Puma- organization behaviour and recommendations

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Puma- organization behaviour and recommendations

  1. 1. Fathmath Juhaina Rashyd S11423051 Bba 13
  2. 2. Puma Se, officially branded as PUMA, is a German Multinational Company which produces athletic shoes, fashion footwear and sportswear. Being headquartered in THE COMPANY Herzogenaurach, Bavaria, Germany, the business was foundin 1924 as the Dassler brothers shoe factory. In the early days the shoe factory was named as Gebrüder Dassler Schuhfabrik by Adolf and Rudolf Dassler.However, by 1948, the brothers split their business, Adolf called his business Adidas after his nickname and Rudolf called the new firm Ruda. Though the company was named as the Ruda Company, it was officially registered as Puma on October 1, 1948. 1948 was indeed a very successful year as the company was at its initial stage. The company proudly launched their first football boot, the “ATOM”. However, slowly the demand for the products started falling, and initially company took a twisted turn at the beginningof 1993, the German sports shoe manufacturer Puma was extremely poorly positioned in the industry and people regarded them as one of the most undesirable sports brands in the world. The Company nearly went bankrupt as a result of a few keyinterconnectedmatters that had persisted since the company went public in 1986, namely, due to a centralized corporate structure, a high- costof production in Germany, and an inability to keep up with the change in global trends.
  3. 3. Although the competition level was increasing significantly where brands such as Nike and Reebok spent significant amounts to capture contracts with the leading athletes such as Michael Jordan (for Nike), in order to develop their brand image, Puma had no such added advantages. So in order to remain in the competitive market, Puma Company needed to promote an image of “cool” to the consumer. Looking at another company at that time, ‘New Balance’ looked to enhance their brand, by strictly catering to older customers with varying shoe widths in the existing market. Unlike how other organizations in the same business, Puma highly lacked of a “Focus”. In order to gain back what Puma was losing since 1993, they needed to determine how their product was differentiated from other companies in the industry; they needed a motive which would lead them to the top.In order to do so, The Puma’s board then hired the company’s marketing director, Jochen Zeitz as the CEO.Mr.Zeitz implemented an ambitious three- phase plan to overcome the high costs, low brand image and a lag keeping up with the trends. Phase 1: Phases of the management which was proposed by Mr. Zeitz were as follows: The main focus was to restructure the business and establish a solid financial footing as a plan for long term corporate development. Therefore, he nearly halved the payroll to 367 employees and closed down the production plants in Germany, instead outsourcing product to Asia. In addition, Zeitz also bought back the licensing right in the US which the company had lost control of when the financial crisis hit them. Phase 2:
  4. 4. The second phase was objected to reposition the company through marketing strategy aimed for its long term development plan. As there was less demands for Puma brand of activity shoes (i.e. running, basketball, Etc.),instead of pushing their luck with it, Puma decided to market their brand as a more fashionable alternative. Phase 3: As a plan for their long-term oriented business plan, company expansion and has the long-term mission to become the most desirable footwear. Therefore, Puma, signs on as the official supplier of footwear to the FIA World Rally Championship, WRC. Further the business was broaden into, sport accessories other than shoes (i.e. tennis rackets. Socks, sportswear, dive suits, etc.). Furthermore, celebrities appeared wearing Puma products, which lead to a larger market with regardless of any effort for advertisement done by the company. The three phase strategy was very effective and the progress at puma was extraordinary, with the sales getting shot up to a 30% escalation from the year 1997 through 2003. Since then, more than 9,000 employees are working at Puma and distribute its products at more than 100 countries worldwide.
  5. 5. Organizational Behavior and Recommendations for further enhancements in the business. Like many other globalized corporations,Puma also believes that “labor flexibility remains as one of the key components to ensure that individual companies survive and grow”. Although, these “flexible” labor practices enable the company to operate cheaply and at a steady speed it violates the rights of the workers. As stated by Puma on their vision-statement, “We are committed to working in ways that contribute to the world by supporting creativity, sustainability and peace and by staying true to the values of being Fair, Honest, Positive and Creative in decisions made and actions taken” Referring to the code of conduct, the first and the foremost issue the company is against is the employment of minors. As a responsibility of the company, this matter is monitored highly. The company considers a minor as one who is below the age of 15 or the minimum age applicable by the law.Many successful businesses such as nike and adidas are often hit by child labor scandals, in order to avoid such controversials Puma, examines thoroughly whom they hire. The company is also concerned over the fake Puma products which are generated through the market. Most of these fake product’s productions are often done through forced child labour at remote areas. This violates the company’s reputation as well as the quality of the product.
  6. 6. Although the company has certain values, attitudes and regulations that the company is to be followed towards its employees,they have not provided much detail on the well-being of their workers. However, based on the the research done on the company, the manager’s attitude towards the employees working at supply factories are different from the employees working at the Puma headquarters. Moreover, in regard to the vision statement, though the supply units ought to have a standard level based on health and safety of the workers and as well as the protection of the environment, unfortunately; this has been proven wrong. Until today no systematic way of handling the chemicals have been revealed by the company. Looking back at one incident, In the year 2011 April, in a supplier plant at Cambodia of Puma it was reported that approximately 101 workers fell unwell. An independent investigation was carried and was found that this was caused due to excessive working hours as well as due to multiple safety violations. Most of these incidents happens due to poor health condition and bad ventilating systems.
