CASE STUDY: Paper Converters Limited

Paper Converters was formed in 1988 following the merger between Dyson Paper
Ltd and Jones Sales Agents Ltd.
Alan Dyson, who founded Dyson Paper, is a production engineer. All of his working
life he has sought to instil a culture in which every employee knows what their job
is, and that each individual’s job forms part of the greater whole. He is a very
systematic man who believes that operational efficiency is the result of structure
and control.
Barry Jones, who founded Jones Sales Agents, is a salesman. Barry believes that
success is achieved when each individual is prepared to accept responsibility not
only for their own work, but also for the outputs of the team as a whole.
The two men had been great friends since childhood although their respective
companies were located 60 miles apart at the time of the merger. This was because
when Alan Dyson founded his company in 1983 the British Government was offering
incentives for businesses to start up in the town of Corby. This was during the
recession of the early 1980s and followed the closure of a steelmaking plant in the
town which had been the major employer. This government intervention was an
attempt to mitigate the level of unemployment in the town. The offices of Jones
Sales Agents were in Stevenage which is where both men grew up.
Immediately after the merger the two parts of the organisation continued to
operate from their separate premises. Until 1989 the main product lines were cash
register rolls sold to major UK retailers, ASDA and Boots the Chemist were the
largest customers. At a strategy meeting in early 1989 Barry Jones suggested that
the company should refocus. Marketing research indicated that the customers of
the retailers, ultimately the end-user of Paper Converters products, tended to keep
the cash register receipt for less than two hours. The usual process was that the
customers checked their purchases against the cash register receipt and then
discarded it. As the product was regarded as a throw-away product the retailers
placed little value on the cash register roll and purchased mainly on the basis of
price. This meant that Paper Converters operated on low margins. Barry was
looking for markets where they could use their existing technology and experience
yet achieve higher margins. As their business was basically paper roll
manufacturing he looked for markets that required paper rolls.
During the 1980s fax technology had improved to the point where machines had reduced in price
from over £3,000 each to less than £500 each. Forecasts were that prices would drop even further due
to technological improvements and economies of scale. It was predicted that by the mid-1990s
virtually every office and many homes would be using fax machines. In 1989 fax machines had
become the most common way of sending documents that were required urgently. These documents
usually contained important information and so copies of the faxes were highly valued by the users.
This contrasted starkly with the value that was placed on cash register receipts. Fax machines
generally printed their output on thermal
paper rolls. Although Paper Converters used plain paper to produce cash register
rolls Alan Dyson agreed that to produce fax rolls all they had to do was to manage
the tension applied to the paper during winding because thermal paper was not as
strong as plain paper. Although thermal paper was much more expensive the gross
margin on a fax roll sale would be ten times greater than a cash register roll sale.
The directors approved the refocus on the condition that the existing business with
cash register roll customers was not neglected.
Within five years sales had increased to the point where, despite the addition of new
machinery and the acquisition of premises adjacent to the original unit, the
production capacity of the manufacturing unit was being stretched to its limits.
Sales forecasts indicated that company would continue to increase their market
share. The production capacity was quickly becoming a limiting factor in terms of
further growth. The directors decided that the way forward for the company was to
acquire larger premises. When the directors identified the building that would
enable them to install the additional machinery required allowing production
volumes to support sales volume forecasts it also decided to relocate the sales office
staff into the same building.
Although the staff from the sales office already knew the administration and
production staff, they had never worked particularly closely together. Within one
month of all staff being relocated onto one site tensions among the staff were
becoming apparent. Within three months both Alan and Barry were receiving
complaints from members of their teams about the “unreasonable” behaviour of the
other staff. The directors could see the results of the tension, but could not identify
the cause. As a result the tension has continued.
After a period of further sales growth, particularly in West Africa and the Middle East,
production capacity was again becoming an issue. The directors were reluctant to
move premises again as they did not want to further increase tensions. They
engaged a consultant to investigate their situation and after two months he
produced a report. The report put forward a persuasive argument that by opening a
production unit in Zambia, a republic in central Africa, they could meet the growing
production requirements and at the same time significantly reduce manufacturing
costs. Following several years of dramatic economic decline the Zambian
Government had received aid from the World Bank to fund economic development.
In order to receive the funding Paper Converters Ltd had to enter into a joint
venture with a local Zambian company. The joint venture partner was an executive
agency of the Zambian Government.
After detailed investigation of a proposed joint venture the company signed an agreement with the
Zambian government and six months later production started in Lusaka. Alan and Barry had expected
there to be some initial teething problems but three years later the joint venture was still not delivery
the expected results. Although some cost savings were achieved the savings were only 20% of
expectations. In order to maintain a degree of control over its investment the Paper Converts board of
directors had installed a system of reporting and control procedures that mirrored the procedures in
the UK organisation. Although these procedures had been successfully implemented in the UK for
several years the directors could not understand why the Zambian staff seemed to ignore procedures
relating to:

 levels of authority for expenditure

 appointment of senior managers
 separation of responsibilities for approving payments
 approval of credit accounts
 selection of local suppliers
 management reporting
You are a student who has approached the company looking for an organisation on which to base your
management project. After a brief discussion with Alan and Barry you mention that research has
shown that the biggest cause of failure to meet post-merger and expansion expectations is a clash of
cultures, both organisational cultures and international cultures. Alan and Barry have asked you to
prepare a report for them that explains this point in more detail and recommends what could be done
to overcome, or at least minimise, the effects.

Using the Paper Converters Ltd. Case study prepare a report of no more
than 3,500 words that addresses the following tasks.

Outline the background and context of the case

(10%)

Using appropriate methods based on the theoretical principles you have

researched, analyse the situation at Paper Converters Ltd. You must at
least apply theories of:
International Culture, Management, and organising and motivating teams.
(70%)

Identify the main conclusions that can be drawn from your analysis and
make, and justify, appropriate recommendations to improve the situation.
(10%)

Prepare an executive summary that gives an overview of the report.

(10%)

The assignments should include appropriate references and bibliography

using the Harvard system.

The assignments must be printed out in Verdana 11 point font with double-spaced lines and all
pages must be numbered.