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The collapse of Eddy Groves in Australia

Paper Type: Free Essay Subject: Business
Wordcount: 4144 words Published: 24th Apr 2017

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This assignment is based on the case study of the collapse of Australian eddy groves ABC learning centre. This assignment helps to understand the different elements which are responsible for the day to day performance and growth of the company and are listed below.

Internal and External environment

Corporate social responsibility

Managerial ethics

There are different reasons for the collapse of Australian eddy groves ABC learning centre like the decline in real estate market, global economy crisis, and above all the bad management of the ABC learning centre. The Australian eddy grove ABC started as one facility in Ashgrove Brisbane during the year 1988 and now it flourished in to 2300 centres in three different continents by the year 2007 ( Walsh.L,2008).

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Organization is considered to be an open system because organization takes the input in the form of resources like capital, materials and manpower etc and the organization produce the outputs in the form of products or services , information’s etc (Robbins et al,2008). A universally accepted thing that the environment which is related to an organization plays an important role for creating constraints for a managerial discretion (Robbins et al,2008).The two dimensions of an environment are internal environment and external environment.


External environment can be explained as the forces and institutions outside the organizations that potentially can affect the growth of organizations performance (Robbins S.et al, 2008) .The external environment is mainly divided in to two:

1 Specific environment

2 General environment


Specific environment can be explained as the constituencies which is having a direct and immediate impact on the manager’s decisions and actions which are directly relevant the achievement of organizations goal which means success (Robbins S.et al, 2008).


General environment can be explained as the broad external conditions which may affect the organization and it mainly contains the political, economical, socio cultural, technological environment and global (PESTEG)



The main political reason for the collapse of eddy grove ABC learning centre was the funding from the government agencies in terms of subsidies. Federal government is considered as the stake holder and they provide subsidies child care using the child care benefit and these subsidies are paid to the parents (Rush.E. et.al, 2006). During the financial year 2005-2006 the ABC learning centre received around 206 million dollars as an indirect subsidy from the federal government as benefits (Rush.E, et.al, 2006).


The main economical reason for the collapse of eddy grove ABC learning centre was the decision of buying more and more centre’s across the country without concerning their present debts and liabilities .Eddy Grove is only bothered about expanding his company across the world with concerning about his staff as well as stakeholders (Business spectator, 2010)

Socio-demographic/ Socio-cultural

The society in which leaning centre develop is very much important for its survival and also the good relationship with other fellow competitors is very much important for the growth and development of any kind of business

The collapse of the eddy grove ABC learning centers the management failed to identify the environments and other uncertainties , when we compared the response to the changing environmental conditions ,first the learning centre didn’t try to adapt the existing environmental elements which are mentioned the actual fact that the learning centre was aware of the global financial crisis and during that time the learning centre shouldn’t try to acquire more and more centre’s across the world and continent .(Business spectator,2010)


Each and every organization having a specific internal environments which affects the managerial discretion in to certain extent .Internal environment refers to the forces and institutions within an organization which potentially can affect the performance of an organization .it mainly contains the present employees, company management which mainly defines employee behavior .the management specially the manager or supervisors philosophical and his/her leadership style will directly impacts the employees working in the firm (Robbins S.et al,2008)

Each and every organization’s internal environment constraints managers in the way they behave, every person has a unique personality as well as each and every organization has its own way to operate and it is known as organizational culture (Robbins S.et al, 2008).


Management view is based on a management theory which states that the managers are directly responsible for an organizations success or failure and it is termed as omnipotent view of management (Robbins S.et al, 2008). When we compared the case of eddy grove collapse of ABC the decisions were fully made by the Eddy grove and he was thoroughly over confident about his decision and also the ABC learning centers’ asset values can also be justify the fact that the eddy grove is directly responsible for the collapse of the eddy grove ABC centre . The main collapse was the management issues such as working hours for staff for ABC learning centre’s, lack of equip-mental support for the child care centre, usage of federal government fund in terms of subsidy, expansion of child care centers’ all over the world without concerning about their debt etc are the main reason for the collapse of Eddy grove ABC learning centre (Rush.E, et.al, 2006).


The organizational culture is considered as an organizational personality. The organizational culture can be defined as the system of shared meaning and beliefs held by organization members which determines in large degree, how employees behavioral act (Robbins S.et al, 2008).

