Need a 1 – 2 page summary for the following business case studies each in IRAC format. IRAC, i.e. Issue (basis of the case), Response (of the parties in the case/Relevance/Recommendations (of the student), Application (to the issue or problem raised and the different options out there) and Conclusion (Analysis of the company’s response and well as your recommendations Thus, to expand on the above , the IRAC categories are the main “headings” of your written case summary and under the “IRAC” categories are sub-headings that may take the following forms, e.g. Basis of the case/Pertinent issues (Issue), Analysis of the fact pattern in the case (Response), alternative options prescribed (Application), Predicted, Possible, and Desired Outcomes (Conclusion) etc. must be part of the case summary. Uber: managing a ride in chinaKent chemical: organizing for int. GrowthMidwest electronics’ asian expansion xiaomi: entering international marketsLevendary cafe: the china challengeTelemetrix (a) – north-south exports lends a helping hand to telemetrix: mexico or brazil?
kent_chemical_organizing_for_international_growth.pdf
levendary_cafe_the_china_challenge.pdf
midwest_electronics__asian_expansion.pdf
telemetrix__north_south_exports_lends_a_helping_hand_to_telemetrix_mexico_or_brazil.pdf
uber_managing_a_ride_in_china.pdf
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For the exclusive use of H. K, 2019.
4409
FEBRUARY 23, 2012
CHRISTOPHER A. BARTLETT
LAURA WINIG
Kent Chemical:
Organizing for International Growth
In July 2008, Luis Morales, president of Kent Chemical International (KCI), the international arm
of Kent Chemical Products (KCP), balanced a computer on his lap, trying to merge the organizational
charts of his KCI worldwide operations with KCP’s domestic businesses. After his third attempt, the
two charts finally shared the screen. He had achieved digital success, but as he looked at a chart that
reminded him of a multiheaded hydra, Morales was not convinced he had found a real-life solution.
Over the past two years, the KCI president had been searching for a way to better coordinate his
fast-growing international operations with Kent’s domestic core. Two previous reorganizations had
not achieved that objective, and now the global economy looked as if it were headed for a recession.
If he was to recommend another restructuring, Morales knew it would have to be successful.
Kent Chemical Products: The Company and Its Businesses
Kent was established in 1917 as a rubber producer, and its historical roots were still evident. The
founding Fisher family owned 10% of the stock and was still the largest stockholder, family members
held a few key positions, and corporate headquarters remained in Kent, Ohio, a town outside Akron.
During the 1940s, Kent had diversified into plastics and, as that market soared, expanded through
acquisitions to become one of the country’s largest producers and marketers of plastic additives and
other specialty chemicals. Responding to postwar opportunities, KCP opened a research laboratory in
1953, harnessing technology-based research to drive product development. By the 2000s, Kent had
become a leading global specialty-chemical company, with 2007 revenues of $2.2 billion. (See
Exhibit 1 for summary financials.) It held minority and majority stakes in more than two dozen
businesses in the U.S. and overseas, employed 4,200 people including 1,200 offshore, operated 30
manufacturing facilities in 13 countries, and sold its products in almost 100 countries.
Kent offered a wide range of products from specialty lubricants to polymer additives, focusing on
niche-market needs in the construction, electronics, medical products, and consumer industries. The
range was managed through six business divisions, three of which had significant international sales.
________________________________________________________________________________________________________________
HBS Professor Christopher A. Bartlett and writer Laura Winig prepared this case solely as a basis for class discussion and not as a source of
primary data, an endorsement, or an illustration of effective or ineffective management. This case, though based on real events, is fictionalized,
and any resemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the narration.
Copyright © 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
This document is authorized for use only by H K in Comparative International Business FA19-57111 SJ-1 taught by RICHARD YANG, William Jessup University from Oct 2019 to Apr 2020.
For the exclusive use of H. K, 2019.
4409 | Kent Chemical: Organizing for International Growth
Consumer Products
Grease-B-Gone, the company’s first major consumer product, was introduced in 1966 and became
the leading de-greaser in the U.S. First targeted at the auto engine market, the brand had expanded
into a range of specially formulated products designed for high-margin niche household applications
such as oven, barbeque, and stainless steel cleaners. KCP subsequently introduced other specialty
household products including drain openers, rust removers, and eco-friendly surface cleaners.
