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Case study
Question 1 contribution to the failure of Huavivo

Answer: first of all, instead of taking calculated risks, the

managers tried to expand their target market base
without having
sufficient knowledge about the expected return on investment and
associated risk factors.
Moreover, difficult to estimate the
expected returns from the investment and plan according to the
investment instead of according to the return. Keeping alignment
with this, the executive started receiving
housing allowance and
car allowance in hope of gaining success from the new venture which
led the
company to ultimate failure.

Question 2 weaknesses in the board remuneration policy of

Huavivo

Ans: first of all, the board members were overconfident about their
new venture. They created a
remuneration policy without even
knowing its outcome. The board members planned that all of them
would contribute a 20% salary cut and their allowances termination
if the project failed while they would
get additional allowances
and incentives if the product faces success. However, instead of
thinking about
the failure, the board members started receiving 18
months' salary in advance along with other allowances
with a 40%
salary hike. They were overconfident about their venture and they
already thought that the
product have gained success and we started
receiving allowances without even knowing its consequences.
Therefore, there was a major planning gap in the remuneration
policy.

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