GROWING PAINS

GROUP 5:

ANKIT GUPTA PGP12008

SHWETA MALLICK PGP12041

SRISHTI HARNE PGP12043

SUNANDITA PGP12045

THOUSIF MOHAMMED PGP12047

VAMSY KRISHNA PGP12109

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Indian Institute of Management Raipur 1

AGENDA• Case Summary

• Issues

• Five Forces Analysis

• Alternatives

• Evaluation of Alternatives

• Proposed Best Solution

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Indian Institute of Management Raipur 2

CASE SUMMARYWaterway Industries, established in the year 1963, is in the business of manufacturing canoe.

Until 1990, Waterway’s sales and revenues had increased with the market.

By the end of 1992,company had begun selling its own line of compact inexpensive , high impact plastic kayaks.

In order to grow in the new market, company should gear up its marketing efforts.

So the CEO of the Waterway Industries, Cyrus Maher, hired Lee Carter.

Lee Carter had been extremely successful in opening new sales channels, and she was personally responsible for 40% of the company’s sales for the last two years.

Increase in sale for the last two years have also led to high operating expenses. Company is spending huge amount in marketing expenses and pays more commission to reps and distributors.

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ISSUESWaterway Industries doesn’t have schemes like retirement packages, golden handcuffs, stock options, deferred compensation arrangements for their top performers where as its competitor provide these schemes.

Company has a reputation of tight wallet.

CFO has left the company as Maher was not willing to redesign his compensation package to include equity.

Lee Carter was paid bonus only once in a year and she was not paid any commission for the sales.

Lee Carter is now planning to leave Waterway Industries as another company is willing to offer her a good compensation policy in the form of salary and equity position.

Maher is now in a dilemma whether to redesign the Carter’s compensation policy or not.

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THE FIVE FORCESPRODUCT : SALES AND MARKETING SKILLS

Competitive RivalrySupplier

Power Buyer Power

Threat of Substitution

Threat of New Entry

Threat of Potential Entry (low) Manufacturing Department (increasing Capacity) New product development

Competitive Rivalry (high) Marketing skills are transferrable

Buyer Power (low)Cyrus Maher Looking for Expansion Competitors working on marketing department

Supplier Power (high) Lee Carter The second Designer New Marketing manager

Threat of substitution (low) Outsourcing of sales and marketing

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POSSIBLE ALTERNATIVES1. No star rewards

2. Give star rewards

3. Revise Compensation: Conditional rewards

• Incentives link to sales• Establishing marketing department• Equity based on grade and performance

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STRENGTHS AND WEAKNESS ANALYSIS

OPTION STRENGTH WEAKNESS

No star rewards • Cost saving• Strategy formulation under control & organization culture remains intact•No division of equity•Best as long as company’s future plans are not decided

• Employee morale will suffer• Risk of leaving

Give star rewards • High morale • Retaining of star performer•Company will be able to hold employees from competitors.

• Cost incurred• Raising the expectations of the employees•Support the idea that employees were paid inadequate earlier

Conditional rewards- Cafeteria approach

• Growth and expansion of organization as a whole•Suitable performance will be rewarded-high morale•Company will be able to hold employees from competitors

• Cost incurred• May create disparity

BEST SOLUTION – SHORT RUN IMPLICATIONSRevise Compensation of Lee Carter on a Short Term as the company needs to hold her as if for now.

Compensation could be revised by either of the following ways:

•A commission arrangement

•Or a stay-put bonus

•Or phantom shares in the business.

This will lead to Carter’s-

•Skill retention

•High morale and productivity

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BEST SOLUTION – LONG RUN IMPLICATIONS

In long run, Maher has to

• Define his new business goals clearly like where does he wants to position his company

• Define a compensation philosophy • Strategy that explicitly supports those goals• Develop marketing department.• Which skills must be retained internally and which can be

outsourced?

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BEST SOLUTION – EFFECT ON COMPANY

Since it’s a small company Maher should go for ownership sharing only to old and trusted employees as

• They could contribute in shaping future strategies of the company

If Maher decides to pursue an aggressive growth strategy,

• He could offer Carter a three-to-five-year performance-based cash incentive plan (based on her sales volume and on her ability to control marketing costs as a percentage of sales).

• He could offer Carter ownership sharing if she develops a marketing strategy suiting the future pursuits of the his.

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10Indian Institute of Management Raipur

THANK YOU

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11Indian Institute of Management Raipur