I need the answers for Borg holdings case study in strategic management

i added the case here and the questions are at the end

below is the case of Borg holdings:

- Organisational Structure of the Holdings

The structure of the Group is highly informal. The non-executive Chairman/founder of the Group today is very senior in age and plays a minor role in the running of the Group of Companies. He is a very cost conscious person and he still runs one of the more cost sensitive and stable business units of the Group in construction material manufacturing. The two eldest sons of the founder, Peter and Tom Borg are the Directors on the Board who are active and who have the major say in the running of the Group.

Today, Tom is the most active family member in the business and although not yet officially recognised as such, he is regarded as the CEO of the Borg Group of Companies.

- Investments

The family business was founded 65 years ago with household goods retailing. Seven years later the company had moved into the furniture manufacturing business which eventually became the company's core business: a business which the company has been highly renowned for. 30 years ago the company had diversified into the manufacture of building materials and 10 years later a further diversification spate had occurred which finale resulted in the creation of a holdings company (Borg Holdings Ltd) in which the various investments of the Borg family were represented. Diversification continued up to the present day with a number of divestments in the process.

The shareholdings that the Borgs possess in the various Strategic Business Units (SBUs) vary substantially but tend to fall in three types of categories of SBUs, ranging from majority to minority shareholding interest as follows:

SBU1 Construction Machinery Import 100%

SBU2 International Trading	100%
SBU3 Furniture Manufacturing	80%
SBU4 Industrial Machinery Mfg	20%
SBU5 Paper Products Mfg	20%
Associate Interest (Equal say in company affairs)	Shareholding
SBU6 Clothing Mfg	45%
SBU7 Construction Material Mfg	25%
Minority Interest (Minor say in company affairs)	Shareholding
SBU8 Office Equipment Importers	40%

Portfolio of Borg Holdings

An overview of the SBUs involved follows:

SBU1 Construction Machinery Import: This business aims to fulfill local requirements for construction machinery and earthmoving equipment. Growth in these sectors is stable and the SBUs local market share is estimated beMeen 30% and 40%.

SBU2 International Trading: Another recent start-up in the area of international trading. Goods traded are mostly in high growth areas. International trading as a service is also a growth business due to its increasing globalisation. As yet however, the SBUs share is very low. This subsidiary is headed by Peter Borg.

SBU3 Furniture Manufacturing: This business is presently catering for the upmarket segment. The company is mainly geared for export and has a low market share. The SBU is presengy finding exporting difficult. The main objective of this SBU is to design and export semi-customised furniture systems. Market growth is stable.

SBU4 Industrial Machinery Mfg: This is a recent, ambitious start-up. The business unit aims at increasingly supplying appropriate technology to developing countries principally in machinery for industrial manufacturing. There is a high growth rate in this particular market segment, due to the import substitution policies practiced by these countries.

SBU5 Paper Products Mfg: There is presently medium growth in the export market in this companys product categories.

However, the SBU's share in the export market is very low and the market is slowly reaching maturity.

SBU6 Clothing Mfg: This is a local garment manufacturer producing in a narrow but high-growth segment of the market. The company is market leader in its segment.

SBU7 Construction Material Mfg: This SBU is engaged in the manufacture of concrete products for construction purposes for the local market. This is a low growth sector with a medium-to- high market share. The market segment is price sensitive but on the whole, the market is pretty stable. Presently, however, the company is losing ground to its competitors.

SBU8 0Pice Equipment Importers: A local market distributor of office equipment, particularly photocopiers, PCs and equipment supplies. A High growth market of which this SBU occupies 40%.

- Key Issues and Interactions Aims and Objectives

The aims and objectives of the group and the key issues facing it are highly influenced by (a) the CEO's personality and aspirations, and (b) the family business' nature of the whole set- up, i.e. the family culture, its traditions and influence on the business.

Tom Borg, the CEO of Borg Group is in fact informal, adventurous, confident, humorous, and idealistic. The organisation of the Borg Group is characterised by its risk-taking and informal nature, with the latter namely being a lack of formal cost and financial controls and elaborate liaison devices.

Although the Group had diversified substantially in these last thirty years, diversification was never recognised as an objective. Spreading the risk was not a primary objective for diversifying.

More so, the founder, as well as his successor (the present CEO), have invested into new ventures chiefly because of the profitability they envisaged.

