Document 1 of 100

CAPE CHEMICAL: NEW VENTURE FINANCIAL PLANNING

Author: Kunz, David A; Dow, Benjamin L, III

ProQuest document link

Abstract:

The primary subject matter of this case involves a review of the fundamentals of financial statements, preparing projected financial statements for a new venture and examining sources of information, which will aid financial statement preparation. The case requires students to have an introductory knowledge of accounting, finance and general business issues thus the case has a difficulty level of three (junior level) or higher. The case is designed to be taught in one class session of approximately 1.25 hours and is expected to require 3 to 4 hours of preparation time from the students.

Full text:

BACKGROUND

Ann Stewart, a former sales manager for the distribution operation of St. Louis Chemical, a mid-sized, regional chemical distributor, headquartered in St. Louis, has decided to begin a chemical distribution business. St. Louis Chemical was sold to a large multinational chemical manufacturer. Most of St. Louis Chemical's senior managers, including Stewart, were told their services would not be required. Without adjustments, combining the two firms would result in substantial management duplication.

Ann Stewart is thirty-four years old and had been employed by St. Louis Chemical, since graduation from University of Missouri - Columbia with a degree in chemical engineering. She earned an MBA from University of Missouri - St. Louis after attending evening classes for three years. With St. Louis Chemical she moved through a number of management positions, each with increased responsibility. For the last three years she had been sales manager for the company's southeast region.

As a result of her chemical distribution business experience and the contacts with customers and suppliers, she has decided to begin a Cape Girardeau based chemical distribution business. Stewart gained a solid understanding of the chemical industry and the distribution process while at St. Louis Chemical. At St. Louis Chemical she had Profit & Loss (P&L) responsibility, but her knowledge of accounting and finance is limited. To prepare for staring her new business venture, Stewart met with a counselor from the Small Business Development Center (SBDC) at Southeast Missouri State University and was given a crash course in preparing and using a business plan. Her business will be organized as a corporation. Stewart, her father and brother will provide initial equity capital. Stewart will use the cash received from the buyout of her (limited) St. Louis Chemical stock options, her severance package and a small amount of savings. Her father will invest a portion of the proceeds from his recently sold business. He will be the largest provider of equity capital. Her brother will also provide a small equity investment

First National Bank has agreed to provide a one year $500,000 short term line of credit to finance working capital on the condition that all assets of the company, Stewart and her father's personal assets are used as collateral. Venture Investor LLC will provide an initial $800,000 five-year, interest only loan. If additional funds are required an additional $400,000 will be available, at a higher annual interest. Venture Investors can convert the initial $800,000 loan to equity after five years (at a share price of $3.00).

Stewart always had aspirations of someday owning a business and it appears the time is right to begin the entrepreneurial process.

CHEMICAL DISTRIBUTION

A chemical distributor is a wholesaler. Operations may vary but a typical distributor purchases chemicals in large quantities (bulk - barge, rail or truckloads) from a number of manufacturers. They store bulk chemicals in "tank farms," a number of tanks located in a diked area. The tanks can receive and ship materials from all modes of transportation. Packaged chemicals are stored in a warehouse. Other distributor activities include blending, repackaging, and shipping in smaller quantities (less than truckload, tote tanks, 55-gallon drums, and other smaller package sizes) to meet the needs of a variety of industrial users. In addition to the tank farm and warehouse, a distributor needs access to specialized delivery equipment (specialized truck transports, and tank rail cars) to meet the handling requirements of different chemicals. A distributor adds value by supplying its customers with the chemicals they need, in the quantities they desire, when they need them. This requires maintaining a sizable inventory and operating efficiently. Distributors usually operate on very thin profit margins. RMA Annual Statement Studies indicates "after tax net profit as a percentage of sales" for Other Chemical and Allied Products Merchant Wholesalers (NAICS number 424690) is usually in the 3.0% range. In addition to operating efficiently, a successful distributor will possess 1) a solid customer base and 2) supplier contacts and contracts which will ensure a complete product line is available at competitive prices.

SMALL BUSINESS DEVELOPMENT CENTER

A Small Business Development Center (SBDC) provides management assistance to current and prospective small business owners. SBDCs are a combined effort of the private sector, education community and government (state and federal) to stimulate economic growth by aiding development of new businesses. Most SBDCs are housed on university campuses and receive a portion of their operating funds from the schools. Many SBDC counselors are faculty members from a variety of academic fields.

Anyone currently operating a small business or interested in starting a business can receive free, confidential assistance from the SBDC. Counseling and training activities include preparing a business plan, examining sources of financing, preparing loan requests and in general providing guidance on how to start a business.

THE SITUATION

In the meeting with the SBDC counselor, Stewart described the chemical industry, the role of a chemical distributor and thoughts on beginning her business. After her initial investigation of the Cape Girardeau area, Stewart decided to begin operations from a leased warehouse/office building located in an industrial park. The facility would be leased for five years and includes two five-year renewal options. The facility would need to be modified to handle both liquid and dry chemical repacking operations, as well as storage tanks for bulk liquids. Exact numbers have not been developed but she thinks the modifications would cost about $400,000. With the modifications and six plant employees, Stewart estimates the facility will support an annual sales volume between five and ten million dollars. Stewart's customer contacts will provide the majority of the sales and she expects first year sales dollars to approach six million. She is very confident the estimated first year sales can be achieved and can be doubled in the second year of operation. According to RMA Annual Statement Studies, distributors report a "Sales/Total Asset" ratio between 2 and 4.

After meeting with the SBDC counselor, Stewart realized that more a detailed financial plan was needed. Expected performance needed to be quantified to remove as much uncertainty about the new venture as possible. With the counselor's assistance Stewart began to project performance for the first year of operation. Together they developed operating assumptions based on Stewart's previous business experience and industry information from RMA. The assumptions will be used to prepare a projected beginning balance sheet and financial statements for the first year.

ASSUMPTIONS

Students are provided assumptions necessary to prepare a beginning balance sheet for the first year, an income statement for the first year of operation and an ending balance sheet for the first year.

THE TASK

As an assistant to Stewart, help accomplish the following:

1. Prepare the following statements:

a. Beginning balance sheet (year 0). Hint: Do not attempt to complete the ending year one balance sheet until the income statement is complete.

b. Year one income statement.

c. Ending balance sheet for year one.

d. Cash flow statement for year one.

2. Will Stewart have sufficient capital for the first year of operation? Explain

3. Explain the importance of the assumptions developed by Stewart.

4. Evaluate projected performance using ratio analysis. Calculate the following ratios and evaluate performance. (Current ratio, Quick ratio, Accounts receivable turnover, Days sales outstanding - DSO, Inventory turnover - using cost of goods sold in the numerator, Total asset turnover, AP deferral period, Times interest earned ratio - TIE, Debt ratio, Basic earning power - BEP, Profit margin, Return on assets - ROA and Return on equity - ROE)

5. Analyze projected performance, from a banker's perspective. Why would the bank renew the short-term loan? What ratios would prove useful in this analysis? Explain.

6. Most entrepreneurs believe it is a positive indicator if expected sales can be exceeded. Explain why this may not always be the case.

Subject: Teaching aids & devices; Financial statements; Startups; Chemical industry

Location: United States--US

Classification: 8640: Chemical industry; 9520: Small business; 4120: Accounting policies & procedures; 8306: Schools and educational services; 9190: United States

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 20

Issue: 1

Pages: 21-24

Number of pages: 4

Publication year: 2013

Publication date: 2013

Year: 2013

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Business Case, Conference Proceedings

Document feature: References

ProQuest document ID: 1509212078

Document URL: http://search.proquest.com/docview/1509212078?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-11

Database: ABI/INFORM Complete

Document 2 of 100

THE ROOF IS ON FIRE: THE ETHICAL MINEFIELD OF THE TEXTILE INDUSTRY IN BANGLADESH

Author: French, Joseph J; Martin, Michael

ProQuest document link

Abstract:

This case is motivated by a recent fire in a textile factory in Bangladesh in which scores of workers lost their lives while producing garments for multinational firms. The case focuses on a multitude of issues involving a corporation's global ethical sourcing program. This case describes a hypothetical assignment facing a public relations and operations manager of Wal-Mart. The assignment revolves around the dilemma of trying to maintain low costs of production while simultaneously trying to ensure tragedies like this one will not happen again. The case provides detailed background information on the social, economic, and political climate in Bangladesh, the current situation of the textile industry in Bangladesh, applicable laws, ethical frameworks, and competitive market considerations. At the end of the narrative the reader is asked to formulate ethically, legally, and financially sound recommendations. The suggested audiences for this case study are upper level undergraduate students and graduate students.

Full text: _TVM:UNDEFINED_

Subject: Textile industry; Fires; Retail stores; Sourcing; Business ethics; Working conditions; Teaching aids & devices

Location: United States--US, Bangladesh

Company / organization: Name: Wal-Mart Stores Inc; NAICS: 452112, 452910

Classification: 8306: Schools and educational services; 8620: Textile & apparel industries; 2410: Social responsibility; 9190: United States; 9179: Asia & the Pacific

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 20

Issue: 1

Pages: 29

Number of pages: 1

Publication year: 2013

Publication date: 2013

Year: 2013

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Business Case, Conference Proceedings

ProQuest document ID: 1509212023

Document URL: http://search.proquest.com/docview/1509212023?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-11

Database: ABI/INFORM Complete

Document 3 of 100

AUDUBON HILL: A RELATIONSHIP MARKETING CASE STUDY

Author: Schmit, Dora E; Larson, Lindsay R L

ProQuest document link

Abstract:

The following case demonstrates how local businesses can flourish even in tough economic times. The case highlights two dominant marketing topics, relationship marketing and customer gratitude, and reveals their favorable effects for a small local business. The case is particularly applicable in an introductory marketing course, although it is also suited for undergraduates enrolled in management, fashion merchandising or retailing courses. It is recommended that students will assess the company's marketing strategy as well as target market, and examine the company's practice of relationship marketing and generation of customer gratitude. Students should expect to spend two hours outside of class reviewing and responding to the case questions in groups. An in class discussion can follow, in which the class hears all of the different group responses.

Full text:

CASE DESCRIPTION

The following case demonstrates how local businesses can flourish even in tough economic times. The case highlights two dominant marketing topics, relationship marketing and customer gratitude, and reveals their favorable effects for a small local business. The case is particularly applicable in an introductory marketing course, although it is also suited for undergraduates enrolled in management, fashion merchandising or retailing courses. It is recommended that students will assess the company's marketing strategy as well as target market, and examine the company's practice of relationship marketing and generation of customer gratitude. Students should expect to spend two hours outside of class reviewing and responding to the case questions in groups. An in class discussion can follow, in which the class hears all of the different group responses.

