2.9 The Office Equipment Company is headed by Glen Jordon, President, who is supported by four people: Ray Fisk, VP Sales, Terry Buford, VP Manufacturing, Fred Hunter, Director of Research, and Bob Christian, Director of Corporate Planning. The company has produced typewriters, calculating machines (desktop with paper tape), accounting machines, and tabulating equipment in the last 40 years. Until two years ago, the company performed well, based on

A. Reputation for quality products and services.

B. Sales increases over the years.

C. Rate of return better than others.

D. Engineering research concentrated on improving existing machines, with new models every few

years by introducing small incremental changes.

However, there had been some significant changes in the last two years. For example:

A. Typewriters sales continued to increase.

B. Sales of accounting machines and tabulating equipment become stagnant.

C. Sales of calculating machines dropped more than 50%, due to the low cost hand‐held calculators.

D. Customers hold off purchases of traditional products to evaluate minicomputers.

The company is at a crossroads. Two strategic plans were presented to the Board of Directors for review, including budgets.

1. Plan A (Ray Fisk and Terry Buford)

A. Continue with company's current products. Improve sales through a National Promotion Program:

• Increase advertising budget by 50% to expand market share by 15%, including price cut, if needed.
• Delay a plant modernization for one year.
• Cut R&D by 15%.
• Restore plant modernization and Engineering Research through sales increase in one year.

B. Supporting Arguments

• Projected sales of calculators will remain at present level.
• Company's overall sales will rise by 10 % per year for the next ten years.
• Customers will want special-purpose transistorized equipment, not complicated minicomputers.
• Full utilization of present resources (e.g. marketing organization and approach, production facilities and skills, management experience, etc.)

C. Opposing arguments

• Ignore the roots of company's problems being technology obsolescence and customer's changed needs.
• Advertisement addresses only the issue of product awareness, not technology obsolescence and performance deficiency (e.g. size, convenience, integrated operations, etc.).
• Plan's assumption is not supported by data available.
• Cycling Engineering Research by 15% is impractical.
• Plan represents only a one-year program, not a long-term strategy.

2. Plan B (Fred Hunter and Bob Christian)

A. Change company's business by entering the fields of microprocessors and minicomputers.

• New line of minicomputers (large scale integrated circuit microprocessor) for office, financial and data processing
• use in small to medium size organizations.
• New line of typewriter, using integrated circuits and internal memory.
• Double Engineering research staff in two years.
• Continue engineering research on typewriters and drop work on other three.
• Delay plant modernization indefinitely.
• Make major corporate commitment to raise new capital through bond or preferred stock.

B. Supporting Arguments

• Revolutionary impact of microprocessor on company business is forecasted:
  • Rapid reduction of microprocessor cost.
  • Significant increase in the use of microprocessors.
  • Sales of company's currents products are projected to reduce to zero in eight years.
  • Sales of typewriters to drop 50% in ten years.
  • Company is already 5 years behind.
• Company's long term survival depends on a timely entry into the minicomputer market.

C. Opposing Arguments

• Forecast is not believable.
• Switching company into new technology will need different marketing approach, organization, sales forces, outlets,
• production facilities, equipment, quality control, inventory management techniques, and management experience.
• Require large capital investment.

Analyze this case and answer three questions:

1. Determine why each of the participants are taking the positions indicated before the Board of Directors?

• The president and vice presidents are usually members of the board of directors meeting
• The assiduity of a company depends on cross functional teams – each process or person or sector is a solid foundation of any decision making and smooth functioning in the board of Directors.
• The participants are the ones in the field: they know the details and techniques in their disciplines
• The decision of the board depends is not mutually exclusive of the functional areas

2. As Chairman of the Board, what action would you take?

As chairman, I will consider the sort-tern (operational) and long term (strategic) issues at hand and implements the following plans based on short term and long term since all are great:

Operational plan will be plan A:

• Increase advertising budget by 50% to expand market share by 15%, including price cut, if needed.
• Delay a plant modernization for one year.
• Cut R&D by 15%.
• Restore plant modernization and Engineering Research through sales increase in one year.

Strategic plan will be PLAN B:

• New line of computers large scale ICM for the office financial and data processing use in small to medium size organizations.
• New line of typewriter, using integrated circuits and internal memory.
• Continue engineering research on typewriters and drop work on other three.
• Delay plant modernization indefinitely.
• Make major corporate commitment to raise new capital through bond or preferred stock.

3. Is Jordon taking the right approach?

Yes, Jordan is taking the right approach because: He cannot function autonomously on such a trivial issue, knowing that he has superiors and subordinates as well with whom he must relate for the best of the company.  He is a great manager.