  7. 7. In Addition, Puma, is also known for its short term contracts with their suppliers. As a result, the lack of stability does not give supplier factories a good incentive respect to workers rights, this results in the lack of motivation by the employees leading to a decrease in quality productivity.Mostly discrimination takes place at chinese supplier plants. Most of the chinese workers are forced to work at very low wages and very long work working hours (i.e. over 48 hours). Although the situation of the workers is bad, they are willing to work at any cost as the unemployment rate is quite high at the country and it is almost impossible to find a job in the market now. As mentioned previously, workers are treated badly not only in china but also by the Taiwanese managers, most of the individuals working at such plants describes the management as “militaristic”. The workers describes the factories as militaristic because of the very strict rules such as, being have to recite the company slogan loudly and march to work, if this does not reach upto the supervisors expectation the workers are being punished. However, the organization prefers the best quality of the product, so to reach up to companys expectations the supervisors at supply factories are forced to make the workers work as efficiently as they could. In other words, Regardless of the fact that Puma’s Vision statement and code of conduct states on the well being of their employees, research has highly proven them wrong. So in order to avoid said problems, and to rebuild their reputation and structure, things can be done the other way around. Instead of using force, they could use alternative methods such as training sessions to build up team work, and by providing full support from the supervisors would also be anadded advantage to the worker to perform better.
  8. 8. Even the company can also appoint one head from the headquarters at each of the supply plant across the globe to monitor the welfare of the employees.Additionally, the company can also have more confidential ways to file complaints by the workers to minimize harassment, intimidation and discrimination. In order to become more successful, one of the best way is by listening to employees it is like finding the way into success through the voices. Referring to one the successful business, Starbucks, have earned a respectable reputation on how the staffs are being treated. Even from the supervisors to dishwashers, are treated equally fairly at the organization.The company believes that their way to success is by always listening to their employees. Likewise the Company’s employees are referred as their partners and are at the heart of their Starbucks experience.This is due to the fact that they follow the matrix organizational structure.In matrix organization each employee has a dual reporting relationship. An employee reports to the project manager for all matters relating to planning and executing project activities. The project manager also exercises administrative authority over the people in the team in matters such as sanction of leave. This ensures that the project activities are carried out smoothly in a coordinated way, and also builds a great trust among the employee and the company. Puma can also adopt similar business ethics in their organizational structure. If Puma adopts matrix organizational structure into their business, they can have constant based suppliers with guaranteed quality products, as well as the workers will be pleased to work with the company. This can lead the business intobroadening into different parts of the world in the form of their own outlets. Not only this but also, it allows the employees to work as a team despite being in different parts of the world. Some of the positive changes it may resemble on the business can be, first, it allows team members to share information more readily across task boundaries. Thus, this would enable the workers to work as a team rather than individually towards the same goal.
  9. 9. Example structure of a matrix organization Secondly it would also enable to improve the knowledge of employees stimulating creativity and innovation. Due to that, individual tasks could be assigned to workers, making it easy to manage them as a team working towards the same goal. Puma can still be repositioned from the list of world’s succesful shoes manufacturers; current position being fourth in the ranking. One way is to create a better brand image in the society, therefore in order to obtain the market, some of the ways Puma could improve is to look at the employees not just as workers but as a family; as a team. As detailed above, organize training programmes could be conducted, as well as more awareness programmes among the employees of the usage of chemicals in the factories. Besides building teamwork, The company can also focus on improving the infrastructure of the supply plants as well as the headquarters. More facilities such as availability of more toilets and rooms could lead to reduce of health issues among the workers. After analysing the current situation at supply plants; more than 100 workers are forced to use the same toilet and upto 12 people live at the same dorm. Likewise,Workers do require a living wage, therefore offering a reasonable wage rate would benefit the company by motivating the employees, thus, providing more quality products. In regard to the code of conduct, “respect and equality, reagrdless of race,creed, agae, sex, social, oridin, political veiws, sexual orientation, or position” shoud be maintained in the supply factories as well as the head organization.
  10. 10. So far, the company has takensome steps towards transparency of the organization. Since 2000, Puma has been auditing all of its suppliers on a yearly basis, and since 2005, the company has publicly provided a list of the suppliers adding more steps in the right direction, (for the welfare of the employees). In june 2011, Puma became the first global brands to sign onto the freedom of association protocol in indonesia and also Puma has obtained the Ethical Clothing Australia accreditation for its Australian-made products whereas puma has made a strong commitment to respecting workers’ rights in some areas. In Conclusion, the company is in a position that if the necessary changes mentioned above are applied in the organizational structure of the business the end result will hike up their current performance level. Looking back the recommendations to further enhance the business; firstly the use of alternative ways rather than force and power such as support from the supervisors in factory plants and a more systematic way of filing complaints. Secondly, by changing the organization structure of the business into a more resourceful structure, for instance adopting the matrix structure. Thereby the communication channel will run smoothly despite Puma having their plants all over the world. Moreover, in order to reposition their current ranking from the world’s top ten shoe manufacturing companies to a better position, they can aim to persuade a bigger market. One of the ways in obtaining a bigger market is to have a good reputation from the quality of the product to working for the welfare of the workers. Last but not the least the improvement of the infrastructure at all the supply plants, which will motivate the staffs to work as a result the productivity increases so does the company’s reputation. A little bit of sacrifice is what Puma need to work on in the company, rather than discriminating blue collar workers and white collar workers if the company tries to works as a family the result will be much more proficient and prolific. Conducting recreational activities is one great way to motivate workers to perform as a whole family.
  11. 11. REFERENCE: (2004),101 workers faint at Puma factory,retrieved from: http://www.safetyinaustralia.com.au/safety- news/6888-101-workers-faint-at-puma-factory.html http://worldtenz.net/the-top-ten-shoe-companies-in-the-world.html http://www.top10sworld.com/top-10-sports-shoe-brands/ http://www.globallabourrights.org/reports?id=0095 http://en.wikipedia.org/wiki/Puma_SE http://www.slideshare.net/vitusmaren/marketing-plan-of-puma/

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