History and Background:
The Galvor company had been founded in 1946 by M Georges Latour who continued as its owner and president until 1974. The company had acted as a fabricator, buying parts and assembling them into high quality, moderate cost electric and electronic measuring and test equipment. On april 1, 1974 Galvor was sold to Universal Electric Company for $4.5 million worth of UE's stock. M. Barsac replaced M.Chambertin as Galvor's controller in April of 1974.
The Business Plan
The business plan was the primary standard for evaluating the performance of unit managers and everything possible was done by Universal's top management to give the authority to the plan. Each January the Geneva headquaters of Universal set tentative objectives for the following two years for each of its European operating units. For each of over 300 Universal product lines in Europe, objectives were established for five key measures: sales, net income, total assets, total employees and capital expenditure. From January to April, these tentative objectives were negotiated between Geneva headquaters and the operating managements. During May, the negotiated objectives were reviewed and approved by Universal's European headquaters in Geneva and by corporate headquaters in the United States. In June and July, Galvor prepared its business plan. The plan aso contained in less detail for the fifth year hence.
The broad scope of the business plan can best be understood by a description of the type of information it contained. It began with a brief one page financial and operating summary containing comparative data for preceding year, current year, next year, two years hence and five years hence.
Anticipated changes in net income for the current year and for each of the next two years were summarized according to their cause: volume of sales, product mix, sales prices, raw material purchase prices, cost reduction programs and accounting...