Read the scenario (below) (Mandy’s Motors Pty Ltd) and answer the two questions that are provided at the end. Each question is worth equal marks. There is no minimum or maximum word count for your answers but they should be sufficiently detailed to address the questions.
Mandy’s Motors Pty Ltd (Mandy’s) was established by Mary Mandy in Melbourne in 1952, selling and servicing new and used cars and motorbikes. Although it started small, specialising in those manufactured in Australia, over recent years it has branched out. It still tends to specialise in a limited range of car brands (led by Holden that, despite its ownership by General Motors in America, many Australians see as an iconic local brand), but now has large car and motorbike saleyards-repair facilities (all known as “123”) in 8 main centres around the country. Each (except the original one that is still run by Mary and her husband Lee) is managed by one of Mary’s siblings (brothers and sisters - 8 in total including her) and both the Australian and family connections have always been central to its product and service promotions in the media. Even with the increases in the range of vehicles (both cars and motorbikes) imported to and available in Australia (and consequently in the numbers of competitors), Mandy’s has managed to retain customer loyalty through a policy of on-going care and reliable service. Several of the largest companies in Australia rely on Mandy’s for supply of their fleet cars and completion of scheduled maintenance. Also, with Michael (the oldest brother) being a member of the Ulysses Club (an organisation of aging motorbike riders – both bikes and owners), Mandy’s has long been the “preferred” supplier and repairer for members around Australia. The club and Mandy’s have had a series of 5 year contracts in place with most of the chapters (branches) of the club, with this contract being rolled over without change. The next “roll over” is due to happen in May 2021.
All the shares issued by Mandy’s are held by family members. Those who run the 123s have 10% each (for a total of 80%) while the other 20% is held by or on behalf of other members of the immediate family (children and grandchildren of the 8 siblings). The Board of Directors is made up of the 8 siblings with Miranda (the youngest sister) as chairperson.
Past attempts to map out a future strategy for the company have been problematic. Zoe (Miranda’s youngest), completed a MBA with the intention of joining the company but left after 6 months of making suggestions and recommendations for radical changes to the business structure, all of which were rejected by the board. She is now very reluctant to get involved at all, particularly after fights she has had with George, Michael’s oldest son, about his declaration that women have no place in business – unless they are making the afternoon tea. Even without tertiary education he still maintains he is a business genius. Michael and his wife Deidre adore him. Everyone else in the family thinks he is an idiot but, because of Michael, George remains employed by the company as HR Manager. While the other adult children (14 in total) are happy to make suggestions about the company, its management and its business, none are interested in getting involved full time and they have no real experience or expertise to offer, which means their suggestions are often ill-informed.
It is now urgent that plans are made for the future, with Mary and her siblings all looking to spend less time with the company. Various options have been floated, including selling the business in its entirety, selling the various 123s separately, splitting the yards from the service centres, closing down completely, selling blocks of shares to carefully selected outsiders, allocating shares to long-term employees, changing the organisation and decision-making (so as to give more autonomy to the different yards), leasing out some or all 123s and closing down some of the less profitable ones. Miranda has been exploring what she sees as a far more outward looking option – that of expanding Mandy’s operations into Singapore via a relationship with Arfurs – Singapore’s largest second-hand car distributor. None of these options have met with enthusiastic support from a majority of board members. Further, with the announcement by General Motors that the Holden name is to be discontinued, the Board is unsure what characteristics of the company should shape its future reputation and focus.
Finally and reluctantly, the board agrees that Adbul, a well-regarded business consultant, should be asked for some independent advice. He conducts an investigation into the company and its activities in order to map out the best strategy(ies)
In his investigation, Abdul discovers the following:
- Revenue from sales in Brisbane and Sydney are comparatively low due to the local competition. However, the repair facilities at those 123s are doing well, due largely to long-term maintenance contracts with large local businesses. Most of the repairs and maintenance (around 80% by value) is on vehicles sold by Mandy’s. Occasionally when things get too busy, both these 123s subcontract out some of their work to other local providers.
