Walden International, the proposed new parent company of Able, is a large multinational conglomerate. It is an extremely financially well-run company, with an emphasis on short-term, quarterly results. In fact, it is Walden's key value proposition to its stockholders that each quarter's sales and pretax profits will be greater than the prior year's corresponding quarter. Walden has a 35-year record of consecutive quarterly increases and absolutely every other corporate objective is subordinate to extending this streak indefinitely. Walden works very quickly re-engineering and consolidating the common functions of its acquisitions into its own administrative services. These functions include accounting, legal, engineering, and customer service. The savings that are realized through the elimination of these common services are usually passed on to the bottom line. Sometimes, if a good case can be made, those funds are reinvested in the new subsidiary.
One of the biggest obstacles to the implementation of a successful business strategy is the clash of value systems between a parent and subsidiary. These differences often manifest themselves in conflicts between the various levels of strategy: corporate, business, functional, and operating. Below are a number of the sticking points between Able and Walden. Discuss the steps you would take to address the issues.
* How would you reconcile Able's need for building market share (long-term strategic business objective) with Walden's drive for year-to year quarterly increases in sales and pretax profit (short-term, corporate objective)?
* Walden's success metrics of head count control, inventory management, inventory turnover, and days sales outstanding can be inhibitors to growth vitally needed by Able. What would you do to moderate these functional objectives and make them work for Able?
Walden International's acquisition of Able Corporation and examines the trouble Able Corporation is facing because of the lack of investments in the company. The strengths that are revealed are an asset to Able Corporation and the weaknesses that undermine the company. Next, opportunities are the advantage to Able Corporation and the threats that might lead to the downfall of the company. There are strategies that might help guide Able Corporation through the difficult process of re-building their business.
In 2001 Able Corporation was leading the electronics industry by 60%. Today that number has dropped to 3%. This dramatic drop off in business in the past 3 years is of great concern. The most prominent reason for this decline in business is that investors stopped supporting Able Corporation. There are many reasons that investors stopped supporting Able Corporation. One reason for this sudden withdrawal from investors is because Able Corporation's products became stale and outdated. In addition, the operations became inefficient and costly. In fact, there have been significant net operating losses over the last four years. Another problem that Able Corporation has experienced is that a new president took over at the company two years ago. Under the leadership of this new president the development of new, poorly constructed business strategies has been implemented.
Knowing that obstacles for a good business strategy can stem from value systems between the parent and subsidiary, several strategy levels can be involved - corporate, business, functional, and operating. This task requires development of several steps to address these issues.
Overview of Able's information
Existing products and related issues with Able, within the Portable Electric Power Tool Category
The firm dominates the market in this product area. Competitors have not focused (yet) on producing a copy (with = quality) to undercut Able's sales in this segment.
a. Currently has 40% market share
b. Strong brand equity from professionals and consumers
c. Good quality
a. Comprise 20% of market - This % will increase over time as battery R&D produces more efficient, longer-lasting, light-weight batteries. When this occurs, the market for corded tools will drop.
b. Gained reputation as innovator
c. Competitors copy products and displace Able with superior marketing
d. This is the fastest-growing market segment, as compared to corded tools. (Cordless = 10% annual increase; Corded = 3%)
e. The prices of cordless vs. corded power tools are fairly similar.
f. Cordless tools are locked into their performance by the state of battery technology.
a. Comprise 80% of market
1. The Power Tool Market can be subdivided into professional and consumer products, consumer and industrial channels, and consumer and professional end-users.
2. Professional tools demand higher prices
3. Consumer tools are relegated to do-it-yourself people.
4. The industrial channel has declining ~ 5% annually, but now seems to be leveling off.
a. Composed of distributors charging higher prices
b. Customers are primarily tradesmen.
c. Represents 45% of total market
The consumer ...
7 Pages, 2332 Words, Conclusion and Sources Utilized
This paper includes how I would reconcile Able's need for building market share (long-term strategic business objective) with Walden's drive for year-to year quarterly increases in sales and pretax profit (short-term, corporate objective).
Walden's success metrics of head count control, inventory management, inventory turnover, and day's sales outstanding can be inhibitors to growth vitally needed by Able. I included what I would do to moderate these functional objectives and make them work for Able.