Texana Petroleum Corporation history: Texana Petroleum Corporation was major producers and marketers of petroleum products in southwest

United States. The main business operations till early 1950 s were processing and refining crude oil and selling petroleum products through chain of company operated service stations. In early 1950s, Texana Petroleum witnessed change in management hierarchy. Donald Irwin took charges CEO and William Dutton as Chairman of Board. The two individuals represented a new generation of top executives at Texana Petroleum Corporation. Under previous management the company suffered a severe downturn, but the highly competitive management team was successful in creating a more profitable business model. The company which started operations as a refiner of crude and marketer of petroleum products was transformed into a vertically integrated producer and vendor of chemicals and plastics .Despite the success, there was growing pressure on corporate management to increase cost savings through coordination. In 1966 George Prentice was designated as executive vice president for domestic operations and responsible for improving the combined performance of the five divisions reporting to him. The five divisions were the Petroleum Products, Polymer and Chemicals Products, Molded Products, Packaging and Building Products organizations. The main corporate mechanism to control the divisions consisted of a semi-annual division review and approval of capital expenses. Division performance was mostly rated on return on

invested capital, and some managers blamed this policy for the existing competitive atmosphere and lack of collaboration DIVISIONAL COMPOSITION OF texana PETROLEUM
EVP DOMESTIC OPERATION

petroleum product division raw material supplier

polymers @ chemical product division

raw material supplier

FUNCTIONAL BREAK UP OF TEXANA DIVISIONS 1) petroleum product division:

Petroleum Product division is the core functional division of company's original producing and refining activities. It supplied raw material to the Polymers & chemical division and sold refining products under long term contracts to other petroleum companies. The "Petroleum Products Division" enjoys an acceptable role as a supplier to rest of the corporation and its relations with other sister divisions was also harmonious. 2) polymers and chemical division Polymers & Chemical division is a highly technical division which executes around the processes .This division was developed with a vision to feed the consumer petroleum market. The division had evolved a wide range of product line of petroleum derived Chemical and Polymer compounds and successfully managed to generate profits from large volumes external sales.The division was a supplier to Molding Products division , Packaging division and BuildingProducts division With the growing production of sister divisions, larger proportion of Polymers & Chemicaldivision capacity was required by the sister division for their efficient throughput andproduction balance that required Polymer & chemical division to reduce their commitment toexternal customers. 3)MOLDED PRODUCTS DIVISION The division had expertise of producing molded plastic products that ranges from toys andhousehold products to electronic and automotive parts. This division gets its raw

material from Polymers & chemical division and works independently from other end products divisions. 4.PACKAGING PRODUCTS DIVISION This division had product line comprising of plastic packaging materials that includes films,cartons, bottles etc and the target market was industrial customers. This division also gets itsraw material from Polymers & chemical division and works independently from other end products divisions. 5)BUILDING PRODUCTS DIVISION; This division produced and marketed variety of insulation and roofing materials and similar products to construction and building markets. This division also gets its raw material from "Polymers & chemical division" and works independently from other end products divisions. PROBLEM AREAS : The core problem area was the division performance rating system that does not promote collaboration. The performance rating system together with aggressive management styles and different areas of expertise had a combined effect that maximized inter division communication deficiencies. Indifference to participate in corporate strategies at the expense of divisional profit is high, and corporate executives try to find middle ground between centralization and autonomy.

POLYMER & CHEMICAL PRODUCT DIVISION: There was particular concern about the lone rider attitude the Polymer and Chemicals division had adopted. Their excessive technical focus, reluctance to participate in corporate plans and determination to maximize profit alienated them from the rest of the company. Corporate management was also uneasy about the constant flow of new project proposals coming from the Polymers division. Executives wanted the corporate board to generate company strategies and flow them down, not just to act as areview board or a holding company.

INTER DIVISIONAL COLLABRATION In the rush to reshape the company, corporate executives unknowingly set up the foundation forinterdivisional conflicts. For instance, despite the fact that the divisional goal was very clear, the methodfor achieving the goal was not set correctly. Under the current performance rating framework, thePolymers group was forced to disregarded corporate integration strategies if they came at the expenseof divisional profit.Polymers group held a strategic position in the organization since three divisions depended on them forraw

materials. But rather than providing more than adequate support to sister divisions, the Polymersgroup was more concerned about capturing new business.Technical specialization seems to be another organizational factor that was causing a communicationsconflict. Some managers considered the Polymers group extremely prone to detail and technicalities butlacking business vision. Most of these perceptions could be derived from the fact that the groups haddifferent backgrounds and communication styles. The corporate and molding groups were closer tomarketing while the polymers group was more of a production operation.

POSSIBLE SOLUTIONS: 1) Spinning the Polymers group as an independent entity, as some managers speculated, could bean alternative to resolve the existing conflicts. After all, this group appears to be the only onehaving problems integrating to the new corporate culture. This could provide other divisions theopportunity to use the raw materials provider they feel the most comfortable with. Obviously,this is the least desired alternative since the company is vertically integrated. Breaking thismodel would expose the corporation to the mercy of external suppliers. It would also mean alost opportunity to profit from this successful operation. Lastly, the future

growth of the Building Products division is tied to the assurance of raw materials provided by the Polymersdivision. 2.)A second alternative would be to limit the Polymers division to produce materials only forinternal consumption. This way any role ambiguities or conflicting interests would beeliminated. Their products market would be focused, and profits directly linked to how well theysupport the sister divisions. Extraneous projects would be eliminated, and internalcommunications increased by minimizing distractions. This alternative is much more attractivethan the first one, but it also has some drawbacks. For example, it would imply losing therevenue generated by selling products to external markets. Also, economies of scale might belost and the division might have to be downsized. Even worse, the corporation could face anexodus of frustrated ambitious general managers leaving the company. 3.) The third and best option would be to adopt a set of confrontation techniques to negotiate thebest resolution for the company making sure all opinions are heard. But in order for anynegotiation to work, it must be bundled with improved organizational practices such as newpolicies and changing the rewards system. On the negative side, this option would require a highupfront cost and patience to see the results.

Also, some of the individual expansion ambitionsmight have to be interrupted in the short term to ensure integral growth. PLAN OF ACTION The main problem appears to be the lack of an effective corporate strategy to manage growth and increase internal communications. As stated before, the best alternative would be to engage in collaborative negotiations; figure out exactly what each other needs are; and come up with and objective set of solutions based in what is best for the company. In order to facilitate the negotiation and options generating process, a third party consultant could be hired to act as a mediator. But it is obvious that a new performance rating system that promotes collaboration also needs to be implemented to harness all divisions together. Ideally, as part of the negotiations, an interdivisional task group could be created and chartered with looking for opportunities to maximize efficiencies. At lower level of organization, standing comities could be created to manage specific areas of interest. Areas of interest could include monitoring on time delivery of products; developing a customer centered culture; or managing strategic growth. Moreover, a commitment from the executive team to promote a corporate identity would be required. Also, a corporate investment in new procedures and infrastructure could facilitate coordination. For instance, a unified product development process and shared electronic

tools would increase interdivisional coordination tremendously. Although, this plan of action is the best alternative, it might be too complicated and long term oriented for Texana Petroleum to execute. The successful implementation of this alternative would require a great deal of coordination, something that they are already struggling with. In addition, a significant investment in financial and time resources would be required to fund task groups, deploy corporate wide processes and tools, train employees and promote a corporate identity. After all, the executive team might decide to stick with the cash cow corporate strategy.