In the U.S., these products were distributed primarily through independent retailers and buying
groups in the hardware and do-it-yourself sectors. Outside the U.S., consumer sales outlets and retail
distribution channels varied by country. In Brazil, for example, Kent sold through distributors to
small independent outlets; in France a direct sales force sold to national chains. And while consumer
preferences in the U.S. were largely homogeneous, overseas the product’s packaging, container size,
aesthetics (scent, color, etc.), and even active ingredients could vary from one country to the next.
About one-third of this business’s $522 million worldwide sales were outside the U.S., with strong
local and regional competitors in each offshore market. General household products were produced
in the company’s large, multiproduct mixing and packing plants in markets from France to Brazil to
New Zealand. However, the only non-U.S. facility able to produce the specially formulated, aerosolpackaged Grease-B-Gone line was in France, in a single-product plant built in 1990.
Fire Protection Products
Kent entered the fire protection business in the 1950s by acquiring a company that had developed
fire retardant chemicals for the apparel industry. Subsequently, Kent’s R&D lab developed other fire
retardants for the electronics, building, and transport industries. Then, following the 1967 fire that
claimed the lives of three Apollo astronauts, government-funded research led Kent to develop a line
of foams, chemicals, and gases, thereby allowing it to enter the larger fire control market segment.
By 2008, fire retardants were mature commodities, but the fire control segment was a large, fastgrowing and increasingly specialized field, requiring big investments in R&D to keep pace. The latter
product line was sold to both fire control systems companies and original equipment manufacturers
(OEMs) in the electronics, building, and oil refining industries. Intense price competition particularly
in the retardant segment, caused Kent to focus on reducing production costs.
Outside the U.S., fire retardants were produced by former Kent licensees, FireGard plc in England
and SicherFeuer AG in Germany, both with long histories in the industry. Fire protection regulations
varied by country, so the chemical agents Kent produced in its four plants around the world often
had to be adapted to local markets. A few multinational customers accounted for the majority of
Kent’s $210 million in worldwide sales, 45% of which came from international markets. As the
number-three competitor worldwide, Kent faced pressure from both local and global companies.
Medical Plastics
In the 1960s, Kent collaborated with a major hospital supply company to develop a non-leaching,
sterilizable plastic that won the U.S. Food and Drug Administration approval to hold intravenous
solutions. That partnership created plastic IV bags that gradually replaced the ubiquitous glass
bottles hanging over hospital beds around the world. Building on that reputation, Kent became a
leading supplier of plastics for medical applications. Over subsequent decades it developed special
formulations for everything from surgical instruments to implantable devices to replacement joints.
2
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Kent Chemical: Organizing for International Growth | 4409
Its customers were large global hospital supply and medical device companies with which it
worked in partnership to develop specialized plastics for targeted applications. In addition to
properties such as biocompatibility, self-lubrication, and non-toxicity, these plastics also had to retain
those characteristics under sterilization-imposed conditions of extreme temperature and moisture.
The company’s growing line of medical products all were developed in the company’s Ohio R&D
labs and manufactured in one of two specialized plants in California and the Netherlands. Overseas
sales accounted for about 35% of the business’s $625 million global revenue.
Kent Chemical International: Going Global for Growth
For many years, Kent’s overseas operations were seen as a source of incremental sales through
exports, licensing agreements, and minority joint ventures (JVs). That view changed in 1998, when
Ben Fisher, KCP’s newly appointed CEO, announced that a more strategic approach to global
expansion would be his top priority: “Our goal is to remake Kent from a U.S. company dabbling in
international markets to one that develops, manufactures, and sells worldwide.”
Old Root Stock, New Growth
To implement his vision of a global integrated company, Fisher named Luis Morales to head the
revitalized international division. Morales was a 22-year Kent veteran who had joined its Mexican
subsidiary in sales, risen to become country manager, then moved to Ohio to run KCP’s Consumer
Products division. He had a reputation as a smart, hardworking team player who liked to win.