The Group's top people have always found it comfortable to diversify into new areas. However, expansion was still occurring in the Group's long established businesses, and in some areas, exporting was taking place.

With all these moves, the Group had passed through various growth thresholds. Growth had thus put a substantial amount of pressure and tension on the structure, culture and controls within the organisation. Presently the purpose and objectives of the Group are not clear and the strategies, roles, procedures, duties and responsibilities at Holdings level are not well defined.

The aim of creating the Holdings company in the first place was for tax and estate reasons. This was thought to be an appropriate way for the founder to pool in the various investments and to pass them on to his sons in a fair manner in view of the gradual succession process which 20 years ago had inevitably to start taking place. For this reason, the Holdings company has been very much regarded as a "paper company" in which the bare essential formalities had to take place. This included such tasks as the compiling of the accounts of the various business units for the preparation of the Groups annual report; the collection of income from property leases and the issue of dividends.

Many top managers of the various business units think that Head Office in the Holdings company is not adding value and that it is more a cost and constraint to growth rather than a means to nurture the success of each business unit.

The CEO and Family Influence:

The family influence on the business has evoked a degree of paternalism in the running of the Borg business. The long established businesses of the Borg family had created goodwill and an image of reputation among local consumers and the business community. However, in the mind of Tom Borg this image may be overstretched. The family influence and Tom's strong personality and charismatic qualities are subduing the corporate identity of the Group both in the eyes of the employees within the Group as well as in the eyes of the business community and the customers.

In some areas there is an unclear distinction beMeen what is of the Borg family and what is of the business. Such problems mostly occur in the long-established business units in which the Borgs have a majority shareholding, namely Medalco Ltd (furniture manufacturing) and J.B. & Co. Ltd (construction machinery importers). Managers of these business units claim thatfamily interference obstructs the professional management of the firm". This has created a certain degree of uncertainty with non-family management becoming defensive, inconsistent, vulnerable and anxious. For example, some incidents arise mainly due to Toms sociable and influential character. Many employees look up to Tom in a paternalistic way.

On the same vein, clients of the business prefer dealing with Tom rather than with non-family members of the business. This is mostly due to his generous character, especially if they know Tom personally. Due to these factors, short-circuiting of the lines of authority sometimes occurs. For example, the CEO

occasionally handles a client personal# himself by communicating straight down to the operational level of the business unit.

A degree of managerial incompetence is present in the Mo above-mentioned business units. These managers put up smoke screens regarding lack of performance in their business unit by blaming the family owners for using the business for their immediate convenience or for recruiting incompetent family employees. While these claims are to some extent true, such claims are being used as screens to cover the managers incompetence. Nevertheless, the managers' incompetence is being reinforced by the fact that the CEO is not fully capable of delegating tasks properly. Incompetent managers continually approach the CEO on the most trivial matters and the CEO is asked to assist. which he usually does. This is both a symptom of his paternalistic attitude and his socialising nature both of which keep him from saying "no" to such trivial matters.

Besides relating directly with each of the eight business unit managers, Tom handles directly any possible new ventures or business deals that come along. His management style makes it difficult for him to address fully the overall strategic issues that face the Group.

Presently Tom is undergoing a period of personal change; a sort of "menopause effect". He is becoming slightly less outgoing, less of a jovial person and does not trust people to the same extent that he used to (some business unit managers say that he used to trust excessively). Some factors which have contributed to this are:

Various incidents of abuse he experienced from partners and managers alike as a result of his trust;

Age (approaching 50) and stress, as a result of excessive commitment in various aspects of the business;

Conflict between the wife of Tom and the wife of his brother, Peter, on certain aspects of the overall business of the Borg family;

A love-hate relationship with his sons.

The latter issue is very much related with the issue of succession which is presently very much on Tom's mind.

Tom is basically a "new ventures" person; he likes new things, new ideas and "new ways of making money". He invests in new ventures no matter how different they are from the present business areas. This is very evident by the very nature of the portfolio. Tom does not like carrying out administrative tasks and very often he feels overtaken by his own creations when business unit managers consult him on trivial administrative matters. Tom's preferences have recently been changing. His present inclinations are to avoid projects in highly competitive areas and projects

which require a high degree of monitoring. Tom's aspirations for the business are increasingly becoming short-term. Tom does not feel that his sons would be good successors (the oldest son, Jim, is 23 years old, while George, 20 who is very creative and design oriented is currently studying Product Design abroad). Peter's has three children Mo sons who are17 and 13 years old and a daughter aged 10. None of Peter's children are yet involved in the business.

