Mrc, Inc. Case

DE LA SALLE PROFESSIONAL SCHOOLS

GRADUATE SCHOOL OF BUSINESS

CASE ANALYSIS

"MRC, Inc."

SUBMITTED BY:

ESTIMADA, ANNA GABRIELLA C.

Executive Summary

MRC, Inc. is a Cleveland-based manufacturing company, specializing on the production of power brake systems for trucks, buses, and automobiles, industrial furnaces and heat-treating equipment; and automobile, truck and bus frames. In 1957, upon becoming chief executive officer, Mr. Archibald Brinton had initiated a program of diversifying the company through acquisition. Up until 1957, most company sales were made to less than a dozen large companies in the industry, making its growth constantly exposed to risk of selling to a few customers in a highly competitive market. In order to minimize the risk and explore new business opportunities, its head Mr. Brinton initiated the diversification campaign through acquisitions. After acquiring (5) successful acquisitions, MRC is faced with a dilemma whether or not the company should go with the acquisition of American Rayon, Inc. (ARI).

Problem

Institutional

Prior to the merger, MRC had a very highly–centralized decision making process; the headquarters management group maintained close tabs and kept itself updated on the products, markets and technologies acquired by the company. However, with the diversification, there existed the necessity of assigning divisions and designating general managers to handle the various aspects of the diversified businesses. This delegation, or rather devolution of power to the division managers, caused delays and friction in the decision-making process. Furthermore, the head of MRC felt that the only way he could maintain control over the "decentralized system" would be through the checks and balances of capital budgeting procedures; this means that the division managers have to keep themselves and their policies with those of the company's, or else suffer the indirect punishment of having their respective budgets diminished.

Operational

The assignment of general managers to the different divisions of the company meant that the different divisions garnered a certain degree of independence in the decision-making process; aside from the capital budgeting procedure and other accountability checks to the headquarters management group, the different divisions can exercise

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