"Growth opportunities are always accompanied by challenges," exclaimed the CEO of GeoBab. She then went on to explain why you, a consultant, were hired. GeoBab started business in the city of Waterloo in 1951 as a manufacturer of televisions and electrical products. Television manufacturing was discontinued in the 1970s. GeoBab remained in the electrical products business, which over time required it to enter many new markets. New products had to be constantly developed to maintain growth. The life of many of those products was short, and thus many products were exited after a few years. In addition, competition and the need to be cost effective obliged GeoBab to locate new plants in China and India, and to enter into outsourcing arrangements. Along the way, GeoBab also acquired about 30 small manufacturing plants. The result has been that GeoBab now has 36 plants worldwide. Systems integration attempts were a constant challenge because of acquisitions, outsourcing arrangements, and new product implementations. If there had been a uniform enterprise resource planning (ERP) System, the CEO said, there would have been fewer problems for you to resolve. Sung, one of the older, larger divisions, has been subject to a series of problems, which the division's general manager and his controller have not been able to resolve. The CEO introduced you to the general manager and the controller. They explained that the sales have been lagging behind expectations, with the recently completed year being typical of the last three. A bigger problem has been that for the first year in decades, actual profits have become negative. You are shown the operating statement in Exhibit I. After a quick review of the operating statements, you asked if there have been any changes to the manufacturing process. You were told that the only change has been the use of a new supplier for the major components. The new supplier, EL Manufacturing, was an acquisition by GeoBab that occurred late in the previous year. The acquisition was premised largely on EL being able to replace most of Sung's existing suppliers. The components from EL have defects, whereas the previous suppliers provided defect free components. Consequently, more materials and labour were needed, and rework and spoilage were charged to overhead. You ask for information on the cost of quality and customer satisfaction, and you receive the information shown in Exhibits 2 and 3. You are also informed by the divisional general manager that EL wants a higher price for the components being supplied to Sung. The general manager at Sung is opposed to any increase in price paid to EL because the market price is less than what EL currently charges. (You confirm with an independent source that EL Page 2 of 4 CSAC3510 Group Case is presently charging Sung five percent over the market price for the components.) Two days later, the CEO introduces you to the general manger of EL. The financial statements for EL are contained in Exhibit 4. You learn that all of EL's production goes to Sung at a markup over costs sufficient to yield a 20 percent ROI, which is GeoBab's markup for setting transfer prices between divisions. This arrangement started at the beginning of the year that just ended. The general manager of EL wants the markup to be increased in order to earn a 25 percent ROI, which he says is consistent with what is earned by other, independent firms making the same components. (You confirm that those other firms were earning 25 percent ROIs.)

Please provide an answer to this on the basis of the given points.

Problems or issues are those attributes, factors, and/or activities that are wrong with the organization.

Students should read a case question once or twice to gather its essence. While reading, it is helpful to identify the issues by circling or highlighting them or by taking notes. Then, the student reviews these identified issues, adding to them any issues revealed by related analysis of financial statements and other supplementary information supplied.

In order to "size up" the root issues, it is essential to have a clear understanding of the organization and its issues. This analysis can be accomplished in two steps. First, make a list of the issues. Arrange and assemble similar issues into groups. Explain the relationships among the groups or categories that emerge at this stage. The groupings should be governed by two criteria.

First, same or related issues should be grouped together; for example, all issues related to inaccurate financial information would go into one group. Second, associations among issues within a group should be specified; for example, inaccurate accounting information led to poor decisions on inventory orders.

Second, the relationship among the categories must be explained. This explanation should reveal the root issues. Once they are disclosed, the root issues should be linked in a logical sequence. This listing should show the dependent relationship between the other issues and their root issues. Care should be taken to account for any specific requests that arise because of the role assigned to the student. The request may specify the perspective the student takes in assessing the issues. Requests may also be understood as additional issues.

The primary reason for grouping and ranking issues is to detect the underlying pattern of root issues. Sometimes, issues may also be the same as the root issues. In others, the detection may be more difficult. For example, consider a manufacturing firm with several problems: sales are not growing as expected; customers are returning products; customer satisfaction with the product quality is declining; and rework has increased. The root issue, lack of quality control, causes the other issues. Specifically, there was no quality control in the production process. The absence of quality control led to more rework and to the shipping of defective products, which the customers then returned or refused to buy again, and persuaded others not to buy.

