensatory time off can be helpful. This method when people resist change because of
adjustment problems. However, this method is time-consuming and expensive and its implementation offers no
assurance of success.
Negotiation and agreement: Negotiation can be a particularly important strategy when one group perceives that
it will be hurt by the change and is in a position to cause the change effort to fail. In this method, the management
neutralizes potential or actual resistance by exchanging something of value for cooperation. This method is
sometimes a relatively easy way to avoid major resistance. Yet one cannot ignore its potentially high costs.
Additionally, there is the risk that, once management negotiates with one group to avoid resistance, it is open to
the possibility of being threatened by other individuals in positions of power.