CASELET 1

Rajiv Gupta, President of the Universal Food Products Company, was tired of being the only one in his company actually responsible for profits. While he had good vice-presidents in charge of advertising, sales, finance, purchasing, production, and product research, he realized that he could not hold any of them responsible for company profits, as much as he would like to. He often found it difficult even to hold them responsible for the contribution from their respective areas to company profits. The sales vice-president, for instance, had rather reasonably complained that he could not be fully responsible for sales when the advertising was ineffective, or in a situation when the products customers wanted were not readily available from manufacturing department, or when he did not have the new products he needed to meet market competition. Likewise, the manufacturing vice president had some justification when he made the point that he could not hold down costs and still be able to produce short runs so as to fill orders on short notice; moreover, financial controls would not allow the company to carry a large inventory of everything. Mr. Rajiv had considered breaking his company down into six or seven segments by setting up product divisions with a manger over each with profit responsibility. But he found that this would not be feasible or economical since many of the company's branded food products were produced using the same equipment and used the same raw materials, and a salesperson calling on a store or supermarket could far more economically handle a number of related products ....than one or a few. Consequently, Mr. Rajiv came to the conclusion that the best thing for him to do was to set up six product managers reporting to a product marketing manager. Each product IIBM Institute of Business Management Examination Paper of Principles and Practices of Management manager would be given responsibility for one or a few products and would oversee for each product, all aspects of product research, manufacturing, advertising, and sales, thereby the person becoming responsible for the performance and profits of the products under his/her portfolio. Mr. Rajiv realized that he could not give these product managers actual line of authority over the various operating departments of the company since that will cause each vice president and his or her department to report to six product managers and the product marketing manager, as well as the president. He was concerned with this problem. But, he knew that some of the most successful larger companies in the world had used the product manager system. Mr. Rajiv resolved to put in the product manager system as outlined and hoped for the best. But he wondered how he could avoid the problem of confusion in reporting relationship

Questions

1. Do you agree with Mr. Rajiv's program? If it were you, would you have done it differently? Explain. (10)

2. Exactly what is your suggestion that may help to avoid any confusion in this organizational structure? (10)