There is an information pertaining to the Wallace Group. Please answer the given questions:
Problem 1. What is the most important problem facing the Wallace Group?
Problem 2. What recommendation(s) would you make to Mr. Wallace, and in what order of priorities?
Problem 3. How do you educate a manager to manage an organization as it evolves over time from an entrepreneurial structure to a more sophisticated and complex organizational structure?
Case Scenario:
The Wallace Group is a diversified company dealing in the manufacture and development of technical products and systems. The company currently consists of three operational groups and a corporate staff. The three groups include Electronics, Plastics, and Chemicals, each operating under the direction of Group Vice President. The company generates $70 million in sales as a manufacturer of plastics, chemical products, and electronic components and systems. Principal sales are to large contractors in governmental automotive markets. With respect to sales volume, Plastics and Chemicals are approximately equal in size, and both of them together equal the size of the Electronics Group.
Electronics offers competence in the area of microelectronics, electromagnetic sensors, antennas, microwave, and minicomputers. Presently, these skills are devoted primarily to the engineering and manufacture of countermeasure equipment for aircraft. This includes radar detection systems that allow an aircraft crew to know that they are being tracked by radar units on the ground, on ships, or on other aircraft. Further, the company manufactures displays that provide the crew with a visual “fix” on where they are relative to the radar units that are tracking them.
In addition to manufacturing tested and proven systems developed in the past, The Wallace Group is currently involved in two major and two minor programs, all involving display systems. The Navy-A Program calls for the development of a display system for a tactical fighter plane; Air Force-B is another such system for an observation plane. Ongoing production orders are anticipated following flight testing. The other two minor programs, Army-LG and OBT-37, involve he incorporation of new technology into existing aircraft systems.
The Plastics Group manufactures plastic components utilized by the electronics, automotive, and other industries requiring plastic products. These include switches, knobs, keys, insulation materials, and so on, used in the manufacture of electronics equipment and other small made-to-order components installed in automobiles, planes and other products.
The Chemicals Group produces chemicals used in the development of plastics. It supplies bulk chemicals to the Plastics Group and other companies. These chemicals are then injected into molds or extruded to form a variety of finished products.
Presently, Harold Wallace serves as Chairman and President of the Wallace Group. The Electronics Group has been run by LeRoy Tuscher, who just resigned as Vice President, M. Hempton continued as Vice President of Plastics and J. Luskics served as Vice President of the Chemicals Group.
Reflecting the requirements of a corporate perspective and approach, a corporate staff has grown up, consisting of Vice Presidents for Finance, Secretarial/Legal, Marketing, and Industrial Relations. This staff has assumed many functions formerly associated with the group offices.
Because these positions are recent additions, many of the job accountabilities are still being defined. Problems have arisen over the responsibilities and relationships between corporate and group positions. President Wallace has settled most the disputes himself because of the inability of the various parties to resolve differences among themselves.
Presently, there is a mood of lethargy and drift within the The Wallace Group. Most managers feel that each of the three groups functions as an independent company. And, with respect to group performance, not much change or progress has been made in recent years. Electronics and Plastics are still stable and profitable, but both lack growth in markets and profits. The infusion of capital breathed new life and hope into the Chemicals operation but did not solve most of the old problems and failings that had caused its initial decline. For all these reasons Wallace decided that strong action was necessary. His greatest disappointment was with the Electronics Group, in which he had placed high hopes for future development. Thus he acted by requesting and getting the Electronics Group Vice President’s resignation. Hired from a computer company to replace LeRoy Tuscher, Jason Matthews joined The Wallace Group a week ago.
Last week, Wallace’s annual net sales were $70 million. By the group they were:
Electronics $35,000,000
Plastics: $20,000,000
Chemicals: $15,000,000
Of the net income, approximately 70% came from Electronics, 25% from Plastics, and 5% from Chemicals.
The Wallace Group is badly in need of a management development program for the Industrial Relations division. Because of this division’s growth, the division has been forced to promote technical people to management positions who have no prior managerial experience. However, Mr. Wallace vetoed the idea because developing such a program would be too expensive.
One of the biggest problems that the Electronics division is facing stems from corporate policy regarding transfer pricing. This division is “encouraged” to purchase their plastics and chemicals from “sister Wallace groups” when they can clearly get some materials cheaper from other suppliers. How can this division meet their volume and profit targets when they are saddled with noncompetitive material costs? No one in upper management wants to even this issue.