Case Analysis: MTI Cash Budgeting Harvard Case Solution & Analysis

Case Analysis: MTI Cash Budgeting Case Solution

Introduction and Problem Statement

            MTI was a marketing research company with a great background in the industry. The company’s CEO was Bill Young and the company was owned by numerous people. Furthermore, the company’s 69% shares were held by the CEO while the remaining shares were owned by top executives of the company. The company was working in a stable economy where consumers were spending majority of their disposable income in luxuries and they were living luxurious life. However, as the company’s revenue was associated with marketing research, the company faced a drastic downturn due to the slump in the economy caused by the horrific 9/11 attacks.

            Due to this event, the company faced several problems since; the company had a small cash reserve and due to high uncertainty, the customers of the company started to cancel their contracts with the firm and therefore, the company was facing a decline in its profitability and the future of the company was in trouble as well. Moreover, the economic downturn was also an uncontrollable factor for the company since; the company was unable to change the economic conditions. In addition, the company decided to make a survey in order to enable itself to identify the need of the consumers, but the survey also showed inaccurate results. Lastly, the company was in big trouble and the CEO of the company decided to take several steps to avoid financial crisis for the company.

Decision Made by the CEO

            There were three major steps, which the CEO took to avoid financial crunch and avoid financial constraints. The first crucial step that the CEO took was to reduce the compensation of top executives from 10% to 20%, this will help the company to reduce a significant fixed cost. Moreover, the CEO also decided to lay off some of expensive employees, while he also decided to delay the rental payment for the company’s facility to fulfill the current cash needs.

Should The Business Respond to the Major Event?

            The employees were not responsible for the major event and they should not face loss as a consequence of this, but the company has to respond to the major event. Since, the economy is facing a downturn and there are several factors, which are uncontrollable by the company.  Finally, all these steps are appropriate since, these steps will reduce a significant cost; however, firing employees is something unethical, which should be avoided to prevent social issues and legal obligations. The CEO can instead decrease the salary of the employees.

Sharing Financial Information

            The CEO of the company has started a trend of sharing financial information with his employees to keep them updated with the financial progress of the company. Moreover, this is a wonderful idea since, this thing can motivate the employees and give them energy that their work is being appreciated and the performance of the company is the result of their combined efforts. Furthermore, the CEO shares majority of the financial information with their employees, which is a good thing but this strategy was only good when the company’s performance was in acceptable conditions....................

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