Parnham Clarke (UK) plc manufactures and markets ‘off-the-shelf’ material fastenings (based on zips and Velcro) mainly for the clothing industry. These are mostly sold through a network of wholesalers. The company has two main sites in the East Midlands employing about 800 people. It was taken over a few years ago and is now wholly owned by the American conglomerate Spicer Lowe Inc. (listed on the New York Stock Exchange). Parnham Clarke (UK) plc is number five in the over-the-counter material fastenings market in the UK (based on sales revenue). Its management is led by the chief executive offi cer, Mr D. Gamlin, who was ‘head-hunted’ from Clarke Fastenings (a major UK producer of Velcro-based products) nine years ago. Two years after that, Parnham Zip Fastenings Limited (as it then was) merged with Clarke Fastenings Limited to form Parnham Clarke (UK) plc. Just over four years ago, the enlarged company was taken over by a hostile bid from Spicer Lowe Inc. who are quoted on the New York Stock Exchange. The two sites (one in Leicester and one in Nuneaton) stem from the days when the two companies were independent. For the last 18 months PC (UK) plc has been trying to persuade its American parent, Spicer Lowe Inc. to invest in a brand-new, state-of-the-art manufacturing facility part-way between Leicester and Nuneaton. However, Spicer Lowe Inc. is not happy with PC (UK) plc’s current performance and is unlikely to invest in new facilities unless significant improvements occur.

Staffing
Each of the following directors reports directly to the CEO, Mr D. Gamlin:
Mr D. Stretch.................................................. Finance Director
Ms L. Jones..................................................... Marketing Director
Mrs J. de Blonde............................................ Human Resources Director
Mr P. Martin................................................... Production Director
Mr P. Kendall.................................................. Distribution and Materials Director

Mr D. Gamlin, Chief Executive Officer
The CEO has overall responsibility for long-term growth and development of PC (UK) plc. He is also responsible for its long-term strategic direction in the UK market and its profitability.
Mr D. Stretch, Finance Director
The FD controls cash flow, financial resource allocation and the budgetary control system. He is responsible for the company meeting its financial targets.
Ms L. Jones, Marketing Director
The MD is responsible for all aspects of sales and marketing; this includes sales volumes and revenue as well as PC (UK) plc’s marketing and public relations strategies.
Mrs J. de Blonde, Human Resources Director
The HR director is responsible for the company’s strategies for recruitment, selection, training, development and the remuneration system. She is also responsible for employee satisfaction and internal communications.
Mr P. Martin, Production Director
The PD is responsible for production volume, efficiency and quality. In addition to this, he is responsible for the development of new products. He is helped in this last task by a two-person team of technicians who work from a single laboratory/office. These two ‘researchers’ are both nearing pensionable age and have been with the organization, in its various guises, for many years.
Mr P. Kendall, Distribution and Materials Director
The D&M director is responsible for the finished products from the time they come off the production lines to the time they reach the customers. Major aspects of this are stock storage, sales order processing and delivery logistics. However, due to the fact that the same buildings are used to store both finished products and raw materials, he is also responsible for the purchasing of raw materials.

Internal memorandum – confidential

From: D. Gamlin, CEO             To: The Directors of PC (UK) plc
Dear All,
As you know, I have just returned from my routine quarterly meeting with our parent organization, Spicer Lowe, in Seattle. Unfortunately, I have to tell you that they are seriously displeased with our performance. Off the record, CEO Jon Spicer intimated to me that unless big improvements were forthcoming in the next 12 months or so, we may be closed down and our operations transferred to our sister organization in Spain. At first, I thought this was just another exhortation for us to improve our performance but, in the present economic climate, I think we have to take it at face value. As I was reminded, the Spanish operation outperforms us on almost all fronts; the only thing we seem to be better at is our fixed asset turnover ratio and that is only because our machinery has such a low value on the balance sheet. The Spanish manufacturing facilities are only three years old which gives them many advantages over us but we cannot go on just blaming our aging machinery. We’ve got to make some genuine improvements, and fast. If we don’t, we could all be looking for new employment – and that may not be as easy as we would like to think! Jon is very concerned that we have not launched any new products in the last two years. He believes this to be crucial and cites it to be the major cause of our decline in market share and sales revenue. This may also be the reason why we have slipped from third to fifth place in the recently published annual survey and market league table in our trade magazine, Coming Together. Indeed, there was a copy of this prominently displayed on the table where I had my ‘discussion’ with Jon. I can assure you that it was not a pleasant experience; I felt about two feet tall by the time he had finished. Jon had obviously looked into this in some detail and pointed out that the two rivals who have overtaken us have not done much more in the last few years than introduce minor innovations and redesign their packaging, especially with an eye to the ‘green’ market. I was asked to explain why we had not adopted a similar strategy and competed more effectively. My explanation that we have been concentrating on our cost reduction program in order to increase our profit margin (which now stands at 6.0%) was brushed to one side. Although we have managed to reduce our fixed costs by 11% over two years, which I think is pretty impressive, I had to accept that we could have been more outward looking and proactive in the marketplace. It was also pointed out to me that our debtors collection period is now the worst in the whole group at 79 days. The fact that a big part of this (£350,000) is caused by the dispute and impending court case with Hobbit Anoracks was not accepted as an excuse. If I did not believe we had such a strong case, I would be prepared to settle out of court. As you know, they have offered £265,000 in full settlement but I think we will get the full amount. However, if we lose, our legal costs are likely to be in the region of £50,000 (but zero if we win). The hearing is set for four months time; I just hope they do not go out of business in the meantime! I am also aware that the extensive maintenance problems we have had with our aging machinery has not helped us to perform at the level we would have liked. The resulting downtime actually produced some temporary shortages in some product lines which must have lost us a significant amount of sales. This has caused us permanent damage with too many of our customers switching to competitors’ brands. One of our first priorities must be to somehow get them back. I pointed out, yet again, that we desperately need newer and more flexible machinery to compete effectively but Jon was quite adamant that he was not prepared to sanction any further investment in what he sees as a failing organization! I am afraid we are in a ‘catch 22’ situation and we have somehow got to break out of it. I do not think he is bluffing. If I were on their board, a rationalization of Spicer Lowe’s European operations would probably look like a good international strategy for the group. To be more specific, I have been told that our residual income (the measure used by head office to judge our performance as a division) must increase from this year’s best estimate of £16m to £25m for the financial year just about to start. To be blunt, we are being asked to improve our overall performance by 50% in little more than one year! I am calling an extraordinary management meeting for next Monday at 09:00; we can’t wait until the usual meeting at the end of the month. We need to get started on our recovery plan as soon as possible. We have four days in which to marshal our thoughts. I expect each one of you to make a positive contribution on how we can improve our performance..................

Tasks:
1 Create a balanced scorecard for Parnham Clarke (UK) plc showing four corporate objectives for each of the four generic perspectives. Also choose and show one appropriate key performance indicator for each objective. Target performance levels and action plans should also be shown.
2 Based on your balanced scorecard, create a strategy map for Parnham Clarke (UK) plc. To do this, you will have to identify the cause and effect relationships between the objectives.