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Case: Kent Chemical By Barlett And Wining

1348 words - 6 pages

“Kent chemical: Organizing for Internal Growth”

The case “Kent chemical: Organizing for Internal Growth” by Barlett and Wining shows the development of Kent Chemical, a US-based company, from a local rubber producer into a multinational chemical firm which main product divisions are plastic additives, fire protection products and medical plastics. In order to become one of the leading chemical companies in the world, Luis Morales, the president of Kent Chemical, is struggling, after two unsuccessful tries to integrate the regional and the global business, with his decision what the best way to coordinate the company in terms of the organizational change, structure and strategy is.
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Hill, C. (2005) also states the arguments for decentralized which can be summarized as follows: With the power lying only at the top managers decision making can be very difficult in centralization, individualism is supported by decentralization which leads to more motivated employees, it’s a more flexible system, it allows more improved decisions and it can help to gain better control over the company. Horizontal differentiation, on the other hand, talks about how to organize a company in terms of their regional and global subunits (Hill, C. 2005). The different structures of horizontal differentiation are the typical functional structure, typical product divisional structure, international divisional structure, worldwide area structure, worldwide product divisional structure and global matrix structure. To align with the here discussed case, we only look at the international divisional structure and the global matrix structure in detail. The international divisional structure is according to Hill, C. (2005) discussed heavily as it can create conflicts, coordination and hierarchical problems between the subsidiaries and the headquarters. Theoretically, the global matrix structure is best concept to work with, but in reality is has its problems as it very complex. Integrating mechanisms are depending on the size of the company. The bigger the company the more integration, e.g. in terms of communication or coordination, is to be made. Furthermore, to be successful globally as a company, a common knowledge base and culture has to be established. Hill, C. (2005) also differentiate between four general criteria to integrate subunits; direct contact, liaisons, teams and matrix structures.
The story of Kent Chemicals shows the implementing problem with a new organizational structure very well. After two failed attempts to change CEO Luis Morales faces a major decision how to get the company in the desired future state, not only affecting the company’s but also his own future. In 1998 Kent chemicals changed their strategy for the first time to global integration to make it one of the leading chemical companies. Therefore, they took majority leads in their Joint Ventures, acquired new companies and expanded their global presence in order to increase the control over their subunits. Kent chemicals chose centralization for its vertical differentiation to get one strategy for the whole company steered from US. It allowed to have consistency in the company but created the problems with being inflexible and though decision making. Further, with choosing the international division structure for the horizontal differentiation, Luis Morales faced the problems as stated in theory; conflicts were arising between the managers of the subunits and the managers of the US headquarter making it difficult to gain more control and to turn the company into a successfully working international firm. According to Morales the three main problems with this strategy, which...

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