Galvor case

Analysis of effective working relationship & view points. Presented by: Jyoti Bhushan

(1224108216)

Lawi Anupam

(1224108221)

Sheikh Rozal Anaf

(1224108242)

Zubair Ahmed

(1224108262)

GITAM INSTITUTE OF INTERNATIONAL BUSINESS VISAKHAPATNAM

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French company founded in 1946 by M. Georges Latour.

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Company was involved in manufacturing 

fabricator,

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buying parts and assembling them into high quality,

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moderate-cost electric and electronic measuring and test equipment.

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Sales grew from 2.2 million new francs in 1960 to 12 million new francs in 1971

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April 1, 1974, Galvor was accquired by Universal Electric Company (UE), located in Geneva for $ 4.5 million

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M. Latour became chairman of the board of Galvor and David Hennessy was appointed as Galvor’s managing director.

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Business plan prepared annually by each operating o perating units.

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It is the standard for evaluating the performance of unit managers.

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Authority was given by Universal’s Un iversal’s top management to the plan.

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Business plan was described in detail, and takes long time to approve.

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The plan also contained a forecast, in less detail, for the fifth year too.

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Five key objectives detailed in B-plan are: Sales  Net Income Total assets Total employees Capital expenditures

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As a result :  system

became very strong centralized controller organization  large staff as well as relatively large business unit controller staffs. 

Galvor struggled to adapt complex and time-consuming requirement of UE’s  business planning process.

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System was very inflexible, detailed system that required far too much time and too many resources for a business unit of the size of Galvor.

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For example, the controller, and his chief accountant spent 80% of their time working on the system and reporting requirements for the corporate head office.

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Establish 8000 machines and 3000 assembly standard times.

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In spite of being a highly centralized organization, the management of various operating units had considerable autonomy.

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For example: Mr. Hennessy was free to purchase components from other universal units or from outside sources. Galvor’s performance in July and August (1976) ( All figures in $000s) Actual July Budget Variance Actual August Budget

Inventory

2010

Sales to date 3850

Variance

15801

430

2060

1600

460

3900

50

4090

4150

60

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Reasonable amount of selling models in stock to increase sales.

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To manufacture longer series of each model.

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Reduce number of purchase order by maintaining a minimum stock of low value items. Galvor’s performance in September

Forecast

Actual

Variance

September

1973

2175

202

October

1928

2175

247

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Realistic master production schedules

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Short term physical shortage control to ensure shipments

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Work in process analysis of all orders

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Man power reduction

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Elimination of all unscheduled vendor receipts

‘SHELF DISPLAYING DISPLAYING 70 MODELS MODELS OF 200, IN THIS BUSINESS, INVENTORY REDUCTION IS NEAR TO IMPOSSIBLE: HENRY’

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Staff was grown from 20 to 42 by 1977, making Galvor over staffed

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Language problem between Galvor and UE.

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Lack of necessary know how and training to handle the requirements of the job.

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Difference in Accounting principles and practice in France from the United States.

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Problem of conversion of internal records of Galvor from its functional currency to the reporting currency.

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Galvor needs the organization to be: 

Simple,

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Informal,

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Less-staff planning

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Less control practices and

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De-centralized

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Plan for short term should be prepared, for 1 year, focused on KRA like sales forecasting, inventory etc.

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Should not report on monthly basis.

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Proper cost allocation should be done

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Working hours should be reduced.

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Better trained employees ,familiar in both language.

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Reduce employees in the controller department.

THANK YOU