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Case 2
The Wallace Group, Inc.
I. CASE ABSTRACT
Harold Wallace, founder, serves as Chairman and President of the Wallace
Group. He owns 45 percent of the outstanding stock. The company consists
of three operating groups: Electronics, Plastics, and Chemicals, which
generate sales of $70 million. Mr. Wallace continues direct operational
Decision Date: No Date Sales: $70,000,000
Net Income: $ 1,760,000
II. CASE ISSUES AND SUBJECTS
Corporate Governance Morale and Culture
Diversification Organizational Structure
III. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS
(See Figure 1.5 on pages 52 and 53)
Strategy Formulation
Strategy
Implementation
Evaluation &
Control
IV. CASE OBJECTIVES
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The Wallace Group
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1. To acquaint the students with a CEO’s management of a company that
leads to conflict and power struggles among managers. To deal with an
issue in corporate governance: Why hasn’t the board of directors become
involved in this issue?
V. SUGGESTED CLASSROOM APPROACHES TO THE CASE
1. Dr. Laurence J. Stybel, the case author, suggests two possible ways of
handling this case.
A. The first option involves students individually formulating a
response to the following questions:
• What is the most important problem facing The Wallace Group?
B. The second option would be to bring in a guest who would take the
role of Harold Wallace. A retired president would be ideal for this
kind of exercise. Under this format, students are divided into
consulting teams and are given the following instructions:
• Attached is some information about The Wallace Group, Inc. This
information includes data regarding corporate operations and
operating problems, as perceived by various managers of the
company.
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In addition to the substantive learning objectives discussed
earlier, the second option would achieve the following additional
objectives:
1. To have students learn to develop formal oral presentations,
Special note from the case author
Regardless of the option selected, the key element of this case is that
the acquisition strategy of The Wallace Group has been disastrous in
producing the following problems:
A. The acquisition strategy has moved The Wallace Group away from its
B. The acquisition strategy has locked the electronics group into using
C. A complex MIS apparatus has been constructed by central office to
collect data from three very different operational groups. In
D. Problems resulting from being heavily dependent on defense-related
contracts have not been solved.
Mr. Wallace was once heard to have remarked, “We’ll get organized
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1. We have used it as a written paper. The students find the case
VI. DISCUSSION QUESTIONS
1. What is (are) the most important problem(s) facing The Wallace Group?
2. What recommendation(s) would you (as a consultant) make to Mr. Wallace,
and in what order of priorities?
3. How do you educate a Stage I manager (entrepreneur) to become a Stage
II or III professional manager? What impact does this problem have on
this case?
VII. CASE AUTHOR’S TEACHING NOTE by Laurence J. Stybel*
Presented earlier in Section V“, “Suggested Classroom Approaches to the
Case.”
VIII. STUDENT STRATEGIC AUDIT/STUDENT PAPER
I. INTERNAL ENVIRONMENT
A. Tremendous dissatisfaction among management and employees. This
II. EXTERNAL ENVIRONMENT
A. Favorable market niche in electronics. Longstanding reputation of
III. STRENGTHS
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A. The company is able to supply many of its own component parts and
raw materials because it is well-integrated.
IV. PROBLEM ANALYSIS
A. Heavy dependence on government contracts could put the corporation
in financial difficulty if further sales diversification cannot be
found.
V. RECOMMENDATIONS AND IMPLEMENTATION COSTS
A. Develop new organization chart and clearly, define job
responsibilities. Let management manage! Mr. Wallace needs to stop
trying to run the firm himself.
C. Change management of chemical division or sell off based on cost/
or analysis to corporation.
D. Change management style. Mr. Wallace has got to let his managers
manage. At the same time, he must develop long-term strategies and
goals that will help the corporation grow.
E. Clarify transfer pricing policy. Make sure that all managers
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IX. EFAS, IFAS, AND SFAS EXHIBITS
X. FINANCIAL ANALYSIS
