case is about Catalya Hats which began with a simple design of a Panama Hat in Ricardo
Catalya Home in Ecuador where he first crafted the first hat in 1906. The
specialty was the fact that it was hand made because the straw used for making
can not be woven by a machine. Later the Ralph Dweck bought it as a private
investor who had the capital needed to expand the name and the brand making him
as the president of Catalya Hats.
the passage of time the company prospered and it needed expansion to meet the
supply gap as the demand increased but that led to licensing the company
through outsourcing and that company did the manufacturing by sub contracting.
options were presented as a solution fro the supply chain management and how it
will effect the workers as Catalya Hats culture treated the workers and
employees as a family member and it was very important to maintain that
standard. This case focuses on all the aspects which deals with Human Resource
Management, decision making and how to come up with a solution in timely manner
to for an organization’s growth, keeping in mind the fact that the steps taken
will effect the company’s name in a positive or negative manner
process caused negative impacts on the company’s name as the terms and labor
standards were violated a lot and press reported negatively causing drop in
sales and how they reacted towards them.
Hats has the following people as executives and they were responsible for
running Catalya Hats Management:
Ralph Dweck as President
Warling as the Head of Public Relations
Bianco as the Vice President of Operations
Baugmart as the Vice President of Human Resources
Chio as Manager of Productions
Degast as the Vice President of Licensing
challenges which Catalya Hats faced in developing the company are as following:
manager’s function (Planning, Organizing, Staffing, Leading, Controlling)
to handle the allegations made on a company
with precautionary measures
As the president of Catalya Hats Mr.
Dweck wanted to expand the business in international market and he had a short
term approach of outsourcing the company and meet the supply gap as the demand
for the hats kept on increasing due to the set trend in the market which could
not be shrunk through price increase.
To do this he had a meeting with the
supervisors and executives of the company but everyone denied the idea out
giving the culture to an outsider as Catalya Hats has the culture of Family.
But outsourcing will kill that thing and workers will be effected with this.
Also, this asks for exporting the core competency of the organization and skilled
They came up with another idea of double
shift as Catalya Hats was working with a single shift working methodology but
to meet the demand this was a good idea and was accepted by the team. They
started working as double shift but still the demand was much also if was a
problem for HR department to meet with the family culture of organization and
also to pay them right and also they can have personal time too.
Mr. Dweck however did not dropped his
plan for licensing the firm’s brand and manufacturing processes. He firmly
believed that the business path to buildup brand recognition and market share
and to catapult the brand to the top of clothing accessories market was through
licensing and in essence franchising the company name.
Demands increases and supply decreased
and it was effecting the company and he again came up with the idea of
Outsourcing and he also had compiled certain rules and regulations for
outsourcing. Profits would be derived by licensing the hat, a new revenue
stream. He analyzed the pros and cons of this process and sent an electronic package
to the members to study them and after that everyone agreed with certain
changes to which Dweck agreed. One of which was to maintain the culture.
Later on, after all the analysis and
study they licensed the brand to Xion International in Shanghai, China, by
appointing Mr. Degast as the Vice President of Licensing keeping this in mind
that if it worked they will have the licensing with other people too. Deal was finalized
in summer of 2011 with personnel from Catalya on-site in Shanghai supervising
Xion’s employee training and production operations. Xion had very modern
computerized equipment, a highly motivated staff, and a very able workforce who
quickly adopted to the Catalya way of hat making. The Chinese workers took
great pride not only in their work but in the firm they worked for, adding
Catalya to their family was viewed as highly positive.
After some time, they found out that Xion
has subcontracted and the manufacturing was done with very bad working
conditions and poor labor rules and regulations. This effected company’s name
as it came to the eye of press and they started reporting about it. The worker
felt and expressed the fat that they should be treated good and as they are
doing work for an international company they should be treated the way as they
are working their factory and as their own workers. They took the current
situation as worker abuse. All this resulted in short-term production shortages
with Xion stocking out with their deliveries to the retailers and ultimately
this effected Catalya’s brand reputation. Since this occurred within the first
three months of the contract period, Catalya had no historical basis for
determining production and sales irregularities.
This led to the series of articles
published in the local papers as well as some minor news leaks in social media.
The management was thinking that why Xion has not notified them about all these
actions but, they forgot the fact that in the contract they did not preclude
subcontracting. Also the working conditions only applied to Xion but not the
subcontractors and any queries should be directed towards Xion but not the
is Needed To Be Done:
Dweck did not do the right
planning but always thought of the idea of outsourcing and a short term way to
success of the organization. In fact, the person uncharged is responsible to find
the sources of what is not right in your process. This can be done by the
process of Planning.
Here in this case the
problems which are mentioned it the issues sections is have the solutions where
first of all the Manager should realize that what is going on. He should plan.
Many theories on management have been proposed and all of them has the first
A 4-Step Approach of
Strategic Planning was presented from the work done initially by Price
Waterhouse (accountants) which states that there are four steps which needs to
be kept in mind while working on any kind of business or project. These steps
1: Where are we now?
2: Where do we want to get to?
3: How are we going to get there?
4: How will we know when we have got there?
This theory helps the manager know where he
is standing and what needs to be done. Moreover, the step of Planning is the
foremost thing which a manager does.
Once a manager plans he can step on to the
processes of organizing those plans on the basis of his skills which includes:
· Management Skills
· Technical Skills
· Interpersonal Skills
All these skills are utilized by a manager
and he can do his tasks more accurately.
