Page 345 - The Case Lab Book

and future competitive position. Essentially, it is an attempt to read between the lines, to pick out the critical
elements and build a solution that the students can take a measure of ownership from.

Moreover, the process aims to enable students to construct their own solutions to future cases by applying
the same questioning and relationship building steps without being mired in the all too rigorous application of
accepted diagnostic tools advocated in their course literature. These tools should and must be adapted to
circumstances existent in the case study under examination. In a sense the lecturer is trying to show by
example and the process of questioning and adaptation that the mantra for students should be ‘don’t do as I
say do as I do!’ both look, see and comprehend.

Learn by example but adapt where necessary.

BUSINESS COMMUNICATIONS GROUP (BCG) CASE STUDY

The Business Communications Group (BCG) had, in its seven years of existence, established for itself a
dominant position in a number of global markets in the US, Europe and latterly China. The credit for its success
lay at the feet of one man, its founder; Chairman; and Chief Executive, Richard Sweet. Sweet had developed
the company on the basis of planned introduction of new products supported by imaginative marketing, and
good customer service. On the basis of this the BCG had achieved an annual turnover in excess of £2 billion
and an IPO after five years. With its high profit margins, and continually rising share prices, it had rapidly
become one of the favourites of investors. However, it had recently become apparent to Sweet that the
organization structure, no longer fitted the company's strategy.

For years the company had been organized along functional lines, with directors in charge of finance,
marketing, production, personnel, purchasing, engineering, and research and development. In its growth, the
company had expanded its product lines beyond its original product of Network Systems, Satellite
Communications Systems, and Network applications. However, concern had arisen that its organization
structure did not provide for profit responsibility below the office of the CEO, did not appear to fit the product or
geographic dispersion of its businesses, and seemed rather to accentuate the "walls" impeding effective
communication and coordination between the functional departments of marketing, finance, production,
personnel and Research & Development; there seems to be too many decisions that could not be made at
any level lower than the CEO.

As a result, Sweet decentralized the company into twelve independent domestic and foreign divisions,
each with complete profit responsibility. However, after this reorganization was in effect, he began to feel that
the divisions were not adequately controlled. There developed considerable duplication in purchasing and
personnel functions, each division director ran his or her operations without regard to company policies and
strategies, and it became apparent to Sweet that the company was disintegrating into a number of independent
parts.

Having seen several large companies get into trouble when a division manager made mistakes and the
division suffered large losses, Sweet concluded that he had gone too far with decentralization. As a result, he
withdrew some of the authority delegations to the division directors and required them to get top corporate
management approval on such matters as:

(1) any unplanned capital expenditure over £10,000,
(2) the introduction of any new products,
(3) marketing and pricing strategies and policies,
(4) plant expansion, and
(5) changes in personnel policies.

The division directors were understandably unhappy when they saw some of their independence taken
away from them. They openly complained that the company was on a "yo-yo" course, first decentralizing and
then centralizing. Sweet worried about this problem, calls you in as a consultant to advise him what to do.

1. In your opinion, what did the CEO do wrong when he set up the twelve independent divisions?