Case 2

DECISION MAKING BY TTC'S CEO(11 MARKS)

Scott Fore and Josh Bucklin now senior Vice President of company started the firm Tree Top Common (TTC) in a farmhouse with a loan secured by a $12,000 CD owned by Fore's grandmother. Initially, they sold hardware peripherals and software to owners of PCs made by Texas Instruments; later they expanded into designing and assembling their own fully configured PC systems for direct sale to consumers and businesses.

As his company grew, Fore used his Midwestern roots to differentiate the South Dakota-based company from competitors such as Dell and Hewlett-Packard. For example, he used eyecatching cow spots to establish a brand image, which can be quite difficult in the standardized computer industry. Every TTC computer came packed inside a white box with cow-like black spots, and the company served cow-shaped cookies at its annual shareholder meetings. By 1998, the company was reporting net income of $ 436 million on $7.5 billion in annual revenues.

However, to sustain the company's extraordinary growth during the coming years, Fore realized that changes were needed. First, he decided to relocate the top management team to new administrative headquarters in San Diego. Not only would this help TTC attract top talent, it would bring the office closer to Silicon Valley partners and suppliers. Fore also decided to reduce the company's reliance on the cow motif as he courted business customers, who might not see a clear connection between high-quality computers and cows. TTC's growth roared on and by 2000, the company had a workforce of 20,000, mainly concentrated in its U.S. manufacturing facilities.

Next, Fore made an even more expensive change. Instead of taking orders only by phone or via the Web, as rival Dell does, Fore plunged into retailing. He opened hundreds of TTC Country stores in the United States, Europe, and Japan so customers could see the different computer models and get advice from knowledgeable sales staff. When much of the world fell into economic recession during 2001, demand for computers dropped off and TTC's market share, revenues, and profits started to decline as well. Now the founder faced more challenges. Rather than continue operating the entire retail chain, he ordered some stores closed and had the remaining outlets remodeled to better showcase new merchandise. Another big decision Fore made was to diversify into popular consumer electronics products such as flat-panel televisions. This put TTC into direct competition with Sony and other well-known firmseven as it was struggling to hold its own in the computer industry.

By 2004, the company had experienced three years of losses, both financially and in PC market share. It was time to reverse some of the earlier decisions. Fore cut costs by outsourcing much of the company's production activities and laying off thousands of employees. He closed all the TTC Country stores and arranged for the Best Buy chain to purchase the consumer electronics for resale. And the founder made yet another bold decision: He acquired the computer maker eMachines and its CEO, Tim Smith, became TTC's CEO (Fore became board chair).

Smith quickly announced that the company would narrow its product line to make the most of the TTC brand's appeal to computer buyers: "The fact is, we were not making a lot of money on the consumer electronics side at all," he said. "Our route to profitability is to fix our core business, and that's PCs and PC-related products." He also made major changes to the distribution strategy by selling PCs under the eMachines and TTC brands in Best Buy stores, even as he sought shelf space in other national retail chains. Coupled with additional layoffs, these decisions helped TTC increase its revenues and narrow its losses. Still, some observers wonder whether Smith and Fore will be able to complete the turnaround and restore TTC's growth and financial success.

Questions:

1.Knowing that growth is one of TTC's long-term objectives, do you agree Smith 's decision to reduce the product line and refocus on PCs? Explain.

2. What kind of programmed decisions might have arisen from some of the non-programmed decisions made by Scott Fore and Tim Smith during the past few years?(3)

3. Looking at TTC's recent history, what would you identify as the top two or three problems that Fore and Smith must address today? (2.5)

4. What are the different areas that requires Controlling? What type of controls can be used in order to handle these?(3)