Glancing over the shoulder
In a conversation with Henrique Mol, Sales and Marketing Manager for Belgium, on 10 February 2003 it was mentioned that Jan Straaten had recruited Henrique Mol as Sales and Marketing Manager for Parteisch Belgium. A background as a hands-on manager within large European organizations, and latterly a management consultant with a Belgian- based but international firm, he was an interesting and thoughtful member of the senior management team at various marketing and sales meetings in Belgium. Henrique was keen to establish working relation- ships with colleagues and to identify common ground within the company. His thoughts had become more polarized as a result of Teresa Posten’s new position in Parteisch International and, of course, his close geographic proximity.
Parteisch International and Parteisch UK 159 Henrique said that Belgian and Dutch customers had continued to buy from Parteisch for many years because there was little competition.
There were now growing problems with increasing competition across Europe and resultant dramatic falls in price for similar or comparable products. New life-style type products were beginning to emerge in the traditional Belgian, Dutch and German retail markets but Parteisch was unable to compete in these countries. Henrique felt that there was little hope of the company developing any alternative to the traditional and low price products because the owner saw a sales problem, not a production problem. Henrique believed that Teresa was her father’s daughter and thought, or at least acted, no differently. It was as though, he commented, the market should be privileged to deal with Parteisch and not the other way round.
Henrique believed that there was more obsolete and excess stock in Belgium, the Netherlands and Germany than there had ever been in the UK and the company saw stock as an indicator of efficient production and poor selling. The experiences of the UK stock problems had not been assimilated or associated with overstocking in the rest of the com- pany and he could only conclude that love of product blinded the company to the new values of the evolving market place.
Henrique Mol observed that the company reflected the wishes of the owner and his daughter and these were based on their attitudes and values to issues such as production and stock on the one hand, and customers on the other. As a consequence, the behaviour of the company was expected to reflect these traits in all quarters including decision-making and judgements of how the company should behave in the future. The interpretation of the future, and the future direction of the company, is conditioned by the values and beliefs of the owner and senior manager, Christoph Posten.
The heir to the throne
Extracts of a selection of exchanges between Tom Eden and Teresa Posten following a marketing meeting held at Lucerne, Switzerland, on 8 March 2003
Teresa Posten announced that the Board had decided that Parteisch UK should immediately adjust sales prices to all customers without excep- tion so that the net margin contribution should be a minimum of 15 per cent. This net contribution would include the deduction of com- mission, freight, special payment arrangements including bonuses and retrospective discounts. The Board accepted that some customers would
be lost but felt that there was little point in selling products at a loss or too low margins to sustain an acceptable profit. Teresa also made it clear that Parteisch International was not interested in small customers with infrequent deliveries and low sales turnover but rather the develop- ment of larger bulk orders of individual items was a priority. The Board reserved the right to increase prices further in the future.
Tom Eden took his opportunity to raise a raft of issues with Teresa Posten that included the quality and supply of products from the Czech Republic as well as pricing policy and the future marketing approach in the UK and Europe. He pointed out that provisional quality checks on Czech products delivered to the UK had to reject 32 per cent of the items so far examined. Employees had worked on this laborious process for eight days. The costs of this exercise were massive and because of vastly different labour costs, the Czech Republic will owe more than they were charging for the products in payment for these checks. Fur- thermore, the disposal of rejected products posed a problem because returning them to the Czech Republic would be wasteful and they would have to be sold for scrap. Teresa told Tom that the source of the quality problem at the Czech factory had been identified and some members of staff had been dismissed as a result of these and other mistakes.
Tom pointed out the serious consequences of the problem because the initial delivery of these new lifestyle products has immediately halved customer order requirements and there was a strong likelihood of cancellation of subsequent orders. It was likely that the retail mul- tiples would fine the company for late delivery and loss of profit. The outcome of this event meant the probable loss of nearly €975,000 worth of orders at net margins of more than 50 per cent as a result of quality and delivery problems. Parteisch UK efforts to reposition in the mul- tiple retail market were likely to be frustrated by fundamental flaws that existed within the company. These needed to be addressed.
Tom Eden told Teresa Posten that the meeting at the factory of Parteisch Germany in December of the previous year was the first time that he had recognized the true extent of fragmentation within the company and the importance attached to individualism in each coun- try. There was no single overall guiding philosophy pointing the way and this ‘severalty’ of identity and associated uncertainty was causing real problems for customers who wanted more certainty and reliability.