CASE SYNOPSIS

Audubon Hill Antiques and Gifts is a gift shop located in Saint Francisville, Louisiana. Saint Francisville was founded in 1809 and has traditionally been a popular tourist attraction due to its historic plantations, churches, cemeteries, gardens and renowned golf course. Audubon Hill is located in the downtown market district and the rustic design of the store fits in well with the town 's history. The store has been in business for six years and carries a wide assortment of high-end merchandise including gifts, antiques, home décor, jewelry, bath and body products, children and baby items, women's and men's clothing, accessories, seasonal merchandise, souvenirs, and traditional Louisiana specialty foods. Gifts can be found for weddings, baby showers, holidays, and birthdays for all ages. The owner, Kathleen, describes the store as being the place where you can find a gift for anyone and take a little piece of Louisiana home with you. Although Audubon Hill has survived the 2008-2012 global recession thus far, the owner worries about the company 's fixture. Since 2008, tourism in Saint Francisville has been unpredictable and Audubon Hill's current year-to-date sales are down from last year. Kathleen 's afraid that Audubon Hill may not experience enough sales to keep the business operating.

AUDUBON HILL OVERVIEW

The downtown market district in Saint Francisville, LA has been steadily experiencing fewer customers than prior years. In the past five years, various local retailers have gone out of business, including clothing and antique shops, video stores, and a neighborhood meat market. The decline in Saint Francisville patronage is likely due to turbulent economic conditions and decreased tourism. According to statistics provided by the director of the West Feliciana Parish Tourism Commission, Katie Smith, Saint Francisville tourism has declined from 2008 - 2011 and has not experienced nearly the same tourism levels as New Orleans. In fact, Saint Francisville recently had to increase sales tax, which is another indication of the financial hardship being experienced. After seeing several of the local businesses close as well as experiencing a decline in sales, Kathleen, the owner of Audubon Hill Antiques & Gifts, a shop located in Saint Francisville, is worried about her own business and whether it can stand these market conditions. Kathleen states, "In the past few years, I've witnessed many nearby businesses close, and I don't want to end up like one of them. My sales have been mediocre, and I know I need to change some things around this shop to stay afloat, but I don't know what to change."

Saint Francisville was established in 1809 and rests on bluffs overlooking the Mississippi River. The town and its surrounding parish (i.e. county), West Feliciana, has traditionally generated a large amount of tourism. In fact, the annual financial impact for tourism in the West Feliciana Parish is roughly $18 million. Saint Francisville's plantations such as the Myrtle Plantation, which is proclaimed as one of America's most haunted homes; as well as the picturesque Rosedown, Butler Greenwood, and Greenwood Plantations, are primary tourism venues. In addition, historic churches and cemeteries are other popular sites, including Grace Episcopal, Our Lady of Mount Carmel Catholic Church, United Methodist Church, Hebrew Rest Cemetery, and Locust Grove State Historic Site. Saint Francisville is also home to the renowned golf course, The Bluffs, which has been recognized as one of the best golf courses in Louisiana as well as one of America's top public golf courses. Lastly, Afton Villa Gardens, is another tourist site that includes roughly 250 acres of lavish gardens. Not surprisingly, due to its quaintness and beauty, Saint Francisville is a popular venue for Louisiana weddings, which are often held at the aforementioned plantations, churches and gardens.

Saint Francisville is roughly 40 minutes north of Baton Rouge, Louisiana and two hours northwest of New Orleans, Louisiana. According to the 2010 census, Saint Francisville's population equated to 1,765 people which is only a 3.1% increase from the 2000 census (an increase of 53 people). Residents are primarily white. The median age of Saint Francisville residents was 36.8 years and the median household income was $44,605.

Audubon Hill is located at the entrance of the downtown Saint Francisville market district. Matching the historical nature of the town, Audubon Hill is located in rustic building originally constructed in the 1880s, which still retains most of its antique features. The retail space is roughly 4,000 square feet. The back of the shop (1,300 sq. ft.) which includes a kitchen, is rented out approximately two times per month for various occasions, including bridal and baby showers, rehearsal dinners, birthday parties, and chamber of commerce meetings. The cost to rent the space is $400 per day. When such events take place, the shop is divided by two Victorian pine doors to isolate the selling space, however for the remainder of the time the space is used to display merchandise.

Audubon Hill sells a broad variety of merchandise in hope that customers can find a gift for anyone, even themselves. Product categories consist of accessories, which includes purses, wallets, luggage, backpacks and other bags; antiques, which includes serveware and home decor items from the 1800s; baby, which includes clothing, shoes, pillows, blankets, and books; bath and body, which includes candles, soaps, lotions, and fragrances; childrens, which includes clothing, toys, games, and books; women's and men's clothing; specialty food items, which includes different sauces, jellies, baking mixes, and spices used in traditional Louisiana cuisine; gifts, which includes gifts for weddings, birthdays, and anniversaries; home, which includes home decor items such as lamps and tables, as well as serveware such as platters, glasses, and copper chafing dishes; jewelry, which includes earrings, necklaces, rings and bracelets; seasonal merchandise, which includes decorations for Mardi Gras, Easter, Halloween, Thanksgiving, and Christmas; and souvenirs, which includes key chains, photographs and other memorabilia of the Saint Francisville area. Kathleen mentions that women between the ages of 35-65 represent nearly 90% of her business. Traditionally, roughly 60% of the store's customers were tourists, while 40% were locals; however she estimates that in the past year her customer mix has changed to represent both segments equally since the economic downturn. According to Kathleen, tourists tend to purchase souvenir, jewelry, and food items, while locals tend to purchase gift and home items. Current year-to-date sales and profit margins for each of the categories are shown in Table 1.

The shop is open from 9:30 AM to 5:30 PM every day. Kathleen, the owner, works the shop on most days and is the only full-time employee. Six other individuals are employed parttime, and oftentimes these employees work once every two weeks. Typically Audubon Hill staffs one employee on weekdays and two to three employees on weekends. Kathleen performs all of the management responsibilities and purchases merchandise for the store twice a year.

Kathleen understands the value of relationship marketing and she encourages all employees to foster and grow relationships with customers. By working the shop on most days, Kathleen has placed a strong emphasis on learning and remembering customers' names and merchandise preferences. In fact, local customers greatly appreciate Kathleen's knowledge of customer preferences and merchandise expertise along with the special attention they receive when shopping, which drives customers to continue shopping at Audubon Hill. In an effort to find the perfect gift, local customers will often consult with Kathleen to learn what the gift recipient tends to purchase or desire at Audubon Hill. Customers trust Kathleen's expertise and customer knowledge so much that oftentimes they will call Audubon Hill on their way to a party and say they need a gift for a certain person in a matter of minutes. Kathleen will select merchandise without the customer seeing the item(s) and have the item(s) wrapped prior to the customer's arrival to expedite the shopping trip. Kathleen states, "I understand that people are so busy nowadays, I just want to make my customers' lives easier." Audubon Hill places a large emphasis on providing excellent customer service. Kathleen believes that talking with customers and being friendly is critical to making customers feel welcome. Audubon Hill also offers additional services to make the customer's shopping experience easy and extraordinary. Additional services include gift wrap, delivery to local events (weddings, baby and bridal showers, birthday parties, etc.), and delivery to UPS so that tourists can have merchandise shipped. Another service offered by Audubon Hill includes special orders. When customers desire merchandise that is out-of-stock, Kathleen will special order that merchandise, even if it is the customer's first time at Audubon Hill. Customers often express their gratitude for the treatment and services they receive when shopping at Audubon Hill. In fact, Caryn, a frequent local customer mentioned that, "Kathleen has done so much to help me that I just want to help her in return."

Audubon Hill primarily communicates with customers through facebook and email. Audubon Hill uses facebook to show new arrivals and inform customers of upcoming events. Oftentimes, Kathleen will send personalized emails to local customers mentioning new merchandise that fits their individual tastes or describing an upcoming event or sale. Besides placing merchandise on sale, Audubon Hill also engages in an annual promotion targeting K-12 teachers in West Feliciana Parish. For this promotion, Audubon Hill provides teachers in the district with a gift bag that includes a business card, candy and a 20% off coupon. Kathleen claims that this promotion has been very successful by bringing new customers to the shop and establishing new customer relationships.

Audubon Hill does not currently engage in any traditional advertising, but instead participates in four community events that are sponsored by the city. However, all the events themselves are advertised in Country Roads magazine, which publicizes cultural events occurring between Natchez, Mississippi and New Orleans, Louisiana. Country Roads is distributed to retailers purchasing advertising space, who then distribute the magazine to their end customers. The four weekend events include the Pilgrimage which occurs in March, Polos and Pearls which occurs in August, Yellow Leaf which occurs in October, and Christmas in the Country which occurs in December. Retailers participating in these events operate until the late hours of the night and offer an open house atmosphere to customers. During these events Audubon Hill samples food merchandise including wine slush and traditional Louisiana spreads, dips and jellies. Kathleen states, "Advertising just doesn't seem worth it. Sales generated from advertising will not offset its high cost ($400 to $800 per ad in Country Roads); and potential customers must drive by Audubon Hill on their way to an advertising retailer anyway. There's just no point of advertising." To attract customers, Kathleen decorates the outside of Audubon Hill with a bold assortment of seasonal decorations and signs.

Although four other gift shops are located in Saint Francisville, Audubon Hill differentiates itself by providing high quality merchandise that is thought to never go out of style. Audubon Hill is the only shop selling items considered to be shabby chic-et design style using aged items to create an elegant effect. Of the other gift retailers, one solely focuses on antiques, another primarily sells jewelry and wholesale items, the third concentrates on bridal registry and gardening items, and the last sells clothing marketed toward women over sixty years of age. Kathleen states, "I'm the only shop in the area that carries such a wide assortment of merchandise, and I want my shop to appeal to all kinds of customers so they can leave with something that they love."

This past year (2012) has been very challenging for Audubon Hill. With the turbulent economic conditions, fluctuating tourism and customer segments, Kathleen has been open to new marketing strategies. Kathleen noticed a drop in sales early on this year, and in effort to boost sales, Audubon Hill offered a minimum of 25% off all merchandise for seven months. Unfortunately, these financial rewards to customers were not effective, and Audubon Hill's sales are currently down by 37% compared to last year. Kathleen claims that "The discounts we offered this year really didn't do much beside hurt our margins and we really need to think of new ways to generate revenue for the store." She realizes that important decisions and changes will need to be made if Audubon Hill is going to remain in business.