Morales began implementing the global integration strategy by taking majority interests in Kent’s
15 offshore JVs, acquiring other overseas companies, and generally expanding global presence. The
subsequent rapid international sales growth—from $139 million in 1999 (11% of total revenue) to
$598 million in 2007 (27% of revenue)—was managed through Kent’s International division. That
division reported to Morales through three regional directors—for Europe, Middle East, and Africa
(EMEA); Central and South America; and Asia-Pacific—all located in Kent, Ohio. (See Exhibit 2.)
Historically, regional directors had managed subsidiary and JV managers in 22 countries with a
light touch encouraging them to optimize their local positions. Because Kent was a minority
shareholder of many of these companies, its financial and operating control were often limited. But
strong informal links ensured the necessary financial and technological support. “For decades we’d
provided them support, and they had sent us dividends,” Morales said.
The entrepreneurial independence of offshore entities was often complicated by long competitive
histories. Morales acknowledged that the regional directors’ post-acquisition task of coordinating
activities and integrating operations was extremely difficult. “For example, FireGard and SicherFeuer
had been competitors for decades,” he said. “Even after we took minority positions, they refused to
cooperate or even to coordinate activities. In fact, it’s only in the last couple of years that we’ve finally
begun to get many of our own subsidiaries to stop exporting into each other’s markets.”
Even after Kent took majority positions, establishing control often proved to be difficult. In 2000,
the EMEA regional manager relocated his staff to Hamburg. “We needed to work more closely with
local companies to rationalize overlapping activities and duplicative operations,” he said. “But
relocating didn’t solve the problem. When my staff tried to consolidate redundant European
manufacturing, for example, local managers with 20 or 30 years’ experience in their markets ran
circles around them. It soon became clear that most of the regional staff simply lacked the market
knowledge and detailed technical expertise to counter the country subsidiaries’ strong pushback.”
HARVARD BUSINESS SCHOOL | BRIEFCASES
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4409 | Kent Chemical: Organizing for International Growth
New Strategies, New Stresses
As overseas operations grew, Morales became concerned that his organization was not adapting
well to changing pressures and demands. His first concern was the impact of new systems. As Kent
acquired majority positions, corporate reporting systems had been added to allow operations to be
controlled and financial reports consolidated. But these changes had caused strains. “Having the data
sometimes tempted my staff to second-guess local country managers,” admitted Morales. “The
subsidiaries felt that we set arbitrary financial targets that were out of touch with their market
realities. Despite our good intentions, I think the country managers were often right.”
Capital allocation had also become more complex. Subsidiaries now had to complete capital
requests that were first reviewed by a regional manager, then by Morales, and often at the corporate
level. In the process, relations between subsidiaries and their U.S. technical contacts shifted. A
country manager explained: “Our U.S. colleagues used to consult with us on our projects, but once
they were involved in the funding decisions, they became more critical and less collaborative.”
Morales’s second concern was that overseas subsidiaries’ long history of independence led
managers to protect their self-interests. “When the Korean subsidiary wanted to manufacture fire
retardants for its electronics customers, its plans challenged the German subsidiary that had been
exporting retardants to Korea for years,” he said. “When we began trying to integrate the strategies of
our overseas operations, conflicts like this regularly reached my desk for resolution.”
Parochial attitudes also blocked technology transfer when the informal relationships that had long
linked offshore operations with U.S. technical experts were replaced by the more-formal structures
that growth had required. Berthold Hugel, SicherFeuer’s general manager, explained:
As we grew, a U.S.-based technical manager was appointed to the regional director’s staff as
our liaison with domestic divisions. Perhaps he just lacked good contacts, but we were never
properly connected. So I sent an English-speaking SicherFeuer employee to Ohio to serve as
our technical link. But he had no clout, so that didn’t work either. Finally, I decided that the
only way to get technical help and to learn what new products were being developed was for
me personally to travel to Kent headquarters every 60 days. So that’s what I did.
