Pibrex Russia Essay

Then do wants a strong organisational enculturation communications indoors and mingled with de leavements ar poor on that point is inequity between in leases, working conditions and training and problems with motivation and employees is prevalent. Pibrex International is losing interest in the Russian operation and two sub-cultures d intimately within the Pibrex Russian organisation. The new customary Manager, Elena Michasilova must stimulate an action syllabus that open fire turn the operations around to break scour point by the yr 2000 at minimal be to the beau monde.This reportoutlines to Elena Michailova considers both the remote environmental (Political, scotchsocialand organisation factors affecting Pibrex Russia and analyses why the grounds are underperforming in a difficult economic environment and outlines four incompatible unique strategies retrenchment, scathe clueership, quality flatusership and merchandiseation orientation) makes rememberations that Elena Michailova heap utilise to overcome the legion(predicate) organizational and monetary ch bothenges that the connection faces.It foundes a practic open export orientate dodging and application prima(p) restructuring computer programme, c completelyed altercate 2000 that Elena behind quickly implement to overcome these challenges she faces managing Pibrex Russia at minimal cost to the society. capital punishment of both exit lead Pibrex back to pro give-up the ghostability by the year 2000 This report illustrates what the circumspection team has done to begin a turnabout of the firm and the problems that remain. In particular, the connection must reassess its focussing strategies and evolve steps to masintain its competitive positionIntroduction This report considers both the remote environmental and organisation factors affecting Pibrex Russia and analyses why the full treatments are underperforming in a difficult economic environment and makes reco mmendations that Elena Michailova hatful implement to overcome the numerous organizational and financial challenges that the party faces. It establishes a viable dodging and industry leading restructuring programme, called Challenge 2000 that Elena notify quickly implement to overcome these challenges at minimal cost to the company.Background. Pibrex is one of the areas largest producers of petrochemical found polymers for the plastics market. The company has purchased a full treatment in Russia and after three years of skilful operate losses and has appointed a new general motorcoach of the plant. The plant lacks a strong organisational culture communications within and between departments are poor inequity in wages, working conditions, and training outlast nevertheless motivation and retention problems are prevalent.Pibrex themequarters is losing interest in the Russian operation and two sub-cultures exist with Pibrex Russian organisation. Two subcultures exist withi n the company because in that respect is two separate manufacturing plants. The first plant is Pibrex KAZ, which is one the site of the original plant in Kalingrad. The other plant is the recently purchased (1993) Pibrex KZ plant which is unspoilt outside Moscow. In addition Pibrex loose a gross revenue enhancement and marketing federal agency in St Petersburg (called Pibrex AO) and a head office in the capital city of Moscow (called PibrexRussia).In line of merchandise to the two manufacturing facilities Pibrex AO and Pibrex Russia were staffed with people from Pibrexs other overseas operations and burning small graduates such as Elena. In 1994 Pibrex KAZ, Pibrex KZ, Pibrex A) and Pibrex Russia were grouped together into Pixbrex region Europe North. However, within Pibrexs decentralized governance structure, the regional subsidiaries were able to decisions autonomously In 1997 the perplexity of PREN Europe North took steps to stem the losses at Pibrex KZ.Pibrex Russia was shut down and the gross sales and marketing department integrated with Pibrex KZ. At Pibrex KZ over half the work workers were laid off and prices were elevated to increased margins, but this only had the effect of eroding sales even further. A macroeconomic shock came in the form of the Russian financial Crisis (RFC). This preceded the Global Financial Crisis. As a offspring of the RFC, Pibrexs sales slipped even further and management was now safey involved in crisis management with the ultimate goal being survival.Whereas in the past Pibrex had relied on a decentralized governance structure, on this occasion, Pibrex formed a steer commissioning to augustct system in its Russian operations. The point committee reassigned Elena as the new Financial Controller and asked her to perform a financial audit on all of Pibrexs Russian operations. They as well as unconquerable to concentrate on reducing costs and change magnitude profits wheresoever possible. Sales activity was hold to only the largest and most profitable of nodes. alike, the steering committee took various steps to control all finances as well as melt off all expenditures.The steering committee as Elena to serve as Managing Director and Financial Controller of all Pibrexs Russian operations pending a submission of a full set of hear issues face up Pibrex and a dismiss set of recommendation on Pibrex with the view to reaching breakeven point by 2000. This is that set of recommendations. acknowledgment of Key Issues and Challenges. Pibrex Russia is faced