|Case Abstracts: 2007 Meeting
JEA: ON THE ROAD TO COST TRANSPARENCY
Business & Society Ethics
NORTHLAND PREPARATORY ACADEMY: FORECASTING AND PRESENT VALUE ANALYSIS
The case exposes students to the cost management issues of cost variability and controllability, cost transparency; process based costing systems, balanced scorecard and the role of executive management in facilitating organizational change. The case has been developed primarily for use in both the undergraduate cost accounting and MBA management accounting classes. In the undergraduate class it should be used as an example of the technical applications presented in the textbook. In contrast, MBA students will find that it helps to bridge the gap between the management accounting and the management of technology classes by using technology as an important cost driver in organizational decision making. Finally, the case can be used in the master of accountancy program as an application of PBC and how accounting information helps foster both desirable and undesirable behavior in organizations.
This case presents a unique opportunity to look at the decision making process of the Chief Information Officer of a major utility. The issue of the cost of technology services in recent years has continued to become significant in all types of organizations. This case offers the opportunity to take a first hand look at how one CIO engaged in a strategic cost initiative with the purpose of both making costs more transparent to users/customers of the Technology Services unit at JEA, a community-owned electric utility in Jacksonville, Florida. In particular, the case examines the role of a multifunctional consulting team to examine and make recommendations on the development of a process based costing system to both make technology costs more transparent to users and impact on their demand for technology services. As part of the process the CIO begins to integrate the PBC objectives into her balanced scorecard as she attempts to look toward the support of this initiative by other members of the organization’s c-suite/executive committee.
SETTING THE EXERCISE PRICE OF EMPLOYEE STOCK OPTIONS:THE CASE OF UNITEDHEALTH GROUP INCORPORATED
Northland Preparatory Academy (NPA) is a chartered school with a mission to prepare students for college and provide an exceptional educational experience. NPA is symbolic of a new wave of educational choices which have emerged in the United States. Legislators have expressed concern about catering to thousands of students using only the traditional framework of the big public school environment. As part of the “school choice” movement, which is sweeping the nation, charter schools have materialized as an innovative alternative. A charter school is a publicly-financed/state funded school that has been "chartered" for a specific reason. It typically has a much smaller enrollment compared to a traditional school and often has a specialized mission. The school is fully accredited by the North Central Association, the same organization that accredits the local public schools. While there is no tuition at NPA because, by definition, a charter school is a public school receiving funding from the State. The State provides funding on a per capita student basis only. The State does not provide funding for buildings and maintenance. This case should enable students to: (1) gain skills in developing financial forecasting for financial projections (budgets for the next three years), (2) develop skills in using Microsoft Excel spreadsheets, and (3) analyze present value options from bond versus conventional bank loan proposals.
The school has just been moved into a new building when an opportunity for expansion presents itself. Land adjacent to the school has become available at a bargain price. Purchasing the land is a “no brainer” decision but now the school is considering building a new gymnasium and fine arts wing which is expected to cost $3 million. The school’s principal, Bill Johnson, and members of the Board of Directors at NPA need to decide on the construction of a new building. Management must come up with a financial forecasting and present value analysis of different financing options. In this case, students are placed in a decision making role to provide a financial forecast, including revenue and cost projections, pro forma financial statements, an analysis of different financing options, and selecting the optimal financing model.
STUDENTS FOR ADVANCEMENT OF PROFESSIONALISM
More than 150 companies have been identified over the past two years as participants in options-backdating schemes. These companies are now faced with restatements of financial information, unanticipated tax liabilities for the employees, shareholder lawsuits, and federal criminal charges for misrepresentations in federal filings. Unfortunately, setting a fair exercise price on employee options remains a difficult task due to accounting rules and volatility in share prices. The case should enable students to enhance their understanding of the role of stock options in corporate governance decisions. In addition, students are also required to assess the financial reporting and taxation impacts of stock-option pricing decisions. The case writers developed this case primarily for an upper-level and/or graduate financial reporting class. Because the case integrates corporate governance, financial reporting, and taxation issues, the case can also be used in a capstone accounting class.
Between 1994 and 2002, UnitedHealth Group Incorporated (UNH) made twelve option grants to its CEO, Dr. William McGuire. Very often, these grants were made when the company’s stock price was near its low for the year. These issuances led to an investigation by the Securities and Exchange Commission to determine whether the stock-option grants had been backdated – i.e. the options were retroactively “issued” on a prior date when the company’s stock price was low to maximize the potential benefit to the employees involved. Subsequent reaction to articles in the Wall Street Journal and other business publications led to the dismissal of Dr. McGuire and other Board members at UNH. With the events of UNH as a backdrop, students are required to assess the costs and benefits of stock options when used to align the interests of managers with the shareholders. The case questions help enhance student understanding of the accounting and taxation issues involved with employee stock options.
SUPER VALUE’S PRICING STRUCTURE: THE BAHAMIAN SUPER MARKET
A student organization at a large public university sponsored a fund-raising event at which admission was paid in cash. The cash disappeared in an ostensible theft from the treasurer’s auto. How was this possible? The goal of the case is for business students and leaders in student organization to recognize the importance and the challenges of controlling collective assets. Incoming leaders of student organizations should be asked, as part of a university program, to identify risks and controls that are appropriate in their fiduciary role. This case could be an introductory exercise, with the teaching materials used as the core of a seminar preparing them for office. Alternatively students in an accounting information systems course might be asked to recommend policies and controls to safeguard student organization resources. Among other challenges are the regular and systematic turnover of offices and membership, creating significant communication breakdowns. Care should be taken to consider issues from the perspective of the organization and its members and the university itself.
Late last spring, the Coordinator of Student Organizations and Activities received a phone call from the faculty advisor of Students for Advancement of Professionalism indicating that he suspected that the treasurer stole the money from a one-time fundraiser and inquiring as to what actions can be taken against her. The $700 that was now missing, having been paid by students for a test preparation workshop, was to be the main source of income for the organization for the year. The treasurer stands behind her claim that the money was stolen and a police report is filed. Yet, irreparable harm has been done. The treasurer is devastated about the loss and hurt that the other officers and advisor believe that she stole the money. She is expelled from the club and eventually agrees to pay half of the loss to the club.
TO SAUSEDGE OR NOT TO SAUSEDGE: INVESTMENT ANALYSIS CASE STUDY
This case focuses on the pricing structure of a local Bahamian grocery store that is experiencing a decline in sales and loss of customers because of high prices charged in the store. The high prices are attributable mainly to customs duties which comprise a large percentage of the total cost of the product. The manager of the store must now determine how he can become price competitive and adjust his pricing structure when the custom duties barrier is an external threat.
The case should enable students to: (1) assess the macro-environment that a company operates in, (2) establish an appropriate profit margin, (3) evaluate external and extraneous factors that may undermine and destabilize the success and profitability of a business, (4) explore how management can overcome the uncontrollable threat of government regulations, and (5) identify the factors that influence and impact a company’s pricing structure. The case was developed for business school undergraduate and graduate courses Intermediate Accounting, Cost Accounting, and Managerial Accounting, International Business and Marketing Management course (particularly small business or retail).
Mr. John Lincoln, proprietor of Super value Grocery Store in Nassau Bahamas, was perplexed as to why his customers were declining which consequently led to a decrease in sales. Upon further investigation via surveys and interviews with his customers, it was determined that Mr. Lincoln’s loss of sales was attributed to the premium prices charged in his store. The store’s pricing structure has deterred customers away and consequently has significantly impacted the profitability of the store. Customers have concluded that the store’s products are too expensive and as a result customers now purchase their goods from the U.S.A. Mr. Lincoln, along with his team from the accounting department, is now faced with the task of streamlining Super Value’s pricing structure. Presently, the company charges all customers a 200 percent markup over the cost of products. One limitation however is customs duties. Mr. Lincoln and his team must now devise a comprehensive action plan. As he reviewed the issue, Mr. Lincoln thought to himself, “How can I adjust Super Value’s cost structure, make my products cheaper, regain all of my customers, cover all of my present expenditures, and still have a decent and fair profit margin?”
The case objectives are to develop students’ understanding of the information required to analyze capital investments, their ability to apply capital budgeting techniques, and their understanding of the meaning and use of the results of the analysis. Students use cash flow projections from multiple scenarios to analyze an investment by calculating net present value, payback, and internal rate of return using financial calculators. In some cases, the methods result in conflicting accept/reject signals. Students must justify their decision by discussing the advantages and disadvantages of the various methods. Additional case questions require them to address sensitivity analysis in terms of the cash flow projections and the discount rate used in the analysis. This case was specifically written for introductory Managerial Accounting students. It can be used in Finance classes by having the students develop the cash flow projections and perform the analysis in Excel.
Rick and Dave Brown, brothers and co-owners of a flower farm, have invested in a new piece of equipment to aid in the production and development of a new product, the “SausEdge”. A “SausEdge” is a cylinder of compressed pre-mixed potting soil pre-planted with ornamental flower seedlings. The product is intended to ease planting by combining everything in a self-contained potting base. Rick and Dave did not do an investment analysis prior to purchasing the equipment and are now wondering what they got themselves into. The brothers ask their accountant to perform an investment analysis to determine the sales volume necessary to recoup their investment and to project potential returns at different sales volumes. Students assume the role of the accountant performing the investment analysis. They are required to apply the capital budgeting techniques of net present value, internal rate of return, and payback under different sales volume and discount rate assumptions and prepare an analysis for the brothers.
A TALE OF CHOCOLATE: THE BITTER, THE SWEET, THE DARK AND THE LIGHT
CENTURION MEDIA: DOING THE RIGHT THING
This case highlights the murky area of environmentally-friendly business practices. The primary objective of this case is to provide students with a real-world platform through which they can examine and identify the ethical consequences of marketing and legal decisions and explore alternatives. The case has been developed to examine the ethical implications of business decisions that affect employees, suppliers, customers, and other stakeholders. It is comprised of three distinct parts – legal control, social responsibility and ethics in business, and charitable donations. Each section may be used independently or as separate parts of the whole case. This case introduces students to legal issues in the business environment, including employment contracts, business formation, ouster, intellectual property, and ownership control. Additionally, marketing ethics are introduced through a comparative lens in the examination of third party fair trade certification versus “ethically traded” products, in which no third party acts as objective overseer of the products or processes. Likewise, corporate social responsibility and governance are examined vis-à-vis decisions relating to corporate donation beneficiaries. Businesses’ ethical obligations to customers as a result of expectations created through marketing of business image and products emerge as key questions. The case is suitable for undergraduate instruction in business law, international business, environmental studies, ethics, social entrepreneurship, business strategy, marketing ethics, and corporate social responsibility.
The Endangered Species Chocolate Company (ESCC) was located in Oregon from 1993 – 2005, but moved to Indiana in 2005 when ownership changed hands. This case explores the company's mission, values, support of sustainable supply-side practices, support of charities, and legal issues involved with control of the business. It also explores the duties owed to customers based upon customers’ perceptions and expectations of company products and practices, fair trade versus ethical trade, and the legal implications of changes in business form. This case examines the underlying issues of social responsibility in business including the significance of business ethics and values, environmental stewardship, and sustainable supply-side practices. Additionally, it focuses on important ethical and legal dilemmas presented by ESCC’s interactions with the natural environment, and its employees and customers.
OUIMET-TOMASSO INC: AN EXPERIMENT IN SECULAR SPIRITUALITY
This case illustrates the complexity of ethical decision-making when decisions affect your own financial security, your family, and your employees. It emphasizes that – even when you believe strongly in what you feel is the obvious ethical course of action – you must consider that it is not just you that will be affected by your choice.
The case is designed for use at both the undergraduate and graduate level in a Business Ethics class. For an undergraduate course, the discussion should focus on the point of view of the protagonist who must decide what to do about a financially disastrous contract executed by the newly-appointed president of his division. In a graduate course, complexity may be added by including the ethical perspectives of other key players in the case. Additionally, an Epilogue provides the facts of what really happened to the protagonist and others in the company. Use of this case early in the course will build a foundation for subsequent discussions about the many forces which impact ethical decision making. Students are required to identify and understand conflicts of interest and complex ethical dilemmas, as well as ethical theories. They also must determine how their decisions can affect the creation of an ethical work environment.
Richard Bennett was faced with a serious ethical dilemma that would impact his career, family, and co-workers. Bennett, a regional Vice President in the Cable Division of Centurion Media believed that a contract recently executed by the new President of his division, Joseph Fowler, would cause significant financial losses for Bennett’s own division and their company. Bennett was only two years from retirement. If he chose to stand up to Fowler and take the issue up the corporate chain of command, he could jeopardize his own financial security and that of his family. He would probably be fired. Additionally, his actions might endanger the careers of other employees and co-workers. The personal relationship between the CEO of Centurion Media, Chuck Reilly, and Fowler made Bennett’s decision more difficult. When Bennett contacted the General Counsel and Controller in the corporate office of Centurion Media, they suggested he back off. He was surprised by their stance that the financially disastrous contract was in the best interest of the company. The Controller went so far as to remind Bennett how near he was to retirement, emphasizing that he should be concerned about protecting his job and his family. It did not seem like anyone other than Bennett was interested in doing the right thing.
The Ouimet-Tomasso case works very well as an introduction to the ethical dimensions of leadership by demonstrating how ethical beliefs are translated into managerial practices. The case describes in detail the philosophical origins of a spiritually-informed leadership style and the various elements and principles that allow it to be implemented in a diverse secular society.
The objectives of this case are to: 1) Explore the meaning of a personal leadership philosophy and its consequences for both individual and group outcomes, 2) Identify the contextual realities of the food processing industry and encourage students to acknowledge the interplay of social, economic, and spiritual dimensions of organizational analysis, 3) Challenge the assumptions of the classic market imperative, i.e., the presumption that human behavior can be “managed” though the application of purely rational business techniques and, 4) Identify experimentation as an integral activity when attempting to implement a values-based leadership system.
Ouimet-Tomasso is one of Canada’s largest and most successful privately-owned frozen food processing companies. In 1999, it began a deliberative effort to incorporate “spirituality” into its managerial system. The effort is organized and communicated as an ongoing “Project” and is comprised of an explicit set of values and management practices. The case provides an introduction to the concept of a spiritually-informed leadership and showcases the challenges of implementing this form of leadership within the social, economic, and political contexts of Quebec, Canada.
SUNCOR ENERGY – SOUR GAS AT CHINIKI
The Stratton Auto case is designed to present students with a realistic situation involving ethical decision making in an entrepreneurial setting. It involves an issue, taking undeclared kickbacks from buyers, that is not uncommon. The case gives students the opportunity to practice ethical reasoning and to apply ethical models to a real situation. They will need to define and assess a situation where a manager must deal with a subordinate who has solicited and secured kickbacks to provide products at a price that is below market cost, and to take the role of one of the owners and decide how to deal with this difficult situation, given the constraints and issues presented in the case. The case can be used at either the undergraduate or graduate level in a course where ethical decision making is taught, including Corporate Social Responsibility, or Business, Government and Society. It could also be used in a course on Entrepreneurship or Small Business Management, or in a course on General Management.
John Calhoun, one of two brothers who are the owners and senior managers of Stratton Auto, has been contacted by Tyler Mann, the owner of one of the firms that wholesales their unwanted used cars. Mann has informed Calhoun that he has been asked for a kickback to supply good condition used cars from Stratton Auto at a discount, by Blake Power, a Sales Manager at Stratton Auto. Mann also states that he had previously provided a small kickback for the purchase of one car, but Power was now asking for much more for several late model cars. Calhoun investigates the situation and is reminded of a similar incident that had occurred, where the guilty manager had been given a second chance after recanting his actions. Calhoun asks a senior Sales Manager for his reaction and advice. Calhoun questions the senior manager’s objectivity due to his social interaction with Power. After discussing the situation with his brother, who is attending a dealers convention out of state, John Calhoun confronts Blake concerning the situation. Blake admits to the facts as stated, but does not apologize for his actions. Calhoun is concerned that firing Power might be a problem since it is now close to Christmas. He is also concerned with the impact any decision will have on his employees. Both brothers pride themselves on their ethical, employee, and community oriented practices. The case concludes with Calhoun wondering what to do.
THE SOLIDARITY FUND QFL AND THE GILDAN FILE
Suncor is an integrated energy company, with its head office in Calgary, Canada. Suncor wishes to explore for natural gas on a nearby Native reserve. The well to be drilled will be a ‘sour gas’ well that has the potential to be extremely dangerous (perhaps deadly) and affect many nearby residents. The major alternatives facing Suncor are to abandon the project, or to proceed and seek approval while managing the objections that will undoubtedly arise from stakeholders. The case will expose students to a number of factors affecting the oil and gas industry alongside issues pertaining to stakeholder relations. Students should be able to make recommendations to Suncor by using a variety of ethical decision-making frameworks that: 1) identify the facts and ethical issues shaping the decision; 2) assess the moral development of an organization; 3) identify and assess the salience of stakeholder groups; 4) assess the ethicality of the required decision in terms of potential gains and losses of each stakeholder group; and 5) recommend and justify an ethical course of action. The case writers developed the case for undergraduate and graduate courses in Marketing Ethics, Business Ethics, or Business, Government and Society.
After an initial look at the land and review of existing seismic data, Suncor negotiated for the mineral rights for the area of land located on the Stoney-Nakoda reserve known as Chiniki 6-36 property. In October 2002, the Manager of Aboriginal Affairs and Stakeholder Relations for Suncor had just received the first formal objection regarding the planned exploration well. Suncor had held some initial public consultation meetings about this project. It was likely that a few more objections would arise prior to Suncor’s formal application to the EUB (Energy Utilities Board) for approval to proceed. This natural gas project was very sensitive for a number of reasons. First, it involved drilling a critical sour gas well (i.e., one with the potential for large H2S (hydrogen sulfide) releases) in close proximity to the residents of the reserve. Second, it was determined that the emergency planning zone for this well would encompass a number of homes, resorts, recreational areas, and public transportation routes. Third, the project would have to consider access and disruptions within a very high-usage recreation corridor.
There was still much to do before any drilling could begin at this site. The team needs a plan in place that would involve the key stakeholders and fit within Suncor’s current stakeholder relations policies, core values, and profitability objectives.
UNAUTHORIZED DISCLOSURE: HEWLETT-PACKARD’S SECRET SURVEILLANCE OF DIRECTORS AND JOURNALISTS
After using this case, students will be able to understand some implications of globalization, international value-chain on labour conditions in a developing country, and, more particularly on the international codes of conduct; and appreciate the challenges of collective action to change the behaviour of a firm in around sweatshop issues in the global context.
The case is based on the events and discussions that led to the Solidarity Fund QFL’s decision to sell its Gildan’s shares in October 2003. The case and its appendices offer additional information on the Fund, Gildan, codes of conducts, Honduras and maquilas.Part A: Sewing discontent - On January 22, 2002, the CBC television presented deplorable working conditions in a Honduras factory operated by Gildan, a Montreal-based textile and garment company. The Solidarity Fund QFL was a shareholder of Gildan and these alleged practices were in contradiction with the Fund’s union-based principles. Part A presents the players, the business partnership between the Fund and Gildan between 1995 and 2002, and the context in which this partnership unfolded – including the fast-changing global textile industry, trade agreements, Honduras, and the emergence of sweatshop-related controversies and codes of conduct in the textile industry. At the end of Part A, students have to decide how the Fund should take advantage of its shareholder status to try to influence the firm’s conduct by helping it correct the litigious points that had been raised in Honduras. In this decision and given the specific context, they have to consider the main international codes of conduct. Part B: A strategy and new developments - Part B extends from end of January 2002 to late October 2003. Part B covers (1) Fund’s recommendations on codes of conduct, (2) new allegations of illegal firing of 38 Honduran workers at the Gildan El Progreso plant; (3) Gildan’s reaction and the Fund on site investigation process. At the end of Part B, given the confirmation of these allegations, Gildan denial and the Fund’s values, students have to decide whether the Fund should divest from Gildan’s shares.Part C: Epilogue (2003-2007) - In November 2003, the Fund announced that it would gradually and in an orderly fashion divest its shares in Gildan. The remainder of part C presents the evolution of the company since 2003, including its changing relations with MSN and the FLA, its economic performance, until the closing of its last factory in Canada in March 2007.
WILDFIRE PROTECTION: CONFLICT IN THE BITTERROOT NATIONAL FOREST
This case uses primary documents, released by the company in connection with a congressional hearing, to tell the story of Hewlett-Packard’s investigation into the unauthorized disclosure of confidential board deliberations. After studying the case, students should be able to identify problems in the functioning of a public company board of directors; apply theories of ethical reasoning to an analysis of actions taken to address these problems; and debate options for how the company might best improve its corporate governance processes. It is suitable for use in upper-division undergraduate, graduate, or executive education courses in Business and Society, Business Ethics, or Corporate Governance.