Subject: Teaching aids & devices; Statistical data; Relationship marketing; Customer satisfaction; Small business; Target markets; Market strategy

Location: United States--US

Classification: 8306: Schools and educational services; 7000: Marketing; 9520: Small business; 9190: United States; 9140: Statistical data

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 20

Issue: 1

Pages: 47-51

Number of pages: 5

Publication year: 2013

Publication date: 2013

Year: 2013

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Business Case, Conference Proceedings

Document feature: Tables

ProQuest document ID: 1509212131

Document URL: http://search.proquest.com/docview/1509212131?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-11

Database: ABI/INFORM Complete

Document 4 of 100

THERE IS ROOM AT THE INN!: A CASE STUDY

Author: Karani, Komal; Sen, Kabir; Mulcahy, David

ProQuest document link

Abstract:

The primary subject matter of this case concerns entrepreneurship. Secondary issues examined include marketing, management and franchising. This case has a difficulty level of three, appropriate for junior level and senior level. This case is designed to be taught in two class hours and is expected to require six hours of outside preparation by students.

Full text:

INTRODUCTION:

Mr. Shah looked at the occupancy figures for the past week again, hoping there was an error in his bookkeeping. But there wasn't. This was the third month in a row where his motel had not even enough guests to cover his running expenses. He wondered if buying this motel had been a mistake. It had been six years since he had owned the Kwality Motel but he was still struggling to break even.

He pondered over what could be going wrong. He had been very careful choosing the location. Kwality Motel is strategically located on the comer of what use to be a major thoroughfare, but is still close to two Interstate highways in a mid sized town in South Texas. It has 127 rooms which include a single or double bed, a chair, a table, television and bathroom. The Hotel offers free wireless high-speed Internet access, free local calls, free coffee and breakfast and a seasonal outdoor pool as well as a children's pool.

The original building where Kwality Motel is located was started in 1997, and has since had several owners operating the hotel under different names but most were unsuccessful due to various reasons. Raj Shah thought he could turn it around and purchased it in 2006 along with a partner. The building was then renovated, cleaned and slightly updated. The current owners decided to become a franchisee with Kwality Hotels and Motels in an attempt to boost sales. That did not help Mr. Shah and the motel averaged a paltry twenty percent occupancy in 2012. The hotel seems to get the best business when there is either a natural disaster or other things causing many utility workers to stay there for a long period of time at a lower cost than most hotels in town. As part of the franchise, the hotel is only benefiting from being listed on the Kwality Hotels & Motels website and other travel websites that Kwality advertises on. The Kwality Hotels & Motels Corporation is not helping the owners of this hotel in any other way. The owner must pay a franchise fee of $4000 a month in order to keep the franchise name. Considering the very low occupancy rates, this fee makes a further dent in the revenue making it almost impossible to make a profit.

Mr. Shah had considered his options before. Last year, he had made up his mind to terminate the franchising agreement with Kwality Hotels & Motels Corporation when the annual agreement came up for renewal. He hit an unexpected roadblock with his bank though. His mortgage officer informed him that the bank required him to continue as a franchise rather than an independent hotel. Although the franchise name is obviously not helping the company, Mr. Shah still owes the bank over$l million. This gives the bank a great deal of say in Mr. Shah's business decisions and unfortunately eliminates one option of reducing expenses.

Mr. Shah's thoughts went back to the location of his motel. While it was indeed easily accessible thanks to its proximity to the Interstate, it was in a part of town that had been steadily sliding in reputation and safety. Once close to a bustling downtown, it was now home to mainly commercial properties and after nightfall was frequented by mostly prostitutes and drug users. Mr. Shah had lost a lot of business by refusing to permit unsavory members of the society into his motel. But he was convinced that was the right thing to do.

As Mr. Shah drove home that day, he noticed yet another hotel just 3 miles from his. Within a 15 mile radius, there were now 9 similarly priced hotels, most of them franchises with well-known names. Unfortunately, the city did not have the potential to provide business to so many hotels and motels. There was nothing to attract tourists. The only draws were the local University, a couple of oil refineries and the occasional business traveler. Where and how could he find additional business?

Subject: Entrepreneurship; Franchising; Marketing; Strategic management; Hotels & motels

Location: United States--US

Classification: 8306: Schools and educational services; 7000: Marketing; 2310: Planning; 9190: United States

Publication title: Allied Academies International Conference. International Academy for Case Studies. Proceedings

Volume: 20

Issue: 1

Pages: 59-60

Number of pages: 2

Publication year: 2013

Publication date: 2013

Year: 2013

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 1948-3198

Source type: Conference Papers & Proceedings

Language of publication: English

Document type: Business Case, Conference Proceedings

ProQuest document ID: 1509212221

Document URL: http://search.proquest.com/docview/1509212221?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-11

Database: ABI/INFORM Complete

Document 5 of 100

An Amalab-Movie Creation Approach Model: Utilizing Statistical Science To Design Anime Hits

Author: Ishikawa, Akinori; Hiroki, Koyama; Amasaka, Kakuro

ProQuest document link

Abstract:

The authors have created an "Amalab-Movie Creation Approach Model, A-MCAM", by utilizing statistical science to support filmmakers' design hit movies. This paper first identifies the factors that make an Anime hit movie by making the expertise and knowledge of Anime movie producers explicit. Second, explicit knowledge is then made of factors that have an emotional impact on moviegoers to identify key subjective elements in films. Third, cause and effect links are then forged between these subjective elements and those in hit movies. Finally, this knowledge and the research process are used to create an A-MCAM. The authors then enlist the support of movie producers in verifying this model, which is deemed a successful model for improving the quality of hit filmmaking. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Knowledge; Motion picture directors & producers; Emotions; Statistical methods; Case studies

Classification: 9130: Experimental/theoretical; 2600: Management science/operations research; 8307: Arts, entertainment & recreation; 5200: Communications & information management

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 1

Pages: 13

Publication year: 2013

Publication date: 2013

Year: 2013

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1418712176

Document URL: http://search.proquest.com/docview/1418712176?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 6 of 100

Using Mathematical Programming For Marketing Plan Optimization

Author: Bramorski, Tom

ProQuest document link

Abstract:

While a growing number of companies are embracing analytical metrics to measure the performance of their critical business processes, many neglect to apply the same mathematical rigor to their marketing efforts. This paper examines how to apply a disciplined quantitative approach to resource allocation within the context of marketing. This project will examine a company that manufactures and sells electric power generation components. This firm's executive management believes that developing nations in Asia have a particularly strong need for power generation equipment as they build and expand new infrastructure at a rapid pace. Management objective is to construct a marketing plan that will maximize both total revenue as well as revenue from a targeted geographic region, while working within the budgetary and other constraints. Operations Research offers sophisticated tools for translating complex business situations into mathematical expressions. These expressions may then be evaluated to identify one or more optimal solutions. Multivariate Testing is used to quantify all the relevant variables for the mathematical model. This statistical tool allows the researcher to simultaneously test the effect of various input factors on the response variable, and also test for any interactions between factors. These interactions are often significant in predicting the response outcome. Using indexed utility values produces a blended model that can simultaneously satisfy both objectives. This blended model results in a marketing plan that will increase total revenue by more than five million dollars, a 57% gain. At the same time, the plan will generate an 18% increase in targeted revenue, positioning the company for future growth. The project shows that companies can, and should, insist on the same degree of financial accountability from their marketing investments that they would expect from any other capital or operational expenditures. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Marketing; Investment; Competitive intelligence; Strategic planning; Case studies; Optimization algorithms

Classification: 9130: Experimental/theoretical; 2600: Management science/operations research; 2310: Planning; 7000: Marketing

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 1

Pages: 23

Publication year: 2013

Publication date: 2013

Year: 2013

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1418712132

Document URL: http://search.proquest.com/docview/1418712132?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 7 of 100

REAL ESTATE INVESTOR'S ADVANTAGE, INC.

Author: Wharton, Arthur L

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Abstract:

REIA, Inc. had just received seed capital financing of $500,000 and has commenced operations. Anthony Washington, the new CFO, needed to develop financial projections and a financial reporting and controls system that is flexible enough to provide the necessary information about the finances of the start-up company without overburdening it with bureaucratic procedures while also participating in the setting the strategic direction of REIA. REIA's existing accounting system was handled by a part-time administrative assistant. While adequate currently, the current system would not accommodate REIA's growth plans. REIA developed a unique "bricks and clicks" business model that sought to integrate the delivery of real estate investment services via the internet and physical offices to real estate investors that ranges from novice to experienced investors. [PUBLICATION ABSTRACT]

Full text:

REAL ESTATE INVESTOR'S ADVANTAGE, INC

After nearly 2 years of meeting weekends and countless hours developing the business model, Real Estate Investor's Advantage, Inc. was finally a reality! With $500,000 of seed capital financing in hand, Anthony Washington, the new Vice President of Finance/ CFO was now responsible for pulling together the financial aspects of the new company. His first tasks would be to develop financial projections for the next five years and a financial reporting and controls system for REIA. During the course of the previous two years the assumptions, upon which the projections were based, changed several times. It appears that the most recent set of assumptions (See Exhibit 1) will be what he should use. In developing the financial reporting and controls system, he must take into consideration the unique needs and financial situation of a start-up company.

Nathan Anderson wanted to get rich investing in real estate. He attended seminars, took courses, earned his real estate license and eventually became a certified real estate appraiser. After a number of years, several thousand dollars and going down several blind alleys he knew there had to be a better more direct way to real estate riches. If there was only some way to pull together all the elements needed to learn how to successfully invest in real estate?

That idea was the genesis of what would eventually become Real Estate Investor's Advantage, Inc. (REIA). The notion of combining all the resources necessary to be a successful real estate investor was an idea whose time had come. Besides, people were hatching less wellthought out ideas into businesses and going public almost every day.

By this time Nathan had become a licensed real estate broker, had run a successful real estate appraisal company, had tried his hand at originating mortgages and was fresh off a foray investing in Baltimore real estate and was looking for a new challenge. He would start a company that would be a "one-stop shop" for the average person who wanted to learn how to successfully invest in real estate. It would provide not only information but also access to potential investment deals, partnering opportunities and advice from real estate professionals.

After sharing his idea with some friends and associates, he began meeting weekends to further develop the idea. He enlisted the assistance of his long-time friend, Anthony Washington who had financial expertise and had written several business plans for start-up businesses. He also reeled in his banking contact, Carla Edwards, to work with developing the business. After nearly a year and a half they had produced a detailed business plan and began to approach sources for seed financing. Through Caria' s contacts, REIA received $500,000 in angel financing for 24.97% of REIA's stock. The angel investors also were given 2 seats on the 5 member board of directors where they would monitor REIA's operations and progress. The remaining 3 board seats would be held by the founders' whose positions were as follows:

Nathan Anderson President

Carla Edwards Vice President of Business Development

Anthony Washington Vice President of Finance/CFO

Nathan and Carla became full-time employees in September 2001 and Anthony was expected to come onboard full-time in January 2002.