with a multitude of problems and challenges that it needs to deal with as it progresses through 1988 and 1999, if it is to break even by the year 2000. ?The following is a synopsis of the most critical issues a)The Financial Situation in Russia Pibrex Russia faces precise challenging external factorsthat make for a very difficult external environment as a result of the Russian financial crisis The unsteady financial situation bought about by the RFC means that Pibrex Russia is strugging to increase its revenues and swerve its costsdue to rampant inflation a dramatically devalued Russian currency, the rouble the evodus of foreign investment funds the financial collapse of many Russian small to medium enterprises, multiple argot faces and an increasing unskilled, unmotivated and misanthropic workforce.This unstable financial situation means that Pibrexs costs (particularly of knifelike materials) is going up and increasing company failures will mean it will be more difficult to make sales. It will flip difficulty finding plant finance and to attract and retain employees with the right skills. (b)Difficulties in the Internal Operating / Accounting Environment. The internal operating environment of the company as well as seemed very chaotic, like the external environment. in that respect was a lack of internal accounting controls, which I assume would eventually impede the dire to drive down costs an d increase revenues c)Difficulties in the Legal / regulative Environment. Since reentering Russian in 1992, the Russian government has imposed a subdue of operating conditions on PR that undoubtedly prevent PR from operating at optimal efficiency. Russian law required each of Pibrexs subsidiaries to maintain separate bank account and pay local taxes (p125). thither were also many other bureaucratic hassles (d)Difficulties with Organisational Issues. Organisational obstacles included PR neer being legally registered as the Russian mother company.The Russian subsidiaries were heart-to-heart at different times and were in that locationfore registered as different entities. Also the distance between the subsidiaries were substantial leading to taxation constraints. (e)Difficulties with Old and seedy Maintained Plant and Buildings. The aged plant and poorly retained and buildings tailors the military capability of occupation, potentially creates health and safety concerns for the workers but more than that, it severely affects the esprit de corps of the workers who see it as ineptitude on the part of management and indicatory of how they value the production workers. f)Poor Management and Employee Relations There are old and deeply held resentments between factory workers and middle management whom the factory workers suppose stole the workers share of the company when privatization. This resentment has never gone away. The workers were also deeply resentful of the dual wage structure whereby sales and management staff who were transferred Pibrex AO (the Moscow sales and marketing office were given brilliant new facilities while the production workers had to work in cold and outdated factories. (g)Cultural Conflict within Pibrex RussiaIn my opinion the main problem facing Pibrex is the cultural conflict between the factory workers and the companys management. There are many subcultures at play within Pibrex Russia. This arises because Pibrex Russia i tself is a nuclear fusion reaction between the old Pibrex Russia, Pibrex AO, Pibrex KZ and Pibrex KAZ. As a result of being part of the old Soviet Russia there is a rigid, bureaucratic and authoritarian culture which affects the production workers, and management. Characteristics of this culture included strong power distance, adherence to authority, dogma in hierarchy, clear lines of communication, and strong uncertainty avoidance. downstairs this environment take place managers did not delegate, middle managers did not make the decisions that they need to, whereas production workers looked for clear direction. This authoritarian culture was a complete contrast to, and did not fit well with Pibrexs usual practice of decentralization and delegation. The highly interlinking and decentralized structure of PREN (Pibrex Region North Europe) which involved two barter areas and four functions did not fit with this traditional, authoritarian culture at Pibrex KZ which favoured a mor e straight ahead bureaucratic structure.After the Merger between Pibrex AO and Pibrex KZ there was a definite cultural conflict betweenthe younger, more urban, more entrepreneurial sales and marketing staff from Moscow and the older established production staff and established management staff from Pibrex KZ. (h)International Management losing Interest in Pibrex Russia As a result of all of the above problems listed above, it seems that Pibrex in Gothenburg seems to have lost patience with Pibrex Russia. Accordingly, Pibrex Gothenburg has a firm directive that it wants its Russian operations to sideboard to favourableness by 2000.General External Environmental digest Pibrex Russa is in the Russian plasticsand chemicals industry. Polymers and resins produced by Pibrex Russia are found in a large number of different Russian industries including packaging, construction equipment, furniture and consumer goods. It was judge that demand for Pibrexs resins and polymers would remain stro ng as a result of the need to rebuild Russias floor (after the fall of Communism) and to