In 2006, Hewlett-Packard (HP) admitted it had hired outside investigators to spy on members of its board of directors as well as outside journalists to uncover the source of several leaks of confidential board deliberations. The investigators used methods, including “pretexting” (using an assumed identity in order to access others’ telephone records), which were possibly illegal and almost certainly unethical. Newsweek summed up the situation: “Lying, spying, name-calling, finger-pointing—all of it is a tragicomedy that Shakespeare might have penned if he had gotten an MBA.” This descriptive case uses e-mails, internal reports, and meeting minutes to present various perspectives on HP’s leak investigations, including those of its non-executive chairman, CEO, former CEO, various board members, managers, and investigators. What problem was HP attempting to address in its investigations? Were its methods ethical? What, if anything, should the company have done differently? Ultimately, the case revolves around a classic ethical dilemma: were the means employed by HP and its investigators justified by their ends—to halt breaches of confidentiality in HP board deliberations?
The case should enable students to (1) analyze the core values, objectives, and strategies of stakeholders seeking to achieve conflicting objectives in complex, high-stakes situations. (2) Evaluate policy formulation, implementation, and change using the advocacy coalition framework (ACF) to see what potential it offers for resolving conflicts, and (3) examine conflict management and resolution in complex, high-stakes situations involving powerful stakeholders. The case writers developed the case for undergraduate and graduate courses in Business Strategy and Business, Government, and Society (i.e., stakeholder analysis; policy formulation, implementation, and change; and conflict resolution). The case should enable students to understand concepts and develop skills taught in these courses.
It was June 2007. In the US, the number of wildfires had increased significantly since the 1980s. In 2006, a record 96,000 wildfires burned nearly 9.9 million acres in the US. The Forest Service spent $1.5 billion fighting fires—about $100 million over budget. Forest Service managers attributed the increase in wildfires to fuel accumulations, the result of ninety years of fire suppression, global warming (e.g., drought), and forest mortality attributed to disease and insect infestations. Fuel reduction was an imperative; but fierce opposition from environmental groups made it difficult for the Forest Service to implement fuel-reduction projects.
The case explores the development of the Middle East Fork Hazardous Fuels Reduction Project on the Bitterroot National Forest in western Montana. As one observer noted, “It took six years, 15,000 person days, and $1 million to approve the reduction of fuels on less than 5,000 acres in the Bitterroot Valley.” This was not an anomaly. Similar projects in the US had faced similar delays and costs. The policy question facing the students was this: How could the Forest Service expedite the reduction of forest fuels? Was the missing element a framework for analyzing how public policy formulation, implementation, change, and conflict resolution occurred over long periods?
CARIBOU COFFEE COMPANY
Case Research for Theory
CHEVRON CORPORATION: THE OIL & GAS UTILITIES INDUSTRY
This case is appropriate for an undergraduate strategic management course. The case provides students an excellent scenario to employ Porter’s Five Forces model to learn about the complexity of the gourmet coffee environment and the dimensions that strategic decisions must address. After analysis of the company (a SWOT and ratio analysis), students assess Caribou’s present business strategy and make recommendations. The difficulty of competing in a fragmented market with one monopolistic competitor is discussed. The case exposes students to the correlation between strategy and mission statement. Effective strategy evolves from a clear, complete mission statement.
Founded in 1992, Caribou Coffee Company has continued to make a distinguished name for itself in the gourmet coffee industry. Second only to Starbucks in number of stores, the company aims to differentiate itself by providing individual customers with exceptional product quality and service that caters to both the rushed and relaxed customer and by providing employees with a great work environment. The company prides itself on its dedication to socially responsible organizations.
The coffee industry continues to be a large and growing market; it is fragmented, intense, and highly competitive. Gourmet coffee has gone mainstream. Caribou implemented an aggressive domestic growth plan in 2002. At the end of 2005, the company’s financial performance has steadily declined over the past three years; operating losses and net losses have increased each year. According to Caribou’s Statement of Cash Flows, Caribou is investing large amounts of cash in new store openings. Caribou cannot continue long-term on this path. Is Caribou’s current strategy effective? Why or why not? What is caribou’s mission statement? How might Caribou address the financial concerns along with the need and desire to differentiate in an intensely competitive environment dominated by a large, established player?
EMIRATES STADIUM: ARSENAL FC’s £390 MILLION GAMBLE
David J. O’Reilly, Chairman of the Board and Chief Executive Officer of Chevron Corporation, was faced with an increasing problem of rising profits and lower stock values. The main question to be resolved was how to differentiate Chevron Corporation from its competition and so achieve a winning edge over competitors within intensely competitive, rapidly changing immediate, intermediate, and long-term time frames.
Specific objectives of the case include: (1) Evaluate a company’s competitive market position within a given industry and how a company reacts to opportunities and threats within the industry. (2) Evaluate how a company identifies keys to success within an industry and use them to gain competitive advantage over competitors. (3) Evaluate a company’s ability to react to changing market place and develop alternative strategies to deal with this change. (4) Increase students’ abilities to analyze and conceptualize a given situation in order to develop future planning skills. (5) Increase students’ ability to evaluate a situation and effectively communicate both written and verbal remedies for the situation. (7) Increase students’ ability to understand a situation or problem by identifying patterns and addressing key underlying issues in order to develop strategic future thinking that is needed for effective leadership and management.
In the fall of 2005, David J. O’Reilly was faced with a series of decisions regarding the future of Chevron. Higher demands for energy and rising costs of fuel were on track to give Chevron earnings of $15 billion for the year, compared to $13 billion in 2004, even though stock prices had been down. O’Reilly noted that “the supply side is stretched from an industry prospective… it’s a little reminiscent of the squeeze we had 25 years ago”. With fuel and related utilities at record highs, O’Reilly announced that Chevron was purchasing Unocal for $18.4 billion dollars which added 8.5 billion barrels of reserve oil and daily production oil capabilities of 2.3 million barrels. Hurricane Katrina brought devastation to the Gulf of Mexico where a large portion of the United States oil production and refineries resided. The increased demand for fuel coupled with the shortage due to the disaster could be what some say was a look at the future. O’Reilly’s task was to develop an effective differentiating enterprise-wide strategy if Chevron Corporation was to survive and prosper against aggressive competition over the intermediate and long-term future.
FISHER & PAYKEL HEALTHCARE: JUST ADD WATER
This case is designed to allow students to: (1) Examine the structure of a services-based industry; (2) Consider the business impact the threat of relegation (i.e., demotion to a lower league) has on team operations management; (3) Examine the challenges the club will face in building a new stadium; (4) Consider marketing opportunities & challenges the new facility will present.
The English Premiership is the fourth most valuable sports league in the world following only the NFL, MLB, and NBA. At the top of this league are a handful of perennial powerhouses. Unlike their American counterparts where the worst performing teams stand to benefit through higher drat positions, the bottom three teams in the Premiership are demoted to a lower league. Relegated teams will stand to lose as much as £26,800,000 in annual media contracts and additional millions in decreased game-day ticket and merchandise sales. This loss of revenues exacerbates the problem of signing top players whose salaries may exceed £5,000,000 per year.
For decades Arsenal FC has been one of the Premiership’s elite teams. But in this era of high priced free agency the team was at a distinct disadvantage when compared to elite rivals such as Manchester United that played in a substantially larger stadium. To remain an elite team the club needed to increase revenues. The most obvious means of doing so was to build a new and significantly larger stadium. But the English soccer market is a very different industry than their US counterparts in football, baseball or basketball. Unlike US sports franchises, English soccer clubs cannot relocate to another city or even to another neighbourhood within the larger cities. Indeed archrival Tottenham’s stadium is located only four miles away. Given the scarcity of build able land in northeast London it was clear that even if land could be found that this would be an expensive proposition. Top management’s decision to push forward with the new stadium -- the cost of which will approach £390,000,000 and be privately financed -- will create unique challenges and opportunities for their marketing group. Among these will be facility design, ticket pricing, sponsorships, and determining what to do with the old stadium -- which happens to be a historical landmark.
JETBLUE AIRWAYS: A MAJOR LOW-FARE CARRIER IN THE AIRLINE INDUSTRY
The global leader in respiratory humidification technology surveys the opportunities available to continue the rapid growth trajectory it currently enjoys. The underlying humidification technology has driven the attainment of a dominant position in intensive care. More recently, the technology has been extended for use in breathing apparatus for Obstructive Sleep Apnoea (OSA) and further product opportunities exist in areas such as laparoscopic surgery. All the markets represent significant global growth opportunities – particularly with OSA having very low levels of awareness. The challenge moving forward is to manage the growth opportunities within the capabilities of an internationally small company based in New Zealand Undergraduate, graduate and executive students in Strategic Management and International Business are the target audiences for this case. Pedagogically, the focus is on strategic innovation, international growth and competitive dynamics. The case does allow a full internal and external analysis.
Fisher & Paykel had grown to become an icon of New Zealand business since it’s inception in 1934. As well as a world famous appliance maker, the original company had spawned a global-leader in humidification technology within the healthcare sector – Fisher & Paykel Healthcare. As Michael Daniell, Chief Executive of Fisher & Paykel Healthcare surveyed the competitive landscape in September 2006 he saw a world of opportunity. New applications for humidification beyond their intensive care stronghold were developing all the time. The obstructive sleep apnoea market also had the potential to be huge as awareness grew. The question was - which way to grow?
MIDWEST AIRLINES’ RECKONING: LEVERAGE VERSUS LOSS OF IDENTITY
In 2003, David Neeleman, CEO of JetBlue, decided that JetBlue needed to develop a strategy to assure that the carrier continued growing. He believed the company would continue its growth by adding additional frequencies on existing routes, connecting new city pairs among the destinations JetBlue already served and entering new markets often served by higher-cost, higher-fare airlines. However, first JetBlue had to buy new aircraft.
Specific objectives of the case include: (1) Evaluate a company’s competitive market position within a given industry and how a company reacts to opportunities and threats within the industry. (2) Evaluate how a company identifies keys to success within an industry and use them to gain competitive advantage over competitors. (3) Evaluate a company’s ability to react to changing market place and develop alternative strategies to deal with this change. (4) Increase students’ abilities to analyze and conceptualize a given situation in order to develop future planning skills. (5) Increase students’ ability to evaluate a situation and effectively communicate both written and verbal remedies for the situation. (7) Increase students’ ability to understand a situation or problem by identifying patterns and addressing key underlying issues in order to develop strategic future thinking that is needed for effective leadership and management.
On December 1, 2005, JetBlue Airways Corporation’s executives were celebrating the performance of the company during the last 5 years. JetBlue grew from zero to $1.3 billion. The good results were attributed to the demand stimulated through low fares, the emphasis on low operating costs, and the focus on point-to-point service to markets that were underserved or large metropolitan areas with high average fares. The company’s success brought the need of important and substantial investments, especially in the fleet expansion, in order to maintain the same growth pace. In this turbulent and competitive industry, JetBlue was faced with a number of critical long-term decisions. Some of these strategic decisions included: Should the company add a second aircraft type to its fleet? If so, what type and how many aircraft should be added? If not, should the airline cancel an order for 100 new Embraer E190 jet aircraft and place an order for Airbus A320? The main question to be resolved was how to be a low-fare passenger airline by offering high-quality customer service and a differentiated product, following a controlled growth plan designed to take advantage of JetBlue’s competitive strengths.
OMNIJET: SOAR TO THE CLOUDS OR CRASH & BURN
This case asks students to consider two scenarios—the merger of AirTran and Midwest Airlines versus Midwest Airlines going it alone. Sufficient financial data is provided to permit a quantitative analysis of the merger offers and the combined company. Additionally, qualitative issues such as culture clashes between the two firms, labor issues and the impact of the merger on the Milwaukee community (Midwest Airlines home city) are also discussed. The case asks students to consider the merger from the perspective of the corporate board of directors at Midwest Airlines. The case should enable students to: (1) Understand the forces of change that are reshaping the business environment for companies in the airlines industry in the twenty-first century. (2) Understand the competitive advantages provided to firms following the low cost leadership and differentiation business level strategies. (3) Compare and contrast of possible merger scenarios and evaluate their ability to create a sustained competitive advantage. (4) Develop and evaluate future strategies for Midwest Airlines. This case was developed for use in undergraduate and graduate strategic management courses. It should be positioned in the course after corporate level strategy topics have been presented.
On October 20, 2006, Midwest Airlines received a letter from AirTran Airways expressing an interest in acquiring all of the outstanding shares of Midwest Airlines. As a small, regional airline that was characterized by some as a “sitting duck” for a possible takeover. Midwest Airlines rebuffed AirTran’s offer, but AirTran continued to pursue its prey upping the offer considerably in January 2007 and taking the offer directly to Midwest’s shareholders. The two airlines could not be more different in their business models. Midwest Airlines had grown by distinguishing itself from other airlines based on exceptional service with such offerings as in-flight meals served with real china and silverware and free wine. In particular, the airline was known for its chocolate chip cookies which they baked onboard and two-across seating. AirTran represented the opposite business model—operating as a low-cost carrier and expressed their intentions to achieve significant cost savings through the increased scope of the combined airlines. Should Midwest’s management accepted AirTran’s offer or could Midwest survive alone in a hostile, unpredictable industry?
PEOPLES CREDIT UNION
The case is designed for use in a strategic management, entrepreneurship, or family business course at either the graduate of undergraduate level. A turnaround consultant receives a memo of desperation from a client CEO. The client company has a liquidity crisis, serious governance, management and organization problems as well as poor financial controls and records. The student reads the case from the perspective of the consultant and must make recommendations to effect a turnaround and prioritize them. The case allows students to apply typical turnaround prescriptions to the particular case of OmniJet.
Joe Barton, founder and CEO of OmniJet has seen his company grow from a small FAA-certified jet repair and service facility to a multi-business single-location one-stop center for fuelling, chartering, sales, training, refurbishing, and repair for piston and jet aircraft. Along the way, his brother had become a partner, and his father had secured a controlling interest in the companies. Both participated in the management of the business.
By virtue of his controlling interest, the father presumed that he had the right to make any decision he wanted, and unilateral decisions of financial and strategic importance began to affect the company’s performance. The brother’s contribution to the jet sales business was significant, and he wanted the company organized around jet sales. Conflicts emerged between the brothers, the father, and the managers of the other businesses, and financial performance deteriorated further. Trust deteriorated between the partners, employees became unsure of which senior management they should respond to, and management became paralyzed with respect to both pressing and strategic decisions.
To make matters worse, the accounting and control systems functioned poorly, and the firm did not have a cash budget. The company faced a cash crisis and little ability to borrow. The culture was described as a “big heart” culture where the CEO felt responsible for the livelihood of the employees and their families. The CEO turned to a turnaround specialist to guide and prioritize a turnaround sequence.
Peoples Credit Union (PCU) was a profitable organization, which was approaching structural inertia. This case will help students to recognize that even currently profitable organizations have to reinvent themselves and devise strategies to reposition for long-term growth and sustainability. It illustrates features of organizational change and the role of strategic leadership in implementing organizational changes. It is a field-base research augmented by internal documents and publications. Students should be able to: (1) identify the triggers of change as well as critical success factors, (2) analyze the actions taken by the strategic leader in terms of appropriateness and effectiveness for realizing the vision of the organization, (3) understand the synthesis of management principles with real world situation and assess the effectiveness of their application, and (4) apply comprehension and analytical skills to discuss the financial environment and evaluate PCU’s financial performance. This case is primarily directed toward management majors in a Business Administration program.
Mr. Boss assumed the office of the President and CEO of Peoples Credit Union (PCU) on December 26, 1996. He was entrusted with the mammoth task to institute changes within the organization and undertake strategic measures for the long-term growth and sustainability of the credit union. Prior to his tenure, the Board of Directors crafted a new vision for the credit union and developed its Mission Statement accordingly. This move was necessary because, although PCU had grown since its inception in 1936, by the early 1990s growth had begun to plateau. However, up to 1996 the former CEO had not taken steps to embrace the new vision. After 60 years in existence as a financial institution with total assets of $435 million, strong cash flows and 58,571 members, the credit union was still operating from one central location with 7 tellers and no ATMs. Also, it had one outdated personal computer with a few dummy terminals and no Internet access. Its 60 employees labored without the benefit of a Human Resources Department. The Board of Directors recognized that the organization needed strategic leadership to re-position the credit union for successful longevity. They appointed a new President and CEO (Mr. Boss) to undertake this task. Under new leadership the credit union expanded its customer base; introduced new products and services; improved service quality through human resource development and increased access to products and services; initiated use of state of the art technology; engendered cultural changes and developed internal controls, policies and procedures.
RESMED: WAKING UP TO SLEEP
Perry Group is a New Zealand-based, family-owned business that operated in a variety of industries such as galvanising, refuse, lime, aggregates and property development. The development of the company could probably best be described as opportunistic. Moving forward the company was looking to restructure and run more as a holding company with decentralised operation of business units. The challenge was to become more systematic in the assessment and prioritisation of opportunities while still retaining an approach to business that was consistent with the Perry family values that centred on community, sustainability and heritage. Undergraduate, graduate and executive students in Strategic Management and Entrepreneurship are the target audiences for this case. Pedagogically, the focus is on corporate strategy at a smaller, private, family-owned company involved in ‘dirty’ industries. The case does allow a full internal and external analysis.
It was May 2007 as Waikato BMS graduate Simon Perry contemplated the next moves for the Perry Group (www.perry.co.nz). At the end of 2006 Simon had returned from a study break at Harvard Business School fresh with new ideas and excited by the prospects for the Hamilton, New Zealand based company. Simon’s father, Brian Perry, had struck out on his own more than 50 years previously establishing Brian Perry Ltd – the forerunner to the Perry Group. Over the course of its history first Brian and then Simon had lead the company’s expansion into a diversified portfolio of business interests. From an initial focus on excavation, the Perry Group in 2007 operated in metals, aggregates, waste management, property development as well as the Perry Foundation charitable trust. In 2006, the Perry Group had also won sustainability awards for the first time – a major achievement for a company perceived as operating in ‘dirty’ industries like mining. A major restructure was occurring at Perry Group that Simon Perry and the executive team hoped would provide the stimulus for increased growth.
RETAIL PRICE STRATEGY: LOWE’S COMPANIES, INC.
The case provides information that students can use to evaluate strategies at the business level. The firm, ResMed is a manufacturer of sleep equipment that has operations integrated throughout the world. The case provides details on how a global firm operates in a relatively new and unknown industry experiencing high growth. The major challenge faced by the firm is to increase awareness of sleep disorders and thereby stimulate the demand for its products. However, looming in the background are a plethora of products that are substitutes for the equipment sold by the firm. The case allows a student to apply Porter’s five forces model, do an analysis of the firm’s strengths and weakness and suggest strategies suitable for a firm in a new and growing industry.
The case focuses on ResMed, the second largest company manufacturing and marketing sleep equipment. ResMed at its rival Respironics jointly own greater than 70% of the market. The case describes a successful company with strengths that are closely tied to its current strategy and situation.
ResMed is a global firm with global sourcing, manufacturing and marketing. In contrast to its major competitors, ResMed concentrates primarily on one product in one industry. The industry is very high growth, and dynamic with constant threats from substitute products outside the industry. The case depicts the situation in an industry that is in a growth stage.
A key component of the company’s competitive success and strategy is its innovation. The case provides information on various aspects of the firms operations – from design, manufacturing to marketing and sales. The challenge before the firm is not so much the competition within its industry but to influence overall industry demand by providing information about the health problems of sleep apnea. A major threat is of substitute products from outside the industry and allows students to debate whether the firm should be in a single business or diversify.
SAFEWAY AND THE GROCERY INDUSTRY, 2007
In 2007, Lowe’s Home Improvement Warehouse – the number two home improvement retailer in the world – was struggling to identify why their every day low price (EDLP) strategy and well-promoted Low Price Guarantee was failing to produce a leading price image among consumers, considering rival Home Depot had transitioned from an every day fair price retailer to more high-low practices over the past 5 years. Management must decide (a) what long-term price strategy would be most profitable, (b) how the execution of that strategy should evolve to better serve its customers, (c) how to affect its price perception via its product mix and store experience, and (d) how its increasing expansion into urban areas will affect the effectiveness of its pricing strategy. Students should be able to (i) evaluate the critical success factors in home improvement retail, (ii) analyze and interpret the effectiveness of Lowe’s and competitors price strategy and execution, and how it affects each firm’s overall corporate strategy, and (iii) provide recommendations to senior management on the business issues mentioned above.
In early 2007, Lowe’s President and COO Larry Stone, and Executive Vice President of Strategy and Business Development, Greg Bridgeford, were preparing to deliver to Lowe’s board of directors a long-term price strategy for the Fortune 50 retailer. At the time, the United States home improvement industry was suffering from the effects of a fragile housing market, and competition was extremely tough. Over the past 2 years, Lowe’s has had to evolve their every day low price strategy to compete with increasingly-promotional Home Depot. With their presentation to the board looming in three months, Mr. Stone and Mr. Bridgeford had to consider Lowe’s heritage, evaluate their data, and finalize a strategy that could continue Lowe’s aggressive growth for years to come. The case presents a thorough analysis of Lowe’s history and current internal and external environment, and explores price strategy and tactics in the retail universe and the home improvement segment. Home Depot’s business and price platform is discussed in-depth, and related competitors are highlighted. The case evaluates the three home improvement customer segments, and their impact on industry behavior, and price strategy and execution by Lowe’s and Home Depot. Critical success factors in the industry are discussed, and short and long-term external environment forecasts are provided.