Frustration about links between geographic and product organizations also existed in the U.S.
divisions, as reflected in the comments of Jack Davies, the VP responsible for Fire Protection:
We had developed this great new halogenated flame retardant product that was selling great
in the U.S., but it was stalled in Europe. The U.K. subsidiary told me that their projectappropriation request had been blocked by corporate. I discovered that someone in the
controller’s office was withholding approval as a lever to force the U.K. to bring its receivables
under control. It wasn’t my responsibility, but I stepped in to put a stop to it.
The third problem worrying Morales was that even within his international division, the regional
organization had difficulty coordinating issues with global implications. In the Medical Plastics
business for example, most of KCP’s customers were multinational hospital supply and medical
device companies. So when the Brazilian subsidiary unilaterally reduced prices on its line of general
purpose polycarbonates as a loss leader to sell more of the expensive, technical medical products, the
pricing impact was felt throughout Kent’s worldwide medical plastics business.
The issue highlighted the fact that nobody was coordinating price, product, or sourcing decisions
globally. “Worse still, because the international division had a regional rather than a product-based
structure, our global product-development needs and priorities were seldom communicated to the
4
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Kent Chemical: Organizing for International Growth | 4409
research group,” said Morales. “And since our R&D efforts respond to specific problems or identified
applications, they rarely focused on offshore opportunities or needs.”
The 2006 Reorganization: Bridging Gaps with GBDs
In June 2006, when CEO Ben Fisher also became Kent’s board chairman, he used the occasion to
announce a major reorganization. Angela Perri, who had joined KCP 20 years earlier as a PhD
scientist in the R&D lab, was named president of the U.S. businesses. Perri was a capable, harddriving, ambitious executive who most recently had run the U.S. Medical Plastics division.
Simultaneously, Peter Fisher, Ben’s 35-year-old son was named vice chairman with responsibility
for all corporate staffs and the international operations. Peter had joined Kent in sales before heading
the Consumer Products division for the past four years. Under the new organization, the
International division became Kent Chemical International (KCI), a separate legal entity structured as
a subsidiary of KCP. Both Angela Perri and Peter Fisher reported to the chairman. (See Exhibit 3.)
Morales hoped the reorganization would improve domestic/international relations. “Historically,
all vital communication between us occurred either at top levels or on the front lines,” he said. ”At
my level, I’d negotiate funding decisions, and in the trenches relationships between U.S.-based
technical experts and international plant managers got things done.” But as overseas operations
grew, Morales had become stretched thin as KCI’s principal top-level contact. And the advice and
support that had long flowed freely to the front lines was now provided slowly, reluctantly, and
often accompanied by an invoice for intercompany charges. “The regional directors should have
provided the extra link with the domestic divisions. But they never had the status or power of
product division managers, who were all KCP vice presidents,” said Morales.
To respond to these problems, Morales in 2006 appointed three global business directors (GBDs),
each with a long, successful U.S. career before moving to KCI. The GBDs would be responsible for the
three lines of business within KCI, and although the new roles were not well defined, they were
announced as VP-level positions reporting directly to Morales. Each GBD assembled a staff of 3 to 6
product or project managers and began defining their roles and setting priorities.
The consumer-products GBD was a 25-year Kent veteran of senior sales management in KCP’s
Consumer Products division. Before this appointment, he had run a small domestic JV. He explained
his understanding of the new role: “I’m trying to inject consumer-oriented thinking into our overseas
subsidiaries. I don’t care if they see my role as advisory or directive, as long as they do what needs to
be done. They have to realize they’re part of a global company now.” Responding to his mandate to
“sort things out,” particularly within EMEA, he saw his first priority as determining why the GreaseB-Gone line had not sold as well in Europe as it had in the U.S.—and then to fix it.
A second GBD was given responsibility for fire protection products. He had 10 years of
international sales experience and four as manager of market planning in the Fire Protection division.
“I’ll need to assume worldwide technology control and marketing responsibility,” he said. “The way
I see it, regional managers should be mainly responsible for production and government relations.”
The third GBD, an engineer and 15-year KCP veteran, was assigned to medical plastics. She saw
her ro …
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