After securing the seed financing, in September 2001 REIA commenced operations. In the first months, REIA's focus was on refining its business model, hiring personnel, complete the development of its website and develop a marketing/advertising strategy that will appeal to its target market. REIA's website was to be the centerpiece of its business strategy. The website would perform multiple roles simultaneously. The website had to be aesthetically appealing but also needed significant functionality to provide information, real estate investment services and facilitate exchanges and dialogue with and among its members. As part of this initial phase, REIA needed to complete the development of its online basic real estate investment course (Real Estate Investment Made Simple (REIMS(TM)) and integrate it into the other website services and also determine which mode of delivery (web versus in-person) that would be best suited for the various services being offered.

In January 2002, Anthony became the full-time VP of Finance/CFO and discovered that there was no financial reporting and control policies currently in place. In fact, the financial operations of the company were handled by a part-time bookkeeper/office assistant who worked 2-3 days per week. She posted bills and invoices as they arrived using the company's accounting software and made payments when checks were cut on the 1st and 15th of each month. The president, Nathan, was the only signatory on the company checking accounts. Currently the only revenue sources were commission fees from real estate settlements. REIA averaged about 2-3 settlements per month. The commission checks were typically hand-delivered to the company by the agent of record for the transaction who generally attended the settlement (real estate closing). Two copies of the commission check were then made. One copy was for the property transaction file and the other for the financial records. The revenues were posted to the accounts via the accounting software and the check would be deposited into the bank. The agent's portion of the commission would be paid once the funds were available. For the most part checks were cut utilizing the accounting software. On some occasions, however, checks were cut by typing the information using the typewriter. These payments would then be manually entered into the accounting system. All checks were copied prior to being signed by Nathan. The check copies were then filed according to payee in the financial records file.

Now that Anthony was on board he had quite a task ahead of him. He would need to participate in the strategy development meetings to determine REIA' s future direction, make financial projections and develop a reporting and control system that provided vital information for the near-term management decisions. The reporting and controls system would also need to accommodate the growth REIA anticipated for the future. This needed to be accomplished without being cumbersome and bureaucratic. In addition to managing and monitoring the day-today finances of the company, with a constant eye on the cash position, he must take care not to stifle the inherent creativity and spontaneity of the start-up environment.

THE BUSINESS MODEL

REIA designed a "bricks and clicks" business model, very popular in the late 1990s, where there would be a seamless integration of actual real estate brokerage offices (bricks) and the web-based service delivery (clicks). It was expected that after an initial start-up period where the business model was refined, possibly a year or so, REIA would then sell franchises first on a local, then regional and ultimately a national basis. An example of an individual REIA franchise's projected profit/loss statement is provided in Exhibit 2. REIA's business model provided for three major sources of revenue and one minor revenue source. The major revenue sources were: (1) subscription membership fees, (2) transactions fees such as real estate sales brokerage commissions and (3) franchise fees once the concept had been proven on a local level and franchises were sold. The minor revenue source was management fees that were received on large on-going deals such as condominium development etc.

Membership subscriptions entitled members to numerous specially designed real estate investment services. Some of the services included were (1) a 13-module online real estate investing course, Real Estate Investing Made Simple (REIMS (TM)), (2) an Investor's Bazaar (TM) where members could post online properties for sale, real estate notes, investment opportunities and potential partnering opportunities (3) Investor Select (TM) a flat-fee transaction fee schedule, (4) Expert Consultations, consultations with various real estate experts and (5) Hot Deals (TM) , a real-time member notification service that on a preferential basis notified members of the most recent real estate deals brought to REI A by its many industry sources and contacts. The memberships were divided into 5 levels: Bronze, Silver, Gold, Platinum and Group Platinum costing $395, $695, $995, $1995 and $4995 respectively. The benefit features of the various membership levels would provide services for the entire spectrum of real estate investors, novice to advanced, to benefit from REIA's offerings. For the novice, Bronze level investor, just getting their feet wet in real estate investing, to the seasoned and experienced Platinum level investor, REIA offered a range of services that were delivered through an integrated fully functional website (clicks) and traditional offices (bricks). The services provided at the different levels would enable all levels of real estate investors to be successful.

REIA also instituted a team-based real estate service delivery system that it expected to revolutionize the industry. This system used a team of real estate professionals to provide all of the services associated with a traditional real estate sale or purchase transaction. In a traditional real estate brokerage office, a client (seller or purchaser) would be serviced by a single and relatively autonomous real estate agent. This agent would typically be simultaneously handling several transactions (sales or purchases) as well as constantly marketing their services to potential future clients. This generally resulted in the current client having difficulty getting current information on the status of their transaction because their agent is constantly on the move and inaccessible. With the team concept, different team members were responsible for different portions of the transaction with any team member having access to the status of the transaction using an innovative transaction tracking software system. A client would be able to receive an update on their transaction's status from any team member and thereby experience increased client satisfaction.

* All names have been changed to provide anonymity for the individuals featured in the case.

EXHIBIT 1

REIA Assumptions

1) Sales will increase at an annual rate of 50% for years 2 and 3 and 20% for years 4 and 5. (Scenario 3)

2) Expenses grow at 50% the annual rate of sales growth.

3) Average commission is $4,500 per transaction side*. In the first year 500 transaction sides will be completed.

4) Membership subscriptions will increase by 1000 each year starting in year 2. Each year will experience a subscription attrition rate of 5%.

5) Membership subscription will be distributed as follows:

A) Group Platinum ($4995) ...2%

B) Platinum ($1995) 6%

C) Gold ($995) 13%

D) Silver ($695) 24%

E) Bronze ($395) 55%

6) New REIA franchises will be sold, starting in year 2, as follows:

Year Two 2

Year Three 5

Year Four 10

Year Five 20

7) Franchisees will complete, on average, 400 transaction sides in their first year of operation. In subsequent years, completed transaction sides are as follows: 550 in year 2, 625 in year 3, 700 in year 4 and 800 in year 5. Average real estate brokerage commission is $4,500 per transaction.

8) Franchiser will generate 70% of all subscriptions sold. Franchiser will split franchisee generated membership subscriptions (30% of total memberships sold) revenues 50/50.

9) Franchise royalties will be 8% of franchisee revenues.

10) Initial franchise fee is $25,000.

* A typical real estate transaction is comprised of 2 transaction sides (selling side and purchasing side) or a total of 2 separate commissions being paid. The listing and selling agents will each receive a commission. The individual commission translates to a transaction side.

Subject: Management accounting; Accounting policies; REITs; Case studies

Classification: 8360: Real estate; 9130: Experiment/theoretical treatment

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 1

Pages: 23-28

Number of pages: 6

Publication year: 2013

Publication date: 2013

Year: 2013

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1370192515

Document URL: http://search.proquest.com/docview/1370192515?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 8 of 100

A thirst for change

Author: Joyner, April

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Abstract:

Don Park's product was a bottle cap equipped with a nitrogen-pressurized chamber, able to store fresh ingredients and instantly mix them into the bottle once the cap is turned; he had discovered it while scouting business opportunities. Several of Parks advisers questioned the licensing strategy. It turned out that the London company wanted to use the Gizmo for a new beverage that would dispense an energy shot akin to Red Bull into a soda. He was uncomfortable licensing the Gizmo for such an unhealthful beverage. Park turned down the deal immediately. Park consulted his other advisers. Most agreed that in the long term, a successful beverage brand could be more lucrative than licensing the Gizmo. In December 2010, a neighbor introduced him to Walter Apodaca, a former executive at Coca-Cola and Miller Coors. A month later, Park and Apodaca launched Gizmo Beverages. Over the next year and a half, the duo worked to develop a line of teas. Tea of a Kind debuted in August 2012 in 10 stores in Los Angeles.

Full text: Not available.

Subject: Beverage industry; Licensing; Tea; Case studies

Location: United States--US

Company / organization: Name: Gizmo Beverages; NAICS: 312111

Classification: 8610: Food processing industry; 9190: United States

Publication title: Inc

Volume: 34

Issue: 10

Pages: 104-105

Number of pages: 2

Publication year: 2012

Publication date: Dec 2012/Jan 2013

Year: 2012

Section: HANDS ON

Publisher: Mansueto Ventures LLC

Place of publication: Boston

Country of publication: United States

Publication subject: Business And Economics--Small Business

ISSN: 01628968

CODEN: INCCDU

Source type: Magazines

Language of publication: English

Document type: Business Case, Feature

Document feature: Photographs

ProQuest document ID: 1239550565

Document URL: http://search.proquest.com/docview/1239550565?accountid=38610

Copyright: Copyright Mansueto Ventures LLC Dec 2012/Jan 2013

Last updated: 2014-04-12

Database: ABI/INFORM Complete

Document 9 of 100

Transforming Drug Development: A Case Study

Author: Torrey, Kathryn; Grace, James; Dahlem, Andrew M

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Abstract:

The opportunity for innovation in drug discovery has never been brighter. The understanding of relationships between genetic makeup and disease is expanding. The population is aging and in need of new treatments to prolong and improve the quality of life. Expectations for access to medicine on a global basis are increasing. Eli Lilly is a global pharmaceutical company with approximately 46,000 employees operating in more than 146 countries and $22 billion in sales. Lilly invests more than $5 billion a year in R&D, but, like most pharmaceutical companies, must manage patent losses and an evolving R&D business model. Four options were evaluated for the Lilly Greenfield site prior to the ultimate decision to sell the facility and enter into a strategic partnership with Covance. In order to establish a mutually acceptable agreement between Lilly and Covance, strategic drivers and an increased understanding of each company's business needs were established.

Full text:

The opportunity for innovation in drug discovery has never been brighter. The understanding of relationships between genetic makeup and disease is expanding. Our population is aging and in need of new treatments to prolong and improve the quality of life. Expectations for access to medicine on a global basis are increasing.

In spite of all of the opportunities, there are many factors acting in opposition to pharmaceutical innovation including: rising costs of R&D, longer development timelines, shorter periods of exclusivity for innovators to recover investment, pricing pressures, increasing regulatory expectations and expectations for demonstrating benefit over existing standards of care. The juxtaposition of opportunity with the need to improve productivity calls for innovators to consider new options for increasing value and reducing costs.