SPECTRUM BRANDS: THE DIVERSIFICATION OF RAYOVAC BATTERIES
The case is written in such a way that helps students evaluate Safeway’s competitive strategies. Students should realize that supermarket shoppers were divided into two broad categories, price shoppers and high-end shoppers, and Safeway operated in the middle. Students should also realize that Safeway’s performance under Burd was sustained by several strategies that included: the introduction of private labels and “preferred shoppers” programs, the revamping of the chains product line, the remodeling and revitalization of Safeway’s stores, the introduction of the two-tier wage and benefit schemes, and the implementation of employees buyout plans.
The case discusses the single most important development in the grocery industry in recent years: Wal-Mart’s entry into the industry –by means of large retail outlets which combined the sale of grocery and non-grocery items (“supercenters”) -- and its impact on one of the nation’s leading supermarket chains, Safeway. The case focuses on a variety of strategies undertaken by Safeway’s CEO Steve Burd during his 14-year tenure (1993-2007) to combat Wal-Mart. It analyzes Safeway’s successes and failures under Burd’s leadership, and compares Safeway’s experience with that of other traditional chains such as Kruger, Albertson, and Whole Foods. Would Safeway manage to slow down Wal-Mart in California, its largest market?
THE SAS INSTITUTE AND SAS INTERNATIONAL
The case should enable students to: (1) assess the relatedness of diversified companies. (2) Analyze the strategic fit of acquisitions. (3) Compare strategic business units for contribution to the corporation. (4) Calculate financial benefits of the business portfolio of a diversified company. (5) Recommend steps for improving corporate performance. The case writers developed the case for undergraduate and graduate courses in Strategic Management.
Our suggestion for assignment is: You should examine the attractiveness of the industries Spectrum competes in and the competitive strength of its product divisions. You should also evaluate the strategic fit of each of Spectrum’s major acquisitions. You should also provide a list of recommendations that will grow the company while increasing the profitability over the next five years.
For nearly 100 years, Rayovac maintained a single business strategy keyed to the manufacture and sale of dry cell batteries and battery-operated flashlights. The company had undergone a number of ownership changes since its founding in 1906 and eventually became a public company in 1997. Rayovac found itself in a highly competitive industry with eroding brand equity and little success in sustaining growth in revenues or earnings. In 2003, the company’s chief managers set about transforming the company into a broadly diversified consumer products company capable of delivering higher returns to its shareholders.
Rayovac first diversified outside the battery industry in September 2003 with the purchase of Remington Products--the maker of lower-priced electric shavers and electric personal care products like hair dryers and curling irons. Pleased with the success of its corporate strategy, Rayovac management executed a $1.2 billion merger with United Industries Corporation in February 2005. United Industries businesses included pet supplies, lawn & garden products, insect sprays, and first aid products. Rayovac supplemented its new pet supplies business in April 2005 with the $536 million acquisition of Tetra Holdings—the worldwide leader in fish foods and aquarium supplies. The company changed its name to Spectrum Brands in May 2006 to better reflect its status as a conglomerate. By January 2007, the company’s investors were still hoping signs of substantial improvements in financial performance and clear guidance on the future direction of the company.
TRANSFORMING AN IRISH DAIRY COOPERATIVE: DAIRYGOLD CO-OPERATIVE SOCIETY LTD.
Students are introduced to the complexities of controlling a software firm’s internationalization process 25 years after it was launched using a singular hybrid franchising model. They must decide (1) if the firm should recentralize for greater control, (2) how to increase this control or integrate the subsidiaries into a more global management of the firm’s brand equity, (3) how to homogenize product delivery worldwide, (4) what should be the role of the US headquarters in this homogenization effort? The case should enable students to (1) understand the building of a business idea into a mature business model, (2) understand some of the motivations of an entrepreneur, (3) evaluate the choices of internationalization modes, and (4) understand the need for local responsiveness versus global integration in internationalization strategy.
The case opens with Jim Goodnight, founder and CEO, preparing for a meeting of his Executive Committee where they will discuss above all the international structure of the organization and the firm’s future evolution. He sits down to review in his mind the history of his firm. In this review, the case covers the background on the firm, Jim Goodnight’s personal history, the firm’s business model, including discussion of its pricing model, its focus on long-term customer and employee relationships, its management style, the evolution of its product range in line with the evolving business landscape, and the accompanying cultural changes. Then the case moves on to describe the two major kinds of competitors the firm is facing in 2006, niche players and generalists. The purpose of this section is to point out the challenges it faces, despite its very solid positioning as a supplier to Fortune 500 firms, in creating a brand identity to match identities like those of Microsoft, Oracle and SAP.
A major focus of the case has to do with the unusual internationalization model the firm has used. Internationalization was started very early by this start-up firm and has generated a federation of rather independent subsidiaries that are generating considerable revenue. The case ends with a description of the global branding campaign led by the American headquarters, the purpose of which is to create real brand equity globally, but which also raises the issue of the extent of independence that the international subsidiaries enjoy.
WHAT’S NEXT FOR AT&T? STRATEGIC DIRECTION AFTER THE BELLSOUTH ACQUISITION
After three years of rationalization and restructuring, Jerry Henchy and the Board of Directors of the Dairygold Cooperative needed to decide (1) whether to retain the organization as a “pure” cooperative, (2) spin-off the entire organization into a publicly-owned corporation, or (3) maintain a “core” cooperative enterprise that encompassed its more traditional dairy activities and spin-off its “non-core” activities (like consumer foods, real estate development, and retail stores) into a publicly-owned corporation
The case should enable students to: (1) develop an understanding of the structure of cooperative organizations, (2) identify and evaluate the differences in organizational structure between cooperative organizations and publicly-owned corporations, (3) evaluate the fiduciary and social responsibilities of the management and board of directors of a cooperative enterprise.
By the end of 2005, Dairygold, a dairy cooperative based in County Cork, Ireland, had already undergone nearly three years of cathartic change. During this time new chief executive officer Jerry Henchy had relentlessly pursued an approach summed up in his mantra of "fix it, sell it, outsource it, or exit". Consequently, Dairygold exited the red meat and liquid milk businesses, outsourced its yogurt production and transport operations, consolidated its administrative staff, and eliminated over 1,400 jobs. Now that the bloodletting was over, and Dairygold’s operations were on a more competitive footing, Henchy and Dairygold’s Board were ready to tackle the emotional question of Dairygold’s status as a cooperative organization. The firm was already in the process of dividing its businesses into “core” and “non-core” business units. Was the cooperative structure optimal for some or all of these new business units, or would conversion to a for-profit publicly-owned corporation provide important advantages?
Henchy had two fundamental commitments. The first was to help Dairygold’s dairy farmer-members sustain a viable livelihood on the farm, and the second was to utilize all of the organization’s assets (built up over nearly 100 years as a cooperative organization) to generate additional financial returns that would enhance and augment the incomes of their farmer-members. Whatever organizational form Henchy chose would have to provide optimal opportunities to meet these commitments.
This case should enable students to: (1) Understand the forces of change that are reshaping the business environment for companies in the telecommunications industry in the twenty-first century. (2) Understand the use of mergers & acquisitions to improve a firm’s strategic position. (3) Compare and contrast the advantages and disadvantages of possible acquisitions and evaluate their ability to create a sustained competitive advantage. (4) Develop and evaluate future strategies for AT&T. This case was developed for use in undergraduate and graduate strategic management courses. It should be positioned in the course after corporate level strategy topics have been presented.
AT&T relied upon a strategic growth plan of acquisitions over the 16 years which ended in 2007, resulting in the firm’s development as an integrated service provider that operated on a national scale as one of the largest communication providers in the United States. AT&T’s strategic direction was developed to successfully position the firm to provide continued value to customers as well as shareholders within the continuously evolving telecommunications industry. Although AT&T CEO, Ed Whitacre seemed content with the firm’s strategic portfolio following the 2006 acquisition of BellSouth, he also hinted that future acquisitions were possible—to allow for international expansion or perhaps product extensions into markets such as satellite television or internet content. Further expansion into the national telecommunications market was also a possibility.
This case reviews AT&T’s history as a monopoly, through divestiture and back to an integrated telecommunications giant in 2007 providing local telephone access, internet access through dial up or broadband, wireless communications and video access. Dominant economic factors and driving forces of the telecommunications industry are examined to provide a basis for understanding the competitive climate AT&T operated in during 2006 and 2007. These factors provide students with the insight needed to evaluate seven specific acquisition opportunities within the international, satellite, content, and national markets.
AN IRB’S VERSION OF INFORMED CONSENT IN CASE RESEARCH: HELP OR HINDRANCE?
RESEARCH NOTES: THE MPRD CASE-STUDY DESIGN: PROGRESS, FRUSTRATIONS, AND LESSONS
Institutional Review Boards, or IRBs, have been mandated by the Department of Health and Human Services since 1981 in order to protect any human subjects involved in research that is funded by the federal government (Marshall, 2003). Many universities and colleges, both private and public, that receive federal funding have therefore instituted review boards to review research proposed by their faculty members. While many academics associate IRBs with review of research in the clinical sciences, such as medicine and bio-medical engineering, the purview of IRBs has expanded to include qualitative research, such as narratives, ethnographies and case research (American Anthropological Association, 2006; Dougherty and Kramer, 2005) . While many education institutions have established IRBs, and others have IRBs that are just in developing stages, the author suggests that research organizations like NACRA can inform IRBs of appropriate options with regard to case research and informed consent. The question is: What “form” should informed consent take in the process of case research?
This paper briefly discusses the purpose and development of Institutional Review Boards. This paper explores recent developments in and responses to the use of IRB rules concerning informed consent for social science disciplines when researchers are employing qualitative research methods. It explores the use of the informed consent form as it relates to the social sciences and case research in particular. The paper also describes the problems encountered by two experienced case writers as they used the new IRB-sanctioned “informed consent” form created by their university in case research field interviews with public officials and private individuals. Based on the researchers’ experience, the author suggests that the use of a complex IRB-sanctioned consent form has negative implications for the research methodology used in case research studies and that a less complex, modified consent form may be more effective. Finally, this paper makes broader suggestions for a formal position statement by the North American Case Research Association with regard to IRB-sanctioned informed consent. By taking a specific position on the “form” of informed consent, NACRA would be in the company of other social science organizations such as the American Anthropological Association and the American Sociological Association.
This paper describes the research design, initial results, and ultimate failure of a longitudinal multi-paradigm case-study (MPRD). In the original research proposal MPRD was seen as a response to calls for more relevant strategic management (aka “Business Policy,” and “Business Strategies”) theories. The argument was that theory had become estranged from “real world” business practices; the result was a decline in relevance of theory to both the practice of management and application to the classroom. Second, MPRD was intended to “go beyond” the “mixed method” (MM). The argument was that while MM techniques certainly improved the case-study, it captured complexity only along a single dimension: the ontological distinctions of subjectivist and objectivist realities. In contrast, MPRD captures reality along the three incommensurate dimensions identified by Burrell and Morgan (79) and Hassard (91): ontological, praxeological, and epistemological. MPRD was designed and tested during a two-year on-site investigation of a small, highly localized proprietary-brand soft-drink bottler. MPRD was expected to support theory development, however, while the research generated internally consistent paradigm-specific descriptions of “messy and complex reality,” it failed to generate novel theory. The author examines two possible causes of the failure. First, (a) the interview (primary data collection mechanism) was designed in “the naïve interview” format; the result was interviewee’s stream-of-consciousness; (b) in contrast to the “long interview” design (i) interviewer was virtually invisible; (ii) “observation,” archival and literature followed (rather than preceded) each of the 48 three-hour interview with the key informant. Second, the recursive nature of data collection process created an “over-determined” bias in the results: method created a self-organizing logic. Indeed, MPRD supported a logically consistent explanation of “pastness,” although a re-visit to the research site two years later established that a more accurate explanation of the firm’s strategic rigidity would have been “family conflict.”
FAR FROM HOME: AFGHAN REFUGEE
Finance & Economics
INCIDENT IN ROOM 322: THE CASE OF THE PURLOINED EXCEL® FILE
This case is for use in a graduate course designed for future school administrators. The course requires participants to confront school issues, which will force them to interface with other community agencies. The case is designed to develop school leaders problem solving and collaboration skills. In class, it is used with chapters on decision making, community partnerships, and, organizational change. Additionally, students examine the struggles that immigrant/refugee children and their families experience prior to re-settling in the United States, as well as the challenges they bring with them to the community and schools. Students are required to analyze whether current political and NGO practices sufficiently address the needs of the immigrant, especially refugees. Hence, it could also be used in a course offered by sociology or criminal justice. This case was developed from an interview with a graduate student enrolled in the course “School, community and family relations”, who was confronting this particular challenge in her inner city middle school.
An urban school system has been working with a refugee family from Afghanistan who ultimately immigrated to the United States in their effort to escape the terrorist acts of the Taliban. In their homeland, the family was considered to be of very high socioeconomic status as the father was a General in the Afghan army. Unfortunately, because of his occupation and reputation, he was targeted by the Taliban and beheaded in front of his wife and children. The mother took her son and four daughters and fled the country, first to Moscow, then to the U.S. where, with the help of Catholic Charities, they settled in Leominster.During the 2006-2007academic year, the administrative team at Leominster Middle School was confronted with the dilemma of how to address the behaviors of the son, who due to his size was placed in the 8th grade. The student had been in a special education program during elementary grades, much to the dismay of the mother. However, in the middle school Ian exhibited signs of PTSD, poor academic performance, gang involvement, and, was threatening other students and faculty/staff. According to one administrator, the school used “many, many strategies-- mentoring, small group instruction, social skills training (role play), wraparound, after school programming.... all to no avail.... his affect remained FLAT, FLAT, FLAT!!! What else can we do??”
MANGO (A): THE MAKING OF & MANGO (B): GOING TO NACRA?
A university faculty member has discovered a complex case of academic dishonesty involving an Excel spreadsheet solution which was stolen from the instructor’s computer during a laboratory class in managerial accounting. The professor must decide a range of issues, including the relative guilt or innocence of 5 students, the penalty appropriate for each student, and whether to handle the matter “quietly” [which is the faculty member’s prerogative under university policy], or to go through official proceedings, which would involve considerable time and effort. The core issues in the case are  dealing with matters of academic dishonesty when multiple students are involved in the same incident, and  the trade-offs between settling “out of court” or going through the official procedures of a hearing. The case encourages the identification of appropriate practices in dealing with suspected academic dishonesty. It highlights the internal struggle which most faculty go through in making decisions in these matters. Finally, students identify the criteria to be used in making a decision about penalties and the role that those criteria play in a decision.
Paula Davidson, a professor at Fairbanks University, has discovered that a student has somehow obtained a copy of her spreadsheet solution to a major assignment. Initially it is unclear how many students are involved, but by the end of the case, five students have admitted to benefiting from access to the file. Davidson is uncertain how to deal with the situation. Under university policy, she has considerable flexibility in determining what penalty should be assessed and how the entire matter should be handled. A number of questions arise as Davidson ponders what to do. Are all five students equally guilty? Given the nature of the offense, what penalties should be assessed? Should she settle the matter informally or go through official channels?
STRATEGIC PLANNING FOR THE NEXT CENTURY AT A UNIVERSITY
The case studies “Mango (A): The Making Of” and “Mango (B): Going to NACRA?” were designed to be used in seminars for training faculty members in writing case studies on various management disciplines. They describe the challenges and the issues that the author went through in writing his case study “Mango: The US Market”, recipient of the Ruth Greene Memorial Case Award for the best case presented by an author from outside the US and Canada at the 2004 NACRA annual meeting held in Sedona (Arizona) The target audience is faculty members who use case studies in class and are interested in learning how to write their own cases, or how to improve their case writing skills, if they already have some experience in this area. The main purpose of these two cases is to help faculty members improve their case writing skills. The specific teaching objectives are: to address the importance of producing decision-focus case studies; to identify a case lead; to illustrate how important it is, in the writing process, to properly define the pedagogical objectives of a case study; to develop the main outline of a case study and its opening paragraph; and to motivate faculty members to publish their cases.
In “Mango (A): The Making Of”, Josep Franch, Associate Professor in Marketing at ESADE (Barcelona), was considering writing a case study on Mango, a leading Spanish company in the garment industry. After collecting a lot of secondary information and a company visit where he had the chance to meet different company managers, Franch was still doubtful as to which approach he should take with the case and what the main issues of that case study should be. And he needed to make a decision. In “Mango (B): Going to NACRA?”, Franch had already written his case study on Mango, dealing with the challenges the company was facing in November 2001, when considering entering the US market, the largest clothing market, which presented several entry barriers. The case had been successfully used in class with different groups, when Franch decided to submit it to the 2004 NACRA annual meeting to be held in Sedona (Arizona) in October that year. The case was accepted and one of the blind reviews was indeed very good, but the other one was really very bad. After receiving such a bad review, Franch was seriously considering whether to attend NACRA or not.
THE PARKING DILEMMA: A UNIVERSITY ADMINISTRATOR’S SCARIEST NIGHTMARE
This case is appropriate for use in the undergraduate or MBA organizational behavior class. It deals with issues of communication, power and organizational planning and change. This case is appropriate for teaching topics related to individual behavior in organizational context. Specifically, it provides a good description of organizational communication, power and the challenges of coordinated action. It shows how organizational structure that is designed to facilitate organized action can actually become a barrier to individual participation. A strategic planning meeting designed to involve wide participation can lead to wide-spread alienation if the process by which the meeting is organized is not perceived to be participatory. The case illustrates the challenges of conducting any large scale organizational initiative involving a large number of people. Power, communication and leadership topics are some that are relevant for this case.
This case showcases a piece of the strategic planning process at the University of Redondo, at the time that it is celebrating its centennial year. The new President of the University, Dr. Stuart Dreamy, has brought in an outside consultant, K. Kliendorfer, with whom he has worked in the past at his previous job, to facilitate the strategic planning process to plan for the next century. A series of four hour long meetings over a period of one week have been setup by the consultant. all faculty, staff and students are asked to sign p to participate in these meetings by the VP of Finance, Phil Dole, who sends a mass e-mail. Very few faculty sign up to participate. Concerned about this poor participation, Phil dole sends out reminders to the faculty, as well as calls the various faculty leaders within the university and asks them to participate and encourage their faculty to join the process. The case provides the detailed e-mail exchanges amongst faculty about the process, the consultant and their concerns about participating in the process. Leadership, power and communication related issues are highlighted by this descriptive case.
This case is for use in undergraduate management principles or organizational behavior courses. It could be used with chapters on decision making or organizational change. This case was developed from an interview with Bill Mathews as well as publicly available documents obtained through Samford University’s web site. This case is designed to assist students in developing their critical thinking skills. Additionally, students should see the difficulty in satisfying multiple organizational stakeholders and constituents while simultaneously addressing the needs of the organization.
At the beginning of the Fall 2005 semester, Samford University’s Vice President for Business Affairs and University Council, Bill Mathews looked anxiously at the campus map that lay across his desk. He knew how many employees the University had and how many students were attending the University, what he did not know was how all of these people were going to find a place to park when all internal studies and reports showed that there was a significant shortage of parking spaces.
As Mathews began to consider ways that the University could relieve its parking crunch, he realized that this problem did not arise overnight and that it could not be solved overnight either. Even with this realization, Bill knew that the University had to act to relieve the parking problem using both short term and long term solutions.
BOEING CAPITAL CORPORATION: FIXING THE LEASING OPERATION
GRIFFIN LUMBER COMPANY: RESOLUTION OF THE SOFTWOOD LUMBER DISPUTE?
The case investigates aircraft leasing from the standpoint of one of the largest aircraft lessors, Boeing Capital Corporation (BCC). It allows students to evaluate the risk and return of leasing alternatives and structure a lease in an international context that accounts for quantitative and qualitative factors. The case is written for MBA and upper level undergraduate courses such as Financial Management, Financial Strategy and International Finance.
Boeing Capital Corporation (BCC) was the leasing and financing business of the Boeing Company. The new President of BCC was appointed in 2003 to overhaul the financing operation, to implement a new mission and to manage risk more effectively. Typical of the many problems he encountered was a lease of several Boeing MD-11 passenger airplanes to a South American flagship carrier that in 2006 was in default and had filed for bankruptcy protection. While BCC worked to improve risk management policies and procedures, it simultaneously had to address the MD-11 mess. Repossessing planes from a national flagship carrier in a South American country where the bankruptcy judge was not sympathetic was just part of the problem. Once BCC gained access to the planes located several thousand miles away on foreign soil, they found them in terrible disrepair.
If BCC could legally and physically get the planes returned to them, they envisioned several courses of action. By 2006 the market for aircraft had crawled out of the depression following the 9-11 terrorist attacks. Consequently, one alternative was to refurbish them and re-lease them as passenger aircraft. A second alternative was to modify them as freighters and lease them to a Russian customer who was interested in a deal. The choice would have to be consistent with BCC’s new mission and make the most strategic and economic sense as well.
