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Cyclone Furniture Company Case

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CYCLONE FURNITURE COMPANY

The Cyclone Furniture Company is a well established family business. It consists of an ‘exclusive furniture retail show room in the downtown business centre of a large New Zealand city, and a manufacturing plant in a neighbouring satellite town. The plant manufactures furniture for their own retail showroom (25% of the output) and for export to Australia. The plant also makes top quality office furniture all of which is exported to Australia. Overall 75% of all output is exported to Australia.

Three weeks ago you were recruited as general Manager for the company. Until you were appointed, Winston Prebble had managed the business. Winston was the son of the founder of the business. Winston, although only forty, has decided to retire from running the business so as to pursue other interests. Yesterday, 31st May, he left with his new wife for an extended world trip. His parting words to you were ‘you have full authority, treat the business as your own, keep in touch, phone or e-mail me once a month’.

You have a tangible incentive for the business to perform well as your remuneration package includes a bonus calculated at 2.5% of the pretax profit of the company (if the budget is achieved your bonus will be $16,500). Today, 1st June, is the first day Winston has not been breathing down your neck and you get to the office early, keen to get started. (The ‘Head Office’ is on the mezzanine floor of the retail showrooms). You are particularly anxious to visit the factory, for although you have met Rangi MacDonald the factory manager, you have not as yet visited the factory. Winston had shown little enthusiasm for the manufacturing side of the business. In fact he had said to you ‘I sometimes wonder if we would be better to close the factory and just concentrate on the show room and export side of the business’. You have to admit that

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