Management Chapter 2 Homework The Acquisition Strategy Has Locked The Electronics

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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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The Wallace Group

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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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The Wallace Group

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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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The Wallace Group

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IX. EFAS, IFAS, AND SFAS EXHIBITS

X. FINANCIAL ANALYSIS