The next steps were to decide which alternative was best and to structure a lease. The lease would have to be priced to cover all of BCC’s costs including its required rate of return on investment. Furthermore, it would have to be structured to minimize BCC’s risk exposure.
PHYSICAL THERAPIES COMPANIES CASE: BUY AND BUILD
The case examines small business, entrepreneurial decision-making in a mature small business with a challenging environment, due to US import duties and changing foreign exchange. It gives an opportunity for students to analyse alternatives, which may include using financial statement forecasting. Exposure to international exchange rates is also a potential topic. In a wider context, this case provides an opportunity to discuss rights and obligations of nations and the incentives for businesses and governments under trade agreements such as NAFTA. Comparing international trade economic theory and actual practices shows the complexity of real world situations. Students can examine the events unfolding during the softwood lumber dispute from various perspectives. The case can be used in intermediate to advanced undergraduate or MBA courses in financial management, small business finance, and entrepreneurship. It can also be used in an international business or trade course in business or Economics at either undergraduate or master’s levels.
Brian Caldwell is an experienced owner of a group of small businesses that share management and financing. In early August 2006, Brian is trying to decide what to do with Griffin Lumber, one of his firms. Griffin is a small, secondary forest products firm that cuts first quality lengths from longer second quality boards purchased from primary producers. Resulting high value first quality products are exported to the United States for use in the construction industry. Second quality boards are sold for pallet construction in Canada and the US. The recent softwood lumber dispute between companies and governments has resulted in high duties on Canadian lumber exports to the US. Many Canadian lumber companies have closed unprofitable sawmills, creating higher unemployment. While waiting for as settlement through NAFTA appeals, Canadian softwood lumber companies have had to find financing to survive with losses for an extended period. A further market stress has been an unfavourable shift in the Canada/US exchange rate. These effects have had a very severe effect on Griffin’s profitability. Brian needs to estimate his 2006 profit and cash position under alternative duty rebate percentages. He also has to consider his “steady state” operations for the future, and decide whether to continue in business or to exit the business permanently.
The case has several major objectives for student learning opportunities: 1) to investigate the physical therapy (PT) industry for a potential investment opportunity by a private equity fund, 2) to analyze various financial accounting adjustments for their impacts on reported earnings, financial condition, cash flows and business valuation of two PT companies, 3) to assess benchmarking comparisons in order to help develop strategies and synergies for growing these two PT companies efficiently , 4) to construct pro-forma earnings and free cash flows for business valuation purposes, 5) to understand the “buy and build” or “invest and divest” strategy that makes many private equity funds very successful, lucrative, and attractive employment opportunities, and 6) to apply various business valuation methods and deal structures for this PT investment opportunity in order to understand their impacts on net proceeds for the General and Limited Partners of a private equity fund. This case is intended for senior undergraduate and advanced graduate courses in finance and accounting where financial statement analysis and business valuation topics are taught.
This is a decision based case written from the point of view of a private equity fund General Partner who must recommend to his other General Partners whether their private equity fund should acquire two physical therapy (PT) companies in order to develop them for subsequent sale to a larger private equity fund, i.e., the “buy and build” or “invest and divest” investment strategy. This investment strategy can also be summarized as arbitrage: buy at lower multiples of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), or other valuation metrics, and sell at higher multiples. The typical investment holding period is three to five years. For the last several months, this General Partner has been involved in the “due diligence” process of gathering information about this potential PT companies acquisition. For financial accounting analysis and forecasting assistance, he has engaged consultants from one of the “Big Four” CPA firms. He is now reviewing their report as well as investment bankers’ prospectus on these two PT firms and financial analysts’ reports on the PT industry. He must make a recommendation concerning this PT investment opportunity at the upcoming General Partners meeting in early 2006.
THE BATTLE FOR CORTEFIEL
An entrepreneur is evaluating his growth objective in the nascent Indian wine market. Supporting his firm’s expected growth in this rapidly expanding environment will require significant expansion of assets and their financing. The firm has relatively modest earnings and cash flow margins, thus requiring external financing if rapid growth is to be sustained.
The case should enable students to develop an appreciation for the significant challenge facing the management of Sula. Financial analysis of the firm’s position over the last five years will contribute to their understanding of these challenges. Working capital analysis and management are critical to the efficient operations of the firm, historically and in the future. Financial forecasting will enable students to ascertain asset needs that support different growth rates in sales and market share. An optimum capital structure plan for the firm will contribute to its success. The case is targeted towards courses in finance and entrepreneurship in an MBA program.
The Sula Vineyards case provides students with an opportunity to learn about the growth of the Indian wine industry in its early years of development. They may observe how the internationalization of the Indian economy has contributed to the changing tastes and preferences of consumers with respect to the wine segment of the broader beverage marketplace.
A strong contributing factor to growth of the industry has been the entrepreneurial efforts of individuals like Rajeev Samant, a native of India who studied at Stanford, worked for Oracle and returned to his homeland to create a firm that has spearheaded wine consumption and production in India over the last decade.
Mr. Samant is now faced with the challenge of financing his firm as it seeks to grow with industry demand. Currently, in mid 2007, management is considering how fast to grow over the next five years, and how funds should be obtained to support these strategic plans. He has already used a private equity investment to supplement his firm's capital, since low profit margins do not supply all the funds needed to support his capital intensive expansion plans.
THE CASE OF PRUDENTIAL INSURANCE COMPANY’S OPTIMAL ENTRY STRATEGY TO CHINA
This case study aims to illustrate the various factors that have to be taken into account in this type of acquisition by a venture capital fund. More specifically, it describes how value can be created in a company by improving aspects of its operations and how the take-over is financed. The case study is aimed at post-graduate students taking the Financial Management II course, looking at the topic of leveraged buy-outs. It could also be used in seminars on corporate finance or valuation.
In July 2005 Javier de Jaime had to make a decision. As the Managing Director of the venture capital fund CVC he had to decide, along with his executive team, whether to raise the price at which they were offering to buy the company Cortefiel, a leading Spanish clothes retailer. Specifically, he had to decide whether to maintain the price at 17.9 euros per share and allow their competitors to outbid them by ten per cent, thereby losing the support of the family group that owned the majority shareholding, or whether to follow the family’s recommendations and raise their offer to 19.30 euros a share. This case study describes the process of the sale of Cortefiel between February and July 2005 in detail. During the process two take-over bids were made, led by two different venture capital funds each with the aim of buying all the company's shares.
THE GREEN DUPLEX: INVESTING SUSTAINABLY OR TILTING AT WINDMILLS
Prudential considers China a potential market for future growth. The learning objective is to immerse students in the culture of the far-east, and to combine their knowledge of economics, statistics, accounting, finance or capital budgeting and international marketing to suggest the appropriate strategy for Prudential. There is no pre-determined solution. Students must use the knowledge and resources at their command to write a “realistic” solution to the international business decisions faced by Prudential. Students will subsequently be required to present and defend such findings to a panel of experts composed of university professors. The case is structured for use as a teaching tool in a MBA course in Business & Policy Strategy, Economics, Accounting or Finance.
In this case the Prudential Insurance Company (PIC) is searching for a strategy to introduce its insurance policies into China. Students must recommend a strategy to PIC management, based on three or possibly four strategies assuming an initial investment of $100 million. The joint venture approach has always been an option for Prudential. Although Prudential had always preferred 100% ownership, the joint venture model is still one of its potential entry strategies in China. If Prudential does pursue the joint venture approach, it needs to first find an appropriate partner and further examine an appropriate business model – a Life Planner operation or a traditional business model. The second possibility is an equity investment in an existing Chinese company. If students select this approach, they will need to suggest a state-owned Chinese company for the PIC investment. A third option: investing in a new domestic entrant is also a possibility. The Chinese insurance regulators have given licenses to eight China-based life insurance start-ups. One prerequisite to start this type of operation is to find a foreign strategic investor. Prudential is well sought after by these new domestic entrants due to its well known name in the industry.
This case was written for use in either a real estate investment course or a course in financial planning, at either the undergraduate or MBA level. In the context of a real estate course, it could be used to consider how to analyze the merits of investing in green projects. In the context of a financial planning course, the case could be used to help students understand how to advise their future clients who may want to diversify their investment portfolios beyond traditional stock/bond choices into rental real estate. It would also be suitable for use in a course on social entrepreneurship.
Generally, the case provides students with an opportunity to consider the economics of investment in rental property. It requires them to evaluate the financial return associated with green versus non-green investment, and forces students to consider whether an investor should be willing to forgo some return in order to make a project green. The case allows students to consider how to value a real estate investment given multiple investor objectives, as well as how to market and price unique real estate properties. Finally, the case presents students with a common challenge facing green developers – deciding what materials and methods are most green and whether or not these methods are worth the additional expense associated with them.
Sean McFarland, an emergency room doctor, has recently decided to invest in rental properties. After buying two duplexes in the last year, Sean has decided to build a “green” duplex – one that uses materials and methods intended to minimize the environmental impact of the building. Sean has purchased a lot to build on, and has been working with a builder on the design for the duplex. Sean recently received an updated cost estimate from the builder, and it came in 35% higher than the original estimate. Sean is considering whether or not the project still makes sense given this increased cost estimate and uncertainty about how much he can rent the units for once they are completed. Sean is trying to figure out what type of return the project will produce compared to equivalent, non-green investments, how he might reduce the cost of the duplex to improve the return without sacrificing the ‘greenness’ of the project, and whether or not he should proceed with the project at all. Uncertainty about how much rent the green duplex can generate, ambiguity about which design elements are most important from the standpoint of building green, and the existence of multiple goals for the project all make the decision of what to do more difficult for Sean.
CULTURE, MOTIVATION, AND CHANGE, OH MY: A CASE STUDY AT THE TOLEDO ZOO
ELLEN ZANE: LEADING CHANGE AT TUFTS/NEW ENGLAND MEDICAL CENTER
An executive director of nationally renowned zoo has been in the job for almost a year. During this time, she has begun to face the major challenge of addressing employee dissatisfaction, decreasing employee motivation and a lack of strategic focus of the organization. The case allows students to focus their attention on how to develop effective goals, as well as the role of employee involvement as it relates to goal setting. In addition, students will be able to recommend actions for the executive director to facilitate a successful planned change process. The case was developed for the use in undergraduate management, leadership, and organization development courses.
This is a case study of the Toledo Zoo over a 6 year period of time. The award winning Zoo has had an exceptionally successful track record based on public attendance and on recognition from professional associations. Beginning in 2001 with the death of a Zoo animal and followed by the firing of the Zoo veterinarian in 2004, the Zoo undertook an employee survey as a means to address the poor morale that had developed as a result of these events. Outcomes of the survey indicated that although there were items that were perceived of as favorable by the employees, a large percentage of the employees were not satisfied with communication and leadership/management. In 2006, a new executive director was hired. Part of the expectations for her leadership include motivating the employees and increasing the effectiveness of the Zoo. The focus of this study is on understanding goal setting theory and the use of a culture survey as a diagnostic tool to support planned change.
JOHNNETTA COLE: LEADERSHIP FOR A NEW ERA AT BENNETT COLLEGE FOR WOMEN
In January 2004 Ellen Zane, CEO, arrived at the Tufts/New England Medical Center (Tufts/NEMC), Boston MA, to lead a turnaround of the financially beleaguered hospital. Approximately 18 months into her tenure, Zane described the turnaround as “fragile” and continued to face numerous strategic and organizational decisions.
This case should enable students to: 1) Identify environmental forces that pushed Tufts/NEMC into the failed merger with Lifespan; 2) Articulate the steps that Zane took in her first six months to lead the turnaround; 3) Identify the structural and cultural organizational changes needed to implement operational changes; 4) Recommend a set of future actions for Zane; and 5) Examine Zane’s career risks and rewards of leading a turnaround.
In the 1980s, the healthcare environment in Massachusetts and the nation changed dramatically. In the early 1990s in a bold move to contain rising hospital costs, a group of Boston leaders merged the Harvard Medical School’s affiliated Massachusetts General Hospital and Brigham & Women’s Hospital under Partners Healthcare Inc. This move in the Boston healthcare market left hospitals such Tufts/NEMC, the primary teaching hospital of Tufts University Medical School, isolated. In 1997, Tufts/NEMC affiliated with a Rhode Island hospital group. Five years later and at a “divorce” cost of $30 million to Tufts/NEMC, the merger was dissolved. Desperate to save the hospital, Tufts University’s president recruited a highly successful hospital administrator, Ellen Zane, to turn around Tufts/NEMC.
In January, 2004, Zane became CEO. The hospital was losing approximately $6 million/month. Because of the merger and then divestiture, there had been a brain drain of administrative personnel. The list of problems went on-and-on. How could she learn quickly and accurately the depth of the problems? Once she had diagnosed the issues, which ones should she attack first? How should she build her executive team? How should she reach out and communicate to the hospital’s 5000 employees who worked 24/7? What should she say to physicians who often had attractive opportunities locally and nationally? How could Zane keep these physicians at Tufts/NEMC and ask them to change how their practiced medicine in order to reduce costs? Zane routinely rose at 4:30 am to tackle the hospital’s numerous problems.
POWER COMPANIES MERGE: HR DECISIONS
Dr. Cole must decide whether she still has the energy, but most of all the leadership ability and interest to tackle the issues facing Bennett college for Women. She must make immediate decisions on urgent issues such as 1. Stop the exodus of students who found the environment unbearable. 2. Identify sources for the much needed funds.3. Restructure the institution and hire new personnel, and 4. Work with the board of Trustees to rebuild the image of the College.
The case should enable the students to 1. Assess management issues in a non-profit organization such as a College.2. Analyze leadership skills and decision making processes. 3. Identify the risks facing an entrepreneurial leader even in a non-profit organization. 4. Assess the potential viability of operating a failing organization and discuss the ethical responsibilities and implications involved.5. Discuss potential restructuring strategies for the organization. The case is developed for both graduate and executive seminar courses in Education, organizational Behavior and theory, Leadership and governance.
At the invitation of the board of Trustees, Dr. J. Cole agreed to come out of retirement and become the fourteenth president of Bennett College in June 2002. She described the soul-searching process leading to her decision to take the challenge as a “calling”. She believed that in the process she realized that “It’s one thing to know you should do something, It’s another to want to do it”. However, following discussions with some trusted friends, she made her decision, describing her performance at Spelman as a good job, but looking at the possibility of saving Bennett as a “Legacy”.
Dr. Cole who had retired at Spelman in 1997 had no illusions about the challenges she faced. A tour of the campus, the news coverage and conversations with students highlighted Bennett’s critical condition. Even with this preparation, her self-directed tour of the campus caused her to stop and reconsider the magnitude of the challenges she is undertaking.
THE DISOBEDIENCE OF ARMY LIEUTENANT EHREN WATADA
Two power companies are merging into one state-wide utility, based on market pressures and company needs for capital for expansion. Issues that are important here are 1). Change must be planned and executed with regard to legal and organizational cultural issues 2). What difference does it make when the VP is not selected for the new company? 4). What possible legal challenges to the reorganization can occur if this is not implemented smoothly 5). Older workers are more likely to not be selected. The case aims to enable students to discuss 1). Minority and female roles in the workplace 2). The role of consultants in advising companies in reorganization 3). Who holds the power in a merger situation, which is usually the company with the deep pockets 4). The importance of job specifications and profiles for each position in the new organization 5). What happens to long term employees in this situation? Outplacement, previous records? 6). Importance of severance packets 7). Importance of transparency of the transformation 8). Importance of detail and communications. The case was developed for undergraduate and graduate courses in Human Resource Management, and Consulting.
The VP for HR, Jean Johnson, a black female, is in charge of developing and implementing a plan for the new organization created out of the merger of two power companies, Sunrise and Sunset. Jean has just found out that the consultant who she had picked has left the large HR consulting company, New Dawn, and now she is faced with working with a white male, David Dunkley. She has trepidations on that score, as has David, but both of them want to make this work. They have a detailed restructuring plan and have covered all the bases in order to optimize the success of the new organization and avoid expensive legal challenges to layoffs.
Just as they are beginning the process of reorganization, Jean finds that she has been passed over for the new VP position, so in effect will be out of a job after the merger. What kind of message does this send, and what kind of new organization is there likely to evolve? The culture of the new organization looks like it will now be dominated by the old style, formal reporting lines of Sunset Power, which has the capital to develop the market, while Sunrise, which has a more entrepreneurial and informal culture will not be likely to have such an impression. The case provides the student with several discussion points and shows the importance of a structured approach to resolving the HR issue in a merger situation.
THE STORY OF PETROHUASTECA
This case is still evolving and has great potential for several topics relevant for managers. Values, ethics, the distinction between legal and ethical, conflicts between individual and organizational values and norms, and choices in the face of conflicts and dilemmas, and perhaps even issues of identity (which have not been elaborated in the present version sufficiently, but there are aspects of being a Japanese American Army Officer that play a role in this case). A preliminary list of discussion questions in some of these topic areas is included in this early draft version of the case. More will be added as the case evolves.
This case is appropriate for graduate level courses in organizational behavior and ethics classes. It would be specially useful in an executive classroom with working adults who face conflicts and dilemmas at work as part of their jobs. Use it as an example for topics of values, ethics, distinction between legal and ethical, conflicts between individual and organizational values, and choices in the face of conflicts and dilemmas. It is not appropriate for an undergraduate audience or for a group that does not have maturity to debate beyond the ideological and political biases that this case is likely to bring up for sure. It is also not recommended for a class where the teacher does not have a high level of comfort with his or her own mastery over steering debates productively while using cases, since this one is likely to fuel heated debates.
This case showcases the moral and ethical dilemmas facing an officer in the US Army. While doing research in preparation for his upcoming deployment to the war in Iraq, First Lt. Ehren Watada learnt things that led him to conclude that the war was illegal and immoral. He was not allowed to resign from his position or choose a different role within the army. He faced the dilemma between obeying orders to go into combat or following his conscience and disobeying his superiors. Disobedience had serious consequences: a court martial, upto six years in prison, and dishonorable discharge from service. He sincerely believed that the executive branch of the government was misleading the Military and waging a war that was in violation of the constitution of the country, which he as an army officer, was under oath to protect. He chose to disobey the orders and go public with his position.
UNIVERSITY OF SMALLTOWN: A CASE ON A UNIVERSITY HARASSMENT DILEMMA
The case explores the interconnections between executive team formation and establishing the core principles and values for the culture of a start-up company. The case calls upon literature in executive team formation and culture formation to explore how well the founding principals of Petrohuasteca go about defining their new firm and establishing the core values and principles that will define their business culture. The issue presented is team culture formation with considerations for further culture development. After analysis of this case, students should better understand the role of values in the formation of the culture of a senior executive team, and be able to explain how leaders influence culture formation and embed it in the organization.
This case examines the long term process of how a senior management team formed over a period of seven years. The team’s company was being created in anticipation of opportunities expected to become available in the exploration and production of hydrocarbons in Mexico in late 2007/early 2008. The core characteristics of the new team are the principles and values by which all members of the company will be expected to live and work. Among those principles are a strong commitment to “giving back,” the disdain for organizational politics, absolute honesty and integrity in business relationships, zero tolerance for corruption, sharing knowledge, fostering teamwork and collaboration, employee ownership and financial participation, and finding the right fit between the person’s values and the organization. Now the question is, can the team make it work?
A Human Resource Director of a small Canadian University has received an e-mail from a female professor who is asking for advice as to how to deal with a sexually harassing e-mail and her remaining classes. The e-mail was sent to several other individuals who are higher and lower on the organizational chain, and they have all been responding to the professor. It appears as though the situation might be under control, but the case has two underlying issues: 1) to what extent is the organization responsible for the safety of its employees from clients and what role does HR have in this above and beyond management; 2) to what extent should the organization protect the client and his/her rights to privacy; and 3) what can organizations do to mitigate negative effects of workplace violence, aggression or threats thereof. The case should enable students to: (1) identify and understand the legal considerations and their role in administrative decision making; (2) explore and identify multiple stakeholder considerations in administrative decision making; and (3) learn about leadership, culture, power and perceived organizational support, how they may influence organizational outcomes positively and negatively. The case writer developed the case for undergraduate and graduate courses in Human Resource Management and Organizational Behavior.
It was Monday afternoon on April 3, 2006 and Ms. Melinda Turner, the Human Resource manager of University of Smalltown, was sitting at her desk looking at an e-mail she had received from a faculty member, Dr. Janet Zwarich, and the subsequent e-mail communications between her and various Administrators. In her e-mail, Janet asked for advice and assistance in a harassment case. Janet had received a very harassing sexually-oriented e-mail from an individual who stated he was one of her students, although he was otherwise unidentifiable as he had created a false e-mail address for this purpose. Janet was 7-months pregnant and requested someone to sit in her remaining classes so she may concentrate on doing her job. It was the last week of classes, so Melinda needed to decide what, if anything, she was going to do to respond to Janet’s request. It appeared as though the situation was likely taken care of by the Vice Presidents and the Dean who had been copied on the e-mail; however, none of them had expertise in the Human Resources area. Was there anything she could or should do?
