Practise analysing differences between leadership and management using IB Business Management HL 2.3.2 questions and mark schemes.
Royal Danish Bearings
Royal Danish Bearings ( RDB ) is a successful multinational company operating in the ball bearing industry. RDB was set up in 1915, in Denmark, by a Danish machinist called Henrik Holstein. Henrik was a visionary. He foresaw the expansion of the ball bearing industry in the twentieth century, which was largely due to the growth of the automotive sector. Ball bearing technology contributed to engineering progress throughout the twentieth century, especially in the secondary sector of the economy. Today, the outlook of the ball bearing industry is still promising: its market size is predicted to further expand over the next decades. "High-tech industries" such as computer software and artificial intelligence attract considerable attention and capital; however, most global industrial output continues to be mechanical devices. For example, ball bearings are found in all types of vehicles, such as in gearboxes and wheel suspension; there are even ball bearings in fighter jets and space shuttles. RDB has always operated in the business-to-business (B2B) market. Throughout the twentieth century, it expanded by internal/organic growth. Consistent with business thinking of that era, the company concentrated its manufacturing in three megafactories (very large factories) located in Denmark, northern Germany and Sweden, where the workforce had become highly skilled in operating machinery for industrial production. Benefiting from several economies of scale, RDB created thousands of jobs, supporting the "company towns" where they were the main employer, held in high esteem both locally and regionally. In the 1930s, RDB 's market position was determined by the high quality and high price of its ball bearings. RDB's two main competitors were UAB and FIB; UAB 's ball bearings were medium quality and medium price, and FIB 's ball bearings were low quality and low price. Immediately after the second world war, RDB began to face competition from new Japanese companies, which used their low labour costs to gain entry into the ball bearing market. Thanks to its well-established reputation for high quality, RDB maintained its market share. By the 1970s, the competitive environment changed again. As Japan's economy developed, wages rose substantially. To remain competitive, Japanese companies moved to just-in-time production. Using this method, they could respond faster to specific customer needs. Their flexibility became their unique selling point (USP); it represented an important competitive advantage against other companies such as RDB. They also met international quality standards, making it easier to export to different regional trading blocs. Valdemar Holstein's efficient leadership Valdemar Holstein (the son of RDB founder Henrik Holstein) started working at the company in 1951, when he was only twenty-one. He spent his entire career at RDB, including several years as a machinist. In 1965, he replaced Henrik as Chief Executive Officer (CEO). Under his leadership, RDB kept thriving, as he successfully implemented several changes. Although the company maintained a tall organizational structure, Valdemar empowered his middle managers. He also adopted management techniques that were fashionable at the time, such as total quality management (TQM), benchmarking and Kaizen.
Anna had big ideas for RDB. A scientific and analytical thinker, she had carefully studied the external environment in which RDB operates. She knew that demand for ball bearings was slowing down in Europe, whereas it was growing substantially in countries such as Brazil, China and India that were going through a phase of strong industrialization. From her research, she also concluded that manufacturing in the twenty-first century would be accomplished in smaller, more flexible factories, instead of the huge modernist structures typical of the late nineteenth and twentieth centuries. Time would be the critical factor; having factories close to customers' locations would reduce response time and improve logistics, including distribution and delivery. This would also shorten the working capital cycle - an important benefit for RDB. Given her international experience, working at RDB made Anna realize that her colleagues in the Engineering Department, and even the entire RDB workforce, needed a better cultural understanding of their customers. The best way to achieve this, she thought, would be through a workforce that resembled RDB 's customers, and increasingly they would be from Asia, India and South America.
She was also convinced that RDB had to focus on "green" technologies and its corporate social responsibility. The company would have to significantly increase its spending on research and development (R&D) and also examine its impact on the environment and on its customers' carbon footprint. The two are linked, Anna reasoned: the ultimate aim of innovation in the ball bearing industry is to save energy, which is fundamentally what ball bearings do by reducing friction. For users, better ball bearings mean less friction and, in turn, less friction means that less energy is wasted. Thus, less energy is needed. Anna's vision for RDB was to make the world's most technologically advanced, energy-efficient ball bearings in small "green" factories located near its customers. This would require selling the two megafactories in northern Germany and Sweden, and significantly downsizing the one in Denmark. RDB's production would be offshored to 12 small factories to be opened around the world, mainly in Brazil, China and India. In terms of workforce planning, each of those new RDB factories would be jointly managed by one experienced RDB senior manager from Europe and one local manager familiar with the language and culture. Some machinists from RDB 's European factories would be offered key positions. Most of the existing jobs in Europe would be made redundant, as most of the new workers would be recruited locally on lower wages.
Northern European countries have generous redundancy payments, largely funded by the employers, and these costs would be significant in the short term. In the long term, however, RDB would lower labour costs.
Analyse the advantages and disadvantages of each new RDB factory being "jointly managed by one experienced RDB senior manager from Europe and one local manager familiar with the language and culture".
Advantages include the following:
- the factories will benefit from having two managers who combine forces (in terms of synergy, when adding the experience of the European RDB senior manager and the field knowledge of the newly appointed local manager)
- having two complementary managers avoids the problem of RDB headquarters having to decide who to appoint as a sole manager: on their own, expats from northern Europe might struggle to be accepted and respected;
on their own, newly appointed local managers might not appreciate the RDB culture of high-quality ball bearings
- for RDB as a whole, this means a more diverse workforce, which is in line with Anna's ideas about reflecting customers' profiles;
diversity in the workforce is often seen as a vector of creativity;
it is also more politically correct and it seems that Anna has that agenda too
- communication between head office and managers, and managers and employees
- accept any other relevant advantage.
Disadvantages include the following:
- the two managers, being from different cultural backgrounds, could be prejudiced against each other, or could have different values and attitudes, which might create tension or conflict between them and hinder communication between them
- the two managers may have different management/leadership styles, which could be confusing for the employees, for example if one is more autocratic and the other more democratic
- the two managers may have different ideas about quality control, operations or marketing, which could slow the decision-making process in the factories
- accept any other relevant disadvantage.
Accept any other relevant analysis.
Candidates are not expected to refer to all of the above points for top marks, but their analysis must be balanced in order to reach the highest level of the markband.
Marks should be allocated according to the markbands on page 3.