The Wallace Group Case Analysis
The Wallace Group is a diversified company that deals in the manufacture and development of technical products and systems. The company consists of three primary operating groups, electronics, plastics, and chemicals. The electronics group is by far the largest, its size is approximately the size of the plastics and chemical groups combined. Of the $70 million in net sales, the electronics groups contributed about $35 million of that, with plastics contributing $20 million and the remaining $15 million coming from the chemical group.
Both the plastics and chemical groups were acquired for the sole purpose of diversifying the company. Mr. Wallace thought if he added these two new divisions, he would be able to bring new life to the company.
However, due in part to these acquisitions, the Wallace Group faces several problems. The first issue relates to their hiring process and how they choose who to promote. Instead of hiring qualified employees with the proper expertise, they focus more on cutting costs, therefore hiring non-qualified employees. One example of this process is, instead of creating a management development program for training and recruitment of new management, they just promote within. However, they promote technicians to management positions without the proper training, because it's cheaper to do that.
The second issue arising is their inability to have a standardize form of collecting and presenting data. One example is that both the Vice President of Marketing and the Director of Advanced Systems, collect and utilize the similar data for marketing purposes. Because both managers are collecting data for the relatively same purpose, there redundancy and also a greater workload that is unnecessary and unproductive.
The third and final issue, which is the most crucial, is the lack of vision from Mr. Wallace. The acquisitions of the plastics and chemical companies, both lacked forward looking vision, the only requirement for their acquisition was that they were profitable.
The U.S. Government is their primary customer
Changes in government policy or funding to defense can affect sales dramatically
Change in world environment (peace, war, etc) can affect government contracts
Unions enforcing a no lay-off clause conflicting with increased production measures
During a good, booming economy, the Wallace Group should expect large spending from its customers
Company has a hard time attracting skilled employees
U.S. spends more than any other nation in regards to defense
Current wars may affect sales of defense related products
State of economy and expected direction suggest increased current and future sales of autos
Rising interest rates will make it more expensive to finance the necessary adjustments/expansion to the company through long-term debt issues
Due in part to the Department of Defense...