The Wallace Group Case Analysis

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 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 Governance Morale and Culture

Diversification Organizational Structure

Stages of Corporate Development Top Management Responsibilities

Vertical Integration Modes of Strategy Formulation

Transfer Pricing Distinctive Competence

Suboptimization Entrepreneurship

III. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS

O = Emphasized in Case X = Covered in Case

STUDENT STRATEGIC AUDIT/STUDENT PAPER

I. INTERNAL ENVIRONMENT

A. 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.

B. Lethargy and lack of direction on top management's part.

II. EXTERNAL ENVIRONMENT

A. 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.

B. Auto industry on an upward trend with high sales volume suggests solid future sales.

III. STRENGTHS

A. The company is able to supply many of its own component parts and raw materials because it is well-integrated.

B. Solid performance from the plastics and electronics divisions in the past. The electronics group has a good track record in developing and manufacturing countermeasure equipment.

C. Public corporation provides the firm with flexibility to attract equity capital versus long- or short-term debt.

IV. PROBLEM ANALYSIS

A.