POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

WARD SCHOOL BUS

Case Analysis

In Partial Fulfillment of the Requirements in Strategic Management

Submitted to:

Prof. Jose Waldemar V. Valmores

Submitted by:

Jeswel B. Rebato

Shaena S. Peñaranda

Role: Reporter

February 2022

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 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

WARD SCHOOL BUS

A Case Study

CASE BRIEF

Ward School Bus Company was founded in 1933 by Dave Ward, a Conway, Arkansas
Blacksmith. From a very humble beginning of producing an average of one wood-body bus
per month, this family-owned-and-operated firm grew steadily and by 1967 became one of
the largest and most respected and school bus manufacturers in the world. The only sources
of financing of Ward is through its retained earnings, and debt. The company had been
basically profitable until it registered a large loss in 1977.

The company’s main product was school busses, but in recent years sales to the
government (Ward’s has historically provided 80% of the busses needed by the military)
and especially export sales to the Middle East grew dramatically. The school busses are of
two types – 85% have been the large – capacity full-size busses, while the remaining 15%
have been the van conversions or mini – busses.

The key for the early success of Ward School Bus is with Dave Ward. His mechanical
and production abilities, which were incorporated into the Ward assembly line, and have
been described as “engineering genius”. His management style could be described as
“benevolent autocratic” in that he demonstrated a concern for the welfare of his employees,
but retained control of major decision-making responsibilities.

The control of the business was relinquished by Dave to Charles in 1968. Charles
Ward’s management style was basically autocratic, over-ruled decisions made by
departments heads and other managers, not a strong believer of in long-range strategic
planning and too restrictive and inflexible. In 1975, Dave Ward’s youngest son, Steve,
became the president of the company that positively contributes management of operations.
Charles Ward became Chairman of the Board and CEO.

Ward’s School sales are accomplished through a nationwide organization of

independent distributors. The vast majority of sales are made through competitive bidding
to school districts or purchasing authorities. Marketing has been strength of Ward since its
beginning, but it came president in 1968.

Ward was number one in market share until the late 1970s when one of their major
competitors, Blue Bird took over market share leadership.

In terms of the production of Ward, an automated assembly line is the unique creation
of Dave Ward, Bud Ryan and other production employees. Ward has its own tool and die
major who make most of the necessary dies for production. The automated assembly line
was also developed and built by Ward’s own team of engineers and employees. Ward has
emphasized the safety of their product for years, calling their bus “the safest in the industry”.

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 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

At one point in the 1970s, Ward employed an average of approximately 1,200

employees. This included 1,050 hourly employees and 150 salaried employees. The wages
and fringe benefits were at or above those in the area.

Also, Ward’s strategy to deal with the backlog of orders was to expand production
capacity through capacity expansion. Since the company was at that time a privately held
corporation, the sources of fund were limited. The Ward family was unable to personally
guarantee a loan for that amount and the company assets were considered suspect by
financial institutions.

Other problems arises as the Egyptians claimed that the busses were of inferior quality
and especially complained about what they claimed defective mufflers. The cash flow and
supplier problems continued to hunt the firm. Sporadic shutdowns became necessary when
parts became unavailable. Long lines that stretched around the administrative building
formed as anxious workers waited for their paychecks. The company had fallen seriously
behind on paying its federal withholding tax. The IRS was threatening legal action. In July,
a line worker was electrocuted in a plant accident that attracted the attention of the
Occupational, Safety and Healthy Administration (OSHA).

The future of Ward School Bus, as well as the future of its 1,200 employees, was very
uncertain. The bright yellow school busses sitting outside the plant provided a stark contrast
to the gloom and dark mood evident in the management offices.

Relevant Financial Ratios of the Company for the fiscal year ended 31 August 1980:

POINT OF VIEW

This case was analyzed using the authority of the President of Wards School Bus –
Steve Ward.

TIME CONTEXT

This case was analyzed at the beginning of fiscal year 1980.

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STATEMENT OF THE PROBLEM

Provided that there are operational issues and concerns that Ward School Bus is
facing, what strategies can be best implemented to keep the business in a going concern1
status and how will it prioritize the urgency of addressing the arising problems that affects
the management and its business operations?

