Case Week 3: Emerson Electric Co.

1. Evaluate Chief Executive Officer Knights strategy for Emerson Electric Co. in view of
the strategy, evaluate the planning and control system described in the case. What are its
strong and weak points?
Strategy in view of planning and control system is:
-

Every targets are determined and discussed (brainstorming session) at the beginning of
each fiscal year for each division.
Emerson conducts divisional planning conference every year. During the conference, all
corporate officers in every fiscal year will face with the management of each division to
discuss any changes of the goals and short-term target. The meetings are designed to
be confrontational which challenge assumptions and stimulates critical thinking.
During this conference, the division president will give in 4 corporate charts to the
management, example: the values measurement chart, sales gap chart, sales gap line
chart and 5-back by 5-forward P&L, each of which compares different financial ratios
and sales and profit values of the current year with those of 5 years ago and also with
those of forecasted 5th year. The purpose of these charts is to enable the division
management to determine the gap between historical, present and forecasted values
and steps required to close this gap.
Before the beginning of the next fiscal year, another annual corporate wide planning
conference will be conducted; where all participating division forecasts for the next year
and strategic plan for next 5 years ahead.
Emerson practice transparency. The division president and appropriate division staff
meet with top management to present a detailed forecast for the coming year and
conduct a financial review of the current years performance versus forecast, during at
the end of fiscal year. After the forecast, top management will come up with
contingency plans to succumb all necessary uncertainty during the fiscal year progress.
Emerson also listens to division feedback on new product plans, competition, quality,
cost reductions, managements view of customers, inventory levels and compensation.
All Information collected in the gathering (division planning conferences and financial
reviews) is combined and filtered at the HQ by upper management. From the statistics,
it will help to inspect the total data and prepare for a corporate wide plan.

2.

Strong Points
Commitment to total quality and
customer satisfaction
Knowledge of competition and the
basis on which they compete
Focused manufacturing strategy
competing on process as well as
product design
Effective employee communications
and involvement
Formalized cost reduction programs
in good times and bad times
Commitment to support the strategy
through capital expenditure

Weak Points
The prior strategy of being a low cost
producer did not match the quality
levels in some products as compared
to other non US competitors
It did not concentrate much on the
basis on which they compete
Some of the investment community
still did not view Emerson as a
technology leader due to it being a
late entrant in the market place at
times.

What changes if any would you recommend to the CEO?

From the case, we know that Emersons biggest drawback is whereby the world does
not view Emerson as technology leader, as they (Emerson) always being as late entrant in
every market that they are pursuing. As for recommendation, I think Emerson should at first
change their creativity mindset and always be quick on jumping on new ventures or business
opportunities. They need to invest and build a strong pillar in their Research & Development, so
that they may become and inherit the First Mover Advantage. By doing so, they may gain the
entire profit of their own market place. Also, Emerson follows a growth through acquisition
strategy but numbers of organization that they acquire are not as large. Hence Emerson needs
to look out for better avenues for acquisition so as to grow at a faster rate and have better
strategic planning. By doing so, not only Emerson would eliminate new and current business
threat, but also it will open more opportunities as they are able to access all customer profiles
and catalogue to broaden up their business size.

3. What role should the 8 business segment managers have in Emersons planning and
control system?

1.
2.
3.
4.
5.
6.

They should able to identifying business investment opportunities.

Setting up targets for sales and profits for the current year.
Determining strategies for achieving the targeted values
Promoting team work and discipline to enable the division to stretch to reach its goals
Reviewing the detailed actions to improve results
Preparing charts to compare financial ratios and values of current year with past and
forecasted future years. Determining actions to bridge the gap between actual, previous
and forecasted values.
7. Implementation of plans to produce desired results
8. Properly documenting/filing all plan for long-term plan reviewing.