I strongly believe that this view is fully applicable for the eddy groves ABC learning centre’s management, as a fact the managers are completely responsible for the culture of an organization .the management decisions and views plays a vital role in creating a clear picture of the culture of the organizations in the mind of their employees. There are seven dimensions which capture the idea of the culture of an organization .these seven dimensions of culture is given below in figure 1

Source power point slides,( Robins S. et al , 2006)

The ABC learning centre was mainly focused on profit maximization rather than the employee’s satisfaction.

Management especially managers wrong decision making also results in the collapse of Eddy grove ABC learning centre.

Decisions were made only by the eddy grove and he didn’t ask for any opinion from any of his manager’s .this act results in the lack of team work and people orientation.

The following table explains the different dimensions of culture has been evaluated and marked as per the eddy groves ABC learning centres organizational culture.



Attention to details

CEO of the company is only focused to expand the ABC all over the world without worrying about loans and the financial crisis. He is concentrating only in purchasing more centres.

Outcome orientation

Profit maximisation way

People orientation

Decision were made by the eddy grove only

Team orientation

Conflict in organisation change in top level management.


Behaviour of Eddy groves changes the culture of the organisation towards aggressiveness. The only strategy was to expand the company.


Stability of the company is only projected, actually there is no profit .they showed the fake report to the government.

Innovation and risk taking

Narrow prospective of Eddy grove doesn’t allow organisation to change its culture, and were following rule of thumb. He is always taking high risk.

This gives a clear idea that the eddy grove gives only priority to the profits of his own than the welfare of its employees and other share holders .The above given facts gives a clear idea about the lack of team work , people orientation and the wrong decision made by the Eddy grove . Lack of stability was the biggest weakness of the company this happens because of the greed and over confidence of the eddy grove. So this makes the culture weak and that result in the collapse of eddy grove ABC.


A.B.C learning centres where management lacked in considering the effects of their decisions on the organisation culture, employees, resulting a low quality care.

A.B.C case also shows the unethical decisions taken by managers that affected the employees & other company related people in a long run. The A.B.C learning management has illustrated the Utilitarian view of ethics where in the ethical decisions are made solely on the basis of their outcomes or consequences (HYPERLINK “smb://CLUSTER-LISMORE_TWEEDSTUD_SERVER/TWEEDSTUD/HOME/PGRADS/TOURISM/apalac10/data/reference.odt”Robbins S. et al 2008HYPERLINK “smb://CLUSTER-LISMORE_TWEEDSTUD_SERVER/TWEEDSTUD/HOME/PGRADS/TOURISM/apalac10/data/reference.odt”) for following reasons:

A.B.C learning centres has hidden the fact to the public and employee that learning centre is ignoring the basic necessities to maintain the quality.

Though A.B.C learning centres knew about the quality standards the management were not employ more staff for the child care centres though excessive staff were present in community based centre

. Only 37 percent from ABC learning centres for child care were provided with good variety of equipment for children while compared to 66 percent to community based centre.

The main stakeholder which is Federal government which has even subsidised child care via child care benefit which is paid to parents has not been utilised by the ABC learning centre for the child care quality or standard improvement.


There are certain factors & their interaction which affect a manager’s behaviour as ethical or unethical. They are stage of moral development, individual characteristics, issue intensity, organizational culture & structural variables as shown in fig. 2.1.

Fig. 2.1 – Factors affecting Ethical & Unethical Behaviour (Source PowerPoint slides: Robbins S. et al 2006)


This factor mainly explains the stage of the moral development and can be understood by depending upon the external influences. These are basically three levels inclusive of

Six stages i.e. Preconvention, Conventional & Principled as shown in fig 2.2.

Fig. 2.2 – Stages of Moral Development, (Robbins S. et al 2006)

It is said to be that ABC learning centre management was in pre conventional level. At this level they follow the rules only to maximize their profit in business rather being concerned about the staff of ABC learning centre. The utilitarian view of the ABC learning centre management, the managers in the ABC learning centres can only be seen on the second stage of moral development because the management was sticking to the rules only when doing so was in the immediate interest of the Eddy Grove ,After knowing about the ABC learning centre conditions managers tried to manipulate the actual financial status of the company due to the fear of company loosing market share value ,business and faith of the people (Greg H,2008).The preconvention level of managers thinking can also be seen in the case of Lehman brothers and Enron management because here the managers manipulate the actual financial status of the company loosing market share as well as loss of value, business as well as faith of the shareholders (Benston G,et al,2003)

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After realizing the ABC learning centres actual financial situation the company’s market share value fallen from the last year highest decline of dollar 8.80 to just 57 cents per each share is the worst ever decline of ABC market share (abc.net.au,2010) The ABC learning centre CEO Eddy Grove is really worried about this market share fluctuation so he always manipulate the actual financial status of the company .


