Departmental and individual objectives have lead to the situation which TerraCog is in which is the dilemma whether to launch the Aerial project or not. The different departments in TerraCog lack an appropriate leadership which makes each department have its own objectives which it is striving to achieve (Beer 2009). They are not making decision as a team and every department is aimed at making sure that their idea wins and is adopted. For the sales department their priority is to have high quality Aerial at a low cost which will make it prosper in the market. This is because other competitors are providing their aerial as low as $400; the sales department wants their high quality product to be cheaper than this. Their desire to have a cheaper product is to make sure that they make high sales (Beer 2009). As for CFO, they are not willing to let the margin they have set go as also they want to be the winner in this situation.
The design and development is not will to come to an agreement with the cost margin which has been set and it does not agree for costs to cut any more. The issue here is that every department has its own aims which they are trying their level best to ensure that they win. The production team things that it has achieved its goal and is not very much will to cut the costs any further even if the cutting of costs attains the company’s overall goal. The production department feels that it has done its best in cutting the costs depending on the quality of Ariel they are producing (Beer 2009). The problem becomes even worse because the executive vice president is showing that coordination among the departments is not easy because if she can do that all departments can have same objectives. This can be clearly seen where the senior members of the company who include president and vice president for developments are just waiting for positive feedbacks but are not making any contributions and are not even directly involved in looking for these outcomes.
Different objectives of different departments are dragging TerraCog in their current situation and include; the disagreement between the price by the sales department and designs and development department. There is also insufficient communication between the departments, cooperation is poor and poor meetings which have been caused the fact that the vice president Emma Richardson does not make sure the meeting is conclusive and that the contributors of the meeting reach an agreement (Beer 2009). Each department is working on its own and they do not ask each other opinion before making the final conclusion to be presented in the meeting. The departments are not united on a common goal and when they go to the meeting, the subject is not clear. Since the departments are not working as a team, when the price issue was presented, they need to be given time to think about it.
The goal of the sales department is to get the right product to boost the volume of sales which improve compensation as they are compensated on revenues and not profit. The goal of production department it to meet the criterion by which they are rewarded which includes meeting cost, scheduling and cost. The goal of design and development department is not to be involved in any forced redesign of the Aerial.
There are individuals in this team who have their own aims and desires which brought TerraCog to this situation. For instance, Allen Roth who is the director for design and development is hoping that to be promoted after the VP leaves (Beer 2009). This makes him be so aggressive to ensure that she is noticed as a performer and suitable for this position. There are complains that the costs he has set are too high compared to those of their competitors but he ignores this since he wants his idea adopted. When we consider VP of sales Ed Pryor and the team he leads is planning to get some compensations; therefore they are striving to ensure that this Aerial project succeeds as it will enable them get the compensations as they are compensated on revenues but not profit. He aims at maintaining his reputation and pleasing his team (Beer 2009). Tony Barren who is the director of production has the objective of losing his job due to production problems; therefore aims at making sure this product is accepted.
The current decision process in TerraCog is poor since it does not involve adequate consultations from different departments. Involving everyone in decision making could have led to generation of ideas and the current situation could have not occurred (Beer 2009). For instance we can see poor decision making when the management ignored the satellite imagery feature in the posthaste BirdsI product. There were a lot of efforts from the sales representatives but the decisions were made against this. The project on Aerial was decided very abruptly without taking the necessary steps. There was not contribution from design and development department. There was no consideration on whether Aerial project will be more viable than other projects or not. Fiero never made any consultations but only relied on what Pryor suggested (Beer 2009). He assumed that this project won’t fail and its price would be competitive.
When the development of the Aerial product commenced, there were very little efforts towards improving the product. The production department was not given a chance to access the design of the product and give the necessary recommendations. The decisions made about the Aerial product were poor from the design to production to sales which delayed the identification of the problem. The decision made by Pryor on the price of the Aerial product in reference to what the sales department thought but he did not consider the feasibility (Beer 2009). He also made the decision to set low price hoping that design and product design will cut costs which will help to increase margin as time goes by. He did not put in to consideration the process cost in his decision. Decision made by Roth was to meet selfish objectives. He desired to have a product which will lead his recognition. Tony Barren made decisions under fear that he might be held responsible for poor quality as it had happened in the past.
Poor decision making process is also seen as made by Richardson. Though she wanted a consensus among the departments and team members, she never held effective meetings in which she could gather information which could assist in making decisions and conclusions; otherwise she kept postponing the meetings. The decision making process was somehow unclear and each department came up its own decision which they pushed to win (Beer 2009). They never formed, stormed, norm and perform as it is stated by the Tuckman’s model of team development (Anonymous 2011). For improvement of the decision making process, TerraCog needs effective leadership, effective team with a united goal, and improve their communication and conflict resolution skills (Anonymous 2011).
In other words, the current decision making process is controlled by those in the executive positions, it is based on institutional inertia, it is delaying market capture, does involve all the necessary personnel, and there is competition between departments as each tries to achieve its priorities.
