Analysis of effective working relationship & view points of GALVOR company

Presented by:

Santhoshbabu S (MBA09092) Praveen P (MBA09073)

Introduction

French company founded in 1946 by M. Georges Latour. Company was involved in manufacturing
fabricator, buying parts and assembling them into high quality, moderate-cost electric and electronic measuring and test equipment.

Sales grew from 2.2 million new francs in 1960 to 12 million new francs in 1971 April 1, 1974, Galvor was accquired by Universal Electric Company (UE), located

in Geneva for $ 4.5 million

M. Latour became chairman of the board of Galvor and David Hennessy was appointed as Galvors managing director.

UEs Planning system

Business plan prepared annually by each operating units. It is the standard for evaluating the performance of unit managers. Authority was given by Universals top management to the plan. Business plan was described in detail, and takes long time to approve. The plan also contained a forecast, in less detail, for the fifth year too. Five key objectives detailed in B-plan are: Sales Net Income Total assets Total employees Capital expenditures

Control system in Galvor by UE

As a result :
system became very strong centralized controller organization large staff as well as relatively large business unit controller staffs.

Galvor struggled to adapt complex and time-consuming requirement of UEs business planning process.

System was very inflexible, detailed system that required far too much time and too many resources for a business unit of the size of Galvor.
For example, the controller, and his chief accountant spent 80% of their time working on the system and reporting requirements for the corporate head office. Establish 8000 machines and 3000 assembly standard times.

Question no.3

In spite of being a highly centralized organization, the management of various operating units had considerable autonomy. For example: Mr. Hennessy was free to purchase components from other universal units or from outside sources. Galvors performance in July and August (1976) ( All figures in $000s)

Actual

July Budget
15801

Variance

Actual

August Budget
1600

Variance

Inventory

2010

430

2060

460

Sales to date

3850

3900

50

4090

4150

60

Explanations given by Hennessy to UE executives

Reasonable amount of selling models in stock to increase sales. To manufacture longer series of each model. Reduce number of purchase order by maintaining a minimum stock of low value items. Galvors performance in September Forecast September October 1973 1928 Actual 2175 2175 Variance 202 247

Measures Given By UE Executives to Galvor

Realistic master production schedules Short term physical shortage control to ensure shipments Work in process analysis of all orders Man power reduction Elimination of all unscheduled vendor receipts

SHELF DISPLAYING 70 MODELS OF 200, IN THIS BUSINESS, INVENTORY REDUCTION IS NEAR TO IMPOSSIBLE: HENRY

Problems :

Staff was grown from 20 to 42 by 1977, making Galvor over staffed Language problem between Galvor and UE. Lack of necessary know how and training to handle the requirements of the job. Difference in Accounting principles and practice in France from the United States. Problem of conversion of internal records of Galvor from its functional currency to the reporting currency.

Question no.4 -Galvors viewpoint :

Galvor needs the organization to be:

Simple, Informal, Less-staff planning Less control practices and De-centralized

Plan for short term should be prepared, for 1 year, focused on KRA like sales forecasting, inventory etc. Should not report on monthly basis. Proper cost allocation should be done Working hours should be reduced. Better trained employees ,familiar in both language. Reduce employees in the controller department.

THANK YOU