Rudi Case
CASE 4: RUDI GASSNER & THE EXECUTIVE COMMITTEE OF BMG
INTERNATIONAL (A) & (B)
Note: only the (A) case has been included in the case collection; notes on the (B) case have been included as background material for the instructor.
Case Summary
BMG International was the international music subsidiary of the German media conglomerate, Bertelsmann, the second largest media enterprise in the world. In May
1993, CEO Rudi Gassner and the executive committee were gathered for one of their quarterly meetings. Arnold Bahlmann, a regional director and executive committee member, had recently negotiated a reduced manufacturing transfer price for the upcoming year’s production of CDs, records, and cassettes. Because business plans for the year had been established in March based on the assumption of a higher manufacturing cost, the new price would realize an unanticipated savings of roughly $20 million. As a result, the executive committee was now faced with some tough decisions. It had to decide whether or not to change the business plans of each country and the managing director’s bonus targets (which were based primarily on their achievement of the targets) to reflect the new manufacturing price.
In Gassner’s mind, the issues were clear. BMG International had achieved tremendous success and growth in its short lifetime of 6 years, and the team had every right to feel good about its performance. But now, Gassner wanted to guard against the company becoming a victim of its own success. He knew that they would have to monitor carefully the economics of the business and maintain their agility in order to meet their future challenges. In light of these concerns, he felt that the managing directors should be held accountable for the savings. The executive committee, however, seemed unwilling even to entertain this possibility.
The (A) case describes the discussion during the quarterly meeting as well as the evolution of the executive committee from its inception. A short (B) case
INTERNATIONAL (A) & (B)
Note: only the (A) case has been included in the case collection; notes on the (B) case have been included as background material for the instructor.
Case Summary
BMG International was the international music subsidiary of the German media conglomerate, Bertelsmann, the second largest media enterprise in the world. In May
1993, CEO Rudi Gassner and the executive committee were gathered for one of their quarterly meetings. Arnold Bahlmann, a regional director and executive committee member, had recently negotiated a reduced manufacturing transfer price for the upcoming year’s production of CDs, records, and cassettes. Because business plans for the year had been established in March based on the assumption of a higher manufacturing cost, the new price would realize an unanticipated savings of roughly $20 million. As a result, the executive committee was now faced with some tough decisions. It had to decide whether or not to change the business plans of each country and the managing director’s bonus targets (which were based primarily on their achievement of the targets) to reflect the new manufacturing price.
In Gassner’s mind, the issues were clear. BMG International had achieved tremendous success and growth in its short lifetime of 6 years, and the team had every right to feel good about its performance. But now, Gassner wanted to guard against the company becoming a victim of its own success. He knew that they would have to monitor carefully the economics of the business and maintain their agility in order to meet their future challenges. In light of these concerns, he felt that the managing directors should be held accountable for the savings. The executive committee, however, seemed unwilling even to entertain this possibility.
The (A) case describes the discussion during the quarterly meeting as well as the evolution of the executive committee from its inception. A short (B) case