Case Analysis: Chadwick Inc. case analysis
Hamzah. Najib, Mustapha, Syed Hasan
Background of Case 6: CHADWICK, INC.: THE BALANCED SCORECARD (ABRIDGED) Chadwick. Inc was a diversified producer of personal consumer products and pharmaceuticals. The Norwalk Division of Chadwick developed, manufactured and sold ethical drugs. The company was respected for the high quality of its products. Norwalk sold its products through several key distributors who supplied local markets. Norwalk relied on its excellent relations with the distributors who promote Norwalk’s products to customers and also received their feedbacks about new products desired. Chadwick’s long-term success depended on how much money distributors could make by promoting and selling Norwalk’s products. But, recent inroads by generic manufacturers had been eroding distributors’ sales and profit margins. With regards to its Research and Development, The development of ethical drugs was a lengthy, costly, and unpredictable process. The development and testing processes had many stages, starting with the discovery of compound, extensive and tedious testing, and documentation. Norwalk’s profitability during the 1980s was sustained by one key drug discovered in the late 1960s. However, no smash hit drug had emerged during the 1980s, and the compounds going through development, evaluation and test was not as Norwalk management desired. Scientists in the R&D lab are pressured to increase the yield of promising new products, reduce the time and costs of the development cycle. Scientists were currently exploring new bio-engineering techniques to create compounds that had the specific active properties desired rather than depending on an almost random search through thousands of compounds. However, the bio-engineering procedures were costly. A less expensive approach was to identify new applications for existing compounds that had already been approved for use. Suggestions for possible new applications from existing products could be obtained from Norwalk salesmen in the field who were now being trained not only to sell existing products for approved applications, but also to listen to end users feedbacks. Norwalk’s manufacturing processes were considered among the best in the industry as they can quickly and efficiently produce drugs once they had cleared governmental regulatory processes. Challenging financial targets were set for divisions to meet, which were expressed as Return on Capital Employed (ROCE). As a diversified company, Chadwick wanted to be able to deploy the returns from the most profitable divisions to those divisions that held out the highest promise for profitable growth. Bill Baron, Comptroller of Chadwick, had been searching for improved methods for evaluating the performance of the various divisions as division managers complained about the continual pressure to meet short-term financial objectives. He liked the idea of a Balanced Scorecard as it balances short-run financial objectives with the long- term performance of the company. John Greenfield, the Division Manager at Norwalk was sceptical of how much freedom he had to develop and use such a scorecard. Divisional Controller, Wil Wagner, who was involved in the process for creating Balance Scorecards for Norwalk Division lamented that he did not have a clear understanding of the vision and business strategy for Norwalk, which serve as a foundation to build the scorecard. Major Issue:
The major issue of the case is with regards to company’s current processes in its R&D to develop new products which were lengthy, costly and unpredictable. There is the need to make significant investments in R&D to improve the current processes so as to enable the company to sustain and achieve success in the long run. Another major issue is that the company has inadequate or poor performance measurement to ensure managers’ efforts are rewarded for meeting the long term, strategic objectives of the company....
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