Jim is the only 3'd generation family member who is as yet involved in the business. Jim's character is different from that of Tom. Jim unlike Tom, tends to be less creative and less dynamic in growing into new business areas, however Jim is much better

than Tom in administrative, organising and planning tasks. Tom believes that his money may be better invested somewhere that does not give him administrative headaches and that perhaps, there may be some investors who would be interested in buying up some or all of the various business units of the Group.

Presently Tom prefers to see how to "make a fast buck" and to indulge into short-term 'wheeling and dealing. Tom has always had many ambitions for the Group. However, he sees the future of the Group in the hands of the Borg family to be uncertain.

When it comes to succession, it is evident that Jim has become his mother's favourite. This is shown by the way she has been supporting him in the family business. To some extent, this is further alienating father from his son. Even worse is that Tom severely criticises his son in what he used to do and in what he does. Then Jim over-reacts in what he does in order to try to show how competent he is. This makes the situation even worse. Jim once said, In my father's business its difficult to know where I am. Some people tell me that Im doing well but it is hard to distinguish why they are saying it maybe so that they can gain my father's respect... Funnily enough, while I am trying to repair organisational weaknesses left by my father, I find myself subject to criticism by those non-family managers waiting for me to stumble.

Short-term Orientation

Jim does not like the short-term orientation presently being adopted by his father and prefers building the business for the long-term. For example, there is a difference in opinion between Jim and Tom on whether to sell out two of the business units or not. Jim thinks that they are good investments for the long term, while Tom thinks that these Mo particular SBUs are causing too much administrative headaches, the present returns on which do not justify the troubles" being encountered by Tom.

Nevertheless, the short-tern 'fast buck syndrome is not just a recent phenomenon of the Group. It has its origins from the way the Borg family has traditionally done its business. This is not a characteristic unique to the Borg Group, it is typical of the way many diversified family businesses do business. In relation to other groups of companies, therefore, the Borg Group's short- term orientation does not stand out. There are, however, issues which necessitate careful attention and which can harm the Group in the long term unless appropriate action is taken.

These issues are:

Most of the exports of the Group are mainly towards one country which is a relatively closed protected market and politically sensitive. At least two export-oriented business units rely principally on this one country for their sales.

The group is also constraining its own growth due to its lack of concern on management information and accounting systems. The information produced is not particularly useful for management decision making. Certain information pr0duced can also be misleading. Getting this issue sorted out is not as easy as one might expect. It involves such issues as culture and orientations both within and outside the organisation, and it may mean that the Group may have to forgo certain benefits that it presently enjoys.

Perfomance

As previously inferred to, performance in the two longest established majority-owned (50%+) business units is declining. In the more recent ventures and in those with associate and minority interest, performance is good. From the point of view of

family interference, J.B. & Co Ltd, being the longest established wholly-owned subsidiary, has been the company mostly tampered with and abused of. The company is incapacitated with incompetent family employees and incompetent management. Traditionally, this company has played the role of corporate valve for the Borg family, or rather, that part of the Borg carpet' under which the family dust and garbage' is thrown and hidden.

On the other hand, the other, more recently established business units do not have the same family-related problems. However, their shareholding mix is complex. Controlling interest varies from being majority-owned to associate interest, with one company where the Borgs have a minority interest. In associate SBUs, the Borgs have an equal say as the other partner/s in the running of the business. The complexity is compounded by the fact that in some SBUs the general manager has a

shareholding in the business while in others; the general manager does not have a share. Management shareholding also varies from being negligible in some SBUs to being substantial in others. The effect of this is that some managers are owner-managers while others are employee-managers.

All this puts a burden onto the CEO and the Holdings. The diversity of ownership, of industries, of stages of maturity, of growth and of financial performance is putting a severe strain on corporate management in understanding and controlling each of the businesses in a portfolio of this sort.

Many times one can see Tom changing his leadership style as he roves from one business unit to the next. But this requires tough skills at being a good schizophrenic". Since Tom has a liking for that which is new and enterprising, he has a tendency to spend much more time on the 'budding flowers' than the more mature ones, even though he has got less stake in the budding ones. The mature ones seem to be calling for help most of the time but Tom does not seem to take much heed.

