Analysis of Schick Company

Executive Summary

The purpose of this report is to provide a diagnosis analysis of “Schick” giving the major issues that are confronting the company and the attendant implications for the company.

Schick was established in the year 1990 and registered in Southampton as a private limited liability business following the outcome of the collaborative research efforts of three university professors namely; Prof. Chen Ding, Prof. Karl Otto Ludwig and Prof. Andrew Marsh resulting in the design and manufacture of energy saving refrigerators during the period noted for environmental consciousness and high energy prices among others. Given their technical and engineering background, over time, the business became one of the market leaders renowned for its design and environmentally friendly home appliances and enjoy recognition as a 21st Century Role Model in the year 2014 given its unique capability for growth and profitability while setting global standards in innovation, corporate social responsibility, and Responsible Leadership.

The demise of the three professors in a tragic road accident in Munich marks the end of an era coupled with the eventual management change of Mr. John Marsh – Son of Professor Andrew Marsh – as the new CEO who introduced changes in the overall structure of the company including the termination of the four management professionals. Within a short period after this failed leadership and mismanagement resulted in a critical situation which brought the company close to struggling for dire survival as its bedevil by challenges confronting it. The realisation of this reality informs the need for fundamental strategic change, hence the appointment of an independent analysis of current situation.

A cursory look and critical evaluation of current conditions revealed a strategic shift from the founding owners’ ethos creating a non-tangent between value, resources, and environment because of a major shift in the business objective and strategy from environmental protection and corporate social responsibility to a short-term profit maximization and benevolence leadership style. This has several negative implications both internal and external which range from loss of credibility and trust of staff and other stakeholders, lack of strategic investment in the business future, to cost-cutting that resulted in poor design and product safety standard.

Internally, there is a high-power distance organisation culture and leadership style currently whereby the CEO displays a coercive power that tends to alienate other stakeholders and serve as a barrier to adequate crisis management and the future business of Schick. Consequently, there is the need for a general review of management ethos and strategies to regain its lost credibility and image necessary for the survival of the business.

Introduction

This report is intended to provide an independent diagnosis of the Schick[1] issues affecting and to provide a detailed evaluation of the present and future implications of these on this company. Registered as a private limited business with the head office in Southampton in 1990 to manufacture domestic white goods, Schick has been in successful business for over 25 years and with laurels nationally and internationally for its innovative environmental friendly & energy saving products, responsible leadership, and corporate social responsibilities. However, things took a new turn in January 2015 with the demise of the founders in an auto crash and Mr. John Marsh taking over the management of the business. From this stage, Schick started experiencing changes and challenges resulting in its poor image and reputation because of the shift in strategic management ethos of the business that led to product fire and death incident.

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Consequently, this report took a detailed analysis of the major issues with the attendant implications for the future survival of Schick before the summary conclusion of the main findings which leads to the prospective action required in response to them.

Case diagnosis and analysis of implications

The examination of Schick home appliances revealed a series of issues that are hereby provided in this abbreviated SWOT Analysis[2] below and further discussed in this report

Figure 1: Abbreviated SWOT Analysis

Strengths:

  • Global operating platform.
  • Strong brand name.
  • Economies of scale.
  • Strong sustainability focus. (manufacturing in China)
  • Wide range of products

Weaknesses:

  • Lack of responsible leadership.
  • Short-term profit focus.
  • Poor business strategy in terms of innovation, value and core competencies.
  • Weakening bargaining power over distributors.
  • Lack of corporate social responsibility & research & development facility commitment.
  • Negative publicity & poor company image

Opportunities:

  • Increasing concern and demand for environmental & energy saving appliances.
  • Growing Asian market & new market in Africa.
  • New acquisitions & business alliance.
  • Potential inventions.
  • Governmental cooperation and potential funding.
  • Growing concern about climate change and investment in fast-growing product categories, e.g. air conditioning

Threats:

  • Increasing competition.
  • Lower return on investment.
  • Economic uncertainty (BREXIT).
  • Reduce skilled workforce due to migration
  • Changes in laws and regulations.
  • Cheap goods from other countries i.e. Japan
  • Change in customer preferences and demand

The crisis in Schick stems from the change of leadership culture and style. This, in turn, brought about a change of the company’s management ethos and style as the business now focuses on short-term profit maximization strategy through cost reduction and undermines major consideration for other stakeholders. This manifested in a decision to eliminate staff training and development programme, reduce funding for the research and development unit of the business which stands at the heart of the business future strategic investment absence of which leads to the risk of innovation, and development that would further grow the business and increase profit (Koch, 2010). To put this in the context of profit maximization, a scholar states that “To argue that all firms aim to do nothing else but maximize profits has not better basis in logic or intuition as to argue that all students aim only to maximise examination marks” (Hawkins, 1970, pp. 129-140). In other words, it is not ideal to focus on profit maximization especially within a short span of time.

