The Ax Falls on Sunbeam's Chainsaw Al

Essay by clsmithA+, June 2004

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Why were Dunlap's goals unrealistic for Sunbeam?

Dunlap's goal were definitely too extreme for Sunbeam. Chainsaw Al was only focused on short term goals. Dunlap's goals were completely unrealistic. Within three days of Al Dunlap's reign the restructuring plan cut not merely fat but muscle, leaving shortages of skilled and experienced talent throughout the corporation.

In order to meet Dunlap's goals for Sunbeam; 1) Doubling revenues to $2 billion within the next 12 months Sunbeam would have had to increase sales at a rate five times faster than the competition, 2) The sales goal for new products of $600 million would have required a phenomenal number of purchases on the part of consumers, 3. Since household appliances had a 2.5 percent profit margin it was impossible that Sunbeam could increase profit margins by 20%. (Mescon, et al, 2002).

Was Dunlap's slice-and-dice plan a long-term or short-term strategy. Please explain.

Dunlap's plan was a short term strategy.

Al Dunlap knew how to cut costs but not how to build a company's future. Dunlap's methods epitomize the short-sighted greediness that touted reckless downsizing as a long-term strategy for profitability and growth. It is clear that the profits from indiscriminate cost-cutting tactics are short-term at best, and that destroying a company's human capital is hardly a prescription for long-term financial health. Al Dunlap had no strategic long term plan for Sunbeam.

In the long-term cutting away key portions of the company resulted in; 1) Additional costs when contract workers had to be hired to do the jobs of downsized employees, 2) Lack of efficient systems to take care of business, such as the computer system for customer billing being down for months, 3) Production problems at factories when they lacked the necessary parts. (Mescon, et al, 2002).

Human capital is the most important...