A TALE OF TWO SHIPYARDS

/CASE ANALYSIS/

Module: Management Processes in Transition Study Program: Management Study Year: 3

PREPARED BY: Mirella Kaloyanova St. №: 25725

LECTURER: Prof. Andrzej Kozminski

...........7 THE ROLE OF PRIVATIZATION.................................................................13 POLISH SHIPBUILDING INDUSTRY IN 2009........................................................................11 THE ROLE OF FINANCIAL ENGINEERING.................................................................................................................................................................................2 INTRODUCTION....3 THE ROLE OF WORKERS AND TRADE UNIONS..................................................................................................14 2 ...................................................................3 COMPARISON OF RESTRUCTRURING STRATEGIES........................................11 APPROACHES TO FUNCTIONAL RESTRUCTURING.........................................................................................TABLE OF CONTENTS TABLE OF CONTENTS.....................................

For these two reasons the focal point of the analysis will be comparing the decisions made by the managers at that time. this extensive case study provides a large amount of information. To name just a few. namely the year 2009. COMPARISON OF RESTRUCTRURING STRATEGIES The managers of the Gdansk and Szczecin shipyards. most of the questions are focusing on comparing the two different strategies chosen by the shipyards’ CEOs in the beginning of the 20th century. just after the reforms in Poland. Szyc and Piotrowski respectively were both appointed to the general director position at a time when the two enterprises were facing similar circumstances. the last section of the paper will observe what happened to the Polish shipbuilding industry at a more current point of time. 3 . which used to be from the Soviet Union. both shipyards lost their major clients. In addition to that. In contrast to some other cases already discussed. The two different strategies will be analyzed on a number of dimensions.INTRODUCTION This report is intended to investigate and compare the various approaches and strategic tools chosen and implemented by the top managers of two important Polish shipyards. This is a necessity if one is willing to grasp the transition process through which a manager had to lead its company in order to turn it from a state-owned enterprise to an attractive opportunity for private investors.

Despite the fact the two managers had resembling backgrounds and took over enterprises which were in similar situations. on the basis of these a strategy is designed and as a final step 4 . the results achieved by the shipyards 3 years after the reforms differed to a high extent. 1995) The roots of this phenomenon lie in the different restructuring strategies that were introduced into the two Polish shipyards. This case study is a clear illustration of the fact that difficulties cause by the external environment or internal weaknesses can be overcome if an efficient and effective strategy is designed and put into practice. the government was intending to include both companies in the privatization process. but not least. In many of the textbooks he wrote or co-edited a simple but powerful model is presented. The model shows the basis of strategic management: the company should first establish its major goal and formulate more detailed objectives. the two of them were facing large debts they were unable to pay. (Loveman. which in my opinion can be applied to our case to set the foundations of the future analysis. last. One of the famous authors discussing the broad topic of strategic management is Charles Hill.furthermore.

each manager opted for his own strategy to implement in the yard under his control. If the goals and objectives of the two shipyards were to a high extent similar as they were set by another party.various practical tools are chosen to realize the desired strategy. 5 . The two strategies resulted in different tool kits used to achieve the desired outcomes. namely strategy. GOAL OBJECTIVE S STRATEGY TOOLS The green bubbles stand for components which Gdansk and Szczecin shipyards and their management had in common. ways of financing. and becoming competitive in a freemarket business environment characterized by a large number of players and international presence. The government was willing to eventually change the status of the yard from state.to privately-owned but first it wanted the enterprises to get restructured. Main objectives springing from this goal were finding new clients. The goal of both yards was actually tightly related to the privatization policy of the Polish government. the government. Our attention should be focused on the yellow bubble.

As far as Piotrowski’s strategy is concerned. change and adapt quickly if it wants to come out as a winner.In the case the two strategies are broadly described. I would like to mention the essence of both of them as seen from my perspective. (Loveman. As the manager believed the yard should be supported by the government. a company should react. such as a sizeable portfolio. For me it seems as Szyc’s strategy was highly influences by the communist-economy heritage. it was actually restructured to the extent that it became a world leader in the production of a specific container ship. I believe we could actually argue the Gdansk’s strategy was not a restructuring one. The Szczecin yard was not only restructured to the level where it is ready for privatization. as the manager was willing to keep numerous structure parts as they were in the past. In other words. and then also profitable. I think it is an inspiring example of how a state-owned enterprise can be restructured using a broad vision and being persistent in the improvement efforts. and extensive workforce. however. I think the strategy used at Gdansk was not very sustainable as it did not foresee how the enterprise can start functioning on its own without governmental support in the future. 1995) My personal opinion is that this was not a wise managerial decision because the period after the reforms was actually one huge transition for the whole economy and as we observed already in numerous interesting examples in class. etc. Although the case discusses restructuring processes that took place 20 6 . he did not make an effort to design a strategy which would allow the shipyard to become independent and selfsufficient first. (Loveman 1995) The key point of Piotrowski’s strategy was to restructure radically and subordinate the changes and reforms at the yard to the needs and requirements of the market.

