Issue 2 - Organizational Environment - 35 points (1,000 words limit) Rafael has

Question

Issue 2 - Organizational Environment - 35 points (1,000 words limit)

Rafael has been a glass designer and blower for the past 17 years. He operates his small business under the name “Rafael’s Art Glass” out of a workshop in the northeast and makes custom pieces that appeal to an "artsy" market. Although his customers are mostly young, they are affluent and willing to spend money for unique, high-quality items, so “RAG” (as it’s commonly referred to) products command a premium price.   Currently, the sculptures are produced in one workshop in Binghamton, NY and sold in only three locations in the U.S.: New York City; New Orleans, LA; and to a limited market in Princeton, NJ (Rafael is a Princeton University graduate). Production is approximately 2,000 pieces per year, with prices ranging from $800 - $7,500 (and sometimes more) per item. The items are produced in quantities ranging from single, made-to-order, one-of-a-kind designs to limited-availability items of no more than 100. After Rafael appeared on a popular cable television reality show, "Accessory Wars," his glass designs gained instant national recognition. Even though he was one of the earlier designers to be "fired" from the show, the publicity resulted in many fans for RAG designs. Now, people across the country want to have RAG pieces in their homes. Rafael has been approached by a big art-design industry investment firm that is willing to fund his expansion. They have told him that, despite the bad economic conditions, they believe now is the time for him to expand to take advantage of the television boost to his popularity. In addition, they believe that there is now demand for his pieces in markets outside of the U.S.   Since design trends are often fleeting, the investors advise Rafael that he should "go big now" and try to capture as large a market share as possible. Of course, he would have to produce items in larger quantities and sell them at lower prices to do so. Rafael is used to running a small business, but all of this is new to him. He knows the company will have to invest in more trained staff and production equipment to meet the increased demand.   

Rafael has hired you to give him advice about how he should proceed.

Answer the following questions about RAG. Be sure to state clearly any assumptions you make about the organization as part of the description of factors to consider and state the reasons for including each factor. Use organizational structure language and theory in your response.

In deciding whether or not to produce larger quantities, what factors should Rafael consider?  

What specific recommendations do you have for Rafael?

Explanation / Answer

Before deciding whether or not to produce larger quantities, Rafel should get a market research done by a professional market research agency. The firm will study the market for art glass and glass designs, the number of players in this field and the potential growth that this field can see in the future.

If market research report is favourable, then Rafel should tread cautiously. He should not invest aggressively as this an art market and the tastes and preferences of people can change very quickly. It may so happen that the art glasses may lose its novelty factor in the future.

So, Rafel should scale up slowly. Currently he may be operating as a sole propriotorship. He may expand it to a partnership firm, by roping in an additional partner with expertise of running a mid scale business. The organizational structure can be functional where each department performs a different function and there are specialists doing there job. The hierarchy should be flat and the management style should be informal as it will suit the work being done by RAGS.

Thus my recommendations for Rafel are:

1. stick to your core competency - i.e. being an artist with a novel value

2. scale up in a phased manner so as to hedge your risks. Scaling up substantially at one go will increase his risk exposure

3. use a flat organizational structure while scaling up as it will suit the kind of industry RAGS is working in.

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