Emerson

Question 1

Evaluate Chief Executive Officer Knight’s Strategy for the Emerson Electric Company. In view of the strategy, evaluate the planning and control system described in the case. What are its strong and weak points?

What are the planning and control system described in the case?

1. Emerson organizational structure has 8 business segments. Management of the company is directed by Office of the Chief Executive (OCE), which consist of CEO, the President, two vice- chairman, seven business leaders and three corporate officers.

2. The OCE meets 10-12 times a year to review performance and discuss issues

3. The business segments are supported by common distribution channels, organizational capabilities and technologies

4. Best Cost Producer Strategy

5. Initiate planning process

a) Top management sets sales growth and return on total capital targets for the divisions

b) From November to July, the CEO and several corporate officers meet with the management of each division for a planning conference. Meetings are designed to be confrontational to challenge assumptions and conventional thinking

c) Prior to planning conference, the division president submits 4 standard exhibits to top management.

Exhibit 1: The Value Measurement Chart that compares the division’s actual performance 5 years ago, the current year’s expected results and the long range forecast for the 5th year

Exhibit 2: The Sales Gap Chart

Exhibit 3: The Sales Gap Line Chart

Exhibit 4: The 5-Back by 5-Forward P&L used to detect trends

d) Late is fiscal year, division president meet with top management to present a detailed forecast for the coming year

e) In August, top management review the information generated

f) In September, top management presents the corporate and division forecasts for the next year as well as strategic plan for the next fiver years

6. President’s Operating Report (POR) to review division performance. Each division must submit POR on a monthly basis....