Anderson Corporation - out with the Old, in with the New

Out with the Old, In with the New

The Anderson Corporation was started in 1962 as a small consumer products company. During the first 20 years the company’s R&D staff developed a series of new products that proved to be very popular in the market place. Things went so well that the company had to add a second production shift just to keep up with the demand. During this time period the firm expanded its plant on three separate occasions. During an interview with a national magazine, the firm’s founder, Paul Anderson, said, “We don’t sell our products. We allocate them”. This comment was in reference to the fact that the firm had only 24 salespeople and was able to garner annual revenues in excess of $62 million.

Three years ago Anderson suffered its first financial setback. The company had a net operating loss of $1.2 million. Two years ago the loss was $2.8 million, and last year it was $4.7 million. The accountant estimates that this year the firm will lose approximately $ 10 million.

Alarmed by this information, Citizen’s Bank, the company’s largest creditor, insisted that the firm make some changes and start turning things around. In response to this request, Paul Anderson agreed to step aside. The board of directors replaced him with Mary Hartmann, head of the marketing division of one of the country’s largest consumer products firms.

After making an analysis of the situation, Mary has come to the conclusion that there are a number of changes that must be made if the firm is to be turned around. The three most important are as follows:

1. More attention must be given to the marketing side of the business. The most vital factor for success in the sale of the consumer goods produced by Anderson is an effective sales force.

2. There must be an improvement in product quality. Currently, 2 percent of Anderson’s output is defective, as against 0.5 percent for the average firm