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Rudi Gassner and Executive Committee of BMG International

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Harvard Business Case:
9-494-055
October 20, 1995

Rudi Gassner and the Executive Committee of BMG International (A)

I would like to know:
1) The main issue of this case.
2) Analysis of cause of the issue.
3) Analysis of Ganners' leadership style.

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Solution Summary

Rudi Gassner and Executive Committee of BMG International is examined.

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The main issue of the case was whether to restructure managing director's bonuses in response to newly negotiated manufacturing costs.
With negotiations with Sonopress there were price reductions. Sonopress was Bertelsmann's central manufacturing operation in Europe which supplied products to Europe. These countries were required to purchase a certain percentage of their CDs, records, and cassettes from Sonopress. With Sonopress transfer price was negotiated annually by comparing Sonopress's bid with outside vendors.

Gassner's raised question in response to this price reduction as it could increase bonuses by as much as 50%. As a result of these savings executive committee was faced with tough decisions. One decision was whether to change business targets for each country so that they reflected ...

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