Page 346 - The Case Lab Book

2. Do you agree that what the CEO did to regain control was correct?

3. What would you have done under the circumstances?

PARAGRAPH 1

The Business Communications Group (BCG) had, in its fifteen years of existence, established for itself a
dominant position in a number of global markets. 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 the BCG
achieved an annual turnover in excess of £2 billion. 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
the chief executive that the organization structure, no longer fitted the company's strategy.

Normally the class will readily generate the strengths of BCG: new products, imaginative marketing and
customer service which in combination make it a market leader (Board 2). In addition it will normally be
picked up that there is a weakness, a problem with the company structure.
However, it is at this point that a more visual and visceral analysis of the information may be made by
using the chalk board to spell out the linkages and causal factors that might be at play in the paragraph as
shown in Boards 2, 3, 4 and 5.

Board 3 shows the relationship of high profit margins, rising stock prices and sales. Examination of the
product life cycles, as plotted to show the profit momentum line, allows a clearer interpretation of the core
competences of BCG to emerge. Essentially, BCG has created both a potential technological gap and
barrier to entry. From these it may be drawn out that BCG is perceived as a good investment and that
management is also perceived as good.
Board 3 also shows the profit momentum line that may be implied from the statement ‘planned
introduction of new products’. As product ‘A’ reaches maturity a new product ‘B’ is introduced to take-up
the profit short-fall and so on thereby maintaining the up-ward trend in sales and profit growth. It might also
be argued that the same logic could be applied to geographic introduction of the product line (market
extension 1, 2, 3) where new markets (Europe, China etc.) allow product extension driving the profit
momentum line up (profit momentum b) – Board 4.

Board 4 gives a visual interpretation of management’s contribution to financial performance of BCG.
Moreover, it may be drawn out that the market value of its shares is built upon a combination of the intrinsic
value of its assets etc. and the performance of its management. However, a further question on the
implications of the chairman and chief executive being one in the same person may be also be asked and
measured against the normal roles of each – chairman runs the board and the CEO develops the strategy
- a strength or a potential weakness?

Asking the class what the company is selling (Board 5), whether a product or a package, helps to
consolidate the inter-relatedness of the elements embedded in the paragraph as well as the linkages that
underpin them.

PARAGRAPH 2

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, Network applications. However, concern had arisen that its organization structure