Eli Lilly is a global pharmaceutical company with approximately 46,000 employees operating in more than 146 countries and $22 billion in sales. Lilly invests more than $5 billion a year in R&D, but, like most pharmaceutical companies, must manage patent losses and an evolving R&D business model. In 2008, Lilly sought to reduce fixed overhead to focus on internal investments by selling or closing facilities and creating strategic partnerships with third parties. The Greenfield Laboratories in Greenfield, Indiana, were part of Lilly's history for nearly 90 years but had become underutilized due to an increase in global capability and affordability of third party contract providers. The Lilly Clinic for Pharmaceutical Research located at the Indiana School of Medicine was also underutilized for similar reasons. Lilly had dramatically increased the quality and volume of molecules in development, but needed access to broader and more flexible capacity than its own facilities could provide. Lilly also sought to create value from a highly capable but underutilized plant site for its employees, and for Indiana, which has been Lilly's corporate home for more than 136 years.

In 2008, Lilly was preparing for the pending patent loss of several of its successful innovative medicines while managing a full and flowing pipeline of molecules in development. In this evolving landscape, all portions of the R&D enterprise were evaluated and placed in a capabilities matrix in order to assess how the generous, but limited, R&D investments could be used to produce value (Figure 1). This evaluation was conducted against the anticipated patent expiry time period, where revenue growth would be negatively impacted, but where significant resources would also be required to advance the portfolio.

One fixed asset was Lilly's 600,000 square feet Greenfield Laboratory. This laboratory had become the home of Lilly's toxicology facility and was a strong contributor to Lilly's pipeline of innovation with years of demonstrated excellence in the design, conduct, and interpretation of safety studies for exciting investigational medicines in development. As Lilly's pipeline grew, more flexible and cost effective alternatives were required to advance the pipeline and reduce costs.

The goal: a new strategic partnership model

Lilly's initial outsourcing efforts date back to the late 1990s and were focused in toxicology. The long live-phase studies (oncogenicity and chronic toxicology) were the first to be fully outsourced starting between 1998 and 1999 with the redirection of internal Lilly resources for shorter term studies. By 2004, approximately 80 percent of all Lilly GLP toxicology study support was being provided by contract research organizations (CROs). Lilly challenged itself at that time to understand the efficiency of its operating model which maintained full GLP certification for the Greenfield facility despite outsourcing the majority of the GLP study work. The subsequent business analysis revealed that cost savings could be captured by either running all GLP work internally, utilizing the resources needed to maintain GLP certification to their fullest, or moving all GLP work to CROs. The business analysis also revealed that, based on portfolio growth projections, bringing all GLP toxicology work back "in house" would require major capital investments in expanding the Greenfield vivarium space and additional human resources to support that work. In mid-2005, Lilly took the calculated risk of moving all GLP study activities to an external network of qualified CRO providers to reduce fixed expenses and increase flexible capacity to deliver the portfolio.

Lilly wanted a strategic and reliable partner to maintain the quality of research and products while expanding the volume of capabilities available. Lilly developed the concept of becoming a Fully Integrated Pharmaceutical Network (FIPNet) and was evolving its thinking of CRO relationships to more strategic commitments across a smaller base. The three most important criteria Lilly selected to conduct this assessment were quality, capability, and reliable delivery.

Four options were evaluated for the Lilly Greenfield site prior to the ultimate decision to sell the facility and enter into a strategic partnership with Covance. The first option considered was to continue operation at the site by spinning off the location as a standalone contract service provider to compete with other CROs. This option was not selected due to the size, cost, lack of experience of Lilly's employee base in managing a CRO, and the need to leverage the available CRO capacity across the industry. Additionally, there was a low probability that competitors would place studies in a previously owned Lilly facility without significant time for transition. The second option was to vacate the site and outsource work to existing contract laboratories. A third option explored was to sell the site to the state of Indiana and designate it as a technology park and lease back only one or two buildings at the site for Lilly's use. This option proved to be minimally cost effective, not strategic, and difficult to manage. The fourth option was to sell the site to a strategic partner under terms and conditions equally beneficial to both parties. Lilly wanted a capable partner that would maintain the quality of research and fully utilize the capability of the site and staff. After careful consideration, Covance became the preferred partner with which to negotiate this historic transition. Additionally, Lilly's history and experience working with Covance was a determining factor because of their documented performance, trust in the dependable delivery of quality work and the strategic engagement of their leadership team.

Negotiation phase

In order to establish a mutually acceptable agreement between Lilly and Covance, strategic drivers and an increased understanding of each company's business needs were established. Lilly wanted to divest its Greenfield research site to an organization that could operate it with greater utilization at reduced expense and maintain capability through continued employment of the skilled employee base. Lilly's second goal was to send a greater percentage of work to a CRO in order to reduce fixed costs and improve flexibility and value. Covance wanted to expand its business into early research support and clinical pharmaceutical drug development while mitigating the risk of this increased commitment through a long-term partnership. Both companies were eventually able to align their goals in the form of a long-term strategic alliance. The terms of this alliance included a 10 year, $1.6 billion dollar service agreement, the sale of the Greenfield research facility to Covance for $50 million dollars, the closure of the Lilly Clinic in Indianapolis and a negotiated volume and commitmentbased discount in pricing for the duration of the deal.

Lilly views people as its most important asset. When this strategic partnership was negotiated, one important element for Lilly was that the highly skilled employees at the Greenfield site remain employed. The business model utilized in this case retained the majority of highly trained scientists for business continuity while enabling Covance to rapidly acquire new capabilities. In arriving at this landmark deal, Lilly was able to sell an underutilized R&D site and repurpose it for future growth.

Covance was also able to achieve several of its business objectives with this acquisition. First, Covance was able to acquire a functioning R&D site that contained new scientific capabilities and complemented their current investments in the pre-clinical and clinical development space. By increasing their presence and investment in the early discovery area, Covance was able to provide clients with a greater footprint of services across the drug development value chain in a world class toxicology facility, and at a discounted price.

One of the crucial elements to successful implementation of this agreement was the use of key performance indicators (KPIs). Before the Lilly-Covance deal was signed, Lilly communicated a set of KPIs to gauge the quality and efficiency of the contracted work. Covance provided a pricing scorecard for each deliverable required in each of the eight business lines: GLP Tox, Non-GLP Tox, in-vivo Pharmacology, Imaging, Quality Control Labs, Central Lab Services, Clinical Pharmacology, and Late Stage Clinical Trials. KPIs ensured that both parties were aware of what results were expected for each project. An examination of KPI trends over the course of the agreement shows that they have improved and evolved over time to accommodate changes in standards and expectations (see table on page 27). Metrics were also added or removed depending on their relevance and target values were modified as necessary. This flexible approach to measuring success has allowed more KPIs to be achieved, allowing each company to continue to raise its standards of excellence. In the first year of the contract, Covance conducted over 3,500 studies without missing a deliverable, while maintaining quality in spite of the issues of transition.

A second key element of the contract included annual minimum commitments (AMCs), establishing the amount of work and the cost of each study that Lilly would contract to Covance. AMCs were established in each of the eight business lines. A review of the first three years shows that Lilly has surpassed the allotted spending in each year by 30 percent or greater. This is a testament to Lilly's satisfaction in the quality and reliability of Covance in providing the contracted services.

Announcement day and the transition phase

The strategic partnership was announced on August 6 and completed on October 3, 2008. The scope and complexity of the deal was unprecedented for Lilly as was the transition of a R&D site that was never previously anticipated to be outside of Lilly's control. Complex integration issues like the separation of information technology (IT) systems, utilities, site security, and facility maintenance needed to be quickly and effectively planned by a joint oversight committee. Closure of the Lilly Clinic also needed to be executed in an efficient manner. Regular operational briefings allowed Covance personnel to understand the current systems and processes, highlight issues, and begin to develop a gap analysis for the transition plan. Once the announcement was made, a joint transition team was formally introduced and expectations and priorities were set. The leaders of the transition team were responsible for integrating and coordinating a complex set of workstreams ranging from facilities and human resources to IT and in vivo pharmacology. In order to demonstrate their commitment to employees and ease their transition into a new corporate culture, Covance developed an on-boarding program that paired existing Covance employees with affected Lilly employees from their area of expertise. The effectiveness of this program was evident immediately. The retention rate of employees by Covance was 98 percent after the announcement and after one year, 95 percent of former Lilly employees remained.

Overall, the success of the joint transition team was due to essentially three key activities: clear and unambiguous objectives, support of the transition leaders by senior leadership, and rapid issue resolution.

In order for a partnership of this magnitude to continue to succeed, a governance structure was created to provide oversight on the objectives both companies had set forth in their partnership agreement. The governance structure was designed to promote clear communication and establish trust between staff members at multiple layers within the two companies. The governance structure was comprised of an executive steering committee (ESC), a business operating committee (BOC), and a business unit steering committee (BUSC) that monitors each of the operational groups.

The objective of the ESC is to set the mission, vision, and direction of the strategic alliance. The BOC monitors KPIs, implements the strategic aim of the partnership, and oversees critical initiatives such as cycle time improvements for study conduct. The BUSC forecasts future work demand, develops KPIs, and oversees project execution for each of the eight business lines.

Evolution of the partnership

Covance was concerned with their ability to retain employees through the transition in order to meet the needs of the contract. Employees were given the opportunity to apply for positions at Covance that were similar to their previous positions with Lilly. As previously mentioned, a majority of employees, the most critical resource to the transition, remained at the Greenfield site, allowing this partnership to smoothly transition.

To gauge the progression of the partnership each year, voice of the alliance (VOA) surveys are distributed to employees from Covance and Lilly to gain insight on many elements of the alliance. Questions are asked in 13 areas related to cultural, operational, and strategic fit to address strengths and weaknesses of the alliance.

Data from the 2009 survey showed a variance of more than 10 percent in three areas of employee answers: roles, team coordination, and skills/ competence. In the other 10 areas, the difference between the two results was smaller than 10 percent, indicating that both parties were in agreement in how they viewed each other. By 2012, there was no variance of more than 10 percent in any category surveyed and the gaps in each area narrowed relative to 2009, demonstrating that both companies had made great strides in improving the site operations. Additionally, in 2012 the response of the percent favorable for each area was >70 percent which according to Lilly's historical data sets indicates a highly functioning partnership. Based on this analysis and trends of the previous three surveys, the next area of opportunity lies in making both sides more satisfied.

Key learnings

Corporate growth is difficult to effectively manage, but Covance was able to grow a high quality business with committed volume and acquire new facilities in a single deal structure. Forming this strategic partnership with Lilly has enhanced Covance's discovery and preclinical capabilities to engage a broader set of clients. In the course of executing this strategy, it was apparent that Covance also needed to change its business processes to understand and adapt to the speed and efficiency of newer, less linear study designs, such as in vivo pharmacology.