The company can either decide to launch Aerial at a competitive price and hope that the costs will be cut in the future, or launch it at a high price or they might decide to do away with it. All these options have their own strategic and organizational implications. There are options which Emma Richardson has to choose from that will lead TerraCog somewhere. These include; launch Aerial at high price of $475 so that it can be able to meet the standard profit margin (Beer 2009). The second option is to launch Aerial at a competitive price which is expected to be at $ 425 which does not meet the standard profit margin but at the same time work on trying to cut the costs. The third option is to delay the launch of Arial first and then try to make a redesign of the aerial which is aimed at being of a lower cost. The fourth and last option is to abandon Aerial products all together. Each of these options has its own implications.
The first option which TerraCog can choose is to launch Aerial at high price. This is an advantage because it is going to meet the standard profit margin. It will also bring more revenues to the company. Since this product is of high quality, people might like it and ignore the price. On the other hand this price is much higher than what other competitors are offering. Some are offering a retail price of as low as $400 (Beer 2009). This is a disadvantage to TerraCog because it is likely to make few sales. It is likely that people will go for the cheap product and will not mind about the quality. When this option is adapted, the sales department is likely to be disadvantaged as it will make few sales while the design and development will be advantaged as it will be praised of developing a quality product. The second option they have is to launch Aerial at a competitive price which does not meet the profit margin standards (Beer 2009). It will be a disadvantage to TerraCog since they will not be able to reach the accepted standard margin but they are likely to make more sales since their price will have a competitive advantage. This means the revenues of the company will increase without necessarily having generating any profit (Beer 2009). It will have no direct negative impact on any department but the organization is going to be affected as it will suffer some losses.
Third option which is to delay the launch of Aerial and then redesign it at a lower cost also has its own implications. The company is expected to launch this product as soon as possible and the delay will bring out questions. It will also lead to waste of resources since they have already used some in designing the first product. It will also be unfair to the design team because they will have to go back and repeat what they had already done. Redesigning the product and cutting cost means that the product is going to be of a lower quality as compared to the one which was launched before. The low quality might bring problems to the production team as it had happened before. This is an implication that incase the quality of the redesign is not satisfying; the jobs of the production team will be at stake (Beer 2009). Since the company has been built on quality, it will be insensible to destroy the reputation of the company. As we can see, the company is already losing its share in the market and delay will lead to more loss and may even miss some opportunities which may arise in the market.
The final option which is to abandon Arial altogether has its own implications also (Beer 2009). This will be a show of lack of organization and coordination. It will also have the implication that the teams cannot agree on anything and that the leadership is poor. There will be an implication that the company is incapable of designing a quality product at competitive price and still cut costs. There will be a great loss to all departments since a lot of money has already been invested in this project. There will also be an implication of low technological capabilities since they are not sure what kind of product they should produce; and are not sure if the reputation of the company and the product will be maintained by quality and cost alone.
Emma Richardson can save the company from all these situations which it is in. first she should ensure that the teams are well coordinated and have a common goal she should ensure that communication is effective communication among the teams. Effective communication will ensure that each team member has the opportunity to make contributions and give ideas which can produce identify problems at an early stage facilitating solutions. In addition to this, she should also ensure that she has a strong leadership skill and be able to make decisions based on information she collects from the teams. The main aim of the meeting seems not to have been clearly formulated. Richardson should ensure that each meeting has its own objective to avoid going out of the subject. She should also ensure consultations are made in every department because the launch of a product involves many departments and if they are not consulted, the probability of failing is very high. She also makes sure that she is directed involved not just to sit and wait for results from other people.
She should also be creative enough to identify decisions which are made based on personal interests or to achieve selfish objectives. There are different options from which she has to choose from because the company must continue. From these options, she should involve all the team members to come up with the right option which will be of benefit to the organization to the organization and to the departments. To avoid any inconveniences, Emma Richardson should launch Aerial at the competitive price which will have low profit margins, establish its market and devise ways to gain customer loyalty and find mechanisms which can improve design to produce a high quality product and cut the costs for production. This will help in capturing all the market opportunity. Nevertheless all these should be done with a lot of consultations, effective communication, effective leadership and appropriate team development.
She should also ensure that she assigns some people the role of doing market research to ensure that they identify the gaps in the market and come up with solutions to fill these gaps. In addition she should improve the process of product development. There is ambiguity in the project; therefore Richardson should clearly identify the project to ensure that the teams have a common goal. Teams front different departments are in conflict, Richardson should develop conflict resolution mechanisms to prevent these conflicts from occurring again. She also needs to gain confidence in making decisions which lead to achievement of organizational goals. It is not advisable to keep postponing decision as this will not solve any problem but can create many problems or even delay a project which is so crucial to the organization.
Anonymous, 2011, Tuckman’s Model of Group Development, viewed on April 21, 2011 from http://www.ncsu.edu/csleps/leadership/Group%20Develoment%20-%20Tuckman.pdf
Beer Michael, 2009, TerraCog Global Positioning Systems: Conflict and Communication on Project Aerial, viewed on April 21, 2011 from ftp://22.214.171.124/share/research/hbr/2184-PDF-ENG.PDF