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The Wallace Group; Laurence J. Stybel

Case 2
The Wallace Group, Inc.

I. CASE ABSTRACT

Harold Wallace, founder, serves as Chairman and President of the Wallace Group. He owns 45 percent of the outstanding stock. The company consists of three operating groups—Electronics, Plastics, and Chemicals, which generate sales of $70 million. Mr. Wallace continues direct operational control over the Electronics Group. Several years ago, Wallace and the Board embarked on a strategy of diversification into plastics and chemicals in order to decrease the company's dependence on defense-related business.

Presently, the morale within The Wallace Group has deteriorated to the point where some of the employee stockholders made an attempt to force Wallace's resignation. As a result of this crisis, Wallace has hired Frances Rampar, a management consultant, to conduct a management survey into the problems facing The Wallace Group. Her task is to develop a series of priorities for Wallace's consideration.

Decision Date: No Date Sales: $70,000,000
Net Income: $ 1,760,000

II. CASE ISSUES AND SUBJECTS

Corporate Governance Morale and Culture
Diversification Organizational Structure
Stages of Corporate Development Top Management Responsibilities
Vertical Integration Modes of Strategy Formulation
Transfer Pricing Distinctive Competence
Suboptimization Entrepreneurship

III. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS


O = Emphasized in Case X = Covered in Case
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Copyright © 2001, 2003 and 2005 by Thomas L. Wheelen and J. David Hunger. Reprinted by our permission only for the Eighth, Ninth and Tenth Editions of Strategic Management and Business Policy and Cases in Strategic Management.
IV. CASE OBJECTIVES

1. To acquaint the students with a CEO's management of a company that leads to conflict and power struggles among managers. To deal with an issue in corporate governance: Why hasn't the board of directors...