It is identification of the root issues that enables the student to specify succinctly what is wrong with an organization. Proper identification requires close reading of the entire case, including appendices. Some information may have little or no bearing on the issues. As in the real-life situations that case analysis seeks to emulate, the student must sift carefully through all discernible aspects of a situation in order to determine what is relevant.

Analysis

Analysis and issue identification are highly related. Analysis requires a thorough assessment of why an issue arose or exists, how various issues relate to each other, and which issues lead to others and are, therefore, the most crucial to an under standing of the root issues. The analysis section includes required quantitative analysis, e.g., cost-volume-profit variance analysis. The analysis discloses how well essential organizational functions are working, e.g., planning, controlling, and management information systems. Analysis can also reveal, when necessary, the strengths and weaknesses of the organization. The analysis may vary in complexity. It can be as simple as listing the supporting issues, or as complex as finding the root or underlying issues.

Some case questions have a singular answer either because of the context or because of the "required". Other case questions lend themselves to a series of alternatives for solving issues. Alternatives should be individually meaningful and mutually exclusive. For example, for a business with serious profit problems, one alternative might be to reduce costs and focus on the core business. Another alternative might be to close the business and sell the assets and inventories. Each alternative must be explained and justified as an answer, and if appropriate, its advantages and disadvantages should be discussed.

Recommendations

The recommendations are a student's approach to remedying the root issues. If there are alternatives, the recommendations should be selected from the alternatives discussed in the analysis section. In resolving the root issues, the recommendations must also resolve most of the other issues. Recommendations should be action oriented, decisive and unambiguous; i.e., they should explicitly resolve the issues, assign responsibilities and set deadlines.

It may be suitable to include a conclusion that deals with implementation, especially with timing, and the assignment of responsibilities that arise out of the recommendations.

For example, with respect to the organization with profit problems, a student might recommend cost cutting and focus on the core business alternative. The student should follow the selection of this alternative by specifying how he or she would resolve the profit problems, and by suggesting an implementation plan. The implementation should detail which costs are to be cut, by whom, and with what consequences. It should detail which businesses are to be eliminated and which ones are to remain. If sufficient information is available, the recommendations should be quantified, showing the expected profit improvement.

In the report writing stage, it is often more time efficient and effective to identify, analyze, and make recommendations for each root issue individually. It is nevertheless essential to show the integration of the various issues within the case. Whatever the approach, it should be justified as the most appropriate for the case question.

Sung Eletronics Division
Operating Statement
Item	Budget	Actual	Actual Vs. Budget		% Change
Sales	842.00	823.80	-18.20	U	-2%
Variable Cost:
Direct Materal Components	270.20	281.00	10.80	U	4%
Direct Labour	34.80	47.80	13.00	U	37%
Manufacturing Overhaed	78.00	110.60	32.60	U	42%
Selling	38.40	38.20	-0.20	F	-1%
Total Variable Cost	421.40	477.60	56.20	U	13%
Countibution Margin	420.60	346.20	-74.40	F	-18%
Fixed Expenses
Manufacturing Overhaed	196.40	264.40	68.00	U	35%
Selling	42.40	42.20	-0.20	F	0%
Administrantion	74.40	74.60	0.20	U	0%
Total Fixed Cost	313.20	381.20	68.00	U	22%
Net Operating Income	107.40	-35.00	-142.40		-133%
Sung Eletronics Division
Cost Of Quality Control
Items	T	T-1	T-2	T-3	CY Vs.LY
Prevention	1.1	1.2	1.1	1.2	8.33%
Apparaisal	2.1	2.3	2.2	2	8.70%
Internal Failure	3.2	2.4	2.3	2.1	-33.33%
External Failure	8.8	1.8	1.7	1.6	-388.89%
Total Quality Cost	15.2	7.7	7.3	6.9	-4.05193
Sung Eletronics Division
Custumer Satisfaction Survey
Items	T	T-1	T-2	T-3	CY Vs.LY
Product Quality	60.5	84.5	84.6	85.8	28.40%
Durability	57.3	90.4	93.7	93	36.62%
Good Value	47.2	76.1	77.5	78.4	37.98%
Features	61	69.3	70.4	70.7	11.98%