supply the Russian military. Although there were numerous overseas competitors, none of them had established themselves in Russia.Also, there was a strong research and schooling base In Russia for the development of resins and polymers In late 1990s the external environment in Russia is influenced by the downfall of communism and the RFC. The environment, particularly financial, was characterized by instability and unpredictability. This instability can be traced back to the soviet reforms ofGlasnost and Perestroika. Russia embraced a programme of rapid economic reform and liberalization which involved removal of financial regulations and freeing up the Russian financial system.Largely, this prgramme of financial and economic reform was not prospered and this, in my opinion was one of the main factors leading to the RFC. There was also contagion from the Asian Financial Crisis. The RFC resul ted in a currency devaluation , bank and company failures the collapse of the Russian stockmarket, the exit of foreign investment and this lead to a black market economy. Chaos in Russia was not limited to the economy. There was extensive political and social instability as well. The localise soviet government was still establishing itself.On a social take aim this economic and political upheaval led to many social ills and discontented e. g. increased alcoholism. S. W. O. T Analysis AS. W. O. T analytic thinking Strengths A key vividness that Pribex has is its relationship with its evoke company. This relationship is pregnant because Pribex can leverage of the cite companys international reputation, tacit knowledge, its living supplier relationships, their research and development facilities and manufacturing processes as well as its customer service and safety standards.Additionally I believe the put up company whitethorn be able to provide Pibrex Russia with financial backing, which is particularly important given the financial and economic environment described above. Pribex AO is a strength to Pribex Russia. Their culture is not as divided and its staff and highly handy and motivated. Additionally it is where Elena has come from so it has a history of effective management. Elena herself is a critical strength to the company.She is one of the key managers and is materially contributing to the fdinacial well being of the company. Weaknesses As mentioned before the company, the company has a number of in operation(p) weaknesses. The major one is the conflicts that arise in the various subcultures of the company but there are other weaknsses as well such as ineffective financial controls over revenues and costs, poor relations between management and employees generally, a divisive dual wage system and a absence of top management erect.The two factories Pibrex KZ and Pibrex KAZ old, use outdated technologies and are not very pleasant to work in . The factories have also been poorly maintained so for these reasons production output is poor. In addition to production weaknesses there are also some financial weaknesses. The company is having difficulty increasing revenues in the current economic environment and reducing costs. The company has been losing funds for many years and there is little prospect of returning to profitability OpportunitiesPribex Russia has an opportunity to establish itself as a market leader in the building polymer and resins industry and as the rebuild of Russia infrastructure gets into full swing, it should be able increase revenues and decrease for sure its fixed costs and this may lead to profitability. Additionally Pribex Russia, with its existing research and development facilities has an opportunity to broach new polymer applications and establish itself as an innovator in the market. As the Russian economy is reformed Pibrex Russia has the opportunity to improve its financial situation and develop a reputation as an innovator in the industry.Threats The macroeconomic analysis above indicated that the RFC and the instability and uncertainty that it brings to the financial sector as the major threat to Pibrex. It is a threat because it makes it more difficult for Pibrex to increase revenues and reduce costs. The RFC also threatens the companys ability to raise capital and to issue its works appropriately leading to resentment amongst workers. The other major macroeconomic threat is the political instability that exists within Russia and makes it difficult for Pibrex management to forward plan and affects confidence.If Pibrex pursues a price leadership strategy then it faces threats from competitors, both house servant and foreign, who can produce products cheaper and therefore charge lower prices than pribex then undermining their price leadship strategy If Pibrex pursues a product leadership strategy base on quality it faces competitive threats from both domestic an d foreign competitors who can beat Pribexs current quality standards (which are affected by their aging, inefficient plants).Four Strategies that Can Be Implemented at Pibrex Elena should recommend the following four quite different strategies to the management of Pibrex. 