A complete analysis of everything is
required before getting to some decision. Do you already have
relevant resources? Developing new resources internally is faster and more effective
than acquiring them from external parties when your firm’s existing resources
are similar to the ones you need and when you outshine competitors in the
targeted area. (Lauren Caplon and Will
Catalya Hats executives did not sit together and talked on all
the resources they have rather than just focusing in the fact of maintaining
the family culture and workers and Dweck just thinking of the idea of
Outsourcing and Licensing.
One of the most challenging decision for a company is whether to
diversify. Companies usually face the
decision in an atmosphere not conducive to thoughtful deliberation. For
example, an attractive company comes into play, and a competitor is interested
in buying it. Or the board of directors strongly urges expanding into new
markets. Suddenly, senior managers must synthesize mountains of data—including
internal-rate-of-return calculations, market forecasts, and competitive
assessments—under intense time pressure. To complicate matters, diversification
as a corporate strategy goes in and out of vogue on a regular basis. In other
words, there is little conventional wisdom to guide managers as they consider a
move that could greatly increase shareholder value or seriously damage it.
core responsibility that needs to be focused on is decision making on which all
of them including Dweck and other executives should have focused on. When facing the decision to diversify, managers
should not only think about their own company but also about the competitors
and what is out there in the market already. It forces an organization to
identify how it might add value to an acquired company or in a new market—be it
with excellent distribution, creative employees, or superior knowledge about
information transfer. In other words, the decision to diversify is made not on
the basis of a broad or vague business definition.
right time and right decision are the key notes which help in boosting the
company’s performance. A right decision can be made if the person know what is
his style of making the decision according to the problem. If the manager knows
the style he can know his own natural style and also he will know that when to
use which style.
decision making styles are:
Style – Quick decisions
Style – Plenty of time to make decisions
Style – Average time taken to make a decision
techniques have also been design for decision making which includes individual
decision making and group decision making where the group or the set of
employees is also involved in decision making.
Data technique is utilized to collect previous data to imply on the situation
and see what is the better approach to use. Dweck can use the data from other
similar companies to see what they have done in this situation.
to recent studies from major Big 4
auditor, 69% of all outsourcing deals fail, completely or partially. Due to the
poor relationship management and lack of cultural and social compatibility
between the two parties this happens.
According to Gartner principal analyst Bruce Caldwell, savings achieved through
outsourcing can be significant — in the 20 to 30 percent range. After all,
outsourcing companies must perform tasks quickly and efficiently to make a
profit. A corporation, on the other hand, is not a profit center, nor is it
necessarily driven to quickness or efficiency.
However, outsourcing is
not just about money. Greg Secord, a
vice president at outsourcing heavyweight ADP,
said that although most companies save 10 percent or more in their outsourcing
endeavors, they also are seeking access to best practices.
In an interview with E-Commerce
Times Secord said “Outsourcing purely for financial reasons is not the
best bet. You need to be comfortable in your ability to develop a relationship
with an outsourcing firm, and trust that their best-practice methodology is
proven.” He added that a primary reason companies choose to outsource
functions is because they do not have or cannot attract the people skills they
need. Outsourcing gives companies access to a much greater pool of skills.
Gartner told E-Commerce
that additionally, companies often would rather invest their time in developing
ways to make a difference, to distinguish themselves from their competition, they
often outsource the management and maintenance of routine operations so they no
longer have to worry about them. (Lynn
Wards, E-Commerce Times)
is the right approach for some companies – particularly those that take the
time to properly structure an agreement that drives cost reduction, takes
advantage of outsource provider best practices, clearly defines scope and
service levels that meet the company’s needs, and allows the company to focus
on its core competencies. When well planned and executed, outsourcing
relationships provide substantial benefits to an organization. (Forbes Staff)
When a person has decided for licensing,
he should have taken all the necessary precautions which Catalya Hats did not
take. Dweck was so much into outsourcing that he did not collect all the
necessary data to make the contract and the regulations of it’s implementation.
Also, he did not have any previous experience that led to mismanagement of the contract.
There are certain risks in licensing which needed to be kept in mind and also
the contract should be reviewed several times before finalizing the deal. This
includes all the company’s norms and culture which they want to apply. If
anything that was just in mind and not on the contract happens then the party
cannot be held liable and nothing can be done other than pleading guilty for
that thing happening.
The subcontracting was not there on the
When allegations ae put on a company, it
effects the name of the company very badly and then the sales can drop,
employees may start to leave the company and also, major financial burden on
the company comes. Catalya Hats was also having allegations not in the US
market on a high level but it does not take much time for the news to spread.
If Shanghai’s press was making allegations and writing negative articles on the
company it could have come to US in not time. Social Media has a huge impact on
customers. Catalya was forced to file a lawsuit against their licensee Xion
International, employees were laid off or fired as the company continued to
clean up their image. Degast was fired and all other executives retained.
A company should keep in mind how to
manage every department. Labor force is the key factor in running of the
company and it should not be effected by any means. Their rights and respect
should be kept in mind and no violations should be made in the form of labor
abuse. Also while making any contract every aspect of the organization and it’s
culture should be on the contract rather than just keeping in mind. The pros
and cons should be studied thoroughly and then the decision should be
implemented. Otherwise, if any of the facts is missed or neglected it will
effect the company’s reputation very badly.