CALTRON LTD. Harvard Case Solution & Analysis

CALTRON LTD. Case Solution

Introduction

Caltron is an electronic calculator and electronic supplies manufacturing company, established in 1971 by Jenny Jones. The company is wholly owned by the Pulsar Computer, a leading computer maker operating in North America. Jenny Jones is the founder of Pulsar. Jenny has driven this company successfully from its inception and sustains the business in the difficult economic conditions.

In the event of high competition and development of the technology in microcomputer industry, Pulsar continues its operations and Caltron was the main operating unit specifically important for Jones. Recently Jones’s daughter-in-law, the Fresh Graduate, Kyla Jacob-Jones has been appointed as unit president by Jones.

Problem statement

Caltron has been facing high competition especially from the manufacturers who has cost efficiency because of low-cost labor outsourced from abroad. Many of the independent directors are worried about the future business of the company and doubt its going concern, since the financial performance has been declining with significant pace.

In this situation, Jones has given the task to improve the unit’s performance within two years. She had to make the unit profitable and stable using her management skills. With no financial assistance, she has to make strategic plan and implementation structure to improve the company’s performance in the coming two years. If she fails to do so then divest of this unit is unavoidable.

nalysis

Workforce issues

There were many workforce issues that have been highly affecting the financials of the company. All of the competitors have moved their component production and assembling work abroad where the labor cost is quiet cheap. The industry norm has been developed as to have as a lowest cost as possible with a high volume of production and sales.

In this situation where the competitors are solidifying their competitive advantages in terms of low-cost production from low-cost labor, Caltron emphasis workforce loyalty which has cost it to reach a situation where the solution to the problem is to divest.

The company planned to compensate such disadvantage from the efficiency and capacity effectiveness through automation of production function. Thus, it invested heavily in the new automatic equipment. The new production system faced different problems and even the labor was not able to fully operate the equipment effectively. This results in workers training and time for adaptability with the new system. Moreover, the all the labor and employees of the company were from the same union which is a threat for the company. The company has straight salary payment agreement, apparently agreed because of the union power on the company’s operations.

Overall concluding the workforce issues, it is concluded that Caltron has been failed in achieving labor efficiency and production cost effectiveness. It should have to move to the lower labor cost market and should transfer its production unit there. However, from the case, it is apparent that the labor loyalty is considered important by the company. Thus considering this the suggestion would be that the company should take collective gaining position. The labor rates should be reduced, since the company has planned to avoid layoffs. The company should get the support of the union leaders by giving the union leaders better positions in the company and getting their involvement in making the company efficient.

The automation of the operations has given room where the layoffs are necessary. This will also make the operating cost to reduce. Thus through the support of the union leaders and with an offer of adequate redundancy compensation the unnecessary paid labor force should be laid off. The administration process should also be automated to coincide with the developed production process. The combined activities will then result in efficiency and efficient operations..................

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