This is a decision case designed for MBA students participating in an organizational behavior, management, human resources, or leadership course. The case provides an opportunity for students to apply motivation and change management theory to a complex, real world situation. The student must analyze the situation, generate alternatives, evaluate alternatives, make decisions and develop a plan of action. This complex situation requires students to take an integrative view considering multiple points of view and competing priorities.
Corin Fiske was recently hired as the Director of News and Public Affairs by WEAA a public radio station licensed and owned by Morgan State University (MSU) in Baltimore, Maryland. For many years educators have run the station as a community service of the University. The station has about 90,000 listeners annually and a state-of-the-art broadcast facility. Over the past five years, the station has suffered from turnover in key positions. A somewhat laissez-faire approach to management has been used at the station. The station has not had a fund raising drive in at least two years and has an operating loss of just over $200,000 annually. Corin has been recruited to help the station grow and achieve its potential. She is an experienced TV reporter and radio show host. She has an entrepreneurial spirit and views herself as a change agent. She has inherited a large staff of 30, mostly volunteers, many of whom have been at the station a long time. Most of the volunteers have no journalism or broadcast experience, other than their work at the station. The quality of the station’s news and talk show programming has suffered from lack of knowledge of public radio broadcast standards and from lack of commitment by some hosts. Since she began working at the station, she has experienced some challenges. Some hosts do not show up on time, come to meetings, or return communications. Recently, a long time host of a popular show resigned, taking the show name and concept with her. She is also in the middle of very frustrating discussions with a talk show host about programming standards. She has been unable to convince him of the importance of presenting balanced points of view. The lack of qualified producers for each show also concerns her. Corin must develop a plan of action to review with her boss as soon as possible. Keywords: motivation, change management, span of control, volunteers, radio station.
BANCO SABADELL: THE REINVENTION OF A BANK
HERBICIDE DAMAGE TRACKING SYSTEM
The primary argument found within this case series is how information systems management can be seen as a core competence within a bank’s strategy. Different aspects of this idea are explored: first, we assess Information Technology (IT) value and its alignment with the firm’s growth strategy; second, we explore project management, power, and political issues; third, IT strategies; and, fourth, the managerial role of the CIO. The case was written for General Management and Senior Executive Programs. However, it can also be used in MBA and Executive MBA degrees in Information Systems Strategy. The case is divided into three parts and includes a 15-minute DVD containing a speech by the bank’s CIO. The video material is in Spanish and subtitled in English. Students are asked to understand project success/failure issues, costs of change and what decisions led to one situation or another and understand the development of a new strategy based on knowledge and new dynamic capabilities founded on IT management that Banco Sabadell has developed through its re-invention.
This case series examines the decision-making process between 2002 and 2006 associated to the implementation of the SIBIS Project within Banco Sabadell. In 1999, the bank discovered that its IT infrastructure was obsolete, jeopardizing its growth strategy based on acquiring other banks. Therefore, the bank launched a major € 140 M. project to change its technological infrastructure and core banking system, engaging approximately 900 people in this process. Case A focuses on the bank’s new Chief Information Officer (CIO). The case describes the dilemma arising from priorities regarding (1) SIBIS Project’s implementation and the integration of the recently acquired Banco Herrero and (2) divergences in outsourcing options for information systems. These problems are related to project management issues in a risky context but most importantly, the strategy and value proposition of information systems within the bank. Case B describes the successful 4-year period after Banco Sabadell management decided to carry on with the SIBIS project and developed PROTEO architecture, and acquired and integrated four more banks, and incrementing business from € 27.000M. to € 73.000M in terms of asset management. The bank also created a heavy weighted team to carry on with bank integrations and also decided to outsource its infrastructure management to IBM, a deal worth €107 M. Case C describes the bank’s first acquisition outside of Spain, TransAtlantic Bank in the USA (2007). The case allows for a final discussion about future challenges and opportunities.
HIGH TECH: HARNESSING THE RIGHT TECHNOLOGY
The case was developed to explore issues in database design and to provide enough detail so that students could develop and implement an educational prototype of the database. It also touches on issues of corporate responsibility and ethics. Further, issues of how database effectiveness can impact the lives of everyday people in the “real world” can also be examined. In a suggested application students are required to use ER modeling to design and develop a relational database. The case is designed such that other modeling approaches, such as OO or REA, can be used.
This case is set in America’s heartland and contains detailed information about agriculture that will be new to most students. It also shows how technology benefits a livelihood that is not considered technical but that is becoming increasingly dependent on technology.
Chemicals designed to help farmers control weeds or insects can sometimes adversely affect the crops that they are intended to help, primarily because certain environmental factors can cause chemicals to react differently in different regions or different soil types. In most cases, there are specific crops that a particular chemical can safely be applied to, and any other crop not listed on the product’s label will be damaged if the chemical contacts the plant. The chemical that brought about this case is a pesticide used to treat wheat. The chemical was designed for use in less arid regions and attached itself to the soil and damaged subsequent rotational crops. The crop most affected was potatoes grown the year following the wheat treatment. Yields were severely reduced and potato quality was extremely poor.
AgConsulting, Ltd. is an agricultural consulting company that contracts to a number of clients to perform efficacy studies used to make crop and farming recommendations. AgConsulting also studies the effectiveness of different types of chemicals on crops, analyzes crop damage, and acts as an expert witness in legal proceedings. In this case the company was hired by an herbicide manufacture that specialized in developing chemicals for agricultural uses. AgConsulting’s task was to determine the extent of damage and help assign a dollar amount to the damage experienced by each grower so they could be compensated fairly. They determined that it would be necessary to design and implement a system to track information for damage claims. The system had to be capable of tracking not only current claims related to this chemical, but all future claims against any products owned and distributed by the manufacturer.
INFORMATION SYSTEMS AND TECHNOLOGY SOLUTIONS FOR SMALL BUSINESSES: THE CASE OF WAKE RADIO INC.
Singapore aims to be the IT in Asia and the government of Singapore has implemented many projects to raise the information literacy level and raise the standard of living of its residents. A new electronic medical record (EMR) system has been implemented at one of the government subsidized health clinics. The effectiveness of the operation at the clinic is affected. The case examines user involvement and exploitation of appropriate technology in a new system implementation.
The case should enable students to: (1) evaluate the importance of user involvement in the system and analysis process. (2) Solicit and effectively analyze the needs and requirements users in a new system. (3) Identify and gather information about the users of the systems (user expertise, language, skills, and background). (4) Utilize the appropriate technology in a given situation. The case writer developed the case for undergraduate and graduate courses in Systems Analysis and Design, and Management of Information Systems.
In February 2007, I accompanied my mother to her doctor’s appointment at a polyclinic in Singapore. The polyclinic has just implemented a new electronic medical record (EMR) system. The new system resulted in a lot of frustrations for some of the doctors and the patients at the polyclinic. The effectiveness of the doctors and the polyclinic is hampered and the satisfaction level of the patients nose-dived.
Implementing a new system is a major endeavor that requires significant input from the users of the system. Failure to obtain the necessary information would affect the successful development and implementation of a new system.
THE OUTDOOR EQUIPMENT MANUFACTURING CO.
The case is designed to provide students and the instructors with an interactive and integrative learning environment. WAKE Radio Inc. is a community based radio station that is affiliated with a historically black university. In the recent past, the radio station has been experiencing financial difficulties that have resulted in declining listeners’ memberships and consequently endowments. In order to solve these problems, the Board of Directors has brought in a new management team. The new management team has been tasked with transforming WAKE radio station through information systems and information technologies (IS/IT) strategies.
The case should enable students to: (1) understand the role of IS/IT in relatively small non-traditional organizations strategic decision-making. (2) Have a clear understanding of the theory of Resource Based View of the firm. (3) Test their understanding of how IS/IT resources contribute towards firms’ competitive advantage. (4) Learn how to align a firm’s IS/IT strategy with the business strategy. (5) Identify the benefits inherent in outsourcing of IS/IT functions. Although this case is based on a radio station, the issues presented here are transferable to most small firms. The case was developed for an undergraduate capstone, and graduate courses in Management Information Systems, Strategic Management Information Systems, and Strategy.
It was a late evening in March 2007, when Dante Jordan, the General Manager of WAKE radio station looked through his office window and was surprised to see snow falling. He must have lost his sense of time as he pored through the radio station’s past financial records finally realizing why the radio station found itself in its present financial crisis. Mr. Dante had been with the radio station for two months during which he realized that the radio station had been experiencing high top-level management turnovers. Additionally, the radio station lacked a business strategy as well as an IS/IT strategy and the little IS/IT function it possessed was being outsourced.
As the General Manager, Mr. Dante had to lead his management team at devising a strategy that would steer the radio station forward by utilizing IS/IT resources and rescue the station from the financial crisis that threatened its very existence.
The consulting team is asked to assist decision makers of a small outdoor equipment manufacturing firm in deciding how to survive a downturn in their business. Based on information provided by a model of the firm which the students build, they are to make recommendations on how to cut costs, organize operations, and use external data to continue operations for years to come. The case challenges students to: construct decision model for (1) either a one time problem solving task to help managers understand the problem at hand, or (2) for continued decision making thereby to build a flexible decision support system. Students are faced with ethical issues regarding human resource management questions as well as community related issues. At any rate, they are to build a DSS model to assist decision making. They are to develop a users’ manual to assist decision makers with the model, to facilitate a group decision making environment where students not only learn about group decision making but also participate in building the tools for decision making, use a modular approach to the decision model that can address local economic circumstances as well as manpower management issues.
The case is based on real life consulting experience. However, the OEMCO name is fictitious as are the names in the case. Most of the data is real though grossly simplified to make it manageable in an advanced undergraduate MIS class. The firm OEMCO was originally based on did survive but subsequently was bought out by another outdoor equipment manufacturer who then moved its operations out of the state. The case is written from the standpoint of a small consulting group. OEMCO has been a successful outdoor equipment manufacturer for several years. However, as a result of unforeseen circumstances recently, financial problems arose which they need to respond to. There is need for both short term response and for long term planning. Principals of OEMCO started the business for love of the sport and have minimal business experience, virtually no knowledge of information technology, and do not have tools to analyze and respond to neither short term problems nor to do long term planning. They appear to have the data but not the technological savvy needed to understand its meaning. Data at OEMCO relevant to the case include financial performance data, some operations management data, basic employee files with a simplified HR/performance/pay model, and some county employment and population data. A DSS model would best serve both student and OEMCO objectives.
AN AMERICAN IN PARIS
BALKAN BUSINESS SCHOOL (BBS) (A)
Management styles typically reflect the cultural from which they evolve. This case is designed to illustrate the differences between management styles in the U.S. and France, and how to become a successful expatriate manager. The case should enable students to: (1) Gain a practical understanding of the French culture (2) Identify the difficulty of transferring management styles cross culturally (3) Learn to identify cultural characteristics which can motivate French nationals (4) Develop a management approach to accomplishing a specific task in a foreign culture. This case is developed for use in either graduate or undergraduate courses in International Business, Comparative Management and Strategic Management.
John Williams, armed with and undergraduate degree in biochemistry, an MBA, several years of managerial experience and proficiency in French, was appointed as the Directuer General of a French medical products company in Paris. The company, Les Medical Equip Direct (LMED), had just entered a partnership with Gene Life, a U.S. firm that had developed an affordable genetic test for type II diabetes. The test kit was tailored to be used by both physicians’ offices and hospitals. LMED had a well-developed sales force throughout France and it also afforded Gene Life an entrée to the French market. Upon arrival in Paris, John was under pressure to not only reduce what Gene Life considered excessive overhead, but also to get the sales personnel adequately trained to competently sell the test kit. Since genetically-based products were a totally new to LMED, training was critical. The time pressures faced by Edwards mandated the cooperation and motivation of both the office and sales staff. His first several months in the Paris office were not as successful as he had hoped. . His MBA from a prestigious American university had not prepared him for the difficulties in managing a work force in a foreign culture. He must determine how to motivate his French management and successfully lead a new product launch in an unknown culture.
GOODRICH AEROSPACE: AN ANALYSIS OF MEXICAN SHELTER MANUFACTURING
The teaching objectives of the case are to enable students to: 1) understand the
Complexities of managing a multi-party foreign joint venture, 2) appreciate the
characteristics of foreign business environments, 3) establish priorities among competing
objectives, 4) evaluate the viability of an international venture, 5) assess programmatic
and organizational alternatives for achieving goals.
The case has a broad range of topics and is well-suited for a course in international business or strategy. The case is complex and therefore most suitable for upper-level undergraduate or graduate courses. Since the case deals with an MBA program, MBA students are likely to identify with the issues it raises.
The Balkan Business School (BBS) was an international joint venture established in 2005 between Western University (WU) and the Economics Faculty (EF) of Capajebo University (CU) in the southeast Europe country of Balka. The International Funding Agency (IFA) issued a competitive, eight million euro (ten million dollar) four-year contract for WU to establish BBS as the organizational framework to implement the Balkan Business Education Project (BBEP), which had somewhat broader objectives than the establishment of BBS.
Following the first year of operation, Dean T and the BBS Board of Directors (BoD) faced decisions regarding BBS’s future at the upcoming Board meeting in April 2006. BBS had three more years of assured IFA funding before 2009 when it was expected to achieve sustainability. As Dean T reviewed enrollment trends and expense projections, it became clear that important decisions had to be made.
HOW CAN ARACRUZ MOBILIZE STAKEHOLDERS TO RESOLVE DISPUTE WITH INDIANS?
Case objectives include: (1) exposing students to the concept of offshore manufacturing using a shelter option, (2) develop student diagnostic and decision making skills by requiring students to analyze various shelter options in Mexico, (3) develop students’ ability to translate their chosen option into tactical implementation, and (4) introduce students to factors involved in a manufacturing relocation decision. The case is appropriate for upper-level undergraduate or MBA courses in International Business, Operations Management, or Business Strategy.
The central figure of the case is Jeff Wheaton, a manufacturing manager at Goodrich Corporation, a Fortune 500 company. The case takes place just after the company landed a very large contract for labor -intensive inflatable evacuation slides for the Airbus A380 aircraft. The quantities needed to fulfill this contract were projected to far exceed their existing manufacturing capacity in their Phoenix, Arizona plant. Therefore, the company has assigned Jeff Wheaton with the task of exploring low-cost manufacturing options in Mexico to expand capacity. Due to the stagnation of the commercial aerospace industry after the Sept. 11 attacks and the downturn of the overall economy, the Airbus A380 contract was a huge boost to this division. To get the contract though, Goodrich was forced to make large price concessions and had to promise that they would expand their facilities to accommodate the manufacturing of the evacuation slides. In order to alleviate the price pressure and to expand their manufacturing facilities, Goodrich began looking at expansion internationally.
Three options are being considered by the management of Goodrich. The first was to expand their award winning Phoenix facility to meet the space requirements. This however did little to alleviate the cost of manufacturing the slides. Another option was to expand a plant in India which Goodrich was currently using. This provided great cost savings but it was seen as having higher political risk, and could create problems because of the greater distance. A third option which was being considered is to expand into Mexico. Jeff Wheaton was experienced in Mexico, spoke fluent Spanish, and still had many contacts upon whom he could call. Expansion into Mexico would provide about 2/3 of the cost savings of moving to India, but it would pose less political risk and be closer physically and culturally to the United States.
THE HOPE PROJECT CHARITABLE TRUST OF INDIA: CHALLENGES FOR SUVIDHA WOMEN MICROENTERPRISE
Aracruz Celulose is a large Brazilian pulp producer that is facing a land tenure problem with people purported to be Native Americans that want to extend the Indian reservation through annexing 11,000 hectares of the company’s land. The company and society need to help support the ongoing socio-economic development of Indians. The operations manager believed the courts would eventually uphold the company’s legal title to the land but wondered how to foster the development of the Native Americans. The case should enable students to: (1) comprehend stakeholder management of a complex dilemma perceived as a rich corporation devoted to agribusiness versus poor Indians; (2) appreciate the need for the leadership of a large agribusiness corporation faced with unrelenting socio-economic development needs of neighboring poor Indians to somehow convince them that it is supportive of their socio-economic development; and (3) better understand sustainability and corporate social responsibility in the Brazilian agribusiness context. The case is complex and therefore better suited for a graduate audience than undergraduate. Appropriate courses would be global business or business and society, with specific reference to the sustainability and corporate social responsibility module.
Aracruz Celulose, an award-winning company known for best practices in sustainability and other areas of corporate leadership, owns legal title to land claimed by Indians. The unresolved and contentious land dispute with the Indians and numerous stakeholders that supported them resulted in violent protests and property damage. Though the company thought the courts would uphold its legal title, it could lose assets to sabotage in violent protest and land seizure. There was no apparent simple solution to the dilemma. Even Aracruz’s hoped-for court ruling had not resolved the problem as the court ordered the local agency that deals with Indian affairs to work with the interested parties to resolve the dispute but neither the Indians nor Aracruz would negotiate. Aracruz felt the long-term solution required socio-economic development of the Indians and it wanted to mobilize stakeholders to support an integrated effort in this arena.
A non-government organization (NGO) which is built on ideals of Sufi religion creates a women micro-enterprise unit. This unit is the only money making organization and trains women to organize, develop skills, and manage the unit. Challenges include limitations of activities and strategies for expansion because of religion and other cultural implications for business management.
The case exposes students to the (1) implications of culture in management concepts and strategies, (2) challenges them to evaluate current organization structure and marketing strategies, (3) enables students to assess the potential status of women in a developing economy, (4) exposes students to and challenge them to examine social entrepreneurship and non-governmental organizations as an engine for socioeconomic development, and (5) challenge students to assess and recommend adequate marketing strategies.
The case is developed for both undergraduate and graduate courses in International management, social entrepreneurship, small business management, government, and society and cross-cultural studies.
Six years ago, Salma graduated from Hzt. Inayat Khan Education Center, a division of Hope Project Charitable Trust. She is one of the many young women who has benefited from the Trust programs. The Hope Project was founded in 1975 by the Sufi teacher Pir Vilayat Inayat Khan. The trust was created to reduce the level of poverty among people in the Nizimuddime Village.
The Micro enterprise Unit-Suvidha was created to offer women the opportunity to develop their talents and improve themselves. The unit grew and the women were excited to be part of the micro enterprise. The operation showed a lot of potential however, challenges mounted not only in cultural implication of management functions, but also in developing effective marketing strategies. How would Suvidha (promise) position itself in order to support the Trust that gave it life?
BY-THE-SEA BISCUIT COMPANY
Not for Profit
DEAF IN THE FAMILY
Two long-time friends are proposing the establishment of a frozen biscuit manufacturing operation in a defunct seafood processing plant. Much of the secondary market research has been done and they now need to make a final assessment on the feasibility of the business. Specifically, they need to determine (1) what is the sales potential for the biscuit company, and (2) based on the projected sales and expenses, is the business concept feasible?
Depending on the course and instruction format chosen, students might be expected to a) compare and apply the various methods for calculating market size, b) calculate sales projections based on case assumptions, c) apply the various methods of market segmentation, and d) compare and understand the purpose and power of positioning alternatives. This case may be used in the following undergraduate courses: Introductory Marketing, Marketing Management or Small Business Management.
It was January 2007 and Paul Finney and Pat Jobe, long-time friends and future business partners, were proposing the establishment of a frozen biscuit manufacturing operation in the now defunct Clearwater Seafood plant in North Sydney, Nova Scotia. Cape Breton Innovation and Research Council (CBIRC), a private corporation that had recently assumed ownership of the plant instituted a mandate to expand and develop local business by creating an incubator within the facility. Paul and Pat presented their plan to CBIRC in August 2006 and the organization was very excited and believed the plan to be sound. Paul and Pat, although convinced of the merits of the product concept, still had some questions that needed answering before they could make a final assessment on the feasibility of the business. Both were employed full-time and the decision to leave their jobs to pursue this business was not a decision that could be made lightly.
The case includes detail on the market structure and demand within the bakery/frozen dough industry. Additionally, the proposed marketing mix, selected target markets and production/operation plans are covered in depth. Paul and Pat now need to sift through the information and make a decision on the market size and sales potential for By-the-Sea Biscuit Company.
KITCHENS & STONE: BUILDING A LOCAL BRAND
This case examines the professional growth and ambitions of two young producers in the music industry. The two men are partners in a business where they write commercial music for the ads of several popular products. As their business becomes more successful, their interests expand to producing records for hip hop artists. As of yet, there is no revenue that has been generated by the new venture, but both men have become passionate about the hip hop culture and the artistic side of being record producers.
The case enables students to: (1) appreciate the attraction of work for its artistic value in addition to its commercial value; (2) understand the reasons for the producers’ difficulty in making money in hip hop records; (3) analyze the synergies that might exist between the producers’ commercial music and their interest in hip hop production; and (4) evaluate what opportunities might exist for the two men to generate income as record producers. The case writer developed the case for undergraduate and graduate courses in Marketing, Strategic Management, and Small Business Management.
