Enager Industries

case 11-4 ENAGER INDUSTRIES

Background:

Enager Industries (EI) is a diversified firm which provides unrelated products and services provided by three different divisions: Consumer Products, is the oldest division; Industrial Products; and Professional Services, which is the newest. EI is a new company and has shown significant growth.

Keys to EI’s Success:

From their 1992 and 1993 balance sheet comparisons and latest sales figures of $222 MM, it could be inferred that EI has developed an effective control system. Looking at these facts, it appears that management has a Build Mission.

So far, it seems that EI has been able to implement and maintain a strategy that appears to be successful in each of the three divisions. Consumer Products captures multiple points of value along its product chain. Industrial Products provides its customers with custom-ordered tools. Professional Services has been successful because it provides a service (environmental impact studies) which is in high demand and is required by the government. EI’s ability to differentiate itself with these elements, and make them customer-centric has provided EI with significant growth and future opportunity.

Corporate Management at EI:

There are only a few corporate-level managers and staff to coordinate the activities of the three divisions. Each division is treated as an independent company. Up until recently each division has been treated as a profit center. Although profit budgets had been negotiated between the president and each respective division, growth levels and case data seem to indicate that the divisions were not held to a company ROI target. This manner of control is conducive to growth: lower ROI expectations allow for a greater number of investment opportunities.

Based on his actions, the controller - Henry Hubbard, seems to want to begin a transition for Enager. Past ROI is no longer sufficient. This attitude is apparent with his refusal of...