Very quickly, Covance recognized the value of integrating the scientific disciplines at the site by utilizing a full service model for the discovery work instead of adapting the functional approach used in the past. Prior to the partnership, Lilly research, including pharmacokinetics, toxicology, and ADME, was often performed in a "siloed" structure with each scientific group conducting studies within their area of expertise, without a view of the overall study plan for the project or compound. It was common that once a study was completed and reported back to the requestor, it was up to the project team to aggregate the data sets. Once the transition was complete, the site staff soon realized that integrating these independent functions provided an opportunity that had not existed inside Lilly. As a result, value was also created through the integration of pharmacology and non-GLP toxicolgy. Additionally, Covance learned that applying their standard study systems that were run effectively at their other sites required an adjustment to the non-linear nature of early discovery work conducted at Greenfield. There was also a need to immediately build fire walls against other companies conducting work at the facility.

One transition element for former Lilly employees was their need to recognize a shift in relationships and perspective as previous colleagues became sponsors rather than co-workers. Four years since the deal was completed, communication and flexibility are crucial as Lilly's proportion of the site's capacity decreased while the site built a new client base that supports more than 100 unique sponsors. Another key benefit of the strategic partnership is access to unique external viewpoints which allow for the sharing of non-proprietary information. This information can benefit approaches to protocol development, study design, insights on how to improve standard cycle times for routine studies, and even data analysis.

In retrospect, the decision to opt for further expansion of the Lilly Covance strategic partnership, reaffirmed the significant positive economic impact the decision has had on the local community and the state of Indiana. If Lilly had decided to close the site and outsource the work to other entities globally, the loss of jobs in an industry that is essential to the economic strategy of Indiana may have put into question the long-term viability of the strategy.

To determine the economic impact of Lilly's decision to maintain a critical R&D capability in Indiana through a third party, a study was designed with Crowe Horwath, LLP to quantify and measure the direct, indirect, and induced effects at the Greenfield research site from October 1, 2008 to December 31, 2011 on the local and state economy (see table above). The study focused on key areas such as: employment levels, payroll (wages), and annual output from operational and capital expenditures from the date Covance acquired the site. The initial purchase of the site provided both local and statewide benefits since a majority of the approximate 250 Lilly employees who accepted positions with Covance in 2008 are still with the company today. In addition, from October 2008 to December 2011, Covance has hired more than 270 new employees at the site. At the time of the formation of this aspect of the partnership, Covance had been in Indiana for more than 20 years with a global facility in Indianapolis and a Phase I clinic in Evansville, with approximately 1,000 employees. Covance's own operations at the Greenfield site combined with the multiplied effects of those operations experienced by others are estimated to have added 564 jobs, $35.7 million in wages annually, and $102.4 million in annual output. As a result, Covance recently announced another expansion at the Greenfield site that includes new North American centers of excellence in genetic toxicology, sample storage and developmental and reproductive toxicology (DART).

The bottom line

The pharmaceutical industry needs fresh ideas for reducing recurring expense, expanding learning and increasing the cost effectiveness of discovery and development. This article elaborated upon tactics employed to foster success for both companies, thus allowing for the application of similar tactics for other organizations wishing to effectively decrease fixed costs while increasing flexible capacity. From this partnership, Lilly gained more flexible capacity, access to new, non-proprietary processes and systems that have decreased fixed costs. Covance gained added capabilities in new business lines, an assortment of highly trained scientists, and increased integration across business lines, thus sparking further innovation. It is evident that the economic impact retained and scientific productivity gained demonstrates that divestiture of core R&D capabilities is feasible in today's tough business environment.

Subject: Partnering; Pharmaceutical industry; Research & development--R & D; Business models; Case studies

Location: United States--US

Company / organization: Name: Eli Lilly & Co; NAICS: 325411, 325412; Name: Covance Inc; NAICS: 325413, 541711

Classification: 9110: Company specific; 2310: Planning; 5400: Research & development; 9190: United States; 8641: Pharmaceuticals industry

Publication title: Pharmaceutical Executive

Volume: 32

Issue: 12

Pages: 24,26-29

Number of pages: 5

Publication year: 2012

Publication date: Dec 2012

Year: 2012

Section: Strategic Partnership

Publisher: Advanstar Communications, Inc.

Place of publication: North Olmsted

Country of publication: United States

Publication subject: Pharmacy And Pharmacology

ISSN: 02796570

Source type: Trade Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Illustrations

ProQuest document ID: 1269463001

Document URL: http://search.proquest.com/docview/1269463001?accountid=38610

Copyright: Copyright Advanstar Communications, Inc. Dec 2012

Last updated: 2013-11-22

Database: ABI/INFORM Complete

Document 10 of 100

BC FROZEN FOODS LIMITED: CHALLENGES AND CHANGE1

Author: Shah, Seena; Ghazzawi, Issam A

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Abstract:

The food processing industry has undergone massive changes due to economic, social and political influences. As a result, many companies in the food processing business were forced out of business as the economic climate became more intense and global competitors emerged on the scene. BC Frozen Foods is one such company that has felt the crunch of a changing environment. The primary challenges facing the company were increased local competition, labor shortages, weather, and economic conditions. This has led the company to rethink and develop new approaches to tackle threats to its viability. The results were major changes to its operations to adjust to the intense environment. The company has implemented an approach whereby it has begun diversifying its product line. [PUBLICATION ABSTRACT]

Full text:

INSTRUCTOR'S NOTE

CASE ISSUES AND SUBJECTS

This case serves as an educational tool for discussing and understanding the subject of organizational environment and corporate strategies in dealing with environmental challenges of business. It is also intended to further engage students in understanding the topics of organizational core competencies and value creation.

Subject: Food processing industry; Strategic management; Core competencies; Organizational change; Case studies

Location: Western Canada

Classification: 9172: Canada; 2310: Planning; 8610: Food processing industry; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 1

Number of pages: 1

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

ProQuest document ID: 1286686559

Document URL: http://search.proquest.com/docview/1286686559?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 11 of 100

CASH PROBLEMS AT CAPE CHEMICAL

Author: Kunz, David A; Dow, Benjamin L

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Abstract:

Cape Chemical is a regional distributor of liquid and dry chemicals. Revenues and profits have grown steadily. The sales growth has required the acquisition of additional fixed assets and current assets. Financing the additional assets has placed a strain on the firm's ability to raise capital. While the company ended last year with a healthy cash balance, there were many occasions during the year that it was necessary to obtain short-term bank loans in order to keep the company operating. As part of the firm's annual planning process, the finance and accounting staff prepare a projected income statement and balance sheet for the coming year. This year, Kathy Ford, the company's chief financial officer, directed David Bush, the firm's budget analyst, to also develop a monthly cash budget in an effort to identify potential cash flow problems. The cash budget indicated that the company would need additional cash during the third quarter of approximately $2,000,000. The company's board of directors had previously established a target capital structure of 50% debt and 50% equity and the projected 2012 ending balance sheet indicates the company will be very close to the target. Cape Chemicals' primary bank also incorporated the target capital structure into its loan covenants. Loan covenants require a quarterly compliance report. Increasing the firm's bank debt, even for a short period of time, is not an option Ford wants to consider. Other alternatives for covering the projected cash shortfall must be evaluated. [PUBLICATION ABSTRACT]

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INSTRUCTORS' NOTE

CASE OVERVIEW

Subject: Chemical industry; Cash flow; Bank loans; Capital structure; Case studies

Location: United States--US

Classification: 9190: United States; 3100: Capital & debt management; 8640: Chemical industry; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 9

Number of pages: 1

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

ProQuest document ID: 1286686363

Document URL: http://search.proquest.com/docview/1286686363?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 12 of 100

TRANSFORMATION FROM WITHIN: THE CDBG CASE

Author: Johnson, Scott; Kern, David; Haight, Katie; Haight, Ryan

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Abstract:

The case begins with the recognition by a senior vice-president that the inadequacies of a seemingly insignificant compliance unit could jeopardize the overall growth strategy of BOKF, a large regional bank holding company. Paula Bryant-Ellis agrees to take on the transformation of the CRA department into a modern Community Development Banking Group (CDBG) that will contribute to the overall strategy of BOKF, the parent banking company. The case covers the first two years of significant organizational change, with emphasis on creating a vision, restructuring the organization, and shared leadership at the unit level. For the first three months, Bryant-Ellis is learning the existing, inefficient and archaic process while she studies benchmark banking groups to crystallize a vision for the future and an initial direction for the group. Early in this process, she brings new leadership into the unit. The case chronicles the new leadership team's approach to transforming the basic functions of the group, while concurrently managing the old processes until the new ones are operable. The challenge is complicated by substantial resistance to change by executives in powerful operating divisions affected by the compliance responsibilities of the CDBG. Communication and collaboration across organizational silos and the role of powerful sponsors are key elements of the transformation. The case ends with a summary of "early wins" for the unit, and a list of challenges its leaders will face over the next few years. [PUBLICATION ABSTRACT]

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should review the process utilized in the successful audit, retaining the most effective changes, and improving upon areas of weaknesses. The team should continue to develop the collaborative efforts, focusing on subsidiaries targeted for audits. Reinforcing top management support with continued focus on

2. The CDBG leadership team should consolidate their successes by developing a strategic plan that documents the mission, vision and strategic objectives of the CDBG as a communication tool for senior executives, and as a roadmap for success internally. This will provide the basis for longer term thinking. This is critical in documenting and communicating the long term benefits of investments that will not pay off in the shortterm. The roadmap will keep the leadership team focused on the most important actions in the intermediate term. The three year plan will highlight the potential for profitability in lending and investment departments.

3. The leadership team should accelerate their own learning priorities and those of their associates. Time should be set aside to investigate financial instruments that will contribute to the profitability of the organizations. Outside experts should be enlisted in the learning process as they provide consulting assistance on specific technique. The leadership team should benchmark one or more high performing community banking organization that does not compete with BOKF. Benchmark studies not only provide ideas to CDBG personnel, but can also build credibility with top management and executives in the operating divisions and the subsidiaries.

(Note that these are three possible actions, but students may address a number of additional ideas, such as: hiring staff with specific knowledge, focusing more specifically on collaborative efforts with divisions and subsidiary managers, paying greater attention to internal culture and motivation, and completing the automation program.)