STATEMENT OF THE OBJECTIVES

The analysis came up with the following objectives to address the problem of the case
study:

a. Improve its cash flow to maintain the business operations and avoid further losses.
b. Focusing in reducing the organization’s liabilities.
c. Re-establishing the market share leadership without having backlogs and participating
in a fair bidding transactions with considerations in the profit margins and the
company’s production cost.
d. Strengthening the production activity of Ward School Bus by focusing on the
expansion and increase the production capacity in order to timely meet the demand of
customers and establish a harmonize relations with its suppliers.
e. Regaining the company’s credibility and brand image.
f. Addressing the implications of the significant problem arises concerning job
satisfaction and other personnel related concerns.

AREAS OF CONSIDERATION

Internal Factors

Marketing

The rapid growth in market share did not come without sot to the company. It seemed
clear to some who worked closely with Charles Ward that his major personal goal was to
dominate the school bus market. Market share seemed to be the foremost objective. The
company was so concerned with market share position that, on at least one occasion, they
submitted a bid for large number of busses at a price that was below the cost of production.
Ward got the contract, but would have been better off if the competition had been the
low bidder.

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To be deemed a going concern, a company must be able to generate and/or raise enough cash to
pay its operating expenses and make appropriate payments on debt. Thus, the company must be
both liquid and solvent.

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Sales

The sales department was so successful that by 1980 the company was over two
years behind on the delivery of some school busses. As might be expected, this created
serious customer relations problems.

At one time during 1978 and 1979, Ward was prohibited from bidding on school bus
contracts in West Virginia, Kentucky and Florida because of the late deliveries and
encountered penalties and/or legal proceeding in New York, Los Angeles, and San Diego.

The backlog of orders was mainly created huge sales to Egypt and Saudi Arabia. In
the mid-1970s, the oil-rich Saudis purchased millions of dollars’ worth of busses to transport
Muslim Pilgrims to site of religious significances. These orders were given priority in the
production schedule and resulted in Ward’s “traditional customers” having to wait longer for
the delivery of their school busses.

In the late 1970S, the backlog created an extremely serious problem. Since Ward’s
strategy was to beat the competition by submitting the lowest possible bid, any delay in the
delivery of completed busses would cause the small profit margins to be more than
swallowed up by the double-digit inflations affecting the company’s production cost.

Production

In the mid-to late 1970s, cash flow problems and the problems that resulted from
selling more busses than Ward had the capacity to produce began to create serious
production problems as well.

Cash flow problems caused the company to develop a poor credit record with several
of their parts supplier. This in turn resulted in frequent shortages of parts. When parts were
not available, the bus would continue down the line and most other parts would be
assembled. The bus would then be parked in the lot. When the needed parts arrived, the
busses with missing parts would be brought back into the plant and would pass through
another off-line assemble process for a second, and in some cases, third time. The
increased number of man hours necessary for assembly tremendously.

Personnel

Serious problem came in 1977, when the UAW local called a strike because the
Arkansas is a “right to work” state new employees were hired and production continued on
an uninterrupted basis. Absenteeism, tardiness and turnover have historically been a big
problem for the company. The implications of these suggest that job satisfaction was a
significant problem for the company.

Competitors

Ward was number one in market share until the late 1970s when one of their major
competitors, Blue Bird took over market share leadership.

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Customers

The company was over two years behind on the delivery of some school busses. Late
deliveries, encountered penalties and/or legal proceeding were experienced.

At one time during 1978 and 1979, Ward was prohibited from bidding on school bus
contracts in West Virginia, Kentucky and Florida because of the late deliveries and
encountered penalties and/or legal proceeding in New York, Los Angeles, and San Diego.

Suppliers

Cash flow problems caused the company to develop a poor credit record with several
of their parts supplier. This in turn resulted in frequent shortages of parts. When parts were
not available, the bus would continue down the line and most other parts would be
assembled. The bus would then be parked in the lot. When the needed parts arrived, the
busses with missing parts would be brought back into the plant and would pass through
another off-line assemble process for a second, and in some cases, third time. The
increased number of man hours necessary for assembly tremendously.

