Q1.
a. How can OB (organizational behviour) concepts and theories be used to understand the case and find a solution?
b. How could this problem be avoided in the future?
The Regency Grand Hotel is a five-star hotel in Bangkok, Thai- while mistakes were allowed, repetition of the same mistake land. The hotel was established fifteen years ago by a local more than twice could not tolerated. He advised his managers consortium of investors and has been operated by a Thai gen- and department heads that they should not discuss or consult eral manager throughout this time. The hotel is one of Bang- him on minor issues/problems and decisions. Nevertheless, kok's most prestigious hotels and its 700 employees enjoy the he told them that they are to discuss important/ major issues prestige of being associated with the hotel. The hotel provides and decisions with him. He concluded the meeting by ask- good welfare benefits, above-market-race salary, and job secu- ing for feedback. Several managers and department heads cold rity. In addition, a good year-end bonus amounting to four him that they liked the idea and would support it, while och months' salary is rewarded to employees regardless of the ers simply nodded their heads. Becker was pleased with the hotel's overall performance during the year. response, and was eager to have his plan implemented. Recently, the Regency was sold to a large American hotel In the past, the Regency had emphasized administrative chain that was very keen to expand its operations into Thai- control, resulting in many bureaucratic procedures through land. When the acquisition was announced, the General Man- out the organization. For example, the front counter employ- ager decided to take early retirement when the hotel changed ees needed to seek approval from their manager before they ownership. The American hotel chain kept all of the Regency could upgrade guests to another category of room. The front employees, although a few were transferred to other posi- counter manager would then have to write and submit a tions. John Becker, an American with 10 years of management report to the General Manager justifying the upgrade. Soon experience with the hotel chain, was appointed as the new after his meeting with managers, Becker reduced the num- General Manager of the Regency Grand Hotel. Becker was ber of bureaucratic rules at the Regency and allocated more selected as the new General Manager because of his previous decision-making authority to frontline employees. This action successes in integrating newly acquired hotels in the United upset those who previously had decision-making power over States. In most of the previous acquisitions, Becker took over these issues. As a result, several of these employees left the operations with poor profitability and low morale. hotel. Becker is a strong believer in empowerment. He expects Becker also began spending a large portion of his time employees to go beyond guidelines/standards to consider observing and interacting with the employees at the front guest needs on a case by-case basis. That is, employees must desk, lobby, restaurants, and various departments. This direct be guest-oriented at all times so as to provide excellent cus- interaction with Becker helped many employees to under- tomer service. From his U.S. experience, Becker has found that stand what he wanted and expected of them. However, the empowerment increases employee motivation, performance, employees had much difficulty trying to distinguish between and job satisfaction, all of which contribute to the hotel's prof a major and minor issue/decision. More often than not, super- itability and customer service ratings. Soon after becoming visors would reverse employee decisions by stating that they General Manager at The Regency Grand, Becker introduced were major issues requiring management approval. Employ- the practice of empowerment so as to replicate the successes ees who displayed initiative and made good decisions in sat- that he had achieved back home. isfying the needs of the guests rarely received any positive The Regency Grand hotel has been very profitable since feedback from their supervisors. Eventually, most of chese it opened. The employees have always worked according to employees lost confidence in making decisions, and reverted management's instructions. Their responsibility was to ensure back to relying on their superiors for decision making. that the instructions from their managers were carried out Not long after the implementation of the practice of diligently and conscientiously. Innovation and creativity empowerment, Becker realized that his subordinates were were discouraged under the previous management. Indeed, consulting him more frequently than before. Most of them employees were punished for their mistakes and discouraged came to him to discuss or consult on minor issues. He had to from trying out ideas that had not been approved by manage- spend most of his time attending to his subordinates. Soon he ment As a result, employees were afraid to be innovative and began to feel highly frustrated and exhausted, and very often to take risks. would tell his secretary that "unless the hotel is on fire, don't Becker met with the Regency's managers and department let anyone disturb me." heads to explain that empowerment would be introduced in Becker thought that the practice of empowerment would the hotel. He cold them that employees must be empowered benefit the overall performance of the hotel. However, con- with decision-making authority so that they can use their tary to his expectation, the business and overall performance initiative, creativity, and judgment to satisfy guest needs of the hotel began to deteriorate. There had been an increas or handle problems effectively and efficiently. However, he ing number of guest complaints. In the past, the hotel had stressed that the more complex issues and decisions were to minimal guest complaints. Now there were a significant num- be referred to superiors, who were to coach and assist rather ber of formal written complaints every month. Many other than provide direct orders. Furthermore, Becker stressed that guests voiced their dissatisfaction verbally to hotel employees.1. (4 points) Suppose the following diagram shows the demand (D) and marginal revenue (MR) curves for a monopolist producer of caviar. The diagram also shows the monopolist's marginal cost (MC) and average total cost (ATC). 900 800 700 MC 600 500 ATC 400 300 200 100 MR D 5 10 15 20 25 30 35 40 45 Quantity in thousands of pounds a. What this monopolist's profit-maximizing level of output? b. What price should this monopolist charge to maximize its profit? C. How much profit will this monopolist make if it is maximizing profit?d) (5 points) What would be the value of consumer surplus if the market were perfectly competitive? e) (5 points) What is the value of the deadweight loss when the market is a monopoly? f) (5 points) What is the value of the Lerner Index for this monopoly