Management style adopted by the Mr. John Marsh is akin to autocratic leadership style associated with rigid control and top-down decision making characterised by hierarchical organisation structure (Schein, 2004; Whetton, & Cameron, 2016) whereby the leader makes most important business decisions without the input of his employees. (Enderle, 2009; Northouse, 2016). Efficient decision making is of great benefit especially when urgency is required. But autocratic leaders tend to reduce the morale of his staff and very quickly begun alienating both the directors and employees of the company (Lewin, et al 1939; Cook, 2008). This was compounded by the news of the Schick directors’ termination which caused a widespread shock, concern, and unrest. This is further reflected the organisational culture best described as “power culture” (Hardy 1978 cited by Hughes, M 2010), with Mr. John Marsh at the centre of power

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From the above, it can be stated that the psychological contract Schick and its employees has been damaged and undermine their sense of individual autonomy particularly among Munich staff when given the news of the proposed cuts in research & development laboratory as well as training and development that not only give room for social interaction but knowledge exchange that leads to safe innovative product design that contributed the make the company an household name for silk, efficient, safe and reliable product that creates a background for the business profitability. (Mone, & London, 2010; Abdoli, & Pourkazemi, 2012).

Equally of note is the United Kingdom European Union membership referendum, also known as the Brexit referendum, which took place on Thursday 23 June 2016. This is a critical moment for Schick given all the uncertainty and forms surrounding exit (Global Counsel October 2015) compound matters, as about 50% of the employees in Southampton were of Polish origin, majority of these Polish staffs are concern that they would not have a future at Schick the Brexit situation and employee engagement issues in the company particularly the termination of the four director which they reasoning that if Mr. John Marsh could sack the directors who had help build the company, he certainly could do same to them as well and as such could not be trusted to protect their interest as employees in the event of changes imposed following the formalisation of Brexit. (The Guardian July & August 2016). In turn, this creates skills gap and further made worse by Mr. John Marsh management decision to do away with the operational arrangement in China that gives the business access to the Asian market. The Chinese manufacturer which had established its own market, reputation and distribution channels in Asia was equally concerned about the impact of Mr. John Marsh’s leadership on its profitability. By 15th July 2016, the agreement was reached limiting Schick’s operations to only Southampton and focused on the UK and Northern European market, now apparently more difficult given the UK exiting the common European Union market and without a research & development unit (Lorca, & García-Diez, 2004). The situation at Schick combined with the uncertainty in the UK, the weak pound sterling could increase the company’s production cost and reduce its profit margin (Lorenczik, et al. 2016).

Regarding its customers, the situation could be likened to that implicit contract that is akin to the employee’ psychological contract mentioned earlier that was damaged by Schick by not meeting norms, and value expectations given the fact that the company was synonymous with global standards setting in product quality and corporate social responsibility has been badly affected by the attempt to stimulate sales and regain lost credibility in the marketplace, which made Mr. John Marsh used a previous design for washing machines discarded by the research & development laboratory in 2015 and the attendance fire and death. This accident event effect was poorly managed (Varadarajan, et al 2006; Carroll, 2013). In addition, Schick’s main distributor responsible for the distribution of the faulty washing machine which caused the fire had to terminate its contract with Schick following the negative publicity and the poor management of the situation by Schick. The company option, therefore, could have been to take action in recalling the affected products and make press statement to express regret over the incident and give reassurance of its total commitment to the corporate ethos; safety reliability that would demonstrate good communication, business ethics and values in consideration of corporate social responsibility that could help restore stakeholders confidence and loyalty (Daly & Moloney, 2004; Le, et all 2014). The future of the business is not sure if Schick’s narrow market focus is considered as the Brexit could restrict access to northern Europe. But there is growing market demand for white goods in Africa (KPMG, 2016) if connection with china could be re-established and adequate funding provided for research and development.

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In order to address the issue of staff trust and loyalty, as all staff felt unable to carry on working for Schick given recent events which will also lead to skills shortage and loss of competitive advantage, there is the great need for corporate culture and leadership style. Since staff only remained at Schick due to the memory of the three professors and all they had achieved, there is a need to build on this loyal sentiment through a robust employee involvement as it were to increase employee engagement and participation (Hyman, & Mason, 1995).

In summary, Schick’s established reputation for sleek, modern, innovative energy-saving white goods achieved through a devotion to research & development, corporate social responsibility, and responsible leadership, has fallen from grace in short time under the management of Mr. John Marsh bringing about the following challenges;. The sacking of the directors created a leadership gap and caused grave concern amongst employees and other key stakeholders. The sale of its research & development Laboratory had not only compromised Schick’s innovative capability but placed customers at risk and reduce it comparative competitive advantage as a market leader. The leadership style and short term profit focused approach to business led to the loss of confidence in Schick’s leadership both within Schick and in the marketplace. Schick experienced high staff turnover at over a short period of time which created major gaps in knowledge and expertise.  The well-publicised fire caused by Schick’s new washing machine has seriously ruined its image and reputation in the marketplace resulting in its main distributor terminating its contract, these created a strategic drift and a situation of lost organisation with environmental and resource value tangent (Kew & Stredwick, 2008).

Conclusion

The good old Schick is now confronted with enormous challenges and crisis breaking point. Diagnosis exposed the major issues affecting it which need urgent attention for its future business existence consequently, the need to revisit and change the narrow business strategy of short-term profit maximisation, high-power distance structure to furnish considerations for other stakeholders’ interest with regard for corporate social responsibility, good business ethics and responsible leadership all of which call for immediate action plan and implementation to ensure the survival of the company.


[1] All information relating to Schick in this report and not stated otherwise are drawn from: Sockalingam, S (2016) Distressing times at Schick home appliances. Unpublished coursework case study, Glasgow Caledonian University.

[2]The information provided in the abbreviated SWOT Analysis (figure 1) is drawn from the Appendices. Full SWOT Analysis, PESTLE Analysis, stakeholder Analysis, Cultural Web, and Porter’s five forces of comparative position model respectively.

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