Kent Chemical
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As overseas operations continued to grow, Kent Chemical faces the task of finding the most productive way to combine their domestic and international business operations. In the following report, we will analyze the challenges Kent Chemical faces while expanding globally. Additionally we will discuss the results of the decisions made to address these challenges. Finally, we will share our recommendations for Kent Chemical’s future organizational structure, and the actions that Morales should take to guarantee the success of the business.
Implementation Setbacks
With the goal of implementing a global integrated company, Kent Chemical increased their global presence by taking majority interests in the company’s 15 offshore joint ventures, and acquiring other overseas companies. Although this move increased Kent Chemical’s sales from $139 million in 1999 to $598 million in 2007 (Exhibit 1), the company struggled to align their domestic and international operations. Some of the challenges encountered are below:
New Corporate Reporting Systems: As Kent Chemical worked to acquire majority positions in their joint ventures, corporate reporting systems had been added to allow operations to controlled and financial reports to be consolidated. However, having the data available sometimes caused Morales’ staff to second-guess local country managers; while subsidiaries felt that arbitrary financial targets that were out of touch with their market realities were set.
Subsidiaries Independence: One of the main challenges the company faced was the concern that overseas subsidiaries’ long history of independence would lead managers to protect their self-interests. With no previous history of centralized operations, the efforts to integrate the strategies of Kent Chemical’s overseas operations caused conflicts that would ultimately reach Morales’ desk for resolution.
Regional Organization: Another challenge encountered was the difficulty coordinating issues with global implications within the regional organizations. This caused discrepancies with prices, products and sourcing decisions globally within the company. Also, because the international division had a regional rather than a product-based structure, the global product-developments needs and priorities were rarely communicated to the research group.
Organizational Changes Outcomes
In order to address the challenges Kent Chemical faced, Morales appointed three global business directors (GBDs), who would be responsible for the three lines of business within the new division, Kent Chemical International. This move proved to be unsuccessful, as GBD’s struggled to understand what their role, and regional directors were unclear about how to work with them. Moreover, subsidiaries saw GBDs as interlopers, and often felt that they interfered in local issues where they had neither experience nor understanding. Despite years of service, GBDs were unable to provide a link to the domestic product divisions, or assume the conflict-resolution Morales had been playing.
With the GBD concept struggling, Morales sought to rectify the situation by adding world boards to support GBDs. The boards, which would be responsible for developing strategies for the global business, would