Josh Brochhausen and Adam Podrat, as partners in The Resource Music Group, had written the commercial music for ads for Coca Cola, McDonald’s, and Nike, among others. Rather than being connected with a particular product, they were more associated with a style of music. Equally comfortable with electro and hip hop, Josh and Adam were quite innovative in the recording studio, and they became known as composers whose music could appeal to the underground subculture. Their most successful ad was for the iPod Nano, which raised their status as writers of commercial music and even spawned a hit single.
With their success, Josh and Adam increasingly became involved in producing records for hip hop artists. They undertook a project called Deaf in the Family, which was a full length CD featuring various artists from the hip hop underground. The CD, which differed from most hip hop records in its use of music sampling, appealed to a broader target market and was well received among music critics in the underground press. The project made no money, however, since the producers did not have the financing to secure the appropriate clearances for the right to use the samples. As a result, the CD was not released and was only available on a website created by Josh and Adam. The two producers were passionate about their non-commercial work, and they wanted to investigate options that would make it a profitable business.
MAKE UP STORE: DEVELOPING A FRANCHISE IN MEXICO
The case shows highlights the difficulties a small business faces trying to build a local brand in the midst of both “major market brands” and “strong regional brands” in an attempt to grow market share. The specific issues facing the company president include defining the company’s brand and brand equity value (if any), as well as the role and scope of a branding strategy. In addition, the case employs Keller’s “Brand Report Card” to assess Kitchens and Stone’s brand against that of Home Depot’s. This case provides both qualitative and quantitative information for the Report Card assessment, as well as \secondary and primary research data regarding the kitchen remodeling industry, projected growth by product area, and local competitors. This is a marketing strategy case developed for advanced senior business and MBA students.
Kitchens & Stone is a kitchen remodeling company that provides granite and marble fabrication in-house. The current owner, Doug Lainson, bought out the previous owner and changed the name of the company because of a past reputation for poor quality and customer service. Doug originally began as a business consultant for the previous owner, and saw an opportunity for the company to shift its product mix to focus more on granite fabrication and less on tile and flooring. Granite countertops are significantly more profitable to the company, and this market is still growing while flooring is a mature market with significant competition, which drives down prices.
With the new ownership and name, the company had to abandon its previous channel partner relationships, which had been developed by the previous owner, as well as its Yellow Pages advertising. Essentially, in January of 2005 the company was brand new and needed to develop sales quickly. The owner did both secondary and primary research into the industry as well as the competition, and is now determining the viability of a brand strategy for Kitchens & Stone. Specifically, the company is examining whether to stay residential only, move into the commercial arena, or a combination of both. Faced with constrained financial resources, market segment decisions, and the role of a branding strategy, the next move(s) will affect the near term viability and quite possibly the survival of the company.
SAN ANTONIO - PRIDE: KEY ACCOUNT MANAGEMENT
This case describes the challenges a young entrepreneur is facing when opening a franchise in a different cultural context. Managing the master franchise for Make Up Store in Mexico, Gaby Kalifa has to make a series of decisions in order to bring her business into a more profitable zone. After describing the company background, the market entry into Mexico, and the make-up industry in Mexico, the case provides information about clients, competitors, logistics, and the marketing mix of Make Up Store in Mexico. Gaby has to decide, e.g., which segments to focus on (final consumers, institutional clients, or other franchises who buy from her master franchise), how to raise brand awareness, how to gain a greater percentage of the masculine consumer market, and what kind of promotional mix to use. The case intends to (1) familiarize students with the opportunities and challenges of buying and operating a franchise in a different cultural context, (2) motivate students to discuss and evaluate the importance of branding and positioning in the cosmetics industry, (3) provide students with the opportunity to make important decisions about issues such as distribution channels, pricing, promotion, segmentation, and targeting in consumer markets. The case was developed for advanced undergraduate and graduate courses in marketing and entrepreneurship.
It was early March 2007, when Gaby Kalifa returned to her office from a meeting with her father, Dr. Salvador Kalifa, and her sister, Cristina Kalifa. Responsible for overall operations, Gaby had successfully brought the family-run Make Up Store franchise in Monterrey, Mexico, from a difficult start in 2003 to break even in 2006. However, both her father and her sister expressed some disappointment with the financial results of the franchise, and Gaby agreed that more should be expected from the business than just reaching the break even point. On the other hand, she was still convinced of the potential the Make Up Store concept had in Mexico, and she started thinking about how she could move the business into a more profitable zone. Faced with a number of challenges, such as strong competition from upscale and downscale cosmetics producers, low brand awareness, few consumers in the Mexican male cosmetics market, logistical problems with the import of products from Europe, and limited resources, Gaby felt that she needed a systematic approach to make the right decisions in the future.
“San Antonio- Pride: Large Account Management” was written to be used for MBA programs as well as in specific executive education courses including subjects such as Key Account Management and/or Industrial Marketing. This case may prove useful to fuel a discussion on Key Accounts Management System implementation, sales force concepts, business-to-business relationships and KAM (Leading or Key Accounts). Also, it allows to analyze the difficulties encountered by companies upon implementing a change on their sales strategies and the way in which this change impacts on the sales force, corporate culture, the organization as a whole and management systems.
In 2003, after Carlos Etcheverry joined San Antonio (SA) as Latin American Region Vice President, the company implanted a KAM System. SA’s relationships with its two key clients, Vintage and Chevron, seemed to progress nicely until mid 2004, when Chevron’s newly hired Purchasing Manager decided to change the company’s commercial structure, rendering its purchasing process more bureaucratic and extremely competitive. Most purchasing area employees, all oil business specialists who had worked at the company for many years, were replaced by young professionals, predominantly with engineering or business degrees and more of a financial focus. One of the employees replaced was SA’s key contact at Chevron, with whom its Account Leader was renegotiating contract fees. Additionally, the oil company’s operations area was increasingly losing leverage in decision making processes, moving towards an advisory-like role in supplier selection.
In March 2005, Etcheverry was to meet Chevron´s Procurement Manager, since Chevron had decided to reassign a service contract through a new invitation to bid, leaving San Antonio out, despite the fact that the company had submitted the lowest quotation based on requested specifications. Chevron argued that there had been operating failures, including accidents, and other issues under review by both companies and that SA refuted accordingly.
The case poses the questions plaguing Etcheverry at the time of the meeting: was it possible to anticipate this sort of problems? If so, what changes should be recommended? Could those changes enable SA to sustain the steady growth pace it had enjoyed over the past two years? These questions aim at inducing students to contemplate and analyze different decision options regarding a KAM System.
THAT BOOKSTORE IN BLYTHEVILLE
The owner of a small pub has seen revenues and profits decline in the last year. In addition, a recent student survey revealed that competitive establishments may be viewed more positively. The owner has always relied on word of mouth to promote his pub. He is now wondering if some form of promotion might be beneficial. The students are asked to develop a promotional plan which while maintaining the brand image developed over the past 17 years, increases revenue and broadens the customer base. The case challenges the student to develop an integrated marketing communications plan which reaches a geographically and demographically concentrated target market with in a very limited budget.
The case should enable students to: (1) develop a promotional plan and budget which will increase revenue and patronage for a small entrepreneurial business, (2) demonstrate how different elements of the promotional mix can be used synergistically. The case writers developed the case for undergraduate and graduate courses in marketing, communications, and entrepreneurship.
Jim Foster had established the Selwyn Pub in Charlotte, NC, 17 years ago, and each year revenues had grown. Last year, however, the rate of growth had slowed considerably. Eighty percent of the revenue was generated from the sale of alcoholic beverages and only 20% from food purchases. Sales were concentrated in the summer months. Three years ago, he enclosed the patio area in the winter and concentrated on improving the food served. However, these actions had not resulted in any significant growth in food sales. Although there was a loyal group of long term customers, this group had not grown significantly over the past few years. In a recent student survey, the Pub had not done as well as Jim had expected against his competition. Jim had never advertised the Pub, relying instead upon word of mouth to build the clientele. Jim, for the first time, was seriously considering an advertising campaign to revitalize the client base and increase revenues especially during the slow winter months.
THE FREEDOM CUP
That Bookstore in Blytheville (TBIB) is intended for use in both undergraduate and graduate courses in marketing. Appropriate for graduate level analysis, including basic financial analysis, the course is well suited for a strategic marketing course in an MBA program. At the undergraduate level, the case is appropriate for use in marketing management, retailing, consumer behavior, and small business management.
This case provides an opportunity for students to evaluate the internal and external environment of a small business and the responses of this particular small business to these opportunities and threats. TBIB also illustrates the effects of a strong personality as the core competency of such a business as well as the David vs. Goliath aspect of a very small business surviving against the intense competition from corporate giants. TBIB, through the use of industry averages for independent booksellers, provides students with the possibility of understanding the slim profit margins of such a business.
“Contrary to all those business books that say you need to know what you’re doing, bookselling is something I’ve just fallen into,” Mary Gay Shipley says. Based on the desire of she and her friends to for a bookstore, she opened the doors of That Bookstore in Blytheville in 1976 as a paperback exchange, “a cheap way to begin.” Listening closely and responding quickly to what customers wanted fueled growth of the paperback exchange and the addition of hardback books. Eventually, sales of hardbacks increased to the point that the paperbacks were phased out and TBIB became what Mary Gay “thought a bookstore should be” with author book signings and readings and a source of significant personal relationships with customers.
These relationships with authors, publishers, customers and employees have lead to national notoriety for TBIB and Mary Gay Shipley. Because of TBIB’s support of his first book, international blockbuster author John Grisham includes TBIB as one of the five bookstores where he does signings of every new book. When Googled, TBIB and Mary Gay Shipley result in almost 400,000 hits. This case provides the background as to how and why a small independent bookseller in the economically depressed Arkansas Delta region can achieve such exposure and influence in the book world.
This case details an actual situation with all identifying names disguised. The case can be used to provide undergraduate and graduate students in courses on Marketing Planning or Strategy with an opportunity to develop an effective course of action for an interesting and basic medical device. Students are challenged to analyze a medical device company’s struggle to gain market share and branding in a market dominated by another product. The case requires that students evaluate the various options and creatively develop alternative marketing strategies. Detailed financial information is provided so that students can evaluate various alternatives related to the case.
The case should enable students to understand: (1) how a small business with limited resources is challenged to develop an effective strategic marketing plan; (2) the impact clinical evidence has on the ability to successfully market new medical devices; and (3) the development of effective marketing programs for a small medical device company with a single product in order to achieve maximum results with limited resources in a market with an entrenched incumbent product.
Oakmont Venture Partners, a private equity firm, has invested in and started a company called True Medical Products, Inc. (TMPI). TMPI is the licensee of a patented health care product called “The Freedom Cup,” a specialized cup that automatically measures the proper amount of normal-consistency liquid, and then safely delivers the liquid to a patient with swallowing problems. This socially redeeming product is needed as an alternative to revolutionize the care of the dysphagia patient population. It is the end of the third quarter 2006 and the company is suffering. Oakmont has held TMPI for ten years and is anxious to sell off the company or see it flourish. TMPI’s president, Preston Weeks, faces a year-end board meeting and has only three months to develop a revised marketing plan that is designed to gain a critical mass in product sales to make it and the company viable.
BOARD GAMES AT LUTHERWOOD: CLARIFYING THE RULES
CUTGRASS COUNTY HEALTH DEPARTMENT: THE ROLE OF PUBLIC HEALTH IN ALL-HAZARDS RESPONSES
The CEO of Lutherwood has to decide whether to accede to a request from his Board's Chair. The case is targeted at senior undergraduate or graduate courses in governance or in the management of not-for-profit organizations. As well, it is appropriate for specialty courses in governance.
The case highlights the structural dilemmas that many not-for-profit organizations face because of the independence between operating boards and their foundation boards. Students need to struggle with finding simple ways to integrate the boards of Lutherwood. As well, the case will develop a deeper understanding of the management governance issues faced by not-for-profit boards of directors and chief executives. In particular, students may note that, while not-for-profit organizations face different issues and arguably must satisfy a more complex constellation of stakeholders, there are many similarities between them and commercial firms.
John Colangeli, CEO of Lutherwood, a $20 million dollar revenue social service agency, faced a decision about the degree of involvement of the operating Board of Lutherwood in a decision to construct a new 100+ resident life-lease facility. Traditionally, construction decisions were handled by the Lutherwood Child and Family Foundation. The Chair of the Lutherwood Board wanted John to bring the decision to his Board. John was concerned that this would delay the decision and make the decision process much more complicated than necessary. John was surprised by the Board’s concerns. He thought the matter was clear and there were no jurisdictional issues. At the same time, he knew he could not risk alienating the Lutherwood Board. Throughout Lutherwood’s history, its boards had cooperated and worked together to create a unique social service organization that grew at over 15% annually for more than ten years. Board members had good personal relationships and a shared sense of Lutherwood’s purpose and goals. John wanted to continue the growth by developing the new life-lease facility. At the same time, John wished to avoid any divergence of interest or common goals between the Boards. This incident highlighted the fundamental structural division between the Boards and John wondered what needed to be done to manage any potential rivalry or competition over the longer run.
DR. CATALONA’S COLLECTION
This case has five leaning objectives: 1) Explain the implications for well-developed emergency response networks and emergency plans in the context of potential future man-made or natural emergencies; 2) Outline the importance of communication in a multi-agency emergency response event and be able to list the agencies involved in such an event; 3) Explain the impact that local political leadership has on the effectiveness of local response networks; 4) Frame systems thinking and be able to apply it to public health emergency preparedness planning and response; and 5) explain why public health may need a broader, end-to-end role in disaster response (e.g. coordinating, convening, planning, etc.).
The case focuses on response activities for an infectious disease outbreak as revealed during a response exercise (simulated event). It offers the opportunity to discuss infectious disease outbreaks, specifically pandemic influenza and how these events will affect our population, while also broadly examining the evolving role of public health.
In the period since the tragic events of September 11, 2001, considerable time and treasure have been expended in preparing the nation to respond effectively to natural and man-initiated disasters. The roles, responsibilities, and practices of first responders (law enforcement, fire and rescue, emergency medical services, and emergency management agencies) and first receivers (hospital emergency departments) have been well defined. Public health, through the U.S. Department of Health and Human Services, the Centers for Disease Control and Prevention, and state and local health departments, has been inserted into the response process by various federal laws and executive orders (for example the National Strategy for Pandemic Influenza). Within public health, response roles and procedures have been developed; however, the integration of public health into the response network has shown mixed results. This case addresses the role of public health in a large-scale emergency and offers students an opportunity to explore the traditional roles of public health, its emerging role in emergency preparedness, and the integration of public health into the network of first responders and first receivers.
ROOTS OF PEACE: HARVESTING HOPE
Dr. William J. Catalona, a renowned prostate cancer researcher and surgeon, is embroiled in a dispute with his former employer, Washington University, over the control of an important collection of human tissue and blood, an asset now worth several millions of dollars. The case is further complicated by the fact that many of the individual donors—a significant portion of them former or current patients of Dr. Catalona—are aware of this dispute and have expressed opinions about what should be done with these samples.
The case raises important issues of informed consent in human medical research and explores the complicated relationships that exist among various stakeholders in such research. The case is targeted for courses in applied ethics, especially healthcare ethics or bioethics, either at the undergraduate or graduate level. It might also be usefully introduced in courses that consider the ethical dimensions of healthcare policy and research administration as well as the legal concerns related to property rights.
Dr. William J. Catalona’s research and clinical work in the area of prostate research had made important contributions to the understanding and treatment of the disease. Much of his work was undertaken while Dr. Catalona was on the faculty at Washington University. While serving an academic appointment at the university, he began, in the 1980s, to collect a variety of human tissues and fluids related to his research program. Eventually, he amassed a vast collection that consisted of more than 4,000 prostate samples and 250,000 blood samples from approximately 36,000 men. The collection was critical to the work of Dr. Catalona and other researchers and contributed to important diagnostic and treatment advances. Some estimated the collection to be worth more than $15 million.
When Dr. Catalona decided to leave Washington University to accept an appointment at another academic institution, a dispute erupted between him and his former employer over who owned and controlled the tissue and blood samples. As the disagreement intensified it also widened to include the interests of patients and volunteers who originally donated specimens to this research collection. Questions related to property rights, scientific progress, and commercial interests are raised and debated as the different stakeholders appeal to a variety of legal, ethical and pragmatic concerns.
Roots of Peace, a Northern California-based demining organization, must overcome a major challenge—cash flow problems that threaten its future. It must decide whether to: (1) obtain a loan to provide financial stability, (2) continue its mission with diminished operations, or (3) close its doors and forego the organization’s mission. The case portrays the challenges facing non-profit organizations, how they must react to competition and funding problems just like a for-profit company, and their need for a specific strategy and roadmap to achieve success. The case should enable students to: (1) explore and research nonprofit funding theory and apply their research through the formulation of strategic recommendations. (2) Develop awareness and understanding of sustainability and identification of sustainable principles in practice. (3) Gain an understanding of transformation leadership and its influence on an organization’s success. (4) Appreciate the many challenges involved in managing international projects. The case is suitable for undergraduate and graduate level courses in Strategic Management, Social Entrepreneurship and International Business. It is also suitable as a written final exam or student oral presentation assignment.
Roots of Peace, a de-mining organization launched in 1997 as a way to carry on the legacy of Princess Diana, was an organization that went far beyond the act of clearing mine stricken lands. They quickly learned that people who had lived surrounded by mines needed to be retrained to use the land productively. In countries such as Croatia and Afghanistan people were far more comfortable holding a rifle than a plow. Roots of Peace therefore taught farmers how to use the land, and how to effectively sell its crops for a profit. In short, they brought economic stability back to war-torn lands. The organization wasn’t without its challenges, however. In 2006, Roots of Peace faced major cash flow problems that threatened its very existence. Just getting a loan wasn’t enough, it needed to take a serious look at its operations and strategy—were they prepared to be successful in the short and long term?
THE BANKER TO THE POOR: DR. YUNUS’S VISION OF ACHIEVING PEACE BY REDUCING POVERTY
The Surf’s Up case is a cash flow alternative choice decision based dilemma involving a non-profit 501(c)3 organization. The primary objective of the case addresses the question: How does Casey Cruciano, CFO of Christian Surfers US, fund general operating programs including a new membership campaign, when membership levels are down and charitable giving is down to the point that the organization may lose their lease. The case was developed for use at both the undergraduate and graduate level and can be approached from either a strategic or tactical perspective. The case can be used in a corporate finance, non-profit accounting, or managerial accounting course where cash flow alternative decision making scenarios are presented and analyzed.
The Surf’s Up case highlights both strategic and tactical issues top management faces on a regular basis. As is typical with many non-profit 501(c)3 organizations, their overall viability depends upon contributions and donations from individuals who support the mission and vision of the organization. Additionally, these organizations generally have an active board whose members are financially committed to its operational success. In the case of Christian Surfers US, contributions along with membership have declined significantly, and the board has not been willing to give financial support. Adding to the complexity of the decision dilemma is the fact that key board members have recently resigned from the board.
Top management in Christian Surfers US have recently reorganized their roles and responsibilities in the organization and are addressing key issues including the proposal for an aggressive new membership campaign. Constraining the organization at this time is the lack of funds, which has reached such a critical stage, that they are now in danger of loosing their lease. The principal protagonist, CFO Casey Cruciano, is wrestling with a “chicken or egg” type decision as to how the organization can undertake programs to raise funds, when funds are not available to implement the programs. There are strategic issues in the case involving board support and commitment to the organization as well as sustaining the overall mission and vision of Christian Surfers US. The case also has tactical issues to be considered regarding fund raising and membership initiatives in light of extremely limited funds.
THE COURTYARD HOA UNDER THE APGARS, 2005-8
This is the story of one man’s vision and desire to reduce poverty. His initial product/service offering of micro loans has been positioned differently around the world based on customer needs and used very effectively to serve not just the poor but entrepreneurs in developed countries. As a result, millions of people who had been excluded in the marketplace are now active participants. The case approaches a complex social problem (poverty) more as an economic or a business problem due to concepts, systems, and policies that are currently in place. As business students, what can they do to change a situation and allow more people to become active participants in the marketplace and ultimately a contributor to society?
The case should enable students to: (1) understand the importance of a vision, concept, idea, or a product that stems from a need that has gone unfulfilled, (2) the need to segment a market that seems relatively homogeneous but is not, so that the different needs of each segment can be better served, (3) the decision of whether to customize or standardize a product/service to better fit market conditions, (4) understanding the impact of technology such as the internet and how it has given new meaning to the term “exchange” and the value it provides in bringing all stakeholders together in a convenient and efficient way, (5) identify the pros and cons of different economic systems in allocating resources, and (6) determine ways in which a person can contribute in a socially responsible way. The case can be used in both undergraduate and graduate courses in Principles of Marketing, Global/International Marketing, Entrepreneurship, Non-Profit Marketing, Small Business Management, and Government and Society.
