Coltstream Group Case
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Question:
In this three-way debate, who do you think is right, and why: the consultants, Mullen, or Regev?
Coltstream Group has four different business offerings, programming and broadcasting, hotel, catering and appliance rentals. The growth indicators for the business segments are very different for each of these segments as stated by several market research reports, such as IBISWorld. The different growth indicators illustrates that the forecast of each of these business segments shall be taken separately as recommended by Regev.
Then the company is not isolated from the market, competition and new business opportunities. To base the company growth only on targeted profit is very dangerous and may miss a number of additional indicators that can influence the companys position within a competitive environment. The market trends and the company competiveness is not analyzed at all within the planning process inside Coldstream. This lack of external and internal analysis should have been raised by the consultants.
The process is fully top down, which means that a detailed budgeting plan has been pushed towards the Business Units without a realistic opportunity to challenge the “corporate” driven budgeting. This process seems to me a micro management by the Coldstream leadership. The Coldstream should have focused on the strategic objectives for the company and give strategic guidance towards the business units. The business units will provide their own estimation of the required budgets based on the forecasted sales, cost of sales, and R&D expenditures.
However, the Business Units may be challenged by expecting higher sales and/or profits to drive them to do the additional last mile. However, this challenge would be based on their predictions and will look more realistic. Having realistic objectives, but still challenging, is very important for the motivation of the Business unit leadership and the employees and will provide the perception that the business goals are owned by themselves and not given by the corporate management or even worse by the CEO. Reaching the challenge goals shall be awarded as well to increase the motivation to reach them by doing extra effort.
The four business units are needed to secure the continuation of the company financial performance. Having this only based on the current profitable business (i.e. programming and broadcasting, hotels) may endanger the performance due to seasonal impacts, new market trends, the steady business of the catering and the appliance rental business will secure a constant income.
In summary, none of them were completely right or wrong
The consultants were right on spot that Coldstream consists of diversified business units, but were wrong in recommending to close two less performing business units
Regev