Pinnacle Machine Tool Co.Pinnacle Machine Tool Co.Group 3

Christie Gunnels-GarrettCindy Green

Penny LimburgBecky Nave

Linda Perkins

Analysis of Opportunity to Acquire Hoilman

ProblemShould Pinnacle Company attempt to acquire Hoilman, Inc.?

Don Anglo, CEO had the tough decision to make Pinnacle Company is a small Indiana based machine tool company Hoilman, Inc. has the cutting edge technology and communications software to monitor robotics equipment He felt he could become not only the tool producer, but he could also be a service provider

ProblemShould he trust his head or his gut? He had heard Hoilman was going to be taken over by a chief competitor He had some knowledge of the company because he had tried a joint venture with them in the past that did not work out. Don felt his company would be bigger and better if he was able to acquire Hoilman, Inc He knew it would be a challenge since the tool industry was a slow growing sector and they would have to learn the ins and outs of the new addition to the company Although Don did agree with some Sam, his CFO's thoughts, something was still telling him to follow his gut instincts.

Sam’s Thoughts Sam Lodge, CFO of Pinnacle Company did not agree with Don's thoughts He thought the acquisition was a big mistake He felt the timing was all wrong Everyone was trying out the software industry and there would be too much competition out there for it to really pay off. Their current customers could not afford to buy any add-on services He thought this would make their current investors feel worse about the slow growing industry

Four Personal Decision Styles

DirectiveAnalyticalConceptualBehavioral

Directive

Simple, clear-cut solutionsQuick decisionsUsually considers one or two alternatives

Analytical

Considers complex dataConsiderations are objective & rational

Conceptual

Consider broad amount of informationSocially oriented to the analytical styleRelies on input from people and systems Solves problems creatively

Behavioral

Demonstrates deep concern for othersLikes to examine feelingsConsiders the development of others

Don’s Approach: Conceptual

Considered progress company had made in the 4 years he had been CEOConsidered potential for further growth w/o acquisitionConsidered opinions of othersConsidering his head vs. gut feelings

Sam’s Approach: Analytical

Timing considerationsInvestor confidenceCustomer positions in the marketCompetition results

Leadership Styles

Autocratic – Leader decides alone

Consult Individually – Present the problem to the group members individually and get their suggestions

Consult Group – Present the problem to the group and get their suggestions

Facilitate – Present the problem to the group and decide as a group

Delegate – You permit the group to make the decision

Autocratic Style

An autocratic leadership style is one who leads as a tyrant with absolute power and ruling "with an iron fist."

Autocratic Style

Advantages

• Emergency situations• Armed Forces• Employees know what is

expected• Decisions are made quickly

Disadvantages

• Talent flees – Mediocre Stay• High turnover• Decisions become

bottlenecked• Creativity is discouraged

Consult Individuals or Group

• Manager presents the problem to the group members individually, gets their suggestions, and makes the decision

• Manager presents the problem to the group and gets their suggestions and makes decision

Consult Individuals or Group

Advantages• Increases job satisfaction• Develops people’s skills• Motivates employees• Team members feel in

control of their own destiny

Disadvantages• Takes more time• Disagreements• Less initial production• If leader is unsure he may

lean on the group too much

Facilitate

• Assist the group as they work together toward achieving group goals, and in most instances do not interject their own personal opinions or agenda

Never doubt that a small group of thoughtful,

committed citizens can change the world: indeed, it's the only thing that ever has. -- Margaret Mead, Anthropologist

Facilitate

Advantages

• Team building opportunity• New Ideas• Creative and Practical Ideas• Everyone can participate

Disadvantages

• One person dominates the discussion

• Several people refuse to participate

• The group can become distracted

Delegate

Delegation is when supervisors give responsibility and authority to subordinates to complete a task

Delegate

Advantages

• Frees management to take care of more tasks

• Increases motivation• Showcases employees skills

and talents

Disadvantages

• Manager gives up some power

• Manager is still responsible for the results

• Managers can delegate too much of their work

Vroom-Jago Analysis

The Vroom-Jago Model helps a manager gauge the appropriate amount of participation by subordinates in making a specific decision (Pg216)

Based on the Vroom-Jago Model Don Anglos should consult the group before making the decision to buy Pinnacle Machine Tool Co.

Would I recommend that Pinnacle attempt to acquire Hoilman based on what is known today?

No. I am not convinced that this new course of action will meet the company’s needs or that of the customer.

Problem Diminishing profits in company with greater market share Limited growth in tool industry due to foreign competition and a soft economy Significant investment of resources Complete change in strategy of company from manufacturing based to service based Limited amount of time to make the decision

SuggestionsSolicit more input from team – conflicting opinions - the Service Division Head is in favor; a seasoned CFO believes it is too risky due to timing, will have negative impact on earnings from acquisition, and disagrees with the strategy of getting into the service business because other tool companies are doing just that

Suggestions

•Answer the following – What are the goals of the company? What investment of resources would be required (capital outlay, employees)? How will this affect the current employees of the company if they switch from manufacturing to service? Do their customers desire greater service? How will the company’s reputation be affected?

•Develop a worst case/best case scenario

AlternativesKeep the manufacturing division and expand the service divisionContinue as a manufacturing company and look for ways to trim costs but ensure quality Explore opportunities for other joint adventures

AlternativesProceed with the acquisition once important questions have been answered sufficient to support the decisionExplore other markets in which to sell tools Develop better brand awareness and marketing strategies