THE ROLE OF WORKERS AND TRADE UNIONS The main functions of managers are to plan. A manager should never underestimate the importance of employees and the various impacts a change in HR structure can have on the firm. is people. 7 . for some firms this will be the only solution for surviving the crisis or for differentiating themselves in a beneficial way. lead. No matter how difficult implementing radical changes could be. organize and control the work of people to achieve desired results. related to our case study. what implications this has for managers of our time. 2008) A key word here. or human resources. (Robbins. collaboration and co-operation is crucial for the success or failure of a company. People. My analysis of the case study. will also elaborate on the role which workers and unions played in the restructuring processes of the two yards. are at the heart of every business and their performance. What we can learn from Szczecin’s example and apply in current business life is that sometimes continuing to conduct operations as before is not an option at all.years ago I believe this approach can and will be used by managers nowadays when they need to restructure their companies in order to keep them competitive in the era of technology. therefore. and. Workers groups are often represented by trade unions. and fundamental change is required instead. more important.

In my opinion. the following table will summarize the main measures undertaken in the two shipyards with relation to the workers and trade unions which are to be found in the text. In my 8 .First of all. Aspect/ Measure Labour force size Gdansk Shipyard Maintain an extensive labour force Keep them as a sign of Workers’ amenities Employee compensation Szczecin Shipyard Shed unnecessary workers Eliminate them in order to good will cut costs Make efforts not to change Introduce a new system in the wage system used before the reforms Allow them to influence order to increase productivity Receive their support by convincing them the implemented programs will ultimately result in an improved situation for all workers Trade unions management decisions in a way which may not be advantageous for the yard After looking at the table. when the company is taking a new direction. For this reason. I would take a broader perspective: I will look at the role played by workforce in any restructuring process. the article does not provide sufficient information to elaborate much on the role played by workers in these particular cases. The role they play is of strategic importance. which is proved by the fact there is a special branch of management focusing exactly on how to deal with the firm’s human resources when the company is going through an alteration process: change management. we can discuss the role played by workers and unions in the restructuring process. although the work force is a strategic factor in any situation.

however. skipped or postponed. however. they were a factor with greater strategic weight. gain acceptance and turn it into active support. would mean laying off workers who used to manufacture the parts. Buying from supplier. Had management’s 9 . could be unacceptable from the union’s perspective. By being willing or unwilling to cooperate and support the restructuring strategy. workers can strongly influence the end outcome. however. A clear example from the text is the fact that the shipyard could purchase some parts for prices lower than production costs at its own premises. Also nowadays trade unions are among the main stakeholders.opinion a key to implementing a change successfully is finding ways to overcome resistance. and not information provided clearly in the text. it is the important role of managers to lead and organize the workforce and help people contribute as much as possible to the ongoing process. Another party involved and playing a sizeable role in the process of restructuring described is trade unions. especially in post-socialist or postcommunist economies. this. it is just a guess derived from the end result (success of the restructuring process). In the past. We may assume this was the case at the Szczecin yard. In our case study trade unions play almost contrary roles in the restructuring programs undertaken at Gdansk and Szczecin. in turn. For this reason this and other restructuring steps at the Gdansk yard were not undertaken. with importance varying from country to country. The first shipyard has limited options in some aspects because of trade union pressure. Despite that fact. as large number of workers were represented and protected by unions for many years under this system.

there was another reason which led to the union not posing difficulties for the intended strategy. Piotrowski. etc. but this is what makes the art and science of management so exciting and inspiring. on the other hand. he also managed to get his point across and actually convince the trade unions that the planned measures should contribute to the profitability and success of the enterprise.discretion not been hindered by union’s interference. In my opinion. Although some changes or new strategies may create temporary turbulences and discomfort for a limited number of employees. the results might have been different. the explanation for this positive development is twofold. In addition to the advantageous background of Piotrowski. which encompass much more that just education and previous experience: crucial are also social involvement. Szczecin’s chief executive was an active union leader before his was assigned to the general director’s position. To start with. this is justifiable if the end result will be increased well-being of the majority of workers. most probably better. which will in turn benefit every individual worker. The CEO not only had a clear picture of the role and importance of the workforce in the whole process. which can easily be spotted also today: a manager’s image and success are defined by multiple factors. additional activities. 10 . gained the support of the trade unions at Szczecin shipyard and they were not impeding his restructuring measures. The role of the workers in any aspect of the company’s existence and operations is complicated and has multiple dimensions. This is a phenomenon.

by increasing their potential as an investment option and ensuring their survival in the new free-market reality. We can say metaphorically that privatization was playing the role of the next desired destination and restructuring was the road the enterprises had to walk in order to reach it. It will not be wrong to say they also influenced the Western business world. however. In that case. the two enterprises were not attractive investment opportunities. as many investors purchasing shares of ex-state-owned companies came from Western-world countries. were facing huge debts and were not able to cover them with own resources as they had been strongly subsidized for many years. privatization was the powerful drive to conduct some restructuring activities. The goal was to restructure the enterprises first and in that way prepare them for privatization. THE ROLE OF FINANCIAL ENGINEERING 11 .THE ROLE OF PRIVATIZATION Privatization processes. What I would like to investigate is the role that privatization played for the two shipyards in question. as they had lost the majority of their clients. The process of privatization is quite complex and definitely worth studying. this is not the aim of my report. programs and initiatives were not easy or quick. but they definitely market the last decade of the 20th century in the post-communist countries. However. The Polish government wanted to change the ownership of the shipyards and make them privately owned. at the dawn of the new free-market era.