Ward was “forced” to accept lower-quality raw material, which would have been
rejected if other suppliers had been available, and “captive” of some of its suppliers.

External Factors

International Factors

The backlog of orders was mainly created huge sales to Egypt and Saudi Arabia. The
oil-rich Saudis purchased millions of dollars’ worth of busses to transport Muslim Pilgrims to
site of religious significances. These orders were given priority in the production schedule
and resulted in Ward’s “traditional customers” having to wait longer for the delivery of their
school busses.

SWOT (STRENGHTS, WEAKNESSES, OPPORTUNITIES, THREATS)

ANALYSIS

STRENGTHS WEAKNESSES
Marketing
1. Advertising strategy was developed with 1. The company submitted a bid for large
the presence of company’s local number of busses at a price that was below
distributors. the cost of production. As a result, this
2. The company has use placed ads in created a serious customer relations
problem.
several publication to reach their target
market.
3. Market Leadership - it has an estimated
13.6% of the market share. In 1973, the
ward market share doubled to 25%

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STRENGTHS WEAKNESSES
making them the largest school bus
manufacturer in the world.
Production
1. Automated assembly line which was 1. Backlogs on production due to lack of
developed and built by Ward's own team parts/materials.
of engineers and employees. 2. Late deliveries of buses.
2. Uses its own tool and die makers. 3. Poor supplier relations - As steel
3. Wards has emphasized and established became more difficult to obtain from the
their company as the safest in the various suppliers, the Company was
industry. forced to accept lower-quality steel.
4. They are the first company to test 4. Low quality of produced buses due to
crashes their business to research low quality of parts/materials used.
safety features.
Finance
1. The company has been profitable for 1.
Due to cash flow problems, the company
years until it registered a loss in 1977. developed poor credit record with
several of their part suppliers.
2. Limited source of fund since the
Company was totally owned and
controlled by the Ward family.
3. The Company is currently not liquid and
insolvent. Moreover, has negative
working capital.
Human Resource
1. Management wide experience – 1. Job satisfaction was a significant
2. Dave Ward’s diversified expertise in all problem for the company.
aspects of the business. 2. Absenteeism, tardiness, and turnover
3. Management was composed of expert
people which were with the Company for
many years already.
o Bud Ryan - engineer and competent
manager
o Jerry Williams - Vice President and
General Manager, expert in the field
of marketing and administrative
o Charles Ward - Chairman of the
Board - expert in the field of sales and
marketing

OPPORTUNITIES THREATS
Government
1. In October of 1979, Ward received a 1. The company has fallen seriously
government guaranteed loan of 9 million behind on paying its federal withholding
dollars. tax.
2. The IRS was threatening legal action.
3. Legal proceedings in New York, Los
Angeles, and California due to delays in

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OPPORTUNITIES
Production
1. A new 10-million-dollar manufacturing
facility which was planned to allow
capacity expansion. Moreover, it will
support the potential further growth of
the Company.
Customers
1. Sales to the government (Ward’s has
historically provided 80% of the busses
needed by the military) and especially
export sales to Middle East grew
dramatically.
2. Larger market size for public school
busses.
3. Ward School Bus has manufactured and
supplied busses for Saudi’s Moslem
pilgrims to sites of religious significance.
THREATS
deliveries. Moreover, prohibited from
bidding on school bus contracts.
4. Ward came under attack from the
Egyptian Government. It claimed the
busses were of inferior quality and had
defective mufflers.
5. Due to line worker who was
electrocuted in a plant accident, it
attracted the attention of Occupational,
Safety, and Health Administration
(OSHA).
Competitor
1. Blue bird took over market share
leadership.
Suppliers
1. Poor relationship with suppliers due to
the company’s cash flow problems.
Employees
1. Strike called by United Auto Workers
(UAW)

ASSUMPTIONS

✓ Steve Ward has given control of the operations including management of manpower,
production, sales and marketing, and finance.

