Analysis of effective working relationship &

view points of
GALVOR company

Presented by:

Santhoshbabu S (MBA09092)
Praveen P (MBA09073)
Introduction

 French company founded in 1946 by M. Georges Latour.

 Company was involved in manufacturing
 fabricator,

 buying parts and assembling them into high quality,

 moderate-cost electric and electronic measuring and test equipment.

 Sales grew from 2.2 million new francs in 1960 to 12 million new francs in 1971
 April 1, 1974, Galvor was accquired by Universal Electric Company (UE), located
in Geneva for $ 4.5 million
 M. Latour became chairman of the board of Galvor and David Hennessy was
appointed as Galvor’s managing director.
UE’s Planning system
 Business plan prepared annually by each operating units.

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

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

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

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

 Five key objectives detailed in B-plan are:

Sales
Net Income
Total assets
Total employees
Capital expenditures
Control system in Galvor by UE

 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.

 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.

 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.

 Establish 8000 machines and 3000 assembly standard times.

Question no.3

 In spite of being a highly centralized organization, the management of various

operating units had considerable autonomy.
 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 Variance Actual August Variance
Budget Budget

Inventory 2010 15801 430 2060 1600 460

Sales to 3850 3900 50 4090 4150 60

date
Explanations given by Hennessy to UE executives
 Reasonable amount of selling models in stock to increase sales.

 To manufacture longer series of each model.

 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

Measures Given By UE Executives to Galvor

 Realistic master production schedules

 Short term physical shortage control to ensure shipments

 Work in process analysis of all orders

 Man power reduction

 Elimination of all unscheduled vendor receipts

‘SHELF DISPLAYING 70 MODELS OF 200, IN THIS BUSINESS,

INVENTORY REDUCTION IS NEAR TO IMPOSSIBLE: HENRY’
Problems :

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

 Language problem between Galvor and UE.

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

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

 Problem of conversion of internal records of Galvor from its functional currency

to the reporting currency.
 Question no.4 -Galvor’s viewpoint :
 Galvor needs the organization to be:
 Simple,
 Informal,
 Less-staff planning
 Less control practices and
 De-centralized 

 Plan for short term should be prepared, for 1 year, focused on KRA like sales
forecasting, inventory etc.
 Should not report on monthly basis.
 Proper cost allocation should be done
 Working hours should be reduced.
 Better trained employees ,familiar in both language.
 Reduce employees in the controller department.
THANK YOU