This case is an illustration of business principles applied in a unique way that truly changes lives. Dr. Muhammad Yunus realized that very small loans could make a disproportionate difference in the lives of the very poor, a group typically ignored by traditional banking institutions because of a lack of collateral and high repayment risk. With loans facilitated by Yunus, some as low as a few dollars, Bangladeshis, for example, were able to buy bamboo, make furniture, and make a living. Dr. Yunus, who received the 2006 Nobel Peace Prize for this concept of micro-loans in poverty stricken regions, is an innovative economist. This case describes the concept of micro-loans and the difference such small loans make for individuals and communities.
THE DALIT FREEDOM NETWORK & OPERATION MERCY CHARITABLE CORPORATION-INDIA (2007)
Sam had registered for his first MBA course, “Organizational Change and Redesign.” The course involved a research paper and Sam decided to write on the Courtyard HOA. The case should enable students to: (1) Plan a report on a non-profit around the idea “Managing Performance and Behavior by Managing Culture.” (2) Understand how a particular kind of organization, an HOA corporation, functions in the context of the community it serves. (3) Explain how unethical behavior can be reflected back and forth across organizational boundaries so as to become part of a recalcitrant microculture and how economic stresses in the surrounding macroculture can affect this process. (4) Perceive how difficult it is to change a malicious organization culture after it has become imbedded in an organization’s stakeholder constellation. The case writer developed the case for graduate or upper-division undergraduate courses, or course segments, in business ethics, corporate culture, non-profit organization management, strategic management, public policy, law, and real estate.
Sam came to Austin, Texas in 2007 to stay with his Aunt Mary in the Courtyard while he earned his MBA. He found the subdivision both diverse and beautiful. The values of the 320 homes there ranged from around $150,000 for some townhomes to as much as $2 million for the twenty or so dwellings that enjoyed frontage on Lake Austin. The neighborhood had an elaborate park and extensive walking trails. A resident told Sam of an attempt by the HOA, a non-profit corporation, to take over the waterfront behind his home and eleven others. He learned that the HOA was continuing its aggressive behavior mainly focused on one homeowner, a retired management professor who had helped defeat the walkway effort. Certain disgruntled neighbors of the professor were apparently collaborating with the Apgars, who headed the HOA and its architectural committee.
The professor claimed to have been wrongly accused of several covenant violations, threatened with a lawsuit and refused access to HOA records. Letters from a lawyer hired without board approval by the Apgars seemed to tell a story of harassment of the professor and lack of attention to legal niceties. By August 2007, the lawyer had pulled back but the HOA directors were threatening to take matters into their own hands by removing a line of large pots he had installed without architectural committee approval.
Operation Mercy Charitable Corporation (OMCC) partners with the Dalit Freedom Network (DFN), World Relief, and the Cherry Hills Community Church to launch Dalit Education Centers (DECs) and economic development programs throughout India to assist the 250 million Dalit (untouchables) of India in their quest for spiritual and economic freedom from the Hindu Caste system. As plans are underway to offer micro financing to the poverty stricken Dalits, deciding an appropriate interest rate forces the key players to grapple with issues of ethics, economics, and sustainability that non-profit organizations face in serving the poor. The case objectives are: (1) to expose students to the idea of viewing the world’s poorest (most underserved yet largest) population as potential customers; (2) to debate the economic and ethical dilemmas embedded in profit-seeking decisions of non-profit organizations serving the poor; and (3) to discuss the issue of sustainability in the context of non-profit organizations. The case is developed for undergraduate, graduate, and executive-level courses in Non-Profit Management, International management, and Social Entrepreneurship. It may also be used in the Non-profit module in Strategy & Policy courses.
This case focuses on two non-profit organizations, the Dalit Freedom Network (DFN), from the U.S., and Operation Mercy Charitable Corporation (OMCC) from India, as they partner to serve the Dalits (referred to as “untouchables”) -- the poorest and most undeserved population in India. DFN and OMCC establish Dalit Education Centers that provide quality education, medical care, and various training programs leading to the establishment of micro enterprises. As DFN and OMCC plan to introduce micro-finance programs, they face the task of determining what would be the appropriate interest rate to charge on loans taken out by members of Self Help Groups. Through the interest rate question, this case brings the readers’ attention to the economic and ethical dilemmas surrounding the role of profits in non-profit organizations. The issue of long-term sustainability lies at the heart of the suggestions made by the American consultant. The consultant also serves as a critical link with the Cherry Hills Community Church members who offer to commit funds for a period of five years.
"SO, DOCTOR, CAN YOU FIX THIS?" A CASE INVOLVING A MEDICAL SPA
A physician wants to restart his medical office/medical spa in Queens, New York which was destroyed by a flood. He needs to develop a strategic plan to ensure that he can attract enough clients who want Botox injections, chemical peels and laser treatments. He needs to anticipate growing public concerns about the safety of medical spas and their cosmetic treatments. The case should enable students to: (1) explore the ethical issues associated with medical spas, (2) appreciate what is involved in starting and managing a small business, (3) evaluate opportunities for business expansion through internal development and, (4) assess the characteristics of markets in the emerging stage of their life cycle. The case is intended for use in undergraduate courses in Business and Society, Business Ethics, Introduction to Management and Marketing or Strategic Management/Marketing.
Dr. Franz Goyzueta leaned back in his big office chair and reflected on what had happened over the past few months. He had found a new location to expand his practice of over fifteen years. Magique Medical Spa was on a main shopping street in a busy urban-suburb area in the borough of Queens in New York City. Not only was this a medical office, it was also a medical spa. A place to come and be reinvigorated, lose fat cells, get deep facials and massages -- just what was needed to get ready for the summer and its action-packed day of sun, beach, fun and parties. Despite all the hard work, business had been slow. Only 1 to 3 patients a day were coming into the office. Then, disaster struck. A torrential rainfall caused significant flooding from the basement up to the ground level. Dr. Goyzueta was forced to close the facility. What should he do next? Should he re-establish his spa in the same local neighborhood? Should he seek a new location and/or a business partner? Dr. Goyzueta was also concerned that medical spas had recently received negative publicity. In 2005, Shiri Berg, a 22 year old college student, had a seizure on her way to a spa for laser hair removal. The numbing gel that she was instructed to use at home to prepare her skin for the procedure had caused lethal brain damage. Would clients be scared off and stay away? How could Dr. Goyzueta run his medical spa according to the highest ethical standards possible?
ABC COMPANY: THE DILEMMA
One of the founders of a screen printed tee-shirt and apparel business needed to make a critical strategic decision of whether or not to expand into retail. Additionally, he needed to make decisions that would yield better competitive information, as well as improving customer service in his flawed sales and distribution system.
Students should be able to: (1) Analyze the competitive environment of the industry. (2) Observe market segmentation alternatives. (3) Apply Porter’s Generic Strategies theory. (4) Conduct a sales analysis, commenting upon the strengths and weaknesses of the existing system, and make recommendations for improvement. (5) Evaluate whether or not to open a retail store. The case is appropriate for undergraduate marketing, entrepreneurship/small business and sales management classes.
Kip Stone, one of the founders of Artforms, a screen printing casual apparel business, was retrospectively musing to himself about critical strategic decisions that he made several years earlier, while racing Artforms the yacht, in the North Atlantic in the 2004 Transat Race. Kip needed to make a critical navigational decision for maintaining his narrow lead in the race. His analysis of weather reports, speed and distance calculations reminded him of the deliberations that he made several years earlier for the business. The business issues that entered his mind dealt with his need to better serve his customers by improving upon a flawed sales and distribution system, as well as to decide whether or not to expand the business by opening a retail store. Making strategic business decisions, like racing navigational decisions, relied upon careful analysis, but also intuition. Ultimately, he made the right business decisions, since those enabled the company to prosper, which enabled him to be racing in the famous Transat.
The case provides information that students can use to evaluate strategies at the business level. Instructors can walk students through the concept of understanding value added by a firm in its choice of strategy. Good discussion may be generated by asking student groups to debate the pros and cons of each of the strategic alternatives open to the owners. Instead of deciding on the best of these alternatives, instructors could guide students to consider what information should underlie these decisions and how it may be collected.
The case focuses on a small window furnishing company ABC Co., (company name disguised at the request of the owners). A husband and wife team – Jack and Sandra own the firm. The firm has a retail showroom in the heart of a commercial district in a town in the greater Los Angeles area. ABC sells a range of window coverings. The firm offers in home decorating advice and installs the window covering that it sells. The case describes the home furnishing industry, where many products compete for the same dollar – from fire alarm systems to window furnishings. The drivers of this industry are the real estate market, interest rates, gas prices, stock market and consumer confidence. The firm’s growth was aided by the rapid growth in housing in their geographical area. But in recent years, the new house market has cooled down, making it hard for the firm to grow. Meanwhile the low barriers to entry attracted many new entrants. There were three types of new entrants: large firms offering a full line of home furnishing products, but with little decorating advice and no installation, firms like ABC operating from their geographic area as well as from neighboring areas, and small unlicensed operators operating from their vehicles or houses with poor business plans and rock bottom prices.
In this context, ABC Co’s alternatives are examined. Should the firm go in for manufacturing blinds, as it did in the beginning? Should they diversify their product offering, should they expand their territory or team up with other specialists like themselves by using their retail space?
ASKINOSIE CHOCOLATE: LAUNCHING A SMALL BUSINESS AND GIVING FARMERS A STAKE IN THE OUTCOME
American Apparel, Inc. was a vertically integrated garment manufacturer and retailer about to be transformed from a private to a public company through its acquisition by a “blank check company,” Endeavor Acquisition Corp, SPAC. The case may be used independently or together with the Endeavor case, and an Apparel Industry Note is also available. The case was designed for the purpose of addressing in an entrepreneurship course concepts of business strategy and the fit between strategy, policies, and culture in the context of a private firm going public via an unusual IPO. Students should: (1) Analyze American Apparel’s business strategy, and (2) how marketing, human resources, and operations policies fit with the strategy, and (3) examine the atypical way in which the company went public. Students (4) must decide what changes American Apparel needs to make as it becomes a well scrutinized, publicly traded company.
American Apparel, Inc. was about to change from a private firm to a publicly traded company. It had become the largest vertically-integrated garment manufacturer in the U.S., bucking a trend in the garment industry to outsource manufacturing to low cost countries. Its founder and CEO, Dov Charney, was a self-proclaimed hustler whose style generated controversy that most publicly traded companies eschewed. Charney’s open and frank attitude about progressive social issues and sexuality stirred up media feeding frenzies; the provocative photos he selected for American Apparel’s ad campaigns grabbed people’s attention – not always in a positive way. The very way the company had chosen to go public indicated much about the CEO’s refusal to conform to tradition: in summer 2007 American Apparel would merge with the publicly traded specialty acquisition corporation, Endeavor. The company’s commitment to paying high wages and generous benefits to its mostly immigrant workforce, and its “Made in USA” stance might not appeal to Wall Street investors who believed that an adequate return on investment took priority over political correctness. What changes would American Apparel need to make once it became a publicly traded company? Could it maintain its expensive manufacturing base in Los Angeles? Would outsiders’ scrutiny of its CEO, its provocative marketing, and progressive personnel policies and social agenda force the company to make changes in strategy and culture?
AVESSA INC. A STUDY IN NEW BUSINESS DIRECTIONS
This case is suitable for upper-division graduate courses in strategic management, entrepreneurship, and/or a course in business policy and/or business ethics. The three core objectives of this case are to help management students learn to:1) formulate the appropriate pricing and promotion plan for a new entrepreneurial venture with significant commitments to socially responsible sourcing in developing countries; 2) assess a company’s responsibility for the economic and social conditions under which its supply of a key agricultural commodity (cacao) is grown; and 3) recommend appropriate steps for growing a small business organization to manage the challenges and opportunities of socially responsible venturing.
This case focuses on dilemmas facing Askinosie Chocolate, LLC, a start-up company which purports to be the only company in the United States that controls the entire process of crafting small-batch chocolate exclusively from “authentic single origin” cacao beans. Askinosie Chocolate, LLC is based in Springfield, Missouri, projected beginning manufacturing in the spring of 2007. M. Shawn Askinosie’s dream and mission is to craft the finest authentic single origin chocolate bars in the world, made in small batches from rare cacao beans. Mr. Askinosie wanted to implement a program wherein the company would, from day one, return a percent of margin to the cacao growers who meet the company’s “sourcing standards” in addition to the premium cacao price. This program is called “Stake in the Outcome” which is now a trademarked concept. The company faced challenges in that the chocolate market is full of competition with multi-nation companies such as Hershey’s, Mars, and Nestle. As a practical matter, the company must make a profit in order for the “Stake in the Outcome” program to benefit the growers. Consequently, price will play a major role in the outcome.
The company is limits the market that they will enter and will not offer specialized candies as many of the other companies offer; in other words, Askinosie Chocolate does not use additives such as vanilla, mint, fruit or other flavorings. The company maintains its own factory and retail shop in Springfield, Missouri, and the product is available for purchase on the internet; however, only a small amount of premium specialty food stores in various regions will carry Askinosie Chocolate bars. Askinosie must decide the appropriate pricing and market for his company to succeed.
COFFEE BEAN & TEA LEAF: THE MANAGER RETENTION PROGRAM
The owner has been in business for 15 years and has expanded the facility and range of services offered several times. The owner now must decide whether to take a new direction into medical laser services. The expansion would require taking on a partner and the purchase of equipment.
The case should enable students to (1) Consider the ramifications of taking on a partner (2) Consider ownership structure with a new partner (3) Identify the liability risks (4) Analyze the equipment choices. (4) Recommend a direction for the business. The author developed this case for undergraduate courses in Small Business Entrepreneurship, Management, and Human Resource Management.
The entrepreneur of a salon and day spa has just completed a move to a highly visible and desirable location. The number of clients requesting services increased dramatically after the move which was very costly. The move required a bank loan to pay for new equipment and leasehold improvements .Although there were several stations for each service the owner found herself turning customers away and doing more and more labor intensive services because she was having difficulty keeping help.
The owner was approached by a Doctor with the idea of forming a joint business venture offering laser hair removal, vein therapy, skin resurfacing and injections of botox and collagen. There are several laser machines available on the market. One laser, a diode, is readily available and highly utilized by competitors but it caters only to light skin and dark hair. A new laser, a ND Yag, manufactured overseas and new to the industry, works differently and is able to service a wider range of skin types. It also will treat spider veins but is much more expensive than the diode. There is another laser machine that performs light skin peels. It is a different service than the laser hair removal and will contribute a much higher gross profit. The risks are considerable in that the machinery is expensive and the business currently has debt from the recently completed move. The owner has the additional problem of difficulty in maintaining staff that would be necessary to perform the current services offered by the salon while the owner expands to the new laser services.
ENDEAVOR ACQUISITION CORP., SPAC
The case points out the challenges of employee retention in fast-growing companies, particularly in service industries. It can be used to examine the HR practices implemented by an ambitious entrepreneurial firm that needs to compete with a market-dominating competitor. The Coffee Bean & Tea Leaf competes with Starbucks in the worldwide specialty coffee industry. Students are expected to assess and critique the HR practices implemented by the company, and recommend additional actions to improve employee retention. The case is appropriate for undergraduate or graduate courses in Entrepreneurship, Management Consulting, and Human Resources Management. It was as a stand alone case, but could also be used as a follow-up to The Coffee Bean & Tea Leaf case, which describes the company’s strategy, marketing, and operations as it attempts to capture second place in the global specialty coffeehouse market.
The Coffee Bean & Tea Leaf (CBTL), the fast-growing specialty coffeehouse company that competed with Starbucks, hired Michael Serchia as Director of Human Resources and assigned him the task of improving employee retention. Mike Serchia wanted to create an organization that employees didn’t want to leave. Starting in 2000, Serchia implemented a series new human resource management programs to reduce employee turnover, including a competency profile for hiring, an improved benefits package, a revamped incentive plan, and FROTH employee attitude surveys. Yet employee turnover remained significant. At the 2006 year end, CBTL’s turnover rate for coffeehouse baristas was 112% and for Coffeehouse Mangers was around 43%. An outside consulting firm determined that it cost about 1.5 times the salary of a departing employee to replace him or her. Had Serchia and the Coffee Bean & Tea Leaf done the right things to decrease turnover? Had he done enough? Considering that rival Starbucks retained a higher percentage of its employees than The Coffee Bean & Tea Leaf did, what else did Serchia need to do?
FIGHTING THE RAPIDS AT ARKANSAS VALLEY ADVENTURES
American Apparel, Inc. was a vertically integrated garment manufacturer and retailer about to be transformed from a private to a public company through its acquisition by a “blank check company,” Endeavor Acquisition Corp, SPAC. The Endeavor case may be used independently or as a follow-up to the American Apparel case. The case provides a description of how special purpose acquisition companies work, as well as the Endeavor’s / American Apparel deal. Students in undergraduate and graduate entrepreneurship courses can examine the atypical way in which the American Apparel went public, and must decide what changes it needs to make now that is on the verge of becoming a well scrutinized, publicly traded company.
At the time it went public in December 2005, Endeavor Acquisition Corp., listed on the American Stock Exchange under the ticker symbol “EDA,” had no financial statements to study, no company track record, no physical assets, and no employees. Endeavor offered only a promise… a promise to make an acquisition within eighteen months, or return investors’ money. Units were offered at $8, and Endeavor’s initial public offering raised $129,290,000. Endeavor Acquisition Corp. agreed to acquire American Apparel, Inc. in summer 2007 for 32.26 million of restricted stock in Endeavor, and assume up to $110 million of net debt outstanding at American Apparel. Endeavor would also create a merger bonus pool of $2.5 million and setting aside 2.7 million shares for issuance to American Apparel employees, or 520 shares per employee. The deal stipulated that Dov Charney would remain as CEO of American Apparel and hold his shares for at least three years. Charney was to purchase the interests of his partner, Mr. Lim, prior to the consummation of the deal. When the dust settled, Charney would own 55.1% of the total stock of American Apparel. The public outstanding shares would make up approximately 28% of the company. Endeavor Acquisition’s initial shareholders would hold 6.4% and the rest of the shares would be attributed to outstanding warrants and American Apparel restricted stock, options, and bonuses.
The case is intended for a business strategy class, entrepreneurship class, or an introductory business class. The case could be used for either undergraduate or graduate populations. The case should be especially interesting to younger students, who are interested in starting their own businesses and who enjoy outdoor and athletic activities. The case provides for discussions and analyses related to innovation and risk-taking, strategic positioning of product and services, and environmental analysis of the industry and competitors. From reading and analyzing the case students should be able to: describe critical factors in the competitive environment of a business, describe critical factors in the external environment beyond the industry, identify financial and operation factors that contribute to a viable business, assess and analyze possible strategies in a crisis environment for an entrepreneurial enterprise, and reflect on the importance of creative entrepreneurial strategies and tolerance of risk in successful entrepreneurial business.
Duke Bradford, the owner and founder of Arkansas Valley Adventures (AVA), a rafting company in Colorado, has to decide what to do to remain in business or even whether to stay in business. He is facing numerous challenges in a post 9/11 environment. Among the challenges is the worst draught in a hundred years in Colorado, wildfires and a governor’s public statement that “All of Colorado is burning,” increased debt from expansion of the business, and lower profit margins because of significant competition in the industry. After the 2002 rafting season, Duke has to assess his options and decide what to do with his 5 year old entrepreneurial adventure.
Epilogue: During the ski season, the off-season for rafting, Duke develops a highly creative but risky strategy for the next rafting season. At the Beaver Creek ski resort Duke observes the area giving warm chocolate chip cookies at the base at the end of the ski day. This sparks a strategy of repackaging the rafting services as a premium product and charging more for the rafting experience. The strategy is highly risky but could differentiate AVA from the competition while attracting more customers and increasing profit margins. The strategy contributes to a 226% increase of customers over the next three seasons.
HERE WE GO AGAIN! VINCENT LUCKY, INC.
The owner of Heisler Homes, Tim Heisler, wants to grow his company. He must decide how to achieve this objective without damaging the company’s competitive advantage. However, the analysis of the case steps back and allows the student to first determine whether growth is even possible and reasonable, and what effect this will have on the company and the entrepreneur. The case should enable students to: (1) recognize the influence of the founder’s values and preferences on the character, culture, and growth of the firm, (2) identify the sources of competitive advantage and their sustainability, (3) discuss how to manage the growth of the enterprise without compromising sources of competitive advantage, and (4) apply strategic analysis tools such as the diamond-e and Porter’s five forces . The case writers developed the case for undergraduate or introductory graduate courses in Entrepreneurship, Small Business Management, and Business Strategy.
In spring of 2006 Heisler Homes (HH) of Cambridge, Ontario moved into a new office so it could accommodate the company’s growth. In 1997 the private company had started by building seven high-quality custom homes a year. Then in 2002 it expanded construction to 27 homes a year. It was now a leading name in the homebuilding business in the Kitchener/Cambridge region. Tim Heisler, 46 years old, was president, general manager and owner of the company. He picked up a stack of contracts and projects that sat on his desk as he started to plan the company’s activities for the summer. In the back of his mind he was considering the future. He wanted to build 50 custom or semi-custom homes a year within two years, and 100 to 250 homes a year in five years. But he did not want to put the business relationships that were important to its success at risk. He wondered how fast the business could grow without putting those relationships at risk
LET’S MAKE WINE: WHERE DO WE GO FROM HERE?
