Galvor Case Questions
1. Universal Electric’s planning system is not effective for Galvor Corporation. Each operation unit of Universal Electric prepares a business plan to be evaluated by Universal Electric’s top management. The guidelines and requirements for developing the business plan are very standardized. They are basically applied to all the operating units in the same fashion, only making slight adjustments for operating units that have more than a single product line. Universal Electric considers Galvor as a single product line operating unit, even though Galvor’s executives disagree. Galvor ends up having to follow this standardized business plan that does not account for Galvor’s three distinct lines. As a result, Galvor has struggled to adapt to the complex and time-consuming requirements that Universal Electric has established for them. Universal Electric has created an ineffective planning situation for Galvor by forcing them to follow the same standards as a large operating unit. 2. Universal Electric has transformed Galvor from a company that barely produced financial statements, to one that puts out 13 reports due each month. Before Universal Electric bought Galvor, Galvor was only preparing a balance sheet and a statement of income once a year. There was little communication between department heads. The business plan that includes these reports is now the standard for evaluating unit managers. Tentative objectives were set in January for product-line managers to follow. These objectives were based on sales, net income, total assets, total employees, and capital expenditures. Operating managers have the chance to negotiate these objectives from January to April. After approval in May, Galvor could start preparing its business plan. This plan includes Galvor’s objectives for the following two years, as well as fifth year projections. Galvor completes the business plan with financial statements, including an income statement, balance...
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