Assignment 3: BMGT 317: Decision Making
Decision Making for Sunpower
Analyzing a case involves first identifying the most pertinent facts surrounding it, identifying the important issue or issues, specifying alternative courses of action, evaluating every course of action, and recommending the best course of action or process of implementing the best decision. That implies the steps of the decision-making process. This paper details the change process of Sunpower, a solar panel company. The company is currently experiencing problems with its growth and profitability. After factoring in a number of alternatives, it decides to move to New Mexico, a state with a better business environment and incentives from the government. This decision affects Sunpower’s business because, first, it will lead to the loss of the current customers. Second, it might result in the demotivation of customers. Third, the decision will help company save its operations by keeping the costs down. Fourth, it may introduce challenges to the company as it tries to thrive and survive in a new business environment. Nevertheless, the decision needs proper implementation since it is the only way that the company can save its declining business.
Key Facts of the Case
The process of implementing a decision is more important than the outcome of the decision as Roberto (2005) explains. The case of Sunpower, Inc. has several key facts. The company manufactures solar panels with operations in Oakland, California. It has experienced a decline in growth rate but projects to improve growth to 5.4% in the next two years. The Board of Directors conducts an investigation and identifies several factors contributing to the decline. 72% of the problem is due to high expenditures in governmental compliance costs, a new environmental regulation in the state that affects the manufacturing process, increases in state tax, a rise in property and leasing costs, employee benefit costs, utility expenses, and insurance costs. The first action that the Board takes is discussing with the California State government to negotiate for a reduction in the tax because of the company’s green status. The Board also talks to the utility companies to request a reduction in utility bills.
The Governor of California promises a tax reduction of up to 10%, but the insurance creditor, utility and leasing companies do not offer any reductions. Since the negotiations are not as successful as expected, the Board weighs other options. In the New Mexico state, the company may get 20% tax reduction due to its green status and a cut by 5% to 3% on personal income tax in the first three years of doing business in the state. There is also a new incentive in moving the business to New Mexico; the costs will be 30% less compared to Oakland in California.
The company has well-articulated objectives in making its decision. First, it wants to have as many of its current employees as possible when it moves to the new state. Second, it plans to minimize the cost of moving. The company is in the tenth month of the current tax year, which means it must make a tradeoff when it gives up the remaining entitlements having paid tax to the state government. The other objective is that the company hopes to fulfill customer orders with absolute continuity. With these objectives in mind and after consulting with the CEO, the board decides to move the operations of the company to Sunland Park, New Mexico on a specified date.
Consequences of implementing the Decision to Stakeholders
The decision of SunPower has several consequences on the various stakeholders who include current and potential customers, employees, the local community, the California state government, directors, suppliers, creditors, owners, and investors. The first consequence is on existing customers. While the company has the objective of continuing to sell its products and services to them without an interruption, there may be anxiety, fear, and anger particularly among those whose orders are pending. SunPower has to assure the customers that they will not lose anything if the company moves. Moving may affect the owners of the company in several ways. First, it is a way of showing how committed they are to the company and the business. If they handle the move well, the employees and other stakeholders will be satisfied with the decision. The second effect is that the owners must be prepared in case they lose some employees if the company moves to the new state. The owners must address the employees' concerns to make the move as smooth as possible.
Another group of stakeholders affected by the move is suppliers. Moving to New Mexico implies the end of business for the current stakeholders. The decision to move the company affects the Board of Directors because it threatens its existence. If the directors implement the move correctly, they will retain their directorship the following year. The decision to move SunPower to New Mexico affects the local Californian community because it takes away the benefits that the locals get currently. For instance, the company engages in a business that enhances environmental preservation. It helps the local people save costs on other forms of power that contribute to environmental degradation. Another group of stakeholders that the decision will affect is the Californian government. First, the government will lose the revenue from the tax it collects from SunPower. Second, a company that contributes to a cleaner state is moving its operations elsewhere. The governor and other leaders in California may lose credibility if the people know that the company could have stuck to the state if there were better cost-related terms.