Venture Capitalist Approach

A role that the CEO has been playing is that of an informal venture capitalist. A formal venture capital mechanism nationally has only recently started to take shape and sometimes, entrepreneurs who want to start up, or give a new

lease of life to their business have approached Tom for financial support in return for a stake in the company. The decision to invest is mostly based on trust and intuition. With trust coming mainly from Tom's personal knowledge of the entrepreneurs capabilities; while intuition being Toms vision of the potential that the venture has got. Performance in these ventures has been very satisfactory both in the eyes of the Borgs and in the eyes of the entrepreneurs. The latter normally become owner- managers. The relationship that exists beMeen the CEO and the entrepreneurs is very good. The CEO gives a high degree

of autonomy to the owner-managers.

Due to his risk-taking nature, the CEO is usually held back by his brother Peter Borg who is a very objective and logical person, as well as by the Managing Director of the Holdings company (i.e. Anthony Grima, a non-family member of the business who has a financial background). Both Peter and Anthony are conservative and risk-averse in nature. Frequently, Anthony has queries about Tom's investments plans in new or existing SBUs. In these instances, the relationship beMeen the owner-managers and the Holdings company can become strained. For example, situations arise where the CEO reverts from a minuted decision with the owner-manager after Anthony cautions the CEO of the consequences of such a decision

Head Office Management

Two years ago Anthony Grima was appointed by Government to head a government agency. This was a polkical appointment, and it was expected that he would remain Chairman of this organisation or some other government agency for as long as the political party which appointed him remained in Government. Due to this appointment, Anthony is only contributing Mo days a week on work at the Holdings. Clearly,

Tom is in a double-bind situation here. Anthony has good contacts that the Group can make use of, but on the other hand, a lot of work that used to be done by Anthony has become either a burden on Tom or is not being done at all. Tom seems to fear the negative consequences that might arise in removing Anthony from the Group or putting him aside. Such consequences have to be seen in terms of the political power that Anthony now has outside the Group. Tom prefers to have Anthonys contacts which lead to short-term gains; however Tom is not happy with the situation and doubts how possible it is to resolve this issue.

Anthony does not have a share in Borg Holdings Ltd. However, he has got a minority share in one of the SBUs. On some occasions this has created a conflict of interest in terms of his position as Managing Director of the Holdings company.

The staff in the Holdings company is made up of Anthony and his personal assistaht whose services are shared also by the CEO. Peter Borg is no longer very active at Holdings level and is now mainly involved in one of the subsidiaries of the Group.

tvleetinqs At Holdings level, no meetings are made by directors so as to discuss important strategic issues. When meetings are held, discussions centre on day-to-day issues and matters arising.

The Group's Future

The determination of the Groups future is very much an equation of the aspirations of the CEO and the relative strength of the forces that presently impinge for or against those aspirations. The equation cannot be quantified. The qualitative aspect of these forces is very dominant and the relationship between them is very dynamic. Various op0ons and directions are open for the Group, but there are a number of questions that still need to be answered:

and these are the Questions:

1-Vision and Mission

How would you define the aims and objectives of the group? Does the group have a vision? Do you honestly think the group takes strategic management and planning seriously? To what extent* Why?

2-Strategic Analysis

What type of management structure does the group possess? How would you describe the management

style of the group? What type of strategy is the group following? Apply the McKinsey 7-S Framework on Borg Holdings.

Highlight the major Competitive /Comparative Advantages and Competitive Disadvantages of the case in an Onion Model format.

3-Customer Alignment & Competitive Positioning

Prepare a strategic audit of the group: Look at strengths, weaknesses, opportunities and threats at Group level. What are your recommendations as a result of this audit* (use the SWOT Matrix to draw out the situation analysis and identify possible recommendations).

4-Designing Strategic Options & Corporate Strategy

Review its portfolio of investments and its strategic business units. What has led the group to diversify? How would you assess the portfolio of the group in terms of the strategic assessment tools used in class for diversified organisations?

In terms of your audit what changes would you make to its portfolio of Strategic Business Units* Give reasons for any changes in the SBU portfolio? What new vision would you suggest for the Group*