RADCO ELECTRONICS

Case analysis
By
Team A2
Naim Shaikh
Harit Tilva
Parth Mair
Sonam Tilva

Summary
Focused

on the problems arising

due rapid growth of RADCO.
Small scale start up which grew into
a successful commercial venture
though it was based on rather
simple probe technology and
chemical sensors.
Vertical and horizontal growth of the
company which simultaneously led
to organizational dynamics problem

Consideration

of restructuring
hierarchy and budgeting controls
Main Issue is resource allocation
and billing method

 Q1.

Describe the Business Model of RADCO.

A.

Revenue Generation: Revenue generated by

billing customers on the basis of man hours
required to deliver products as per the given
specification. Income from various states and
Federal contracts.
Product: (Initially) Sensor based automated
systems for detection of moisture, mineral content,
acidity and fertilization levels. (Later) Sensors for
precious metal detection, oceanographic studies,
pollution level detectors, etc.
Target Market: Farmers, State and Federal
agricultural agencies, Oil and mineral exploration
companies, industries requiring pollution control
norms.
Cost Drivers: Salaries to marketing personnel,
product and application development, investment
in technology for upgrading response to customer,
outsourcing of sensors.

Discuss the conflict of interest

issues within RADCO. How they
1. Profit
sharing
can
be improved?
The

profits were initially used to offset expenses

in new ventures and research and later they
were given to the three founders as
compensation. After some years the profit were
distributed according to the decision taken by
Executive Committee (ExCom) which based
more on judgement rather than on
performance.

more formal and explicit profit sharing formula

should be put down in order to account for the
efficiency of each department and their
respective employees. E.g. the profit should be
distributed in proportion of the ratios of
revenue and cost.

2.

Relationship of Albert Sells and

Donna Poulos Sells and Poulos were
dating and living together which made
others suspicious about decision
making in the company. Biggs was
against it but Beller didnt see a
problem unless and until it created
deviated business decisions.
Sells should not be allowed to take
decisions in matters involving Donna
primarily.

 3.

Cost Vs. Salary The resource

allocation and billing procedure was such
that the employees were motivated to
increase overhead cost allocation by the
company rather than to decrease
operational costs. They tried to minimize
their billing hours and allocate their time to
nonbilling hours (overhead costs were
charged 200% as compared to billing hours).
Allocation and billing procedures should be
changed to more realistic, i.e. costs to be
calculated on individual department
activities rather than revenue generated.

Q3. Should they add a

Human Resource
Yes
Manager?
A special person in recruiting and training of new

employees which relieves the manager of many

responsibilities and thus focuses on his own
work.
HR manager would help in managing the growing
hierarchy with the growth of organization.
Performance appraisal and profit sharing can be
more efficiently implemented.
Issues pertaining to employee conflicts can be
solved more easily.
A formal department would enhance the
companys reputation in job market thus more
talented employees can be found with relative
ease.

Q4. What financial controls are

needed for improved budgeting
andcontrol?
Decentralization of finance
control.
The budgeting control system
changed
incostsline
Title should be
A* B*
C* Administrative
Total with
Salaries and Benefits
10 10 10 10
310
suggestion
Braun.
0
0 by
0
Fixed Expenses
Variable Expenses
Total Expenses (a)

50
10
16

80
50
23

70
30
20

0
0
0

200
90
600

0
Billable Salaries and 60

0
75

0
65

200

Benefits
Customer Billing(b)

18

22

19

600

Cost Liquidation (b-a)

0
20

5
(5)

5
(5)

(10)

Thank
You!!!