Case 31: fir treest Greyhound, thence Greyhound telephone dial, then telephone dial, now what? Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â merle Henning 1. What were the critical mishaps in Greyhounds return and development over time? Founded in 1914 as a transportation fraternity for miners in Minnesota, Greyhounds success came in truth fast and the fellowship started to expand its r divulgees. In 1930, the prognosticate Greyhound mickle was take oned and by 1960, Greyhound had achieved its goal of a nationally mass transportation system. after roughly years, Greyhound found out that the transportation mickleiness brought in a lot of money, which could be used for new businesses. Thus, in 1962, Greyhounds board of directors pixilated to diversify into op timetions exterior of the bus transportation attention, whi ch meant the giving medication of a commodious partnership. By the demolition of 1963, Greyhound had acquired two inverse companies and was now divided in three major speed industries: bus transportation, bus manucircumstanceuring and pecuniary run. When Gerry Trautman was name CEO in 1966, he wasted no time in accelerating Greyhounds new strategy for blowup and growth. Until 1970, he had acquired 30 antithetical companies, among them several(prenominal) bus lines, a cruise line and a comp e actually specialised in furniture transportation. However, the most important f characterization is, that Greyhound stageed a new run percentage, function. Not solely the companies that Trautman acquired were successful and he divested it as quickly as he had acquired it. gibe to Trautman, the come withs mission is diversification in spite of appearance diversification. This instrument that the direct(a) groups be so diversified, so that each of them is receding-proof a nd all are enhancing the financial bearing! of the confederacy. The succeeding(prenominal) big incident was in 1970, when Greyhound acquired Armor&Co, anformer(a) gargantuan intricate that had legion(predicate) diverse business interests in food, consumer products and pharmaceuticals, which Trautman sold in 1977. What remained subsequently the divestitures were Armors food operations and Armors Dial air division, from which would emerge Greyhounds Dial consumer products operating division. true fir the next years, Trautman move to increase the keep confederations erupt and by 1978, Greyhounds holding company consisted of five operating divisions: Transportation, bus manufacturing, food and consumer products, financial, and function/food service. All of them go on to acquire to a greater extent than operations in sanctify to act Trautmans diversification within diversification. about of the achievements were failures however Trautman believed that the fortune of a failure should be run as long as the co mpany is healthy. The next big learning was in 1978, when he acquired Verex, the largest private insurer of residential mortgages in the US in distinguish to strengthen the operations of Greyhounds financial operating division. The next critical incident was in 1980, when Armor started to extradite huge problems and Trautman cherished to retire. In 1981, nonwithstandingt Teets was appointed CEO, whose challenge was to manage Greyhounds diverse businesses so that he would be able to achieve at to the lowest period 15 % return on equity. Since Armor still practiced a lot of losses, Teets fixed to divest armor. In preparation for the sale, he separated fit Food Company from equip Dial. In December 1983, the food company was sold, which meant that Teets chopped of much or less one-half of Greyhounds business. During the 80s, the bus lines operation caused huge problems and in 1987, Teets decided to sell the Greyhound Bus lines, which brought in $ 290 one million millio n million of cash but as well meant the loss of its ! sum jibe industry, bus transportation. By 1987, Greyhound was in the main a consumer products and services company. A nonher important incident took stain in 1985, when Teets decided to acquire Purex Industries, a large answerr of household products. Teets hoped that he could boost expediencys in Greyhounds consumer products operating division by using the Dial gross r stillue force and merchandise expertness to sell Purex products. It worked! In family line 1990, another consumer products encyclopedism was announced: Breck hair care products. In 1991, the companys name was miscellanyd to the Dial Corporation. Teets goal of a company that operates in multiple services was achieved. Everything seemed to run swell up until 1990, when Dials transportation manufacturing unit begun to bring about eruct and Teets decided to spin it absent. After this incident it seemed that if Dial do strides in one business, problems in another one wiped of the make of the improvement . Finally, Teets decided to cashier the company in two other companies (Dial Corp. and Viad Corp.). The division was scheduled in 1996 but hasnt been gather yet. 2. What was the underlying corporate strategy behind the development of Greyhounds portfolio of investments up until the time that Teets was appointed CEO? Was Trautman correct to check up on this strategy? What were advantages and pit filiations? Basically, the underlying corporate strategy was diversification. By operating in as many businesses as possible, Trautman hoped to make the highest kale in each niche the company operates in. He was prevail on _or_ upon that a huge diversification would fuck off a absolute impact on the companys financial strength and would make it more(prenominal) resistant to a recession. take consume though several(prenominal) encyclopaedisms were failures, Trautman thought, acquisitions are always worse the risk as long as the company as a all in all is better off. Losses in one business could be backed up by profits in othe! r businesses. Furthermore, some businesses are more belike to be complete by a recession than others. Those, which are not effected, fuel help to make the company more resistant to scotch downturns. The strategy of diversification withal consists of sharing knowledge, which Trautman expected to strengthen the companys position. I specify, it is unvoiced to answer the headspring if Teets was honorable or not. To me, he had no other picking than move the strategy, because the company had already expanded too more than which made a intensify in strategy very difficult. However, I would say, that Teets was wrong to engage the same strategy, because the struggle of Armour was a sign for it to be wrong. The diversification was too widespread, which int halt that some businesses, Greyhound operates in, are not tie in in any way, which makes it very difficult to manage. Bus manufacturing and soap, for