- There are marked differences in the local vehicle markets around the country. For example, in Melbourne customers expect to bargain before agreeing to purchase while in Brisbane, they tend to accept the advertised price. In Perth, cars sell for around 10% more on average than they do in Sydney while motorbikes sell for around 20% higher in Brisbane than in Hobart. Repair costs are higher in Darwin than in Geelong due to shortages of skilled labour in the first of these cities and the fact there is only one supplier (NTCarparts Ltd) of vehicle parts for the NT. It is alleged in the Darwin newspapers that where service centres in the Territory have ordered parts from suppliers elsewhere in the country for delivery to the Territory, NTCarparts has put them on a blacklist and refused to supply anything else.
- For much of the time over the last 5 years, Mark, the youngest brother, has been leaving the operation of the Hobart 123 to his friend Gerald. He prefers fishing and hunting so is frequently out of contact for weeks at a time. Gerald often pretends to be Mark when customers call. Further, the Hobart service centre is one of the most profitable but there seems to be a rising number of cases where the parts used in repairs have failed within weeks.
- Peter is Mary and Lee’s only child. He has been working at the Melbourne 123 during his university holidays, mainly doing tasks such as accounts – specifically issuing debtor and creditor statements and depositing cash payments. However, he shows no interest in being involved full-time. He is more interested in creating artworks but sadly his talent is not appreciated by the market. Mary and Lee want to ensure he continues to get some living allowance until such time he finds the success and recognition he clearly deserves. They are proud of the way he manages his current meagre and erratic income: he always dresses nicely, owns an expensive car and goes out a lot with his friends.
- Michael’s mates in the Ulysses Club are getting older and resigning their memberships while the younger ones are more interested in doing their own motorbike repairs with parts ordered online.
- Due to the shortages of skilled labour and the costs of employing them over weekends and holidays, Mirabelle, the Mandy family member managing 123 Darwin, has resorted to hiring international students during those times to do the more straightforward maintenance tasks such as puncture repairs, fan belt replacements and oil changes. In all written communication with these students, they are described as contractors and are paid $20.00 per hour (information: the minimum weekend hourly rate for an employee in the industry is $29.24). Occasionally, if the salespeople are busy, some of these students are able to make extra money by selling vehicles and being paid commission (a percentage of the selling price) for doing so. Although there are normally no major issues, there have been some examples of where things have gone wrong. One angry customer posted to Facebook that she discovered that after two tyre replacements the nuts on the front wheels on her car had not been tightened properly. As a result, she nearly had a major accident. Another customer wrote a letter to the editor of the local paper describing how the fanbelt on her car had been replaced with one that was too big. It stretched, allowing the alternator fan blade to cut a radiator hose. This caused the engine to overheat. A third reported that the motorbike she bought from Cheng (a new arrival to the Darwin yard), was too big and powerful for her to manage. She complained that someone there should have advised her of one that would be more suitable.
- In Sydney too, there have been issues. 123 Sydney is located in an industrial area that is empty of commercial activity at night. It is customary to leave the keys for the cars in the yard hidden under the seats of the vehicles. Unfortunately, there have been a rash of break-ins in the area. Five of these have been into 123 with the burglars looking for tools and supplies as well as the chance to steal or damage the vehicles. The insurance company has paid compensation up to now but there are concerns that either it will refuse to renew the insurance cover or increase the premium significantly. The owner of the lot has been approached with a view to improving security (through CCTV and fencing) but is proving uncooperative. He did agree to provide patrols but these happen only once per night. Coincidentally, the last two break-ins occurred shortly after the security patrol had driven past.
- Recorded in the HR Department files are two separate complaints against George for sexual harassment and discrimination, made by two senior woman employees. Both women agreed to withdraw their complaints and to leave the company. Nowhere in the Board minutes is any reference made to these complaints or to the outcome.
Miranda has received Abdul’s final report and before sharing it with the board, asks you to do a legal risk analysis in relation to the future options and operations of Mandy’s Motors Pty Ltd. In particular you are asked to produce two reports. Each report carries equal marks.
Report ONE: Identify and assess FOUR options for the future of the company. In your report you should describe the legal risks for Mandy’s associated with each one and how they can be managed. You should also identify and justify the one or combination that would best assure the company’s future.
Report TWO: identify FOUR legal risks currently facing the company due to its operations and activities. For each one, you should describe the nature, significance and implications of that legal risk and how they should be managed in a way that has the least negative impact for the company.