The CEO of PlacidCo was coming under increasing pressure from the Board because sales had been static for three years and the share price had been falling slowly. The CEO felt that PlacidCo's performance was just fine because its markets were mature so he decided to ask his executive team for suggestions on how profit might be improved. They came up with the following.

• Marketing manager: enter new geographic markets.
• Finance manager: introduce new stringent cost controls.
• Production manager: introduce JIT and educate all managers in project management techniques.
• Personnel manager: build a gymnasium for employees to improve morale and reduce turnover.
• R&D manager: increase spending to enhance reputation for quality and reliability.

The CEO felt that this was all very constructive. The strategic planner, however, finally contributed by saying that there were principal agent problems and that implementing these proposals would result in further weakening of the strategic process.

Required:

Explain what the strategic planner meant, incorporating the role of the CEO and the individual

suggestions. (20 Marks)