Case Week 3: Emerson Electric Co.

1.  Evaluate Chief Executive Officer Knight’s strategy for Emerson Electric Co. in view of

the strategy, evaluate the planning and control system described in the case. What are its

strong and weak points?

Strategy in view of planning and control system is:

-  Every targets are determined and discussed (brainstorming session) at the beginning of

each fiscal year for each division.

-  Emerson conducts divisional planning conference every year. During the conference, all

corporate officers in every fiscal year will face with the management of each division to

discuss any changes of the goals and short-term target. The meetings are designed to

be confrontational which challenge assumptions and stimulates critical thinking.

-  During this conference, the division president will give in 4 corporate charts to the

management, example: the values measurement chart, sales gap chart, sales gap line

chart and 5-back by 5-forward P&L, each of which compares different financial ratios

and sales and profit values of the current year with those of 5 years ago and also with

those of forecasted 5th

 year. The purpose of these charts is to enable the division

management to determine the gap between historical, present and forecasted values

and steps required to close this gap.

-  Before the beginning of the next fiscal year, another annual corporate wide planning

conference will be conducted; where all participating division forecasts for the next year

and strategic plan for next 5 years ahead.

-  Emerson practice transparency. The division president and appropriate division staff

meet with top management to present a detailed forecast for the coming year and

conduct a financial review of the current year’s performance versus forecast, during at

the end of fiscal year. After the forecast, top management will come up with

contingency plans to succumb all necessary uncertainty during the fiscal year progress.

-  Emerson also listens to division feedback on new product plans, competition, quality,

cost reductions, management’s view of customers, inventory levels and compensation.

All Information collected in the gathering (division planning conferences and financial

reviews) is combined and filtered at the HQ by upper management. From the statistics,

it will help to inspect the total data and prepare for a corporate wide plan.

 

 

Strong Points Weak Points

  Commitment to total quality and

customer satisfaction

  Knowledge of competition and the

basis on which they compete

  Focused manufacturing strategy

competing on process as well as

product design

  Effective employee communications

and involvement

  Formalized cost reduction programs

in good times and bad times

  Commitment to support the strategy

through capital expenditure

  The prior strategy of being a low cost

producer did not match the quality

levels in some products as compared

to other non US competitors

  It did not concentrate much on the

basis on which they compete

  Some of the investment community

still did not view Emerson as a

technology leader due to it being a

late entrant in the market place at

times.

2.  What changes if any would you recommend to the CEO?

From the case, we know that Emerson’s biggest drawback is whereby the world does

not view Emerson as technology leader, as they (Emerson) always being as ‘late entrant’ in

every market that they are pursuing. As for recommendation, I think Emerson should at first

change their creativity mindset and always be ‘quick’ on jumping on new ventures or business

opportunities. They need to invest and build a strong pillar in their Research & Development, so

that they may become and inherit the ‘First Mover Advantage’. By doing so, they may gain the

entire profit of their own market place. Also, Emerson follows a growth through acquisition

strategy but numbers of organization that they acquire are not as large. Hence Emerson needs

to look out for better avenues for acquisition so as to grow at a faster rate and have better

strategic planning. By doing so, not only Emerson would eliminate new and current business

threat, but also it will open more opportunities as they are able to access all customer profiles

and catalogue to broaden up their business size.

3.  What role should the 8 business segment managers have in Emerson’s plan ning and

control system?

 

1.  They should able to identifying business investment opportunities.

2.  Setting up targets for sales and profits for the current year.

3.  Determining strategies for achieving the targeted values

4.  Promoting team work and discipline to enable the division to stretch to reach its goals

5.  Reviewing the detailed actions to improve results

6.  Preparing charts to compare financial ratios and values of current year with past and

forecasted future years. Determining actions to bridge the gap between actual, previous

and forecasted values.

7. Implementation of plans to produce desired results

8.  Properly documenting/filing all plan for long-term plan reviewing.