Radco case analysis

1. RADCO ELECTRONICS
Case analysis
By
Team A2
Naim Shaikh
Harit Tilva
Parth Mair
Sonam Tilva

2. Summary
 Focused on the problems arising due
rapid growth of RADCO.
 Small scale start up which grew into a
successful commercial venture though
it was based on rather simple probe
technology and chemical sensors.
 Vertical and horizontal growth of the
company which simultaneously led to
organizational dynamics problem

3.  Consideration of restructuring
hierarchy and budgeting controls
 Main Issue is resource allocation and
billing method

4.  Q1. Describe the Business Model of RADCO.
 A. Revenue Generation: Revenue generated by
billing customers on the basis of man hours required
to deliver products as per the given specification.
Income from various states and Federal contracts.
 Product: (Initially) Sensor based automated
systems for detection of moisture, mineral content,
acidity and fertilization levels. (Later) Sensors for
precious metal detection, oceanographic studies,
pollution level detectors, etc.
 Target Market: Farmers, State and Federal
agricultural agencies, Oil and mineral exploration
companies, industries requiring pollution control
norms.
 Cost Drivers: Salaries to marketing personnel,
product and application development, investment in
technology for upgrading response to customer,
outsourcing of sensors.

5. Discuss the conflict of interest issues
within RADCO. How they can be
improved?
 1. Profit sharing
 The profits were initially used to offset expenses
in new ventures and research and later they
were given to the three founders as
compensation. After some years the profit were
distributed according to the decision taken by
Executive Committee (ExCom) which based
more on judgement rather than on performance.
 A more formal and explicit profit sharing formula
should be put down in order to account for the
efficiency of each department and their
respective employees. E.g. the profit should be
distributed in proportion of the ratios of
revenue and cost.

6.  2. Relationship of Albert Sells and
Donna Poulos – Sells and Poulos were
dating and living together which made
others suspicious about decision making
in the company. Biggs was against it but
Beller didn’t see a problem unless and
until it created deviated business
decisions.
 Sells should not be allowed to take
decisions in matters involving Donna
primarily.

7.  3. Cost Vs. Salary – The resource allocation
and billing procedure was such that the
employees were motivated to increase
overhead cost allocation by the company
rather than to decrease operational costs.
They tried to minimize their billing hours and
allocate their time to nonbilling hours
(overhead costs were charged 200% as
compared to billing hours).
 Allocation and billing procedures should be
changed to more realistic, i.e. costs to be
calculated on individual department activities
rather than revenue generated.

8. Q3. Should they add a Human
Resource Manager?
 Yes
 A special person in recruiting and training of new
employees which relieves the manager of many
responsibilities and thus focuses on his own
work.
 HR manager would help in managing the growing
hierarchy with the growth of organization.
 Performance appraisal and profit sharing can be
more efficiently implemented.
 Issues pertaining to employee conflicts can be
solved more easily.
 A formal department would enhance the
company’s reputation in job market thus more
talented employees can be found with relative
ease.

9. Q4. What financial controls are needed
for improved budgeting and control?
 Decentralization of finance control.
 The budgeting control system should
be changed in line with suggestion by
Braun.Title A* B* C* Administrative costs Total
Salaries and Benefits 100 100 100 10 310
Fixed Expenses 50 80 70 0 200
Variable Expenses 10 50 30 0 90
Total Expenses (a) 160 230 200 0 600
Billable Salaries and
Benefits
60 75 65 0 200
Customer Billing(b) 180 225 195 0 600
Cost Liquidation (b-a) 20 (5) (5) (10) 0

10. Thank You!!!