✓ Notwithstanding that the personal wealth of the family depends mainly on the success
of the Company’s operation, it is still assumed that each family members has its own
personal assets which can be source of additional financing to the Company.
Moreover, to emphasize, the Company had been basically profitable from the year it
started until it registers large loss in 1977. Thus, for almost 30 years, each family
members have established already its separate personal assets coming from its
share from profits of the Company. This is also supported by the business entity
concept wherein the transactions associated with a business must be separately

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recorded from those of its owners or other businesses. Doing so requires to completely
exclude the assets and liabilities of the Company from its owner.

✓ Partial payments will be collected from the customers once orders were placed, and
full payment shall be paid when the order has been completed and delivered

ALTERNATIVE COURSE OF ACTIONS

ACA No. 1

Current owners shall make an additional investment to the Company to strengthen

its capital base.

ACA No. 2

Ward School Bus Company should go in public to attract potential new investors.

ACA No. 3

Possible merger and acquisition or buyout (leverage buyout) of Ward School Bus to
other competitors (behind the market share domination of Blue Bird and Ward).

ANALYSIS OF THE ALTERNATIVE COURSE OF ACTION

ACA NO. 1
Current owners shall make an additional investment to the Company to
strengthen its capital base.
ADVANTAGE DISADVANTAGE
1. It may significantly increase Ward’s 1. In relation to advantage item no. 1,
capital to fund the business especially its increase in the Capital may be limited
expansion project. since it will also be coming to personal
2. Decision making will be solely retained wealth of the Ward's family. Since the
to the Ward's. Company is not doing well, sources of
financing from their personal wealth
may not be enough.

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 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

ACA NO. 2
Ward School Bus Company should go in public to attract potential new
investors.
ADVANTAGE DISADVANTAGE
1. It will significantly increase Ward’s 1. Going public may put pressure on
capital to fund the business especially to short-term growth of the Company
support its expansion project. due to increases costs in the process.
2. Having investors could raise huge 2. It imposes more restrictions on
amount of money and overcome current management and forces disclosure to
problem in cash flow. Consequently, the the public including its financial status.
Company can use fund to pay for their 3. It makes former business owners lose
current debts. control of decision making.
3. It will enable the company to negotiate
and win back suppliers and resolve
issue of low-quality parts.

ACA NO. 3
Possible merger and acquisition or buyout (leverage buyout) of Ward School
Bus to other competitors (behind the market share domination of Blue Bird and
Ward).
ADVANTAGE DISADVANTAGE
1. Regaining of leadership on the market 1. Retrenchment activities
share 2. Loss of key personnel
2. Economies of scale is formed by 3. Integration
sharing the resources and services.
Union of two different firm’s leads in
overall cost reduction giving a
competitive advantage, that is feasible
as a result of raised buying power and
longer production runs.
3. Financial advantages might instigate
mergers and corporations will fully build
use of tax- shields, increase monetary
leverage and utilize alternative tax
benefits.
4. More efficiency
5. Reduced competition
6. New Technology or New Products

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Decision Matrix:

Criteria ACA No. 1 ACA No. 2 ACA No. 3

1. Improve its cash flow to maintain
operations and avoid further losses. 3 3 3
2. Focusing in reducing the
organization’s liabilities. 2 3 2
3. Market share competitiveness. 3 3 3
4. Production control and focusing on the
expansion and increase the
production capacity in order to timely
meet the demand of customers and 3 3 3
addresses the concerns of backlogs
and late deliveries.
5. Regaining the company’s credibility
and brand image. 2 2 2
6. Enhances working capital
requirements and job satisfaction
improvement, retention and 2 3 2
recognition of personnel.
7. Building harmonious relationship and
regaining the trust of the suppliers and 3 3 2
customers.

TOTAL 18 20 17
*Decision scorecard: 1 – Least Favorable, 2 – Moderately Favorable, and 3 – Highly Favorable

CONCLUSION

Based on the foregoing matrix, ACA No. 2 is chosen. The present situation of the Ward
School Bus requires drastic action such us opening the corporation for new investors. This
maybe a tough decision for the management to make, as the organization is conservative
and private, but ensuring company success and avoiding bankruptcy, Ward School Bus
will need to go public.

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