MGT504 Organization Theory GDB Solution Fall 2018

ABC Motor Corporation has earned a repute of the gold standard in the automotive industry owing to its remarkable customer care services and exceptional quality. The company somehow managed a steady sales growth of 5% per annum for 5 years and $20 billion profit in 2009 despite the fact that world economy was facing global recession at that time. However, early 2011 witnessed the company recalling its 6 million vehicles for removing some design flaw causing unintended acceleration and that too in the production plant of some other country. To eliminate the problem, one needs to understand the company’s Production System known as GPS.

The principles of “just-in-time” production provide the base for GPS operations. In other words, when the raw materials are required at the assembly line, they are delivered instantly, leaving no room for slack resources. Following this principle makes the company’s assembly line efficient and reduces wastage of resources. GPS authorized the assembly line employees of ABC Corporation to pull a cord and discontinue the production process upon seeing any problem.

But, when the company pursued rapid expansion plan, it turned to defensive mode and started concealing information from its own employees and even from management working in the subsidiaries in foreign countries. As a result, response time to customers’ complaints got slowed to put another pressure on expansion strained organizational resources.

Although ABC Corporation quickly resolved the matter by creating repair teams of engineers but vehicle recalls brought bad name to the company. It raised the question, how a company with its exceptional reputation for customer care and quality could have such failures? What made the management more puzzled was that brake problems started appearing in vehicles in 2011, but the company took action only after being confronted by States Transportation Inspection Department. Condition worsened when top leadership of the company went missing from public sight during the early months of the crisis.

Such conflicts not only paralyze the production capacity of an organization but if not dealt with caution, can prove fatal for organization’s survival. The organizational structure of ABC Corporation can provide us useful insight into how to handle this crisis. The company after expansion, in order to maintain control not only has adopted a rigid corporate culture but a strict hierarchy of seniority responds slowly to external threats. The board comprises only of home countrymen, all insiders to the company. Other country executives are assigned a home country boss to mentor them and for making crucial decisions who have little knowledge of local markets. One cannot find delegation of authority owing to centralization of power structure in the company.


Do you think that existing organizational structure is suitable for the expansion plans of the company and for meeting customers’ demand across the world?