I think this also proves that Piotrowski was a manager with visionary skills. A couple of the practices. 2010) No matter which approach we favor more. Piotrowski definitely achieved remarkably better results than his college. In the cost-cutting aspect. In relation to the cost policy followed at the Gdansk shipyard. are in the focal point of modern managerial accountants. As mentioned already in a previous section. There are two major ways in which a company’s profit can be raised: one option is to increase revenues. (Horngren 2010) Both shipyards were trying to improve their performance on the first dimension by generating more orders which were supposed to result in larger revenues. whereas the finance view states that the goal of firms is maximizing shareholders’ equity. Mr. implementing some aspects of just-in-time inventory management and leasing unused capacity. While studying the article in detail.From economic perspective the main aim of every business entity is generating profit. I was impressed by the progressivity of some cost-decreasing activities initiated in the Szczecin yard. the quality of financial management is crucial for achieving the company’s objective. the desire of the Gdansk CEO to keep getting subsidized by the government prevented it from coming up with a constructive 12 . we can definitely state in hindsight that it was quite wrong: the experience of numerous companies has proved that gross profits do not guarantee the success or survival of a business and that tight cost control should be exercised all the time. Another important aspect of the financial policy is the way shipyards’ managers approached and dealt with the huge debts of their respective enterprises. the alternatives is to cut down costs. such as eliminating whole cost centers. (Brealey. however. the manager of Gdansk shipyard.

not only initiated solid functional restructuring. On the contrary. maybe without even realizing it. the enterprise managed to convince the majority of creditors that debt rescheduling is the only alternative that may bring them some advantages in the end. having more time at its disposal to repay its debts. I think that within the time limits of the case study no substantial functional restructuring took place at this particular shipyard. Szczecin shipyard was on the look for actions in every aspect of the business that will contribute to its self-efficiency and it found an almost brilliant way to cope with the difficult situation. At Gdansk shipyard strategies and tools on the functional level did not undergo any significant changes. In a nutshell. Piotrowski.solution. touched on some well-established business concepts. actually. What I find fascinating is that Szczecin’s manager. which were known in the Western economies since the 1970s. APPROACHES TO FUNCTIONAL RESTRUCTURING From my point of view the main characteristics that differentiated Piotrowski’s approach to functional restructuring from Szyc’s were innovativeness and progressivity. however. but were something completely new for the post-communist countries. the yard was able to concentrate on another important issue: functional restructuring. This is how bankruptcy was avoided. but also approached it in a way very innovative for a person who has only been living and working under the planned-market economy system. moreover. As an example I can distinguish the fact that the 13 .

Another interesting point of Piotrowski’s approach to functional restructuring is narrowing down the product portfolio. but exactly the opposite. which led to the bankruptcy of the shipbuilding industry in 2009. The government was subsidizing these companies and therefore they were able to conduct projects which were actually not profitable. In fact this resembled the reality before the Polish reforms to some extent. as a result. However. an investigation was launched in 2005. they were still owned by the state when Poland joined the European Union. Not only was that beneficial for the business then. POLISH SHIPBUILDING INDUSTRY IN 2009 Despite the fact that shipbuilding enterprises started their restructuring efforts already in 1991. for this reason the subsidies were stopped completely. 2009) This proves once again than findings from investigating past managerial challenges can find valuable practical applications today. (Global Security) The conclusion of the EC was that Polish government subsidizing the state-owned shipyards is not acceptable. 14 . but it is also advocated nowadays by some experts as one of the recommended strategic moves of companies willing to survive the crisis. (Schuh. this was perceived by the European Commission as a protectionist measure against the interest of the European free market. I think this closely resembles the Unique Selling Point concept.marketing division was underlining the container ship expertise and the short production cycle when negotiating with clients.

(Global Security) The Polish shipbuilding industry went through a massive turbulence. US: Prentice Hall Schuh. (2008).globalsecurity. (2011) Polish shipbuilding – privatization. The impact of the current economic crisis on the strategies of multinationals in CEE. Management.org/military/world/europe/pl-shipbuildingprivatization. (2010). London. Retrieved from http://www. can we hope the same will happen to the world economy after we get out of the recession??. S. (2010). C. (2009).Although it was a stressful moment both for sector and workers. Robbins..htm Horngren.. 15 .. New York. Auckland. A. (1995) State enterprises restructuring: a tale of two shipyards. and maybe improved: private investors purchased the shipyards assets and decided they will continue the manufacturing and production of marine vessels. but in the end survived. improved characteristics. refreshed. REFERENCE LIST Brealey. the shipbuilding industry came out of it renewed. Introduction to managerial accounting. G. adapted and acquainted new. Great Britain: Prentice Hall Loveman. Principles of corporate finance. New Zealand: Pearson Global Security. R.

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