Bayer Group is located in Germany; it is a health and chemical global enterprise. The company has three key product divisions which include; Bayer Crop Science, Bayer Material Science (BMS) and Bayer Material Science (Bayer AG SWOT Analysis, 2016). Each one of these product categories has a regional or a country subsidiaries in the main markets. We will focus our attention on the subsidiary of Bayer Material Science which is based in North America.
This paper will offer insights on the benefits and the shortcomings of matrix structures and geographical area structures as pointed out in the case of BMS (Seewald, 2003).
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The objective of this paper is to ascertain whether the headquarters have good faith in promoting the sales of their respective commodities or they are just doing so to promote their self-interests like securing their job.
The CEO for BMS was Greg Babe between 2004 and 2011 (Babe, 2011). BMA had an incredible performance during this duration. It had significant sales improvement in 2005, raising from $2.7 billion in 2004 to $3.5 billion (The Bayer Tapestry, 1988). However, in 2006, it underwent a modest decline in sales to $3.3 billion which lead the BMS to make a radical decision to shut down the BMS headquarters based in Pitts-burgh. The regional structure was viewed as too overstuffed because of the undermining cost competitiveness. However, Greg Babe turned the setback into an opportunity to reshape his firm (Babe, 2011). A meeting was held to come up with goals that would promote a strategic growth of Greg’s branch. The goals were achieved within a period of 18 months.
Every firm chooses to use a business structure that better suits its operation. BMS opted to use geographical area structure organization as well as the Matrix structure (Hilton, 2015). Nonetheless, there are pros and cons of both structures as applied in the Subsidiary Initiative at BMS NA.
Advantages and disadvantages of a geographical structure
The geographical structure is mostly used by multinational enterprises like the Bayer Group (Schollhammer, 1971). This structure groups workers together in a particular geographic location. This form of a structure is usually a complex one, but with proper management, it can easily attain their goals. This is very clear in our case when the company suffered a decline in sales, but after setting appropriate strategies, the Enterprise gained its success back.
Disadvantages of a geographical structure are that implementing a whole new structure the company will incur new costs which will result in adverse effects on the functioning of the enterprise. We have also witnessed difficulty in management due to the complexity nature of this structure. For instance, Babe suffered difficulties in controlling the employees after the company was alleged to be shut down completely.
Advantages and disadvantages of matrix organization structure
The matrix structure involves bringing workers and managers together from various departments to work together toward achieving a goal.
Some of its advantages include efficient information exchange. Since units work closely together, it is easier to communicate and solve a problem (Felin & Powell, 2016). Drawing from our case, after various departments met, they decided not to shut down BMS; instead, they came up with a strategy plan to reshape the company. Information exchange between employees is very critical in solving the needs of the customer and the company at large (Bano, Zowghi, & Sarkissian, 2016). This promoted employee satisfaction and boosted their morale.
Some of the disadvantages witnessed involve internal complexity. Employees were confused on whether to continue working as their CEO had told them or just surrender since there were rumors about the demolition of BMS. This without a doubt damaged the morale of the workers. There was also the expenses incurred in maintaining this structure as well as the internal conflicts. The costs for running this structure were increasing due to the need for double management. The struggle for scarce resources may bring about hostility in the workplace and hinder production.
Ethics on subsidiary efforts vs. Self-interest
It is a bit hard to clearly point out what motivates a CEO of an affiliate organization. A good example is seen in the case mentioned above. BMS took a significant risk in agreeing to Babe’s proposal. In case Babe had failed to keep the promise this means that they would suffer a loss of $70million.
Then again, Babe and his colleagues came up with this suggestion to maximize productivity drowned by self-interest (Jurkiewicz & Giacalone, 2016). BMS had already proposed to shut down BMS NA, and this meant that there would be massive layoffs if this were going to happen. As a result, Babe was impelled to find a solution to this predicament.
It is therefore not easy for multinational enterprises to differentiate between opportunistic maneuvers and good faith. The only solution left is putting it to the test bearing in mind that this could be expensive and risky if the plan fails.
Conclusion
One of the top discussion is on how to properly manage big companies like BMS, either through decentralization or centralization. The two types of organization structure discussed in this essay has both the advantages and disadvantages. This means that the management team has to come up with proper strategic planning that will enhance an excellent performance of the company. With good management, the performance will be significantly improved.
Lessons and Recommendation
The lessons learned from this case is that the matrix structure is a structure used to eradicate the shortcomings associated with the geographic area and global product division structures (Eppinger, & Browning, 2012). It brings people and resources together to function and promotes the products.
When encountered with poor performance scenario like in the BMS case, it is recommended to look at the bigger picture. This is by looking at the strategic growth lens instead of a tactical cost reduction lens. It is also important to note that for there to be a transformation, the company has to take some risks that in the end will result into a positive performance.
References
Bayer AG SWOT Analysis. (2016). Bayer AG SWOT Analysis
Seewald, N. (2003). Bayer Restructures in North America. Chemical Week
Babe, G. S. (2011). The CEO of Bayer Corp. On Creating a Lean Growth Machine. Harvard Business Review
Hilton, J. (2015). Former Bayer Material Science Now Legally and Economically Independent. Automotive Industries .
The Bayer Tapestry: An Unfolding History from 1863 . London: Bayer, 1988. Print.
Eppinger, S. D., & Browning, T. R. (2012). Design structure matrix methods and applications . Cambridge, Mass: MIT Press.
Schollhammer, H. (1971). Organization Structures of Multinational Corporations. Academy Of Management Journal .
Felin, T., & Powell, T. C. (2016). Designing Organizations for Dynamic Capabilities. California Management Review .
Jurkiewicz, C. c., & Giacalone, R. (2016). Organizational Determinants of Ethical Dysfunctionality. Journal of Business Ethics.
Bano, M., Zowghi, D., & Sarkissian, N. (2016). Empirical study of communication structures and barriers in geographically distributed teams. IET Software .
