Page 90 - Stakis Consolidated Teaching Note

As the organisation grew, the amount of buildings grew
and resulted in a large portfolio of property assets. These

assets were a mixture of prime sites, which the

organisation occupied, potential development sites for
future expansion and some locations that were not the

best and therefore sold or leased out. From all of these

transactions the Property Division and the Finance

Division, were almost “accidentally” established, these
were not original strategies, as they were not core

competences of the organisation. These would be classed

as “related diversification”, if they could be classed as

strategies at all. Nevertheless, Reo’s primary strategy was
market penetration, within the hotel and casino industry.

While Sir Reo was very much a hands-on manager he did
not have the expertise to cope with the scale of

diversification he had introduced. What is more, with

expansion - at one time building as fast as the banks

would allow - came increased borrowings. The servicing of
this debt began to eat into earnings. Sir Reo realised that

the company was in a difficult position and added various

people to the board to help resolve the problems. His

style of management at this time - mid 1980s - is more
difficult to identify. There does not appear to have been a

clear vision of the future of the company. To some extent

the highly favourable economic circumstances made the
problem less apparent.