A small business entrepreneur in the New Orleans suburb of Metairie is contemplating adding a new venture to his existing ten-division organization. Several of his managers have encouraged him to hold off of this expansion to give some of the struggling divisions time to become profitable. The learning objectives of the case are for students to grasp a better understanding of:
1. The importance of the vision and drive of the founder on a small business’s culture;
2. The need for delegation and empowerment to fuel continued small business growth and development;
3. The necessity of information technology investment to facilitate growth and overcome critical problems encountered at each stage of the organizational life cycle.
The case has been written for a course in small business management at the undergraduate level.
Vincent Lucky, Inc. was an upscale commercial enterprise that served the residential home repair and remodel market in New Orleans. The business was organized into ten small divisions, each focused on a specific segment of the residential repair market, including kitchens, baths, pools and spas, plumbing, electrical, and so forth. By far the largest and most profitable division, however, was medical maintenance, serving area hospitals with plumbing and medical gas repair work. While the firm’s public image was of a vibrant, first-class, upscale operation, several of the firm’s divisions were not profitable.
Two divisions that struggled the most, kitchen and bath, were both recent additions to the company’s portfolio. Vincent Lucky was contemplating adding another division, residential lighting, to the mix. Two of his most trusted advisors, managers of the kitchen and bath shop respectively, were concerned that the time was not right to add another commercial venture. However, Lucky seemed determined to forge ahead.
This case is part of an on-going series of cases tracing the development of a franchise concept from idea through inception. The case is the sequel to “Let’s Make Wine: Launching a Pilot Store” (Case Research Journal, Volume 25, Issue 3, Summer 2005) but contains the information needed to be used as a stand-alone case. Now that the company’s two pilot stores are in operation, but not yet profitable, the entrepreneurs need to think about changes necessary to achieve their objectives for growth and franchise development. Students are asked to evaluate the original business concept and its implementation, diagnose areas for improvement (which could include: finance, marketing mix/product offerings, leases & licensing, facilities), develop a strategy for turnaround of the existing business, benchmark a competitor, and develop a recommendation for a growth strategy.
The case is designed to be used in a course in Entrepreneurship or Strategic Management at the graduate or upper undergraduate level. Students need to have the ability to analyze the company’s situation, including financial analysis, and to develop recommendations. Key issues include: Business plan v. actual results; Turnaround strategy; and Benchmarking a competitor.
Partners Ann Rosenberg and Tom DeRosset’s two pilot wine-making stores had been in operation in Florida for about two years. Despite having done extensive market research, securing good suppliers, and having attractive stores in high traffic locations, their stores were not generating sufficient income to be profitable – and they couldn’t figure out why. By trial and error over time - learning by doing- they discovered what some of their problems were. In addition, they gained a great deal of insight from visiting with a franchisor of a similar concept in Texas, to whom they supplied grape juice, whose stores were profitable. Their visit with George, the Texas entrepreneur, left them with two questions: what changes should they make in their pilot stores and basic concept? And should they change their relationship with George? If so, how?
POWERWATER BEVERAGES, INC.
A successful family business must decide how to grow in the highly competitive toy and game industry. Megatoys can increase sales to Wal-Mart and other retail giants, or seek other distribution channels. It can pursue seasonal opportunities, or identify year-round product categories. The case describes how Megatoys has so far succeeded in an industry dominated by toy makers such as Mattel, Hasbro, and Nintendo, and toy sellers like Wal-Mart and Toys-R-Us. It asks students to consider how the company might move forward, and what it must do – or avoid doing – to remain successful. The case allows students to (a) identify Megatoys’ business strategy and competitive advantages in a mature industry; (b) examine how seasonality affects strategy and operations while presenting unique opportunities; (c) identify advantages and disadvantages of selling to powerful buyers; and (d) decide how Megatoys should pursue growth. The case is appropriate for undergraduate or first year graduate courses in entrepreneurship, strategy, and management. It can be used alone or with the “Toy and Game Industry Note.”
“We’ve become a better company dealing with Wal-Mart,” exclaimed Charlie Woo, CEO of Megatoys, Inc. “To meet their requests, I constantly have to upgrade my systems and improve my business practices.” Was it good business for Megatoys to become increasingly dependant on Wal-Mart? Was the company making the best use of its opportunities, or should it seek new markets and new distribution channels? Was Wal-Mart toying with the Megatoys? The case describes how a small family business founded by immigrants from China grew into a $100 million toy and costume manufacturer by exploiting seasonal niche segments in the highly competitive, global toy and game industry. During the late 1990s, sales of traditional toys stagnated when replaced by game consoles, software, and electronic toys. Unable to compete in high tech toys, Megatoys moved instead toward seasonal toy products. The company redefined itself and its product line, becoming a major vendor to retail giants Wal-Mart, who accounted for over 50% of its seasonal business in 2006. The company is faced with the dilemma of how to grow. Should Megatoys increase sales to Wal-Mart? Or instead were there other, untapped opportunities for Megatoys that aligned with its strengths, resources, and capabilities?
PRODEXNET: MANAGING A GLOBAL START-UP
This case was written to expose students to early startup stage challenges faced by entrepreneurs. In particular, the case focuses on assessing new venture opportunity, capital needs, valuation, and the impact of investment alternatives on the capital structure of the organization. The case is intended for undergraduate and graduate students enrolled in entrepreneurship, entrepreneurial finance, and finance courses. The recommended positioning of the case is at the end of the semester after instructors have provided students with the requisite knowledge and analytical tools to conduct a rigorous analysis of the challenges faced by the constituents.
PowerWater Beverages, Inc. was a startup company founded in 2005 by a group of investors that recognized the growing U.S. consumer demand for bottled water, and, more specifically for “pure water”. The investors, led by Kent Mawhinney (President and CEO), successfully negotiated the exclusive rights and interest in a trade secret and industrial design to produce and distribute a pure distilled oxygenated water. The exclusive license allowed PowerWater Beverages to produce and distribute PowerWater throughout the world, except in Canada.
Mawhinney negotiated terms with his senior management team, secured commitments from independent representatives who comprised the company’s national sales force, and signed contracts with co-packers, suppliers, and distributors. The case begins with Mawhinney meeting with his college roommate, Chris Murphy (a professor of entrepreneurship and member of the PowerWater Board of Directors) to discuss the Board meeting to be held the next day.
Mawhinney believed the company faces several significant challenges, including: 1) to determine whether PowerWater’s CPA estimate that the company needed to raise $950,000 was correct, 2) to calculate what the pre- and post money valuation for the company would be if it raised the $950,000, 3) to analyze the impact of each of the proposed alternatives for investors on the capital structure for the company, 4) to reassess the strength of the opportunity, and 5) to find additional opportunities for PowerWater’s product. These challenges provide the opportunity for instructors to emphasize the integrative nature of new venture analysis in the real world. That is, the case forces students to consider both entrepreneurial and financial analyses to make their decision.
SNOWSPORTS INTERACTIVE - THE DILEMMAS OF BEING BORN GLOBAL
This case focuses on the managerial dynamics and evolution of a small global start-up. Faced with declining market demand, growing competition, and a changing cost structure, an entrepreneur has to decide whether to (1) restructure her company’s global operations, (2) search for an infusion of external capital, (3) search for new international markets, (4) downsize or (5) close down her company. The case sheds light on the close-knit family culture and informal relationships between the founder, managers, and employees that often characterize a small start-up, and how these interpersonal dynamics might affect the ability to bring about strategic change within the company. The case should enable students to: (1) evaluate the differences between managing a start-and managing a larger company. (2) Evaluate the challenges and opportunities of managing a global start-up compared with a domestic start-up. (3) Identify the critical constraints faced by a start-up and the advantages it might enjoy. (4) Assess the economic feasibility of alternative options available to an entrepreneur and the impact of emotional factors in shaping business strategies. This case has been developed for undergraduate and graduate courses in Entrepreneurship and Global Entrepreneurship.
In November 2003, Sujatha Bodapati realized to her dismay that her three year old company, ProdexNet, founded in Saratoga, California, with an offshore development center in India, had only six months of funding left in the bank. Market demand for her enterprise software product solution had slowed down after the dot.com bust in 2001 and had worsened over the months that followed. Prospective target customers were either going bankrupt or had their budgets frozen. Meanwhile, the company’s costs were kept in check by the cost differential that existed between well-qualified engineers in the US and India. Careful cost management was a crucial aspect of the start-up strategy, since Sujatha had bootstrapped the ProdexNet venture. The main rationale for starting the India operations was to control costs while enabling growth. The dual-location structure imparted cost advantages and enabled the company to work 18 hours a day and offer round-the-clock customer service. However, the structure also presented challenges in terms of communication costs, coordination, and managing teams across cultures, geographies, and time-zones. Sujatha tackled those challenges by choosing her team carefully, delegating local country responsibility, adopting an open door policy, and creating a family-like culture characterized by mutual respect and trust amongst employees.
The SnowSports case may be used at the undergraduate or graduate levels in Strategic Management and Small Business/Entrepreneurship. In combination with the accompanying industry note, the case becomes more complex and thus richer for analysis. In addition, the purpose of the case shifts more toward evaluation of the company’s global strategy.
Students should be able to undertake a resource-based-view analysis (including identification of the company’s core competence through a VIRO assessment); compare the results of their RBV assessment with a “standard” SWOTs assessment (using Value Chain for SWs and Five Forces and PEST for OTs); compare the company’s strategy and progress to other new start-ups and to extant theory regarding start-ups; identify the risks of the company’s business strategy as applied in its domestic market (i.e., Australia); and identify the risks of a “born global” strategy.
In mid-2006, Australian-based SnowSports Interactive confronted a review of its strategy components as founder/CEO Steve Kenny planned his upcoming trip to ski resorts in other parts of the world. Among the challenges was whether the business model as originally envisioned would work. Use of the industry note “The Ski Resorts Industry in the Twenty First Century…” assists students in thinking through this dilemma. As a stand-alone assignment, the company case provides insights into the first year of the company’s formal existence.
SnowSports was both a technology-based company and a company that expected to be “born global”, i.e., to initiate significant international activity within three years of its founding. Among the issues students can explore are appropriateness of financing, risks inherent in the strategy (which will require partnerships with each individual ski resort company), the strength of the company’s resources to execute a domestic strategy, and the appropriateness of those resources for a global strategy.
Richard Blumberg, MD is considering the next stage financing for his 10 year old biopharmaceutical startup, Syntonix Pharmaceuticals. The company’s proprietary research had developed and patented an improved delivery platform for long-acting biopharmaceuticals and then utilized that technology to develop new therapies to treat chronic diseases. Syntonix has already been through two rounds of venture capital financing and was considering a third. In addition, there have been several licensing and/or joint research deals put together with several biotechnology firms to utilize Syntonix’ technology. A recent development was the purchase interest from Biogen Idec, another biopharmaceutical company, which had a recommendation from its internal venture capital unit to buy Syntonix outright.
The case is based on field research and is appropriate for courses in Strategy, Small Business and Entrepreneurship at the undergraduate, graduate and executive levels.
Syntonix Pharmaceuticals, a biopharmaceutical startup company, was seeking additional financing for growth. The company founded by Richard Blumberg, MD, a Professor of Medicine at Harvard Medical School and Chief of Gastroenterology at Brigham & Women’s Hospital in Boston, MA, had developed and patented an improved delivery platform for long-acting biopharmaceuticals and then utilized that technology to develop new therapies to treat chronic diseases. The Transceptor® technology utilized a unique biological pathway to allow efficient delivery of SynFusion™ drug therapies via inhalation. The technologies have already been licensed to several companies in joint development deals addressing several different conditions: Hemophilia B, Multiple Sclerosis, autoimmune disorders, a fertility treatment and enhanced peptide inhalation.
The company had already used up Angel and Rounds A and B of venture capital financing and was looking for additional $100 - $120 million for growth. One possibility was to seek additional licensing deals. There was also a venture capital syndicate looking at a C Round of funding. In a recent development, one member of this proposed syndicate, Biogen Idec, has indicated interest in buying Syntonix outright. Blumberg needed to make a decision.
THE POWER DOLLY: WHERE DOES IT GO NEXT?
This case is intended for a business planning course or a course in entrepreneurship or entrepreneurial finance. The case is positioned to discuss the start-up process for a new business and the issues involved in turning a business idea into a workable plan. Specifically, the case deals with the realities of implementation in the face of changing conditions, lack of finances, and uncertain markets. A major theme of this case concerns the planning process and managerial issues facing a young woman trying to launch her own company in a changing economy. This case should provide a forum for discussing and analyzing:1. The personal decisions involved in starting a business. 2. The issues that surround technology transfer and commercialization.3. The process of launching a new venture.4. The risk of not positioning your product appropriately.5. The forces that impact the formation and implementation of a new business.6. The realities and difficulties of “selling” a business plan to investors. This case is based on field research, in cooperation with the host organization.
When Lydia Carson found herself idealess, sitting in an MBA classroom and wanting to enter the Reynolds governor’s cup business plan competition, she took it upon herself to contact University of Arkansas medical school to explore what research they may have that might lend itself to a business venture. She found a skin cream that had been sitting on Dr. Gurley’s shelf for twelve years, but which had only been shared with close friends and employees. Lydia persuaded two classmates to form a team to enter the business plan competition and transformed Dr. Gurley’s skin cream formula to “Omnibalm,” a lotion derived primarily from “fragrant challenged” tea-tree oil. Experimenting with various formulations, scents, packaging and promotion ideas, this case chronicles Lydia’s journey taking a product from research to marketplace to building a viable and fundable entrepreneurial venture. The case ends with Lydia trying to find a way to grow and manage her company without sacrificing her family, her finances, or her enthusiasm.
THE PURSUIT OF MULTIPLE BOTTOM-LINE GOALS: GOVERNANCE AND STRATEGIC PLANNING IN A FAMILY BUSINESS
The Power Dolly is a motorized handcart invented by the case protagonist, Larry, an air conditioning and heating installer. This case is designed to give students a better understanding of the process for examining potential markets, getting a product approved for production, and entering the market for an industrial product. Another key aspect of the case is to foster student discussion regarding the regulatory assessment process associated with the creating and marketing new products. The Power Dolly is an interesting study of new product development from the entrepreneur’s point of view as Larry examines alternative uses for his invention. The case is well-suited for undergraduate entrepreneurship or marketing courses. It will give students the ability to understand why finding the most appropriate “fit” between product capabilities and demand for a new product is critical to initial success of a start-up firm. This case would work well in an entrepreneurship course where students could recognize and understand the different processes required to bring a product to market.
Lifting heavy objects has resulted in lower back injuries that cost companies millions of dollars each year from lost worker productivity and worker compensation claims. As a result, Larry the air conditioning and heating installer designed a product called the Power Dolly to prevent injuries associated with lifting heavy air conditioners and heating units when installed in the residential and commercial locations. The Power Dolly uses a motor mounted on a dolly, or handcart, to move heavy objects over rough terrain with little effort required by the user. Once he completed his design, Larry sought help designing his product and producing the prototype. Once a prototype was tested and found to be a viable product capable of applications in the industrial marketplace, Larry began looking for specific applications in industries beyond heating and air conditioning installation as potential broader markets for his product. Through his research, students will be able to assess potential competition from existing products in several industries and determine how existing products in other industries may become competitive substitutes or present barriers to market entry for the Power Dolly. The decision focus of this case is determining the industries that the Power Dolly will enter to assure the highest likelihood of success.
THE SKI RESORTS INDUSTRY IN THE TWENTY-FIRST CENTURY’S FIRST DECADE – A WORLD-WIDE COMPETITION
This case is appropriate for courses in entrepreneurship or family business at the undergraduate and MBA level; with some modification of assignment questions the case could be oriented toward a “green” business class. In 2006, the president of Babbitt Family Ranches, a family business with a 120-year history, wants to use the newly approved Babbitt Ranches L.L.C. Constitution to guide operating and investment decisions for the firm. The case gives students the opportunity to develop decision criteria for a family business that reflect concern for the environment, family history, values, needs, and relationships, as well as the more traditional economic criteria. A complete analysis should accomplish the following objectives: (1) Evaluate the impact of history and reputation on the objectives and time-horizons of family businesses as compared to publically traded firms; (2) Evaluate the usefulness of the Babbitt Ranches Constitution as a governance structure; (3) Develop criteria (from the Constitution) that can be used to evaluate business opportunities and use the criteria in an evaluation.
The year 2006 marked the 120th anniversary of Babbitt Ranches, a fourth-generation family- owned business that primarily focused on ranching and land stewardship. Billy Cordasco, president of Babbitt Ranches was concerned about how to best meet the needs of his 91 family shareholders. Babbitt Ranch lands encompassing 700,000 acres in northern Arizona was not a liquid asset. Thus, Billy’s greatest challenge was to identify and pursue business and other opportunities generated from the land that met the multiple bottom-line goals of Babbitt Ranches. Potential business opportunities included selling beef products, cultivation and sales of native grass seed, gravel pit operations, wind energy development, water resources, and rental or construction of cell phone towers. The strong ethical values of land preservation and stewardship, handed down through four generations, still guided business decision-making. In early 2006, the board of directors formally adopted a constitution to govern the family business. The multiple bottom-line goals recognized obligation and responsibility on four dimensions: Organizational, Economic, Ecological, and Community. Billy’s responsibility was to operationalize the values and objectives of the constitution in his management of the ranch and in deciding what future business opportunities to pursue.
“WHY IN THE WORLD DO YOU WANT TO DO THAT!” ANDY’S VENTURE INTO WINE
This industry note is intended to be used in conjunction with the company case “SnowSports Interactive – The Dilemmas of Being Born Global” but also be utilized as a stand-alone assignment. It is intended for use in the undergraduate or graduate levels in Strategic Management and Small Business/Entrepreneurship. Used in tandem with the company case adds enrichment and complexity to the analysis and shifts the case purpose more toward evaluation of the company’s global strategy. Used as a standalone assignment, the industry note is better used in undergraduate or graduate Strategic Management (Business Policy) courses.
In conjunction with the company case “The Ski Resorts Industry…” should enable students to deepen their analysis of the external environment especially the Opportunities and Threats related to addressing each geographical market, undertake a strategic groups map, consider SnowSports’ strategy vis a vis the various kinds of ski resorts identified, and strengthen their identification of and assessment of the risks of a “born global” strategy.
This Industry Note depicts the ski resort industry as of the middle of the first decade of the Twenty-First Century. The note provides an overview of the world-wide ski industry including a brief history and overviews of the ski resorts in ten geographical markets. The sections on the geographical areas offer as extant and current information as was publicly available at the time the industry note was developed in late 2006. For each market the note indicates the number of ski areas/resorts, their condition, the known information about demand, and the kind of skiing available. The note is intended primarily for use with the company case “SnowSports Interactive: The Dilemmas of Being Born Global”. Used in conjunction with the case the note provides opportunity for students to think through the appropriateness of SnowSports investing in which geographical markets. Some markets are straightforward, e.g., the USA and Canada. However, others are not so straightforward, e.g., the long-term opportunities in China versus the current opportunity in Japan. As a stand-alone assignment the industry note may be used to provide a basis for applying the strategic group map analysis concept and for asking the general question of how the various ski resorts and geographical areas might position themselves in the worldwide market.
An entrepreneur envisions his “dream” winery in the heart of the Finger Lakes. The winery consists of vineyards, a state-of –the-art wine-making operation, and a modern tasting room on the winery grounds. The tasting room will be his primary sales channel. He has developed an entrance strategy that is intended to develop a brand image through a distinctive blend of sweet table wines. The entrepreneur must determine (1) if the entrance strategy is sound given consumer preferences and local competition and (2) if his strategy provides the foundation for achieving his vision of a “dream” winery.
The case should enable students to: (1) evaluate the reasonableness of an entrance strategy and underlying assumptions given industry and competitive factors. (2) Identify the risks associated with a start-up operation. (3) Be able to evaluate if an entrance strategy is consistent with long term strategic objectives.
Andy Kubrich has always dreamed of opening his own winery. He was raised on his family’s 150 acre winery on Keuka Lake in the heart of New York’s Finger Lakes. Andy’s vision is to operate his own winery complete with vineyards and a tasting room. Andy is not faced with many of the obstacles of most entrepreneurs. His family has agreed to supply grapes and his industry contacts will provide custom crushing and de-stemming services at a nominal price. Start-up capital is not an issue.
Andy knows that the wine industry is competitive and driven by brand image. He has surveyed consumers and believes he can establish a brand name through a unique blend of sweet table wines. He believes this strategy will enable him to compete effectively with smaller wineries while avoiding direct competition with the well-known wineries.
However, Andy knows that he will ultimately have to migrate into dry and semi-dry wines if he is to realize his dream. He has spoken with industry experts that both support and challenge his assumptions regarding his entrance strategy. Andy realizes that there is significant risk associated with his plan and is agonizing over whether his plan will position him to realize his “dream” winery.