The decision will also affect the employees, who might have to leave their families or establishments to go to work in another state. For some employees, moving may not be a realistic option. They may prefer to remain in California and, therefore, will leave the company to seek employment elsewhere. The decision will also affect the current creditors who have been giving money to the company on credit. The creditors will lose business with the relocation of SunPower. Finally, the investors want to protect the money they have invested in the company. A wrong approach to decision implementation may imply a loss of invested capital. Some of the investors might choose to sell their investment rather than remain in a company whose future success in a different state is not certain.
Consequences of implementing the Decision to the Business Concern
The implementation of the decision to move has several consequences to the business. It may affect the business negatively because the company must establish itself first before gaining ground in the new state. It must engage in promotional strategies that can help attract new customers. For the moving decision, the company must understand that it is losing its established status in California that it may never recover unless it employs strategies like e-business. Another impact on business is the loss of entitlement in California guaranteed because of the fact that the company has been paying tax to the state government. Losing this money is impactful to the business because it affects the current year’s budget. Finally, the company risks losing future incentives and deals from the Californian government. Nevertheless, this is only a potential risk.
Implementation Plan using Lewin’s Change Management Model
According to Rick (2011), in the process of implementing change, the organization must have to deal with people who resist change because they are too used to the old ways, incompetent to work in the new environment, or just afraid of the change. SunPower can use a simple yet effective plan that addresses the change to implement its decision. In doing so, it can use Lewin’s Change Management Model in its plan. Managing change successfully depends on the people and change involved, as well as the nature of the business. An important factor in the successful implementation of change is how well the individuals involved in the decision understand the process of change. Lewin’s Change Management Model accentuates that managing change well helps an organization thrive while handling change poorly results in a struggle to survive. According to Sharma (2006), this model requires organizations to provide motivation for change before actually implementing it. The three stages of implementing change successfully according to this model are unfreezing, changing, and refreezing.
Daft, Kendrick, and Vershinina (2010) write that during the unfreezing stage, the organization gets ready to embrace change because it is necessary. The organization analyzes the status quo before building up a new manner of operating. To achieve this, the organization needs to communicate to the staff and key stakeholders regarding the need to introduce the change. SunPower needs to communicate to the employees about the current issues facing the company, as well as why a change is necessary if the company is to thrive. The executive management should persuade the current the employees to accept the moving decision because it is the only way that they can keep their jobs.
Heathfield (2017) recommends motivating employees to own the change process. This can help avoid conflict and manage resistance to prevent crises or chaos. In the second stage, change, the people involved start implementing the change and dealing better with the previous uncertainties. It may take a long time to implement change fully. In the case of SunPower, the implementation of the change decision may take at least a year as the employees get used to the New Mexico environment. The two important factors during the implementation of the change are time and communication, which SunPower management need to employ. The last stage of Lewin's model is refreezing. The organization stabilizes again following the change implementation. It institutionalizes the change, and the employees do not resist the changes anymore. This stage will happen for Sunpower when the key stakeholders in the new state start gaining the benefits of the moving decision. Similarly, it will take place when the employees feel they have security in their job. By this time, the business of Sunpower will be thriving.
In summary, the case of Sunpower shows how the process of implementing a decision is more important than the outcome of the decision. The board of directors looks at all the factors involved and assesses the alternatives. It finds that there is no way that the company can continue operating in California with the high costs of operations. The only decision that Sunpower can implement to ensure its survival is moving to New Mexico. A great way to implement the change by Sunpower is to use Lewin’s Change Management Model in its plan. It is also imperative to ensure that each of the key stakeholders is involved in the change process.
Daft, R. L., Kendrick, M., & Vershinina, N. (2010). Management. Andover, UK: Cengage Learning EMEA.
Heathfield, S. M. (2017). How to Reduce Employee Resistance to Change. Retrieved 07 11, 2017, from The Balance: https://www.thebalance.com/g00/how-to-reduce-employee-resistance-to-change-1918992?i10c.referrer=
Rick, T. (2011). Organizational Change – Reasons Why People Resist Change.
Roberto, M. (2005). Why making the decisions the right way is more important than making the right decisions. Retrieved from Ivey Business Journal: http://iveybusinessjournal.com/publication/why-making-the-decisions-the-right-way-is-more-important-than-making-the-right-decisions/
Sharma. (2006). Change Management. New Delhi: Tata McGraw-Hill Education.
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