Subject: Organizational change; Leadership; Commercial banks; Management of change; Case studies

Location: United States--US

Company / organization: Name: Community Development Banking Group; NAICS: 522110

Classification: 9190: United States; 8110: Commercial banking services; 2310: Planning; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 17,24

Number of pages: 2

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1286686614

Document URL: http://search.proquest.com/docview/1286686614?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 13 of 100

LKT PRODUCTS; A FAILED LEAN JOURNEY

Author: Slipka, Joseph

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Abstract:

Beginning as a basement hobby of founder/president Ronald Jefferson, LKT grew into a world class solid-body guitar case manufacture with 55 employees. Bryan Ackers was hired by Ronald Jefferson as Plant Manager to assist in running the day-to-day plant operations. Ackers, an experienced practitioner of lean implementation at Hewlett-Packard, envisioned potential improvements from implementing Lean Manufacturing at LKT. Jefferson, despite his hands-on management style, was not present during initial lean training sessions or the first kaizen event. His absence was evident to senior managers and department operators which led to skepticism and discontent within the process improvement teams. Ackers understood lean is learned by doing. Ackers apprehension continued when Jefferson verbalize his displeasure with the lean process. Shortly after, Ackers left the company with a myriad of questions of what he could have done better.

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5) Knowing that lean Implementation is a road map and not a recipe, what suggestions would you give Ackers for beginning the lean journey?

There are several suggestions that would assist Ackers in the implementation process, of major consideration are:

* Senior management, to include Ronald Jefferson, need to discuss and agree on a lean vision. This team also needs to identify a project leader and set objectives.

* Communicate the plan to the entire workforce.

* Identify employees who will be members of the implementation team. A cross section of all departments in the value stream should be represented. This team would include Ronald Jefferson and appropriate senior management.

* Train the implementation team to the concepts, methodologies and tools of lean.

*Select a pilot project. Monitor the pilot for 2-3 months to evaluate, review and learn from your mistakes.

* When satisfied with the outcome of the pilot project, consider another area for implementation.

* Identify a value stream manager.

6) What influence did Ronald Jefferson 's role or lack thereof have on implementing lean?

By not participating in training and kaizen events, Jefferson did not "walk the talk". His presence would have demonstrated his commitment to the process. LKT was Jefferson's business, he needed to demonstrate the importance of changing the processes he initially developed through active participation. Consequently, there was skepticism and discontent with management and operators on the shop floor when Jefferson did not become involved.

Subject: Lean manufacturing; Guitars; Motivation; Case studies; Failure analysis

Location: United States--US

Classification: 6200: Training & development; 8600: Manufacturing industries not elsewhere classified; 9190: United States; 5310: Production planning & control; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 25,29

Number of pages: 2

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1286686619

Document URL: http://search.proquest.com/docview/1286686619?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 14 of 100

WILJAX STUDIO: A 10-YEAR ENTREPRENEURIAL JOURNEY

Author: Mosley, Donald C; Marshall, Jennings B; Carson, Charles M

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Abstract:

Will Jacks' 10-year journey from his start as a struggling entrepreneur to a seasoned entrepreneur at the cross roads of a career changing decision point are highlighted in this case. This case examines the evolution of an entrepreneur from his days as a journalism graduate student, to start up entrepreneur, to taking on and disentangling with partners and large commercial photography clients. Jacks' story provides insights into a wide array of entrepreneurial struggles, obstacles, defeats and victories. [PUBLICATION ABSTRACT]

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(ProQuest: Text stops here in original.)

INSTRUCTOR'S NOTE

*This decision-based case was developed based on interviews with Will JacL·, the owner of the firm in question. Disguises have been used to mask some of the names involved.

SUGGESTED TEACHING PLAN

We suggest using this case following an effective class lecture and student reading of relevant text chapters on Entrepreneurial Vision and or Planning (Questions 1-3) and Business Formation (Questions 9-11). Additional reading from an Organizational Behavior text may be required for a better understanding of Escalation of Commitments (Questions 6-8).

The discussion questions also allow students to expand their thinking beyond the nuts and bolts of the case and make application across a broader spectrum of concepts (e.g. vision and decision-making). Senior level undergraduate students will likely have had exposure to the concept of escalation of commitments and junior level students will likely be covering the concept in an organizational behavior or principles of management course. The case also allows...

Subject: Entrepreneurship; Photographers; Goal setting; Case studies; Career changes

Location: United States--US

Company / organization: Name: Wiljax Studio; NAICS: 541921

Classification: 2310: Planning; 9190: United States; 9520: Small business; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 31

Number of pages: 1

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

ProQuest document ID: 1286686393

Document URL: http://search.proquest.com/docview/1286686393?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 15 of 100

RAS CONSULTANTS LIMITED

Author: Smith, D K "Skip

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Abstract:

Ms. Bonnie Jones is Head of Administration for RAS Consultants Limited (RCL). Earlier today, her Finance Director requested that Ms. Jones recommend to him a price RCL should charge International Oil Company (IOC) representatives to attend a training session which RCL will be running next month for 10 staff members of the Ministry of Environment. Ms. Jones has already collected information on the incremental costs RCL will incur by adding each additional participant to the seminar; she now needs to decide exactly how she wants to use the information she has collected to generate the recommendation she will make to her Finance Director, regarding the price each IOC representative interested in attending the upcoming seminar should be charged. Discussion of this mini-case will provide students an example of the importance of pricing and the very substantial impact pricing and pricing policies can have on corporate revenues. [PUBLICATION ABSTRACT]

Full text:

INSTRUCTORS' NOTE

CASE OVERVIEW

This one-page mini-case opens by describing a pricing-related decision situation faced by Ms. Bonnie Jones, Head of Administration for RAS Consultants Limited (RCL). Specifically, Ms. Jones has been asked by her Finance Director to recommend the price which RCL should charge International Oil Company (IOC) representatives who wish to attend a training seminar which RCL is organizing for 10 staff members of the Ministry of Environment. Readers are model suggests that there are additional dimensions which Ms. Jones could (if she had been given more time) have considered. For example, regarding structure (that is, key component #3), it seems clear that instead of using a "one price for all" approach, Ms. Jones could have recommended an approach in which any IOC sending more than two or three people would qualify for a discounted price. This might have been a way to further increase both attendance and revenues. In any case, the bottom line here is that by using a systematic approach, and by moving from a cost-based to a market-oriented approach to pricing, Ms. Jones was able to increase very substantially the revenues which the training session generated for her company.

Subject: Consultants; Pricing policies; Training; Case studies

Location: United States--US

Company / organization: Name: Ras Consultants Ltd; NAICS: 541618

Classification: 6200: Training & development; 7000: Marketing; 8310: Consultants; 9190: United States; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 39,45

Number of pages: 2

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1286686613

Document URL: http://search.proquest.com/docview/1286686613?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 16 of 100

DIXIE ELECTRONICS AND INDIA: A MATCH MADE IN HEAVEN?

Author: Sithemsetti, Narayan R; Borstorff, Patricia C

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Abstract:

Companies are stepping up their efforts to be present in foreign markets. This case centers upon the decision whether to engage in international business. The company must decide if increasing exports and/or manufacturing overseas would be a part of their strategy. If so, they must choose the location and the form of the venture. The vice president of marketing has suggested that Dixie's future success lies in India. However, the company is small and located in a small southern town. The owners and management team are reluctant to enter such an uncertain environment. What they have heard about India is heavy government regulations, oppressive taxation, rampant corruption, deadly terrorism, and massive, unchecked population growth. However, one of the managers mentioned that India's government, in its pursuit to match or surpass China's meteoric rise as a world economic powerhouse, has reinvented itself. None of them have any international experience and, quite frankly, they do not know where to start. [PUBLICATION ABSTRACT]

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7. How should a company proceed in India?

A corporation's main goal is to maximize share holders revenues while minimizing costs. Therefore, when a business in opened in India, apart from the large domestic market in India, there is also the dual benefit of sourcing from the India operations either labor or products or new designs that will give the multinational company an edge, increase the shareholders revenue and hence make the multinational more competitive in the global market. One alternative may be to explore, in the short term, a joint venture with an Indian firm to get a foot hold in the market and in the medium term set up independent operation. Alternatively, buying out an Indian operation will kick start the multinational corporation's foray in India.

8. What are the different options for setting up a MNC?

Liaison Office Option: RBI permits establishment of a liaison office for representing the MNC in India which can undertake the following activities: Represent the parent company / group companies; Promote export / import from / to India; Promote technical/financial collaborations between parent/group companies and companies in India; and Act as a communication channel between the parent company and Indian companies. Foreign banks can establish Liaison Offices in India only after obtaining approval from the Department of Banking Operations and Development (DBOD).

Branch Office Option: Specific approval from RBI paves the way for establishment of branch office by a MNC. It can undertake export/import of goods, professional services, R&D work, technical collaboration, be the buying/selling agent in India, provide IT services, providing technical support and undertaking business for foreign airlines and shipping companies. RBI also gives general permission for establishing branch/unit in Special Economic Zones (SEZs) to undertake manufacturing and service activities subject to a few restrictions.

Wholly Owned Indian Subsidiary (WOS) Option: Foreign companies can also to set up wholly-owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy.

Subject: Case studies; Electronics industry; US exports; Decision making; Market strategy

Location: India

Company / organization: Name: Dixie Electronics; NAICS: 334419

Classification: 9130: Experimental/theoretical; 8650: Electrical & electronics industries; 1300: International trade & foreign investment; 9179: Asia & the Pacific; 7000: Marketing

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 47,50-51

Number of pages: 3

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1286686620

Document URL: http://search.proquest.com/docview/1286686620?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 17 of 100

MYSTERIOUS BROKEN CROSS-COUNTRY M&A DEAL: BHARTI AIRTEL - MTN

Author: Reddy, K Srinivasa; Nangia, V K; Agrawal, Rajat

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Abstract:

To meet the international business commitments and prepare students to craft combat strategies for achieving translational entity's objectives, the present case aims to illustrate the effect of global business environmental factors while negotiating cross-country M&A deals. In particular, this case builds a platform for management scholars to improve communication tactics whilst engaging in international business relationships. Conversely, it would be addressing sensitive issues in chronological order that how long-term negotiations would lead to collapse the cross-border relations. The objective of present case is to describe and track critical factors behind the failure of mega cross-border deal between Bharti Airtel and MTN Group in the global telecom industry. The case covers failure of advisors role-play and how negotiations were extended and leads to calling-off deal in the second innings -- 2009 after it was first attempt in 2008. After twofold negotiation talks in the two consecutive years, the deal has been broken and windup with some precautionary signals while choosing cross-border M&A by Indian entrepreneurs and other community world.

