Square Deal plc is a newly formed subsidiary company of Square Deal International Inc. The intention is to use it to unify the efforts and improve the profitability of the hitherto separate UK subsidiaries of Arnold plc, Carlton plc and Foodrich plc. At present it has a managing director, an administrative/ financial controller and a typist all sharing a large temporary office in central London.
Arnold plc has 69 food stores, all within a radius of 30 miles from London. Most of them contain either a small restaurant or a snack bar and occupy high street or suburban shopping centre locations. It owns one small bakery whose total production supplies ten stores with bread and cakes. Perishables for both resale and restaurant use are bought locally but all other products are bought centrally and distributed from one large warehouse. These products are charged to the stores at selling price on computer-printed internal invoices. Store managers are judged solely on revenue. Accounts for each store are produced on the batch computer system at head office which is an old building on the edge of a dockland redevelopment site in East London. The company owns the freehold, as it does of about half of its food stores.
Carlton plc has joint managing directors, one in charge of 21 restaurants and one in charge of property development. To date it has built four shopping centres and has plans for three more, all as part of schemes to regenerate old city centres in the north of England, around 150 miles from London. It leases out the shops with the exception of one per centre which it operates as a restaurant. Both MDs rigidly pursue a 15 per cent annual return on investment as their measure of achievement.

Foodrich plc was, until last year, a family firm which canned fruit and vegetables from its one factory situated about 100 miles from London, in the west of England. It was bought by Square Deal International Inc with the idea that it would supply
'own label' products to Arnold plc and large catering packs to both Arnold's and Carlton's restaurants. To do this, Foodrich was obliged to deny supplies to some of its regular customers and re-equip part of its plant to handle the large catering packs. The MD, son of the founder, has worked there for nearly 40 years and runs the company, making all decisions, both long term and operational, using his experience and intuition. He is furious to learn that Arnold has not put all its 'own label' business in his direction and Carlton is still buying most catering packs from Foodrich's competitors while its new plant is grossly

Questions

(a) Discuss the benefits and drawbacks of judging performance on a single criterion such as:
(i) Revenue, in the case of the store managers;
(ii) Return on investment, in the case of Carlton's MDs.
(b) Explain to what extent Arnold's head buyer and Carlton's head chef are justified in buying catering packs from other companies.
(c) Describe how further computerisation might help in this quest for unification and profit improvement.
(d) After you have finished this task, the MD tells you he is toying with the idea of regrouping the company under the name of Square Deal plc and dividing it into the following divisions, each operating as a profit centre:
Square Deal plc Restaurants Property Food retail Canning Bakery division division division division division
He is concerned about the effects of such a change on the morale of the managers and other employees so he asks you for a further statement.
Discuss ideas that should maintain or improve morale if this regrouping were to take place.
(e) Highlight any other advantages or difficulties that you foresee in the regrouping idea.

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