Joe Jonson has just been appointed the General Manager of the Procurement Department of a large railway, Statewide Rail Corporation (SRC). The Procurement Department is responsible for procuring and warehousing of goods for all the other functional divisions of the railway. These divisions include the Passenger Operations (responsible for marketing and running the passenger train services), Freight Services (responsible for marketing and running the freight train services), the Electrical Engineering (responsible for the construction and maintenance of the overhead electricity supply to trains), Workshops (responsible for the maintenance of locomotives and rolling stock), Finance, and Human Resources.

The railway does not own the railway tracks it uses for its freight services. These are owned and maintained by a government agency the Australian Rail Track Authority (ARTA) which sells the use of the tracks to providers of rail transportation services.

The main customers of the very profitable Freight Services are five mining companies and one agricultural marketing corporation through the transportation of coal and wheat to export port facilities. The railway has invested large amounts of capital in purpose built carriages to handle the transportation of these bulk commodities. Presently, the main competition is in the form of road transport which is more flexible but can only carry relatively small loads compared to the big freight trains. Until recently no other rail transport organization has been competing in the coal and wheat freight market. However, the ARTA has decided to try to encourage new operators into this market to limit its exposure to SRC

The Procurement Department is presently organized on functional lines with different teams responsible for each of the three stages of procurement, viz., Tendering (sourcing, negotiating and contracting suppliers) , Purchasing (ordering cost effective quantities of goods if and when required) and Warehousing (managing the warehousing and supply of goods to client departments).

Each team has a manager and the team is made up of technical experts responsible for undertaking that procurement function for all the client divisions.

One reason that a new General Manager has been appointed to the Procurement Division is that there have been complaints from the General Managers of the client divisions about the level of service given by the Procurement Division.

Some of these complaints include the procurement of goods that do not meet the specifications required by the departments, the unreliability of supply of the goods, the unresponsive nature of the warehouse’s to their client divisions’ needs, and the emphasis on contracting the cheapest supplier.
There was also a problem with succession planning for the division because there were no candidates with experience across all the procurement functions. The different functional teams do not communicate with each other and concentrate on achieving their own goals rather than contributing to the achievement of the goals of State-wide Rail. This leads to conflict between the functional teams.

Joe wants to change the organizational structure to overcome the problems above. Answer the following questions.

1. a) What are the three levels of strategic planning

2. Use Porter’s Five Forces to analyse the competitive environment of the Freight Services division of SRC.
   On the basis of your analysis which of Porter’s generic strategies should Freight Services adopt as its business strategy and why

3. b) Considering the three contingency factors that determine the best organizational structure, would you recommend a mechanistic or an organic structure for Freight Services and why.

4. c) Considering the Procurement Department, which form of departmentalisation would you recommend to Joe to overcome the problems his department is experiencing and why

5. d) During the implementation of any restructure of the Procurement Department what leadership style/approach should Joe adopt and what would it involve?