Individual characteristics can be explained as the persons value is a factor in ethical decision making process. Locus of control can be explained as the personality attributes in which reflects the degree in which people believe to control their destiny (Robbins S .et al2008)

ABC learning centre had, litigation funder IMF announced a potential lawsuit for “alleged misleading and deceptive conduct”. IMF claims alleged failure by ABC to disclose material information regarding revenue in the 2007 accounts. (Walsh.L, 2008). But ABC’s books were signed “true and fair” and it is understood ABC has argued appropriate processes were followed which also shows locus of control of ABC learning centre’s CEO. ABC learning centre staff were discouraged from raising any concerns about the operations of the centre outside the company itself which shows the pre conventional level of moral the management policies by the CEO Eddy Grove of ABC learning centre (Rush.E,et.al,2006).


The content and strength of an organizational culture has an influence in ethical behaviour as discussed earlier about the weak organizational culture of ABC learning centre and it is reflected through the decision of the CEO of the company eddy grove and also provides a possible root cause for the unethical behaviour of the company. It is said to be that a strong culture exerts more influence of ethical behaviour on the employees than a weaker one (Robbins S .et al2008)


The main important factors in which influences manager’s ethical behaviour is the intensity of the issue. There are six characters identified relevant in determining the issue intensity namely consensus of wrong, probability of harm, immediacy of consequences, proximity to victims, concentration effect & greatness of harm (HYPERLINK “../../../../../Pending/Management/reference.odt”Robbins S. et al 2008).HYPERLINK “../../../../../Pending/Management/reference.odt”

The Eddy Grove ABC learning centre should use the code of ethics in which the management can make a formal statement on the organizations primary and secondary values as well as ethical rules and it should be follow by all employees as well as the management this practise will help the organization more ethical in terms of decision making as well as employee profit (HYPERLINK “../../../../../Pending/Management/reference.odt”Robbins S. et al 2008HYPERLINK “../../../../../Pending/Management/reference.odt”).HYPERLINK “../../../../../Pending/Management/reference.odt”


Corporate social responsibility can be explained as the term which does not have a standard definition or fully recognized criteria. With the understanding that businesses play a vital role on job as well as wealth creation in the society, The social responsibility is generally understood by the way a company achieves a balance or integration of economic, environmental, and social imperatives while at the same time addressing shareholder as well as stakeholder expectations. The way businesses engage/involve the shareholders, employees, customers, suppliers, governments, non-governmental organizations, international organizations, and other stakeholders is an important key feature of the concept. While business compliance with laws and regulations on environmental, social, and economic objectives maintains the official level of Social Responsibility performance, it is often understood as involving the private sector commitments and activities that extend beyond this foundation of compliance with laws (www.ic.gc.ca, 2008).

Corporate Social Responsibility can be said as the business contribution to sustainable development and it is defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”, and is generally understand as targeting on how to achieve the goals like integration of economic, environmental, and social imperatives (www.ic.gc.ca,2008).

Corporate Social Responsibility commitments and activities typically address

aspects of a firm’s behaviour like policies and practices with respect to such vital elements such as; health and safety, environmental protection, human rights, human resource management practices, corporate governance, community development, and consumer protection, labour protection, supplier relations, business ethics, and stakeholder rights etc are the important corporate social responsibilities (www.ic.gc.ca,2008).

Corporate social responsibility can be seen from two different perspectives. They are Classical View in the one in which the management’s only social responsibility is to maximise profits of the company and the second perspective was Socio Economic view is the one in which management’s social responsibility is more than just to maximising profits by involving in protecting and also improving society’s welfare (HYPERLINK “smb://CLUSTER-LISMORE_TWEEDSTUD_SERVER/TWEEDSTUD/HOME/PGRADS/TOURISM/apalac10/AppData/Local/Temp/Assignments/Foundations/reference.odt”Robbins S. et al 2008).HYPERLINK “smb://CLUSTER-LISMORE_TWEEDSTUD_SERVER/TWEEDSTUD/HOME/PGRADS/TOURISM/apalac10/AppData/Local/Temp/Assignments/Foundations/reference.odt”

Corporate organisation can be motivated to change their behaviour according the following factors:

“stronger financial performance and profitability “(e.g. through eco-efficiency),

“improved accountability to and assessments from the investment community”

“enhanced employee commitment”

“decreased vulnerability through stronger relationships with communities” and

“Improved reputation and branding” (ic.gc.ca, 2008).


