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The Gap Analysis on Riordan Inc.

Introduction

Riordan is a multinational company with its operations based in plastic based product manufacturing and has earnings of $46 million. The company’s main products include plastic injections and others include plastic bottles, medical stents, plastic parts, etc. it is headquartered in the United States and has opened a subsidiary operation in China. The gap analysis provides a brief overview of the issues, which plagues the company and the opportunities that the company faces. The Gap analysis provides an overall analysis of the whole situation that the company is in based on the information provided in the case study. In this paper, we will apply concepts of management into a multinational organization, as is the nature of international management (Hodgetts, Luthans, & Doh, 2005, p. 6).

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Situation Analysis

Issue and Opportunity Identification

Riordan Inc. is a multinational organization with its operations spread across various geographical areas. It started its operations in Hangzhou, China. Initially the company faced problems in acquiring skilled labor in China and therefore hired labor from neighboring countries like Pakistan and India. However, with the beginning of the firm the management because concerned with the diversity of the organization under one roof. Riordan is a US based firm with the organizational climate atypical of a US firm. Apart from this operating in China implied imbibing a few of the characters of the Chinese national culture, which is inevitable in case of Riordan.

Hofstede (2005) states that different cultures can be categorized based on four dimensions he has devised viz. power distance, uncertainty avoidance, masculinity, and individuality. As there are cultural differences these differences are often misunderstood and become the root cause of many issues (Hofstede, 2005, p. 364). Therefore developing a unified corporate culture, which incorporates all the cultures and imbibes dimensions common to all, is a necessary step that must be taken by all multinational organizations.

The other issue that is evident is that of training budgeting. Due to implementation of new projects, and systems the cost of training has increased and therefore physical training has become expensive. Therefore, teleconferencing is suggested by the management as an alternative medium to physical training employees dispersed in different geographical areas. This is a measure to reduce cost of operations of a highly geographically dispersed company (Kogut & Kulatilaka, 1994, p. 123). Geographically dispersed operations can be very beneficial to the company as long as the company properly evaluates the environmental and risk factors.

Motivating employees who have geographically relocated and employees coming from different background is an important consideration for multinational corporations. Herzberg in his Hygiene theory of motivation asserts that motivation is not unipolar rather it is bipolar construct. For instance higher wages is a measure of keeping employees from getting dissatisfied however, they are not motivating factors which can induce higher efficiency. It is work recognition and higher job responsibilities, which can increase the level of motivation of employees. Herzberg furthers this theory to state that employees from different countries have different preference for motivators and hygiene factors. For instance, people from Japan have a higher preference for motivating factors than people from India who prefer more of the hygiene factors (Herzberg, 1987, p. 14). Therefore, to better motivate employees the management must take alternative steps instead of just increasing benefits and bettering the working conditions.

Stakeholder Perspectives/Ethical Dilemmas

Stakeholders are individuals, groups or institutions who have an interest in the actions of the organization and who are in a position to influence it (Savage, Nix, Whitehead, & Blair, 1991, p. 61). This provides organizational strategy and the management’s concern regarding interests of human resources, marketing, finance, and other social responsibilities. Stakeholder analysis considers internal, external, as well as integrated issues related to the operations of the organization.

The stakeholders of the organizations, especially in a multinational setting are manifold. However, a few of the stakeholder issues, which are evident, are as follows. First is the problem among employees. As more employees are from one ethnic background and the rest of the employees are from diverse ethnic origin, there is a clash of cultural values, which leads to clash of interest among the employees.

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The group of employees from diverse cultural backgrounds is the first stakeholders this analysis will consider. For instance, Chinese, Indian and Pakistani employees working under the same roof. Cultural is the discoursed values and beliefs which are instilled in individuals and are unique to a culture. Due to cultural differences there may arise problems among employees, which may be escalated, to a large form affecting production. Therefore, with change in the culture the values and constructs differ which changes the discourse of ethics and morality within the organization therefore creating dis-functionality as labors are directly related to the functioning of the organization.

Political influence on organizations is important. The governmental pressure in changing the mode of operation and adoptability of the company to processes not yet prevalent in the country may lead to problems. For instance, Chinese political situation may hamper the operations of Riordan, an US organization, to operate in China due to political instability and political pressure in the company’s operations. China is a communist country with many of its systems still under bureaucratic control of the state government. Further Chinese relation with the United States may be a key issue, which affect the operations of the Riordan in the country. The government’s interests lie in optimizing national benefit and that of the company is in profit maximization, there may be a clash between the two.

The third possible stakeholder issue, which may cause problem to Riordan Inc., is related to training and budgeting. This difference may arise between the finance team and the human resources department. Interest of the internal organizational stakeholders is hampered there are budgeting issues that has been observed with the new project development and the training cost. Training is a priority for management as this leads to greater efficiency and therefore productivity. However, hindrances may arise in forms of increased budget for training, which are usually negated by management.

The fourth stakeholder issue is related to the shareholders. Companies aim at maximization of shareholder profit. However, due to the implementation of change and changes in processes and systems this may be hampered due to increased cost of operations. Due to increase in cost of training, changing plant location in China, implementing new processes and systems, may increase cost of operations. This may reduce the profit that is earned by the company and therefore affecting the shareholder value. This may aggrieve the shareholders who have a great control over the board of directors of the company.

End-State Vision

The main issues that are evident from the analysis are related to culture and operations cost of the company due to its new operations in China. Therefore based on these two visions are evident from the above discussion. First is to unify the culture of Riordan in order to maintain this climate in any subsidiary or division of the company operating in any geographical location. This climate will include the various positive traits of the majority of the employees working in the organization and keeping in mind the different dimensions of culture as stated by Hofstede. The second vision is related to reducing operating costs by shifting the operations from Hangzhou to Shanghai in order to leverage benefits of location and make costs lesser.

