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Indeed keeping in view the present problem in hand in Scott paper company Albert Dunlap seems to be the best option. Albert Dunlap was known as a turnaround specialist and in Scott Paper company problem persists of restructuring. Given his past performance in companies like Kimberly –clark, Lily -Tulip and Diamond International and Crown-zellerbach where he turned around the companies to profitable and doubled the company’s stock. Q2. Which part of Scotts Paper’s business should Dunlap let go as part of the downsizing, and which parts should be retained and / or grown to sustain the company going forward? How would you make such a choice at your company if competitive pressures required you to focus on your “core business”? Dunlap should focus on Personal Care and cleaning segment of their business. Dunlap should let go Printing and Publishing papers as the sales over the years. Printing and Publishing segments is small in size and has no growth potential. Dunlap should focus on the Personal Care and cleaning segment( i-e tissue papers) which still is growing business and scott paper company has good market share in America and slowly increasing share internationally. Even though the competition in the segment has increased. Q3. Is the magnitude of the proposed employee layoffs at Scott Paper reasonable? What about Dunlap’s accelerated timetable for the layoffs? Would you consider adopting Dunlap’s methods at your company, if faced with a severe enough financial crisis? Magnitude of employee layoffs was reasonable as the paper industry is capital intensive industry not labor intensive one. Scott’s layoffs targets were the product of an intensive “work design” that took place over several period of time. Idea was to permanently eliminate jobs without hampering or disturbing the business functionality. So layoff strategy was justified as follows: in the United States, about 3,000 salaried employees costing about $65,000 annually, and about 2,200 hourly employees costing $55,000 annually; in Canada, about 400 employees costing $45,000 annually; in Europe, about 2,400 employees costing $16,000 annually; in the Pacific region, about 700 employees costing $9,000 annually; and in Mexico, about 2,500 employees costing $8,000 annually. So in future this industry is going to be automated and less number of employees would be required. By changing the location of paper making machine and a plant loading dock, it was possible for the Scott to get the same level of output with less number of employees. Q4. How Dunlap should’s restructuring program affect Scott Paper’s common stock price? Given the information available at the time of the case, would you have invested your money in Scott Paper common stock? On the day the company announced the restructuring plan, the price of the company‘s stock increased 5 percent from $43.375 to $45.50. Likewise Dunlap purchased $ 2 million shares of
So it will save cost of the company in other forms of remunerations like committee bonuses. Dunlap’s clear agenda is to maximize Scott Paper’s stock price. This option of compensation will make the top management (key executives) loyal to the company and they will put all the efforts to bring the company on track.the company’s stock by his own investment and later his investment reached to $ 4 million. Q6. As a manager I would focus on giving 70:30 interest to Stockholders and Stakeholders. The market value of Scott’s common stock had increased by more than $3 billion (over 200%). Is this an appropriate focus? Given the terms of the proposed restructuring. to what extent will gains to Scott’s stockholders come at the expense of Scott’s employees or other stakeholders? As a manager. Previously company had awarded restricted stock to certain employees but this time Al Dunlap’s compensation plan was bit intensive and key executives will be benefited to greater extent. Yes it is appropriate focus as its part if the “benchmarking analysis” to determine layoff targets. how much weight should you give to the interests of other stakeholders besides the stockholders? The Dunlap’s agenda since joining the Scott paper company was to maximize the stock price. retirement arrangements. By giving 1. What do you think about Al Dunlap’s compensation package? Al Dunlap’s compensation package of giving shares of the company stock seems workable and would not let the share price drop in the market.000 shares annually. This analysis involves setting up the level of layoff at company by reference to productivity and expense ratios. . Dunlap was known as a turnaround specialist so I would invest my many in Scott paper common stocks. Looking at the Dunlap’s ability and past performance in the companies where he emerged as champion of restructuring. Q5. All other forms of compensation were terminated. So Dunlap’s strategy did affected the employees and stakeholders But since the market value of Scott’s common stock had increased by more than $3 billion (over 200%) so everyone at the end benefited sooner or later.