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Control Management - Case Study

Coastal UniformsAdriana Coelles

Ossama El FatouhiRonan Le Page

Klaudia WypustekŁukasz CichyJose Cortes

Agenda

Introduction

Company Background

Farming Problem

SWOT Analysis

Alternatives

Recommendations

International Examples

Introduction

Coastal Uniforms provides an attempt to improve share- holder profitability by setting

higher performance targets.

Enables discussion of the rights of shareholders, the utility and effectiveness of very stressful performance targets, and the limits on the moral rights of an employer to

require them.

Company Background

COASTAL UNIFORMS

The Case

1999: Signs of Trouble Several small competitors wrested key contracts

from Coastal. Change in Coastal management had to be made in

order to compete with new leaders that were driving sales at a furious pace.

Sales and profit were flat. “Rule 35,” profit and revenue growth increases had

to add up to 35.

The Case

2000: The Beginning of the Decline General managers collectively pressured the sales

representatives increase their sales targets by 20 per cent. Sell catalog items to the customers on their route. Products were re-examined. Ordering lower quality. Reduce what they believed to be unnecessary features on

uniforms to save costs. “delivery surcharge”.

The Case

2001: More Initiatives Are Put in Place Delivery personnel were increased from $300 a week

to $800 a week. Environmental charge was added to invoices. Hazardous Analysis Critical Control Points (HACCP)

charge was added to all invoices. Charge of $30 per $300 was added.

Company hit its “35” target.

Coastal loss five key customers, who discovered an extra thousand dollars a week of extra charges on their invoices.

The Case

2002: More Efforts to Drive Revenue and Profits Additional challenge was put to sales reps: Lose any

customer you signed and you lose your entire bonus for the year.

Increased targets for delivery reps to $1,200 a week.

Up to 25 per cent of customers were “dissatisfied”.

To meet weekly targets they were leaving products at the client’s location (without the client’s knowledge) and charging them for it.

Who is Andrew Vila?

Andrew Vila

Sales representati

ve

Familiar with the

firms practices

Had a pending bonus

Considered legal action and quitting

SWOT Analysis

Strengths-Recognized brand - Constant Growth

- Well running business- Innovative and Diversified.

- Employee motivation- Efficient recruitment

Weaknesses- No attention to competitors

- Pre established profit and growth levels

- Employee pressure- Increasing turnover.

- Bad strategic decisions

Opportunities- Big domestic market

- Innovative products and services- Diversification (connected services:

mechanical tools, stationery,…)- Internationalization

Threats- Several small fierce competitors

- Gasoline price fluctuations- Increasing charges (HACCP,

environmental charges…)- Mature market

- New entrants from abroad

Analysis of Management Control

General managers

Sales representative

sDelivery

representatives

Hierarchy of the sales department:

Aggressive : based on performances (Rule 35). Profit centered strategy. General managers rewarded with bonuses if they reach

their objectives. Strong incentive (40% of their total compensation) Employees not reaching the goals are either dismissed or

not given any bonuses. Efficient recruitment of new employees thanks to their

brand image.

Work environment: Stressful lifestyle Increasing turnover rate by 20%

Management Style

ALTERNATIVES

CUSTOMER RELATIONSHIP Segmentation of clients: propose different products at

different prices To change its bad image → REBRANDING

To behave in an unethical way is damageable overtime: Low quality product with the same price Gasoline surcharge Environmental cleaning charge HACCP charge

HUGE LOSS OF MARKET SHARE

ALTERNATIVES

Human Resource Management

Should have kept

its key managers.

Be more respectful

toward workers.

Increase motivation

through other

means.

ALTERNATIVES

Rename the company

Revamp the company

With Villa: Take legal actions Don't take legal actions Quit his job Agreement 

RECOMMENDATIONS

Redesign the policies

Stop using un-ethical initiatives.

Disregard rule 35 – focus on quality due to the 1999 crisis.

Reconcile an agreement so that Vila and the company are satisfied

RECOMMENDATIONS

To take more seriously the competitors.

Horizontal growth.

Catch new markets abroad.

Diversification.

Invest in R&D and innovate constantly.

1st priority: customer satisfaction.

Reduce costs and maintain a good quality. Improve the logistics and the supply chain.

International Examples

Venezuela - Movistar

Two High Executives in charge of the acquisition of Terminals have mocked internal control system.

Internal Corruption.

Received bribery from cell phone fabricants and distributors to give preference for specific models.

Brightstar is being investigated.

Estimate el 15MM Euros of fraud.

Concern in Telefonica Madrid for incrementing control over subsidiaries.

Poland - APEXIM

APEXIM:

One of the largest company of polish IT market

Working area: tele-IT infrastructure

Andrzej Rybkowski - founder, CEO and largest shareholder of a company

Bankruptcy - September 2002

Analysis of APEXIM

1997 1998 1999 2000 2001 -

10

20

30

40

50

60

70

80

90

100

Apexim - Net Income(in million złoty)

Analysis of APEXIM

1997 1998 1999 2000 2001

-120

-100

-80

-60

-40

-20

0

20

Apexim - Net profit / loss(shown in million złoty)

Analysis of APEXIM

BANKRUPTCY: Unenlightenment on the competition. Unsuccessful attempt to market of 'Application

Integration’. Reckless actions and investments. Scams.

BANKRUPTCY - ANALYTICAL APPROACH: Hypertrophy of employment. Inefficient control of costs. Carelessness in taking loans and signing bad contracts.

Colombia- False Combat Killings Scandal Falsos Positivos

Scandale des faux positifsFalse Combat Kill

Towards the end of 2008, the scandal  involved members of the Army of Colombia with the murder of innocent civilians to pass them off as guerrillas killed in combat in the context of armed conflict in the country. These killings were intended to present results from combat brigades.

France – France Telecom

France Telecom

Waves of suicides in the organization

Causes:

Stressful environment

Fracture between managers and employees

Strategy based on profits and costs savings

Staff reduction plan

QUESTIONS?