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Galvor Company
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Case 10-3: Galvor Company Background Galvor Company was founded in 1946 by owner, and president M. Georges Latour. The company had acted as a fabricator, buying parts and assembling them into high quality, moderate-cost electric and electronic measuring and test equipment. Latour had always been personally involved in every detail of the firm’s operations as in most family businesses. Fiscal growth grew from $2.2 million in 1960 to $12 million in 1971. However, April 1, 1974, Galvor was sold to Universal Electric Company (UE), a large multinational organization with its European Head Quarters located in Geneva, Switzerland. The Company Head Quarter were located in the United States. Early in 1977, 42 people were employed in the controller’s department, prior to Galvor’s take over by UE; there had been fewer than 20 people in the controller’s department. Galvor’s new management and main key players were as follows Latour: remained on the board for Galvor but was not involved in day to day operation and management of the company. Barsac: Galvor’s Controller, 34 years old trained and skilled accountant, good ability in English, employed by universal since 1964 (10 years experience, formerly assistant treasure of Universal subsidiary). Boudry: UE’s European Controller; Chief Bureaucrat – all Galvor’s financial reports were submitted to Boudry. Hennessy: Galvor’s Managing Director, UE employee for 9 years Poulet: Director of Manufacturing in Geneva; uses financial reports to oversee operation and identify problems at Galvor. Communicates with Hennessy via telex when problems are identified. The heart of UE’s reporting and control system was an extremely comprehensive document – The Business Plan – that was prepared annually by each of the operating units. The Business Plan was the primary standard for evaluating the performance of unit managers, and everything possible was done by UE’ s top management to give authority to the plan. As a result of this system there was a very strong centralized controller organization with a large staff as well as relatively large business unit controller staffs. This type of organization was needed to support the needs of the business planning and reporting process. Galvor is struggling to adapt to the complex and time-consuming requirement of UE’s business planning process. It is a relatively small business unit that had a very non-bureaucratic culture, developed over many years under the leadership of Latour. Latour personally took care of much of the business planning prior to 1974. Business planning process at UE is summarized below, note that this process was used for the first time in 1975 to prepare Galvor’s business plan and budget for 1976. Time Frame Goal Objective(S) January – May Product line objectives development Tentative Objectives negotiated: Sales, Net Income, Total Assets, Total Employees, and Capital Expenditures. Objectives reviewed and approved by European and US. HQ June – July Business Plan Developed Galvor develops 2 year business plan and 5th year forecast September Business Plan Approved Meetings in Geneva with European and U.S. HQ executives to approve business plan November Budget Approved Budget approved based on approved business plan (Table 1.) Hennessy and Barsac are struggling to adapt and implement UE’s business planning process.
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