Westport electrical corporation case analysis


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This case is about the Westport Electrical Corporation

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Westport electrical corporation case analysis

  1. 1. Westport Electrical CorporationPrepared by: Milan Padariya, 63-MBA(Pharma) Page 1CASE 4-5: Westport Electrical CorporationBRIEF OF THE CASE:In a meeting, James King, the supervisor of administrative staff budget section of WestportElectric Company, a large manufacturer and seller of electric and electronic products, wasdiscussing his displeasure with the proposed increase in budget of the offices.According to him, these are not justified and are clear indications of faults in the company’sbudgeting system. The company currently has six staff offices like those mentioned and they aretasked with providing advice to top management and operating divisions as well as other staffoffices.They also coordinated among the divisions depending on their areas of activity. These staffoffices are budgeted using the company’s budget approval procedure, which according to someof its officers like King, needs a lot of improvement.OVERVIEW OF THE ORGANIZATION :One of the largest producers and distributors of electronics in the U.S..Activities are divided into four groups, each group headed by a VP:- Electrical Generating and Transmission Group;- Home Appliance Group;- Military and Space Group;- Electronics Group.Each group consists of a division led by division managers. Each division is a profit center.There are 25 divisions within the organization.There are six corporate departments and a separate staff department in Office, each staffdepartment headed by a VP:- Finance;- Industrial Relations;
  2. 2. Westport Electrical CorporationPrepared by: Milan Padariya, 63-MBA(Pharma) Page 2- Legal;- Marketing;- Manufacturing;- PR;The responsibilities of the staff departments include:- Advising top management;- Advise of the divisions and other divisions;- Coordinating responsibilities within their respective divisions.PROBLEM:- The shortcomings of review and approved the budgets of the ring divisions;- The significant (incorrect) increase in the budgets of two staff departments.To whom is it a problem?It is a problem for the entire organization. But especially for King James who works at theDepartment of Budgeting.Why is it a problem?A lack of doelcongruentie the staff departments not perform optimally in the interests of theorganization.Where lack?-Evaluation of budgets (monthly);- Performance based on available budgets compared to actual results;- No responsibility for results in the divisions;- A reward system for corporate departments.
  3. 3. Westport Electrical CorporationPrepared by: Milan Padariya, 63-MBA(Pharma) Page 3Q) What should Westport Electric do about the evaluation problem raised inthe case?The case study provides a brief idea about the issues regarding the budget evaluation inWestportElectric Corporation. Over the years the amounts necessary to run the operations has beenincreasing as compared to the previous year and that is a concern for the authorities.Thoughthey have various methods of evaluating the budget, the increasing expenses didn’t seem to beunder control.According to a supervisor, James King, the budget should be approved only when it is found thatthe budget is sufficiently ‘tight’. There has to be a deep discussion, raising every issueregardingthe expenses to find out where can be the cost cutting done. Any personal favours to approve anykind of budget for the respective department should be stopped and theconcerned authoritiesshould look into that matter.The departments which show laid back behaviour but still ask for a raise in the budget should betaken under scrutiny and see if the efficiency of such a department can be increasedwithoutincreasing the amount of their budget. Or such kind of work can be contracted out toa third partyfor better results.The employees in the case study didn’t seem to be satisfied with the kind of trainings takenby the IR department. The funds were getting wasted in such kind of trainings which werenogood for anyone. The authorities need to look into the workings of such departments andfindout how the functions can be made more practice and viable.The employee participation is important in identifying the issues in the organisation andthis can work only when the employees are not afraid to talk about it so a system is necessarywhere the employees can dodge complaints regarding the work or inefficiency of thedepartments.Finally, it reverts to the knowledge and capability of the higher authorities to evaluate the budgetproperly and provide necessary suggestions.
  4. 4. Westport Electrical CorporationPrepared by: Milan Padariya, 63-MBA(Pharma) Page 4ANALYSIS AND RECOMMENDATION:I recommends that top management actually pay considerable attention to theefficiency and effectiveness of each business division. Currently, it appears that focusis given simply on bottom line numbers; that is, each unit’s financial success is assessed solelyon the basis of how handsome the profits brought in for the company, without being given muchperformance evaluation as is needed in any organization.Being distinct profit centers, both revenues and costs must be calculated for eachbusiness segment. It is important to note that while the individual divisions may report themost exorbitant of profit figures, the numbers do not carry with them as much meaning as whenthese are put into context.As in the case of Westport Electric for instance, Kelly is quick to point out that the company iscertain to do better trimming down budgets handed to certain divisions such as legal departmentand the Industrial relations According to him the training given by the IR division isnot worth the money that they cost.Also during presentations the budgeting department should take proper position on theappropriateness of the proposed budget or the efficiency of the activity. Also the finance VPand the divisional controller should raise their opinion / objections to theproposed budgets if they believe it is not sufficiently tight.