ADP CASE:

EFS Decisions
By Group 2:
Andhika Sinusaroyo
Agung Taufiqurrakhman

IMBA -09 Jakarta

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Question # 1
Explain the system used by ADP to manage its unit businesses
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» ADP uses a strategic planning system which helps SBU general managers review for pruning and
expansion opportunities.
» The heart of the corporate philosophy and strategic planning of was formulated into a list of “Seven Key
Requirements for pursuing major service businesses and products”, which was formalized into what the
management referred to as the “List”.
» The List is the main reference which aided SBU managers in evaluating the businesses and further
determine the strategic direction.
» Despite not having a role in day to day management, the List was frequently referenced in senior
executive meetings, and also suggested SBU managers regarding which types of changes could cause
the greatest damage to a business’s strategic position, thus needed regular review.
» The fact that over the years, each business unit had expanded and thrived while always conforming with
the List, proves the significance and influence that the List has on ADPs’ success.
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Question # 2
Why EFS’s management was thinking about divesting the business?
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» Lynn Mangum as the group vice president of EFS, scanning the most current market
conditions and trends of EFS’s market, concluded that the overall feasibility of continuing
the EFS business unit in the long term would not be inline with ADP’s best interests, due to
the potentially diminishing long term growth potential.

» He suspected that EFS would eventually fail enough of the ‘tests’ defined on the List, thus
failing to be categorized as a sustainable business worthy to be maintained by ADP.
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Question # 3
Do you agree with the plan to divest EFS? Why?
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» According to the article, the List was the primary reference of any strategic planning for pursuing and
evaluating business activities.
» Despite the profitable condition that EFS was in at the time the decision of divesting was made,
Mangum saw the potential downfalls from the fundamental market conditions of EFS’ industry, which
could soon halt the favorable conditions there were currently enjoying.
» Mangum was also concerned that continuing the ‘wait and see’ plan would become costly for ADP, if no
real action was taken.
» It was also apparent that the competition from Cirrus and Plus forced EFS to compete with – what EFS
managers described – competitors which were “rich and illogical”, which insisted the low-or-no profit.
This condition had violated one main key criteria on the List.
» The market condition itself was by no means any fault of Mangum himself, nor was triggered by any
misconduct delivered by EFS.
» Looking at the facts above, we agree that the best decision for ADP at the time was to divest the EFS
business unit.
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Question # 4
What would be the major ADP’s management considerations to divest EFS?
Explain.
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» The decision was made based on overall market conditions of EFS which were not in favor for ADP.
» The limited potential of the ATM services businesses (EFT) – as the main business of EFS – which was
projected to enter a stagnant growth within two years.
» Diminishing uniqueness of EFS’ services, mainly triggered by it’s largest competitors, Cirrus and Plus,
who created substitute services and left EFS’ without the their competitive advantage of possessing
unique services.
» The new nature of EFS clients (mostly banks) which opened the door to shared networks created
directly between these competing banks, left EFS unable to utilize their advantage / value added
capability of linking banks together, rendering the service that they provide irrelevant in the market.
» This overall condition of the market would greatly affect EFS’ business sustainability in the years to
come, a projected condition which caught attention from Mangum and triggered him to take bold
actions to secure the condition which he believed was what’s best for ADPs’ interests and growth.
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THANKS!