Abrief analysis over Kent Chemical challenges to achieve a Global Strategy
Analysis Case: Kent Chemical by Alvaro Colli
1. What were the problems facing Luis Morales as he began implementing Ben Fisher’s
international expansion strategy?
The Kent Chemical Products’ purpose for going Global supposed that just acquiring
companies, where the company had had participation, it should be the way to increase and
follow its growth, and preferable position in markets. However, when Luis Morales started
implementing the integration strategy, he did not make any relevant change in
organizational structure. Therefore, some issues also started appearing as a result of lack
movement in organizational strategy. Those difficulties were: first, problems to align
companies already bought; second, deficiency influence of Regional Directors on
integrated
companies; third, problems to communicate objectives and goals, misunderstanding
between Headquarter and Subsidiaries; fourth, feeling that subsidiaries were competing to
gain capital for their projects and operations; and fifth, lack of technology transfer among
the
whole company, as a consequence of closed-minded attitudes, deficient communication
channels, and lack of strategic leaders who can carry out the strategy.
Thus, Kent Chemical International with those difficulties could not completely explode its
competitive advantages gained before this Integration Strategy, such as: strong and
wellknown
R&D area, well-recognized brand, and capabilities to adapt and aggregate business
lines. Hence, KC was not able to add value on its value chain; it can be seen, from exhibit
1,
that even Net Sales increased in 3.5% even though Net Income dropped dramatically in
36% between 2006 and 2007.
2. How would you evaluate the organizational changes he made in response to those
problems? Why were they unsuccessful?
First of all, when a company introduces or makes changes in its organizational structure it
because pursues to fix or improve company’s performance. However, changes made by
Luis Morales, 2006, did not work out; even those changes had a much deeper effect in
company’s outcomes.
That effect it can be seen when financial date is analyzed, and Net Sales and Cost of Sales
are compared over the period: by 2007, Net Sales grew around 8% and Cost of Sales
increased over 17%, compared to 2006. Therefore, those figures indicate that the
integration Strategy, and efforts to achieve it, had generated higher costs of transaction
inside the company.
The failure in changes in organizational structure and the increasing in those costs of
transaction can be explained because decisions were made without a proper understanding