Fig 3.1 Stages of Social Responsibility (Source: power point slides: Robbins S. et al 2006)

Comparing the four stage model of progression of an organisations social responsibility which is illustrate in Fig 3.1 we can observe that Eddy Grove ABC learning centre at stage 1 where the management follow the classical view, law and regulations are followed for the pursuit of profit because eddy grove is only concentrated in expanding more and more learning centres all over the world. if they were in second stage Eddy Grove ABC learning centres would taken steps to improve employees working condition, open system of management where all employees are free to take decisions and initiative for suggestions , employee feel more secure in the stable job and also get their proper salaries.(Robbins S. et al 2008). Eddy Grove ABC learning centres thought that profit maximisation will not fit in with being responsible for society’s value but it is not truth, the most successful co. of the world like Microsoft, Nike ,IBM etc proved them selves as a good corporate and also social aware and responsible. All these company’s are in stage one which means classical view of social responsibility model as they are aware of society’s values and working to improve it for a better tomorrow .


Social obligation can be explained as the obligation of a business to meet its legal responsibilities as well as economic responsibilities is known as social obligation (Robbins S. et al 2008). The Eddy Grove ABC learning centre should have disclose their company actual situation to its stake holders that is federal government as well as investors which means the share holders and it was a social obligation for them but the management didn’t reveal the real condition of the actual situation of the ABC learning centre to the government as well as investors and the public. The narrow mind view of the management as well as the low ego strength of the management was a hurdle for the ABC learning centre management to act as a good corporate social organization. A similar thing was happened in Enron Company because the Enron Company projected their company as a high profitable, developing company and later on the company’s good brand image turned out to be a long mistruth. The Enron’s company balance sheet about their company profits were marked untrue and their company’s huge debts and liabilities are kept hidden in the balance sheet so that the company didn’t show up in the company’s accounts and the similar thing was happened in the ABC learning centres (malenbaker.net,2010)

A good example of corporate social responsibility is starbucks coffee company holds its employees job satisfaction is 82 percentages when compared to the industry average of 50 percentages. The starbucks company give benefits to the company employees like health care, access to stock options, tuition reimbursement and also the retirement savings account Starbucks is the only company offer its employees availability to health care is a good example of corporate responsibility (Viskovich.J, 2010).


In respect to the collapse of Eddy Grove ABC learning centre case the following recommendations emerge.

The one main lesson learnt from the collapse of Eddy Grove ABC learning centre case on how the external as well as internal environment would affect an organization in both ways like positive or negative way .so it is recommended to have a good managerial ethics and social responsibility, in which corporates should be more concern about their environment as well as their value and obligation

Corporate should be responsible on social issues and also they should follow good ethics and it will help the corporate to maintain more stable and also they can avoid difficult situations which happened during the collapse of eddy grove case .

Management issues in corporate business is all about handling interfaces with a ll the sections the business, government as well as society etc after identifying the environment in which the business happens have to be operated carefully, responsibly as well as ethically to maintain success .


The collapse of Eddy Grove ABC learning centre clearly explains the failure of the company CEO Eddy Grove to understand long term impacts of his decisions for the outcome of the company. This collapse of Eddy Grove ABC learning centre case clearly reflects the inclination of the today modern corporate culture towards the economy prosperity as well as the profit maximization with less regards for its stake holder which is federal government and the company is only concern about their shareholders. The environment in a company which operates clearly defines the decision taken by the CEO Eddy Grove to lead, plan and control the organization or a company (HYPERLINK “smb://CLUSTER-LISMORE_TWEEDSTUD_SERVER/TWEEDSTUD/HOME/PGRADS/TOURISM/apalac10/AppData/Local/Temp/Assignments/Foundations/reference.odt”Robbins S. et al 2008).HYPERLINK “smb://CLUSTER-LISMORE_TWEEDSTUD_SERVER/TWEEDSTUD/HOME/PGRADS/TOURISM/apalac10/AppData/Local/Temp/Assignments/Foundations/reference.odt” The Eddy Groves ABC learning centre is a company without any code of ethics as well as a weak organizational culture and finds itself in moral and ethical vacuum. After evaluating the collapse of Eddy Grove ABC learning centre if any company wants secured success in future of the organization then the management has to act for ensuring employee satisfactions, friendly work culture social concern towards the company action as well as the betterment for its stakeholders in which pays the profit of the company in the long run and also a value based management with organizations shared values


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