CASE STUDY: Paper Converters Limited

Paper Converters was formed in 1988 following the merger between Dyson Paper
Ltd and Jones Sales Agents Ltd.
Alan Dyson, who founded Dyson Paper, is a production engineer. All of his working
life he has sought to instil a culture in which every employee knows what their job
is, and that each individuals job forms part of the greater whole. He is a very
systematic man who believes that operational efficiency is the result of structure
and control.
Barry Jones, who founded Jones Sales Agents, is a salesman. Barry believes that
success is achieved when each individual is prepared to accept responsibility not
only for their own work, but also for the outputs of the team as a whole.
The two men had been great friends since childhood although their respective
companies were located 60 miles apart at the time of the merger. This was
because when Alan Dyson founded his company in 1983 the British Government
was offering incentives for businesses to start up in the town of Corby. This was
during the recession of the early 1980s and followed the closure of a steelmaking
plant in the town which had been the major employer. This government
intervention was an attempt to mitigate the level of unemployment in the town.
The offices of Jones Sales Agents were in Stevenage which is where both men
grew up.
Immediately after the merger the two parts of the organisation continued to
operate from their separate premises. Until 1989 the main product lines were
cash register rolls sold to major UK retailers, ASDA and Boots the Chemist were
the largest customers. At a strategy meeting in early 1989 Barry Jones suggested
that the company should refocus. Marketing research indicated that the
customers of the retailers, ultimately the end-user of Paper Converters products,
tended to keep the cash register receipt for less than two hours. The usual
process was that the customers checked their purchases against the cash register
receipt and then discarded it. As the product was regarded as a throw-away
product the retailers placed little value on the cash register roll and purchased
mainly on the basis of price. This meant that Paper Converters operated on low
margins. Barry was looking for markets where they could use their existing
technology and experience yet achieve higher margins. As their business was
basically paper roll manufacturing he looked for markets that required paper rolls.
During the 1980s fax technology had improved to the point where machines had
reduced in price from over 3,000 each to less than 500 each. Forecasts were
that prices would drop even further due to technological improvements and
economies of scale. It was predicted that by the mid-1990s virtually every office
and many homes would be using fax machines. In 1989 fax machines had become
the most common way of sending documents that were required urgently. These
documents usually contained important information and so copies of the faxes
were highly valued by the users. This contrasted starkly with the value that was
placed on cash register receipts. Fax machines generally printed their output on
thermal
paper rolls. Although Paper Converters used plain paper to produce cash register
rolls Alan Dyson agreed that to produce fax rolls all they had to do was to
manage the tension applied to the paper during winding because thermal paper
was not as strong as plain paper. Although thermal paper was much more
expensive the gross margin on a fax roll sale would be ten times greater than a
cash register roll sale. The directors approved the refocus on the condition that
the existing business with cash register roll customers was not neglected.
Within five years sales had increased to the point where, despite the addition of
new machinery and the acquisition of premises adjacent to the original unit, the
production capacity of the manufacturing unit was being stretched to its limits.
Sales forecasts indicated that company would continue to increase their market

share. The production capacity was quickly becoming a limiting factor in terms of
further growth. The directors decided that the way forward for the company was
to acquire larger premises. When the directors identified the building that would
enable them to install the additional machinery required allowing production
volumes to support sales volume forecasts it also decided to relocate the sales
office staff into the same building.
Although the staff from the sales office already knew the administration and
production staff, they had never worked particularly closely together. Within one
month of all staff being relocated onto one site tensions among the staff were
becoming apparent. Within three months both Alan and Barry were receiving
complaints from members of their teams about the unreasonable behaviour of
the other staff. The directors could see the results of the tension, but could not
identify the cause. As a result the tension has continued.
After a period of further sales growth, particularly in West Africa and the Middle
East, production capacity was again becoming an issue. The directors were
reluctant to move premises again as they did not want to further increase
tensions. They engaged a consultant to investigate their situation and after two
months he produced a report. The report put forward a persuasive argument that
by opening a production unit in Zambia, a republic in central Africa, they could
meet the growing production requirements and at the same time significantly
reduce manufacturing costs. Following several years of dramatic economic decline
the Zambian Government had received aid from the World Bank to fund economic
development. In order to receive the funding Paper Converters Ltd had to enter
into a joint venture with a local Zambian company. The joint venture partner was
an executive agency of the Zambian Government.
After detailed investigation of a proposed joint venture the company signed an
agreement with the Zambian government and six months later production started
in Lusaka. Alan and Barry had expected there to be some initial teething problems
but three years later the joint venture was still not delivery the expected results.
Although some cost savings were achieved the savings were only 20% of
expectations. In order to maintain a degree of control over its investment the
Paper Converts board of directors had installed a system of reporting and control
procedures that mirrored the procedures in the UK organisation. Although these
procedures had been successfully implemented in the UK for several years the
directors could not understand why the Zambian staff seemed to ignore
procedures relating to:

levels of authority for expenditure

appointment of senior managers

separation of responsibilities for approving payments

approval of credit accounts

selection of local suppliers

management reporting
You are a student who has approached the company looking for an organisation
on which to base your management project. After a brief discussion with Alan and
Barry you mention that research has shown that the biggest cause of failure to
meet post-merger and expansion expectations is a clash of cultures, both
organisational cultures and international cultures. Alan and Barry have asked you
to prepare a report for them that explains this point in more detail and
recommends what could be done to overcome, or at least minimise, the effects.
Using the Paper Converters Ltd. Case study prepare a report of no more
than 3,500 words that addresses the following tasks.

Outline the background and context of the case

(10%)
Using appropriate methods based on the theoretical principles you have
researched, analyse the situation at Paper Converters Ltd. You must at
least apply theories of:
International Culture, Management, and organising and motivating
teams.
(70%)
Identify the main conclusions that can be drawn from your analysis and
make, and justify, appropriate recommendations to improve the
situation.
(10%)
Prepare an executive summary that gives an overview of the report.
(10%)
The assignments should include appropriate references and bibliography
using the Harvard system.
The assignments must be printed out in Verdana 11 point font with
double-spaced lines and all pages must be numbered.