Gap Analysis

The gap analysis shows that there is lack of coordination of the organizational operations with that of other departments. Human resources are operating at a separate footing and managing their own budgets. However, there should be a complete procedure to ensure proper functioning of the organization occurs. According to the data provided regarding Riordan it is evident that the organization is a predominantly US based organization with its operations presently being diversified in other geographical areas. Therefore, the country has little experience in handling a multicultural workforce. However, China provides a great opportunity to reduce cost of operations of the company still according to the company financials, the operating costs has been increasing for the company. Therefore, the company must integrate its operations even though it is geographically dispersed in order to mould all the subsidiaries into a unified corporate climate.

Conclusion

The gap analysis shows that the main issue related to Riordan is its present China operations, which need to be integrated with its other operations. Culture is a major issue, which need to be overcome in order to make operations more efficient. Further, the company must try to reduce cost by leveraging technology advantage in order to reduce cost of travelling which is increasing every day. China is a good alternative for foreign subsidiary as in the US operational costs will increase due to rising infrastructural and labor costs.

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References

Herzberg, F. (1987). One More Time: How Do you Motivate Employees? Harvard Business Review , 5-16.

Hodgetts, R. M., Luthans, F., & Doh, J. (2005). International Management (6th Eds.). New York: MacGraw-Hill Companies.

Hofstede, G. (2005). Cultures and organizations: software of the mind. New York: McGraw-Hill Professional.

Kogut, B., & Kulatilaka, N. (1994). Operating Fexibility, Global manufacturing, and the Option Value of a Multinational Network. Management Science 40(1) , 123-139.

Savage, G. T., Nix, T. W., Whitehead, C. J., & Blair, J. D. (1991). Streategies for Managign and Asssesing Organizational Stakeholders. Academy of Management Executive 5(2) , 61-75.

Table 1: Issue and Opportunity Identification

Issue Opportunity Reference to Specific
Course Concept
(Include citation)
Concept
In order to maintain a uni-cultural environment in the China operations in order to manage labor force from different nationalities, it is important to develop a common culture within the organization, which keeps into, account all the other cultures i.e. Indian or Pakistani traits in so that cultural differences can be avoided.
Managing employee diversity is key to success for a multinational organization as cultural differences may lead to operational disruptions.
Hofstede asserts that cultural congruence is necessary to maintain operations in a multicultural organization.
Organizational culture is imbibed from national culture, which is a set of values and practices atypical of the culture (Hofstede, 2005, p. 285).
A diverse workforce allows companies to maintain a large number of workforces and it becomes easier to recruit skilled workforce required for efficient operations. Cultures in different countries help in building the organizational culture. Therefore, a change in the national culture will affect the organizational culture and therefore may cause problem for employees coming from a different culture (Hofstede, 2005, p. 283). Organizational and National Culture
Staff motivation is required to continue operations without any major failures. This will ensure the proper maintenance of the facilities and operations of the organizations.
A motivated workforce is capable of delivering much more productivity than one, which is de-motivated. As has been pointed out by Herzberg (1987), hygiene factors can lead to dissatisfaction while motivators can lead to greater efficiency and productivity.
Employee motivation is crucial for marinating work efficiency. De-motivated or dissatisfied workers may lead to disruption of work, inefficiency, and high attrition. Motivation of the staff does not require fringe benefits, or higher wages, or perks; rather it requires work recognition, achievement, and the work itself (Herzberg, 1987, p. 8). Further from cultural point of view Herzberg showed that the hygiene and motivating factors differ with country (Herzberg, 1987, p. 14) Theory of Motivation
Operations have been costly due to the shipping costs, which had resulted in the management’s decision to shift China operations to Shanghai.
In case of relocation, many issues related to labor and infrastructural cost will arise. These issues must be resolved before a proper relocation takes place.

Training costs have become higher due to implementation of a new system and projects. Higher training costs have become a serious worry for top management team.

Shifting plant to a different location in China will reduce cost of operations in terms of transportation cost and will make supply to other countries easier.
An alternative usage of technology has been implemented to curve the cost of training without negating the need for it.
Taking full advantage of geographical location and coordination between subsidiaries between geographically dispersed areas becomes a priority for organizations (Kogut & Kulatilaka, 1994, p. 123) Geographical dispersion and cost advantage

Table 2 Stakeholder Perspectives

Stakeholder Perspectives
Stakeholder Groups The Interests, Rights, and
Values of Each Group
The group of employees from diverse cultural backgrounds. For instance, Chinese, Indian and Pakistani employees working under the same roof. Cultural is the discoursed values and beliefs which are instilled in individuals and are unique to a culture. Due to cultural differences there may arise problems among employees, which may be escalated, to a large form affecting production.
Chinese political condition is risky as there it is a communist form of government and there are bureaucratic problems, which hinder operational efficiency. China is a communist country with many of its systems still under bureaucratic control of the state government. Further Chinese relation with the United States may be a key issue, which affect the operations of the Riordan in the country. The government’s interests lie in optimizing national benefit and that of the company is in profit maximization, there may be a clash between the two.
Interest of the internal organizational stakeholders is hampered there are budgeting issues that has been observed with the new project development and the training cost. Training is a priority for management as this leads to greater efficiency and therefore productivity. However, hindrances may arise in forms of increased budget for training, which are usually negated by management.
Shareholders Due to increase in cost of training, changing plant location in China, implementing new processes and systems, may increase cost of operations. This may reduce the profit that is earned by the company and therefore affecting the shareholder value.

Table 3 End State Goals

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End-State Goals
Change of position of the China plant to Shanghai.
Inculcating a unified organizational culture and ensuring no cultural conflicts.
Employee motivation considering cultural factors.

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