1. Major issues facing EnClean.
A. Stock price is down more than 85% from its high of $22.
Company has been losing money since the first quarter of 1992. Financial fundamentals are sagging:
· Gross margin is dropping;
· SG&A are too high;
· debt is huge;
As a result, investors have lost confidence in the company.
B. Managerial incompetence.
COO has lost control over several major company’s SBUs. Since 1989 EnClean has been failing the task of properly integrating acquired companies. Business units such as CMC, AlphaChem, and Sizemore have resisted change and have never accepted the vision, the mission, and the common strategy of EnClean.
C. Demoralized personnel.
Because of the following problems EnClean is losing highly valuable sales and technical associates:
· absence of clear goals;
· lack of training;
· confusing deliverables;
· faulty employee recognition system;
· blame culture, finger pointing;
· conflict between corporate and divisional interests;
D. Uncertain/declining economic conditions.
· Economy has been in recession for several years;
· Environmental cause has received a hard blow in 1992 when president Bush Sr. postponed or cancelled many environmental laws. As a result, companies began to postpone environment-related jobs.
E. Facing heavier competition.
· Environmental side of the EnClean’s business faces increased competition due to the business erosion. Competition lowers prices to secure the reduced amount of work.
· Industrial side of the EnClean’s business faces equal competition. For instance, 1992 saw the emergence of two potent competitors: WMX Technologies and Rust International.
F. Losing the focus on quality.
Since 1988 EnClean had been basing its strategy on providing high quality service (as opposed to low-cost). Quality improvement and control processes had been developed and successfully maintained. However, by 1992, as a result of rapid expansion, many divisions were executing quality procedures as a formality, just to satisfy the corporate group. Thus, EnClean is undermining its core competency – hig...
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o Create a learning network to share company’s best practices throughout the organization.
o Start building a management development facility to teach and preach company values to managers of various divisions.
o Identify and start to fold down businesses that are outside of the company’s core competency.
Long Term Action Items
o Free up capital by divesting from the business units that are unprofitable or are outside of the company’s core competency.
o Use that capital to improve financial fundamentals, especially debt-to-equity ratio.
o Put all company’s managers through the leadership development program.
o Put in place semi-annual management evaluation survey. All managers must be regularly evaluated on their effectiveness, creativeness, and, most important, whether they are compatible with company’s values, mission, and vision.
o Grow EnClean into the strongly centralized company, where planning, even if done on an individual division basis, is then linked back to the overall strategy of the company.
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