Tom Eden described the problem as needing to know who we are and where we are going because until these questions were answered it was impossible to position effectively in any market. There was a need to establish meaningful relationships through consistent and reliable
Parteisch International and Parteisch UK 161 actions that matched the words and the promises and met the expect- ations of the customer.
Tom Eden went on to say that Parteisch Germany was an overpower- ing force at the marketing meetings with three sales persons as well as the Managing Director and four more product development staff against only one representative from every other country! Tom said that they spent most of the time trying to convey the message that low price was the only way to sell in Germany rather than developing company products and discussing any common approach.
Tom Eden then moved to the expressed policy of Parteisch Inter- national and bulk selling and price. He pointed out that if the Board wanted Parteisch UK to sell in bulk then there must once again be a change of direction because it had been previously accepted by the Board that they would seek the higher margins of the multiple retail market. If Parteisch International was happy to think in terms of higher margin but unable to understand that this cannot be done without the right products and the whole package that supports the approach then it was a mere dream. The company could not simply pretend and hope that the customer believed. The perception had to match the perform- ance, there was a need to mean what was said and behave in a way that reflected that the company actually meant what was said. At the present time the customer did not see Parteisch as the company that was described or presented through personal visits and catalogue and products because of an inability or an unwillingness to perform in a way that was consistent with the claims.
There seemed to be some confusion about the nature of bulk produc- tion and bulk delivery in terms of the previously agreed policy of Parteisch UK. If the company was committed to mass production and cost leadership strategies in an increasingly competitive European mar- ket then there would be a requirement for constant improvement of the system of production and service through the improvement of quality and productivity, decreasing costs, sustained investment, process re-engineering, intense supervision of labour, products designed for ease of manufacture and low cost distribution. There would need to be tight cost controls, a structured organization and strict and quantified targets. This was an entirely different approach to a differentiated strat- egy that had been adopted as a policy for Parteisch UK. Cost leadership may be compatible with proposals to close the UK manufacturing unit and to maintain a UK sales team through a centralized administration and logistics unit. If this was the requirement then it was important to make some new plans for the future.
It seems that profit rather than market share and perhaps sales turn- over has been designated as the principal objective of Parteisch UK. Bulk sales are a reflection of Christoph Posten’s preference and his daughter Teresa has adopted this approach with the authority of the Board and projected it to the meeting at Lucerne.
The overall strategic future direction of the company based on cost leadership strategies has not been formalized. It is, however, implicit in the wish to continue mass production techniques and develop larger bulk buyers. This approach has its roots in the past when Parteisch had a monopoly of these goods in Belgium and other European countries.
This resulted in an emphasis on rapid sales growth and a commitment to developing production facilities. The approach is based on a past environment and needs to be reviewed against the current circum- stances of the market rather than the business.
An attempt to muddy the water
An email from CEO Ronald van Strek was sent to Tom Eden in late March 2003 requesting that records should be checked to determine what evi- dence was available to assist in a case against the auditor and the former UK Managing Director because of alleged stock control and valuation discrep- ancies. Tom Eden responded by pointing out that the primary responsibil- ity for the financial accounts and the stock rests with the Directors and Officers of the Company. The auditors would have a strong defence if the Managing Director and the Sales Manager had misled them. In any case, any possible deception was undoubtedly enhanced by the culture within the company and the former Managing Director would likely and correctly claim that he was acting in the best interests of the owner. After all, the holding of stock at full value was common knowledge and perhaps encouraged by the owner and the Board of Parteisch International.
This proposal came more than a year after the departure of David Stewart. The memo from Ronald van Strek noted that it was the Super- visory Board that raised the matter. This might suggest that Christoph Posten does not accept any responsibility for the past problems in the UK and he is looking for someone else to shoulder that responsibility.
In turn, Ronald van Strek does not want to take any blame. It is possible that Christoph Posten and the Supervisory Board are holding Ronald van Strek responsible for the problems in the UK, past and present. This is bolstered by the recent promotion of Teresa Posten to the role of Marketing and Sales Director from Parteisch Czech where the troublesome products for the Parteisch UK repositioning strategy have originated.
Parteisch International and Parteisch UK 163