3

This paper is exclusively submitted to Supriyadi, M.Sc., C.M.A., Ph.D.

Management Control System Course

GADJAH MADA UNIVERSITY | MBA |

INTERNATIONAL CLASS
December, 2016

By:

Ahmad Fahmi Mubarok

Case 10-3, Galvor Company
A. Problems
Galvor Company is a family business that founded in 1946. Main business of the
company is buying parts and assembling them into high quality, moderate-cost electric and
electronic measuring and test equipment. Galvor reach the peak growth rate of sales around
2.2 million franc in 1960 to 12 million franc in 1971. The bottom line of Galvor also growing
7.85 times in the same period (1960 to 1971). However, in April 1 st, 1974, Galvor sold the
business to Universal Electric (UE) for $4.5 million worth of UEs stock.
After acquisition process there are numbers of compliance that establish by Galvor
company. Staff numbers, language barriers (French and English), different Accounting
Principles and Standards, problems with the internal records, and lack of professional
knowledge and training. All of those factors are quickly needs to response by UE Head
Quarter as a parent company. From the case insight we conclude that Galvor faces problem to
create synergy and meet standard of multinational company like a UE do in their business
process.

B. Reasoning
Strategic planning system is nothing more than a structured process that organizes and
coordinates the activities of the managers who do the planning. It has two major functions: to
develop an integrated, coordinated, and consistent long-term plan of action, and to facilitate
adaptation of the corporation to environmental change. There are six issues on which a choice

3
.

must be made while designing a strategic planning system. With each issue the proper choice
for large companies will be different in most cases from the one for small companies. The
issues are:
1. Communication of Corporate Goals
2. Goal-Setting Process
3. Environmental Scanning
4. Subordinate Managers Focus
5. Corporate Planners Role
6. Linkage of Planning and Budgeting
C. Case Analysis
UEs planning system is not effective as it is applied to Galvor. It is a very inflexible,
detailed system that required too much time and too many resources for a business unit the
size of Galvor. Furthermore, evidence of its ineffectiveness at Galvor includes; financial
reports are not providing value to the operating business unit.
The working relationship between the Managing Director of Galvor (Mr. Hennessy) and
UE executives (Mr. Poulet) in Geneva are not doing well enough. Mr. Poulet corresponds
with Mr. Hennessy via telex when problems are identified. Mr. Poulet requested very detailed
information to Mr. Hennessy regarding inventories and sales levels compared to the budget.
Mr. Hennessy argue many of the variances on three policy changes that appear to be driven
by the corporate headquarters. Mr. Hennessy is just going through their leadership style in
Galvor and believes he is being over controlled; he is just doing the best to lift up Galvor
Company. The thing that makes the relationship worsens between Mr. Poulet and Mr.
Hennessy is the communication process that only according to their report correspondence
via telexs and the conversation seems to be directing in order to gain sales not helpful or give
solution to problem that appear in Galvor Company.
D. Conclusion & Recommendation
The lists of factors below are the guidance about how the New Management
Systems and Techniques that required establishing by Galvor in order to shifting their
business process that suitable for UEs as their parent company.
Converting from simple to Centralized System structure.
Planning and controlling System.

3
.

Galvor needs to change and adopt itself to the current parent company.
Experts for the new subsidiary.
Uniform reporting and controlling system.
Informal way of Communication.