2024Pearson Education, Ltd.

1-1 © 2024Pearson Education, Ltd.Case 1 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 control over the Electronics Group. Several years ago, Wallace and the Board embarked on a strategy of diversification into plastics and chemicals in order to decrease the company ’s dependence on defense - related business.Presently, the morale within The Wallace Group has deteriorated to the point where some of the employee stockholders made an attempt to force Wallace’s resignation. As a result of this crisis, Wallace has hired Frances Rampar, a management consultant, to conduct a management survey into the problems facing The Wallace Group. Her task is to develop a series of priorities for Wallace ’s consideration.Decision Date: No Date Sales: $70,000,000

Net Income: $ 1,760,000

II.CASE ISSUES AND SUBJECTS

Corporate GovernanceMorale and Culture DiversificationOrganizational Structure Stages of Corporate Development Top Management Responsibilities Vertical IntegrationModes of Strategy Formulation Transfer PricingDistinctive Competence Sub optimizationEntrepreneurship

III.STEPS COVERED IN STRATEGIC DECISION -MAKING PROCESS

(See Figure 1.5 on pages 20 and 21)Strategy Formulation Strategy Implementation Evaluation & Control Performance Strategic Posture Corporate Governance External Factors Internal Factors Strategic Factors Review MBO & Mission Strategic Alternatives

1A 1B 2 3 45A 5B 678

X O O X O O X XOX

O=Emphasized in Case X=Covered in Case

IV.CASE OBJECTIVES

Strategic Management and Business Policy Globalization, Innovation and Sustainability 16e (Global Edition) By Charles Bamford, Alan Hoffman, Thomas Wheelen, David Hunger (Solutions Manual All Chapters, 100% Original Verified, A+ Grade) 1 / 4

Case 1 The Wallace Group

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• 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?

• To have the student act as a consultant. As such, the student should

develop a list of the most important problem(s) facing The Wallace Group, and specific action plans to deal with each specific problem.

• To discuss how to convey potentially negative information to the person

who hired you, especially if that person is the principal cause of this negative information.

• To review the corporation diversification plan from an area of

expertise (electronics) into areas (plastics and chemicals) , where it has no distinctive competence.

V. SUGGESTED CLASSROOM APPROACHES TO THE CASE

• Dr. Laurence J. Stybel, the case author, suggests two possible ways of

handling this case.

• The first option involves students individually formulating a

response to the following questions:

• What is the most important problem facing The Wallace Group?

• Develop a specific action plan to deal with these problems.

This option typically involves one and a half to two hours for class discussion.

• 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.

• Your consulting team should review this material. The team will then meet to analyze critical issues facing The Wallace Group and to identify solutions that The Wallace Group management could either take alone or with consulting assistance from your firm.

• On (date) your team will have an opportunity to meet with Mr.Harold Wallace to discuss your diagnosis and action plans. These plans should be as specific as possible, as they may lead to a consulting assignment for your group. In calculating costs associated with your participation in the plan, you propose, assume a professional fee of $100 per day plus out -of-pocket expenses for food, travel, hotel, graphics, etc.

• Each team will present its findings to Mr. Wallace separately. 2 / 4

Case 1 The Wallace Group

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You will have thirty minutes for the presentation, plus fifteen minutes for Mr. Wallace to question the team. At the conclusion of the presentations, Mr. Wallace will determine which team, if any, would be awarded the consulting contract.

In addition to the substantive learning objectives discussed earlier, the second option would achieve the following additional

objectives:

• To have students learn to develop formal oral presentations,

• To determine a proper approach in conveying potentially

negatively charged information to someone perceived as a superior, and

• To cost out a consulting project based on specific action plans

developed by students.

It is most effective to go through this option in one evening lasting three to four hours, rather than to space it over two to three classes.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:

• The acquisition strategy has moved The Wallace Group away from its

area of distinctive competence in electronics into areas where it does not have distinctive competence. In a small firm such as The Wallace Group, this has resulted in a tendency to not effecti vely utilize scarce technical personnel. It also contributes to the lack of morale on the part of employees because the firm does not have a clear mission.

• The acquisition strategy has locked the electronics group into using

the plastics group as its major supplier, thus increasing costs for one group and making them less competitive. Presumably, the Plastics Group is also locked into using the Chemicals Gr oup and is faced with a similar situation.

• A complex MIS apparatus has been constructed by central office to

collect data from three very different operational groups. In addition, the central office appears “staff heavy” for such a small firm. This analysis is based on an examination of the organization chart.

• 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 tomorrow. But we’ve got to deal with today ’s needs today.” This all too common approach to management must be challenged by the students. This company desperately needs an organized approach to strategic planning which involves both the commitment of Mr. Wallace and the involvement of key employees within the com pany.

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Case 1 The Wallace Group

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Designing such a process would not be easy. But the case does seem to indicate that this is the most pressing need faced by The Wallace Group.

• We have used it as a written paper. The students find the case

somewhat difficult to handle because of Mr. Wallace ’s direct involvement in the company ’s problems.

VI. DISCUSSION QUESTIONS

• What is (are) the most important problem(s) facing The Wallace Group?

• What recommendation(s) would you (as a consultant) make to Mr. Wallace,

and in what order of priorities?

• 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?

• How do you handle the transfer pricing problems involved in the

backward integration? The acquisition of the plastic company has locked the Electronics Group into using its plastic products at a higher cost.

• If Mr. Wallace is found to be one of the major problems, should he be

addressed directly or indirectly?

• Has the Wallace Group ’s diversification strategy been effective? If

yes, please explain. If no, please explain.

*Reprinted by permission of the case author.

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

• Tremendous dissatisfaction among management and employees. This

resulted from Wallace ’s failure to delegate to subordinates and a lack of clear strategies or long-term plans, goals, or objectives.

• Lethargy and lack of direction on top management’s part.

II. EXTERNAL ENVIRONMENT

• Favorable market niche in electronics. Longstanding reputation of

reliable government contracts. Potential for increased sales due to administration’s commitment to a strong military with the latest technology.

• Auto industry on an upward trend with high sales volume suggests

solid future sales.

III. STRENGTHS

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