instance, require completely several(predicate) strategies and different expertness. Certainly, diversification has its advantages. Knowledge thunder mug be share and the company can use different managerial expertise in order to improve the companys surgical operation. Furthermore, some output signal lines can be used or several products and notwithstanding a distribution system, which serves all the businesses, can be realised and be can be divided. On the other hand, diversification is very risky. Some businesses are more likely to be effected by a recession than others, which susceptibility glom a negative impact on the integral company. Some businesses are not made to be linked and this is what Greyhound did wrong. It is very risky to combine food with bus manufacturing, because they be in possession of only when a few things in common concerning their strategies and their likeliness to be effected by a recession. While pursuing a diversification strategy, it is important to stick to one sum industry out of which more businesses may d evelop. Greyhound mazed its core industry and strugg! led to find a new and profitable one. 3. What milieu factors molecule on Greyhounds businesses? Could anything abide been done to control for pester factors? In what ways did they distort the picture of Greyhounds executing? During the 80s, competition in the intercity bus business was deregulated and declining passenger revenues resulted from the end of the energy crunch. Greyhound found itself paying wages and benefits that were from 30 to 50 % higher(prenominal) than those paid by its competitors. Furthermore, Trailways, its major competitor, having negotiated significant wage concessions from the change Transit Union, had immediately passed the legal transfers on to customers in the form of lower fares.. This was an offensive attack against Greyhound, which was supposed to fuck off away market share from them. Even though Greyhound reacted, they unconnected millions of dollars. In order to prevent them from this loss, Greyhound should have reacted earlier by negotiat ing new wage contracts, which could have helped them to lower their fares earlier. By doing so, Greyhound could have maintained its competitive advantage over Trailways.
Furthermore, after the intercity bus business was regulated, Greyhound should have made more efforts to lower its cost in order to sustain its competitive edge. Greyhound wasnt tensile enough and hence lost its competitive edge. By doing more research and by developing a program for providence costs, Greyhound could have prevented it from these high losses. Apart from that, Greyhound has big(p) luck and was touch on by recessions, which had hi gh losses as a consequence. Certainly, they couldnt h! ave prevented the recession, but they could have done market research, which would have helped them to realize the danger of a recession earlier. 4.What did Teets do to change Greyhounds corporate strategy and financial position in the 80s? Analyze the sagaciouse behind this strategy? Was it working? Teets cherished to advance the company a completely new structure. His credence was that some businesses just fit better into Greyhound s plans than others. anyhow selling Greyhound Bus Lines in 1987, Teets also sold Greyhound dandy Corporation (GCC). GCC had become an underperformer in the face of let down interest rates and changes in the task laws that disallowed investment revenue enhancement credits. In 1987, teets tried to sell Verex, because it caused high losses. Unfortunately, the time of the acquisition was very bad and he couldnt find a buyer. Thus, he made Verex a discontinued operation and hoped that it would not be drain on corporate resources. With the sale of Greyhound Buslines, GCC and Armour and with the discontinuation of Verex, Teets announced that he was near the end of his large task of restructuring Greyhound. By 1987, Greyhound was primarily a consumer products and services company. Basically, I would say, that the rationale behind this strategy is logical. Teets wanted to give the company a new structure in order to adopt more control over all the businesses and he wanted to combine those businesses that fit together and can be managed together. He changed the whole core business from bus transportation to consumer products and services because he hoped that these businesses are more recession resistant and measuring stick more profits. Teets found out that Greyhounds food and ingest house services contributed the highest profits and thus, tries to strengthen them. This is logical and a rational conclusion. By acquiring Purex and Breck, Teets even more specialized on consumer products and he was encouraged to acquire more businesses in this industry. 5. How has Teetss stra! tegy worked in the 90s? In the 90s, things went very bad for Greyhound and Tettss strategy didnt really work. Both, the bus manufacturing and the Purex division started to perform very poorly. Furthermore, all the other divisions started to suffer and had to seclude from the cruise-ship niche. According to analysts, Greyhound wasnt more than a hodgepodge of different businesses that had cryptograph in common, were not recession proof and did not even have a secure niche. 6. Do you think that Dial should be split into two companies or that its assets should be divested? I think, the company should be split off into 2 companies, because I believe, that being one company, the two different division sort of destroy each other than help them. Certainly, analysts are right that there will be two sets of managers, which cause higher costs. But in my opinion, the only way to make the company recovering is, to leave them both operate independently. By separate up the company, each one c ould focus more on its own business and could focus on the managerial expertise that is necessary to improve the companys performance. Divesting the assets is also a good possibility, because a bidder could then merge a circumstance Dial business into its own operations and thus cringe manufacturing, distribution or marketing costs. The drawback of it is, that the company would fall away in a way and Im not sure that this will be helpful for a break performance. Basically, it doesnt really matter, what will happen, because to me, it seems as if Greyhound became a resort area for analysts, the CEO Teets and the shareholders. It is very difficult to hand over a company, that has suffered from so many changes. At least, a split off could be the start of a new era for the company and king have a positive impact on the company. Things nearly cannot get worse. If you want to get a full essay, order it on our website:
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