1. Retrenchment Strategy. Under this strategy Pibrex Russia should retrench its operations and closing the aging loss do Pibrex KZ plant and focus on modernizing its Pibrex KAZ plant. This would eliminate all of the problems associated with the older Pibrex KZ plant mentioned above and this would help restore confidence in Pribex Russia with the parent company.The downside is that it would minify opportunities for further growth and expansion 2. Price Leadership Strategy. To minimize the macroeconomic risks mentioned above and return the company to profitability the company could pursue a competitive strategy based on price leadership. Under this strategy Elena would militant pursue domestic production from both manufacturing plants through a low price strategy, which would provide more work for the current production workers.To implement a successful price leadership strategy Pibrex may need to draw up on the financial resources of the parent company. Pibrex would aggressive pursue and develop new customers though aggressive advertising (with support from the parent company). In order to adapt a successful price leadership strategy PR would need to aggressively control costs, establish strict financial controls and eliminate the vtwo tier wage structure 3. smell Leadership Strategy. To minimize the macroeconomic risks to the company it could pursue a strategy based on quality.Under this strategy it would draw on the parent companys tacit knowledge and research and development facilities to baffle a quality leader in the area of building polymers and resins. Elena would lead an aggressive sales strategy based on world leading research and innovation and become a centre of excellence base d on quality. This sales strategy would be to mainly domestic customers and the strategies relies on a considerable upswing in sales, as a result of infrastructure building to correct the companys financial situation and return to profitability by the year 2000.To assist in selling to the rejuvenated domestic market, Elena would draw upon the sales skills and sales teams already existing in the parent company. Pibrex Russia would become a domestic leader based on this calibre Leadership strategy. 4. Export Focused Strategy. Under this strategy Pibrex would split its manufacturing plants so that the older plant, Pibrex KZ would supply solely the domestic market, and the more modern plant Pibrex KAZ would supply the export market. The more modern plant would be elect to serve the export market because more quality and innovation is required. success in export markets would require extra perplexity to the companys quality management processes. This dual strategy should retard there is full work for all the factory workers. Additionally an export led strategy would benefit from any currency devaluation. This dual strategy and the increased attention to quality control may, in the short term require additional capitl funding that the parent company would need to provide. Overall Implentation Plan for Elena. It is recommended that Elena implements an export focused strategy.This strategy would take advantage of the companys strengths (being the parent companys knowledge, reputation, resources and sales strategies) as well as minimizing its weaknesses (under-capacity, sour between workers and culture conflicts). It would reduce the tensions between workers, increase production and reduce the overcapacity problem. This export focused strategy does not initially minimize all of Pibrexs weaknesses (such as poor financial controls and lack of head office commitment) but these weaknesses maybe corrected over time.To successfully implement this export focused strateg y I recommend implementing a change programme called Challenge 2000 which will draw on Pibrexs strengths and minimize the companys weaknesses. Challenge 2000 will be led by Elena as well as supported by the Steering Committee and PREN management. Challenge 2000 will have eight distinctive steps that will arrest success 1. Demand sufficient capital investment from the parent company to allow for the repair and upgrade of the Pibrex KZ plant, implementation of a new sales incentive sub-programme and a quality sub-programme based on research and innovation. . attendant the increased efficiency at the Pibrex KAZ and the upgraded Pibrex plant by removing excess layers of management 3. To this reduction in management layers by creating an efficiency sub-programme bthat implements inventory, cost and revenue controls throughout Pibrex russia 4. Alleviate employee resentment and bitterness by eliminating the dual wage programme, and implementing an aggressive bonus incentive programme tha t rewards both local export sales. 5.Implement the export focusedmarketing strategy but aggressive pursue all domestic leads as well 6. Develop a marketing plan as part of this marketing strategy for both the domestic and export markets. 7. Have Pibrex aggressively pursue all sales leads in domestic and export markets. 8. Co-ordinate production schedules to the marketing plan using just in time inventories Conclusion. This paper outlines four different implementation strategies that Elena Michailova can chose and recommends an export focused strategy for Pribesx Russia.The successful implementation of this export focused strategy complemented with the eight step Challenge 2000 program will ensure that Pibrex will be restored to profitability by the year 2000. Challenge 2000 is a viable low cost change program that will certainly impress PREN management. The successful implantation of both will be replicated in Priexs plants throughout the world which will see Elena Michailova, the o nce young bright inexperienced manager, rise over time to be the world wide Chief Operating Officer for Pirbex