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Acknowledgements: Authors are thankful to Dr. Vinay Sharma, Dr. Nangendra Kumar and Mr. Satish Kumar for their review comments on the early case manuscript are deeply acknowledged. Exclusively, authors also thank Trey Carland, Executive Director of Allied Academies for his continuous administrative support and kind concern throughout the case submission to publication. *Personally, Mr. Reddy grateful to Mr. Ganesh Reddy and Mr. Prasanth Kiran for their unremitting economic bear to execute his doctoral research.

INSTRUCTORS' NOTES

CASE LEARNING OBJECTIVES

The case can be discussed in two courses, Strategic Management (SM) and International Business Environment (IBE). Therefore, learning objectives vary with selective courses, in addition to this integrative learning objectives also presented.

STRATEGIC MANAGEMENT

a. Mapping strategic growth opportunities, via organic and in-organic choices in the touched dry market.

b. To know cross-country mergers, acquisitions, takeovers, alliances and their critics in the corporate world.

CASE KEY DISCUSSION

The broken cross-country Bharti-MTN deal shall become evidence for budding entrepreneurs and rising industries, who would be interested to partake in M&A, joint ventures, takeovers and strategic alliances. Moreover, the deal become complex due to non-availability of ready reckon of regulatory provisions on takeover code, open offer issues and dual listing. Since, India and South Africa are developing nations in the emerging markets, which were initiated after the globalization wave. If, Bharti and MTN could have report the Govt, of India with a detailed regulatory provisions and requirement of amendments in the existing security laws, which would have groomed the shape of Bharti and MTN in the world telecom market. If this matter could have suggested before reengagement, accordingly Indian government might have considered dual listing or would have done favor on the mega Indo-Africa deal.

CASE FEEDBACK

In addition to this, the faculty who teach this course at post graduation level, he/she thoroughly prepare and underline some key points. These points will be discussed in the case analysis as a concrete story. After case presentation, the students fill their feedback on case learning using five point Likert's scale. This helps the faculty member in selection of case studies and progress in teaching strategy that leads to career advancement.

Subject: Telecommunications industry; Acquisitions & mergers; International business; Cross border transactions; Negotiations; Case studies

Location: India, South Africa

Company / organization: Name: Bharti Airtel Ltd; NAICS: 517110, 517210; Name: MTN Group Ltd; NAICS: 517210

Classification: 9179: Asia & the Pacific; 9177: Africa; 2330: Acquisitions & mergers; 8330: Broadcasting & telecommunications industry; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 53-54,60-62

Number of pages: 5

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: Tables References

ProQuest document ID: 1312503899

Document URL: http://search.proquest.com/docview/1312503899?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 18 of 100

AFRO-CARIBBEAN CRAFT PRODUCTS: A CASE IN BUDGETING AND FINANCIAL ANALYSIS1

Author: Bowrin, Anthony R

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Abstract:

Afro-Caribbean Craft Products, a sole proprietorship, was recently offered opportunity to lease space at an International Airport to establish a retail outlet. Earla John, proprietor, estimated that she would need a $40,000 loan to finance the capital and operating costs associated with the proposed retail outlet. This case helps to fill a gap in the pedagogical literature by focusing on the application of basic budgeting principles in a small scale, sole proprietorship setting. This case has been used in three sections of the Managerial Accounting course offered in the BS Accounting program at a medium-sized university in the Midwestern US. Students were generally able to properly classify most of the income statements items, compute the project income statement, and projected statement of cash flow amounts and to the required financial statements. Most students provided a well-reasoned recommendation regarding whether the loan should be granted to John. Students generally indicated that the case material was clear and realistic.

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CASE DESCRIPTION

The primary subject matter of this case concerns Managerial Accounting. Specific issues examined include classifying costs based on changes in the level of productive activity, estimating cost functions, preparing budgeted financial statements, and computing and interpreting selected financial ratios. The case has a difficulty level of three. The case is designed to be taught in two class hours and is expected to require about six hours of outside preparation by students.

CASE SYNOPSIS

Afro-Caribbean Craft Products, a sole proprietorship, which operated on an itinerant basis from the owner's home, was recently offered an attractive opportunity to lease space at an International Airport to establish a retail outlet. The proprietor (Ms. Earla John) estimated that she would need a $40,000 loan to finance the capital and operating costs associated with the proposed retail outlet. Ms. John approached your accounting firm for help with the preparation of a set of projected financial statements requested by a potential financier. She provided a set of historical financial statements for the two most recent years and information about her expectations for the business in the coming year. Students are required to estimate the behavior of all cost items in the income statement and prepare a set of projected financial statements. They are also required to prepare a financial analysis using key ratios and to make a recommendation to the potential financier. This case helps to fill a gap in the pedagogical literature by focusing on the application of basic budgeting principles in a small scale, sole proprietorship setting. The three colleagues that have evaluated the case material all indicated that the specified objectives were effectively targeted in the case material. This case has been used in three sections of the Managerial Accounting course offered in the B.Sc. Accounting program at a medium-sized university in the Midwestern USA. Students were generally able to properly classify most of the income statements items, compute the project income statement, and projected statement of cash flow amounts and to prepare the required financial statements. Most students provided a well-reasoned recommendation regarding whether the loan should be granted to Ms. John. Students generally indicated that the case material was clear and realistic.

Subject: Handicrafts; Budgeting; Management accounting; Financial statement analysis; Case studies; Capital formation

Location: United States--US

Classification: 9520: Small business; 9190: United States; 4120: Accounting policies & procedures; 3100: Capital & debt management; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 63,76

Number of pages: 2

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1286686617

Document URL: http://search.proquest.com/docview/1286686617?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 19 of 100

CHANGES TO ACCOUNTING FOR INVESTMENTS AND THE EMERGENCE OF PRIVATE COMPANY FINANCIAL REPORTING STANDARDS - ISSUES, CHALLENGES, AND OPPORTUNITIES

Author: James, Marianne L

ProQuest document link

Abstract:

Significant changes to financial accounting and reporting during the next five years will affect nearly all private and public entities. One of the proposed changes that likely will affect most entities involves accounting for investments. As part of their convergence project, the Financial Accounting Standards Board and the International Accounting Standards Board are revising the accounting rules governing the recognition and measurement of investments, while attempting to develop global consistency. This case addresses technical accounting issues as well as the strategic issues that may affect companies' investment and acquisition strategies. The introduction to the case provides brief background on the topics. The case was developed for an intermediate accounting course, but can also be used in a more advanced course focusing primarily on the strategic issue. The suggested assignments include case-specific as well as research questions. All questions are independent to allow for maximum flexibility; the case can be assigned as a group or as an individual project.

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INSTRUCTORS' NOTES

TEACHING STRATEGIES

Accounting professionals must be knowledgeable not only about current accounting rules, but also must be aware of changes on the horizon that will affect their profession and the organizations or clients who engage them. Accountants who are knowledgeable and proactive play an important role in the ultimate success of an organization.

Accounting educators play a critical role in helping accounting students, the future accounting professionals, learn about proposed significant changes and emerging trends that will affect financial accounting and reporting. Accounting educators are in a unique position to help instill in accounting students the desire to seek knowledge about significant changes that will occur with respect to financial reporting.

Because of the prevalence of investments, proposed changes to the recognition and measurement of investments will likely affect many business entities. Accounting students must learn about these changes. Furthermore, many students will at some point during their future careers be involved in private entity financial reporting, which soon is expected to change. In addition, accounting professionals working for public companies that interact with private companies must also be knowledgeable about the proposed changes and how they may affect their company and potentially its strategic decisions.

This case accomplishes several goals. First, it can be used to help students become aware of the anticipated changes that affect accounting for investments, as well as the emergence of separate financial reporting standards for private entities. Second, the case also helps students learn the technical details of the expected changes. Third, the case can be used to discuss strategic issues related to financial accounting and reporting and explore the potential effect of accounting rules on a company's decision making process.

Two independent sets of suggested questions are provided and are shown below. The first set of questions can be answered based on the case and the students' current accounting knowledge; the second set requires students to research the issues. Each question is independent, providing instructors with the option to assign some or all of the questions. The case is designed as a group project, but can also be assigned as an individual student project. It is well-suited for The body of this Instructor's Note has been omitted to limit public access. The full text of the NOte can be released by the Executive Director of the Allied Academies. Yo may contact the Director through the official website: http://www.alliedacademies.org.

Subject: International accounting standards; Investments; Financial reporting; Case studies

Location: United States--US

Classification: 9190: United States; 3400: Investment analysis & personal finance; 4120: Accounting policies & procedures; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 77-78,87

Number of pages: 3

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1286686622

Document URL: http://search.proquest.com/docview/1286686622?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 20 of 100

M&D INC. IN THE GOVERNMENTAL SECTOR: A MARKETING CASE

Author: Ababneh, Musab M; Austin, Nathan K

ProQuest document link

Abstract:

M&D Inc. is a multifaceted business services support company focusing on the private sector. Its range of services includes mailroom management, e-commerce development, printing, and marketing. Until recently, Ron Lee was the CEO of the company, but he has had to give up the position as a result of ill-health. Prior to his resignation as CEO, Ron Lee was planning to sign a new service contract with another department of the U. S. federal government. M&D Inc. was successful in servicing its first federal government contract which was much smaller and less demanding. The new contract requires M&D Inc. to hire 250 additional employees who will be required to work extra hours every week with significant cost implications. The incoming CEO, Josh King is skeptical of M&D Inc's capability to service such a large contract, so he meets with Ron Lee to discuss the issue. At the meeting, Ron Lee suggests to Josh King to first fully familiarize himself with the operations of M&D Inc. before making a final decision. [PUBLICATION ABSTRACT]

Full text:

INSTRUCTOR'S NOTES

LEARNING OBJECTIVES

Objective 1 : To help students understand the Flower of Service model and the RATER model and identify their main elements.

Subject: Government contracts; Strategic planning; Diversified companies; Case studies; Marketing

Location: United States--US

Classification: 9530: Diversified companies; 2310: Planning; 9190: United States; 9550: Public sector; 9130: Experimental/theoretical; 7000: Marketing

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 89,95

Number of pages: 2

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1286686618

Document URL: http://search.proquest.com/docview/1286686618?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 21 of 100

SUPPLIER COOPERATION VS. SUPPLIER COMPETITION: THE CASE OF SUPPLIERS IN XINTANG

Author: Jiang, Bin

ProQuest document link

Abstract:

The background is Xintang International Jeans and Textile City, the largest manufacturing base of jeans in China. The specific focus is on Xintang's inferior labor conditions. This case analyzes the problems through a novel perspective: to some extent poor labor conditions are driven by suppliers' fierce competition and buyers' unfair procurement practices which trend to shorten lead times and squeeze prices. Since suppliers in the buyer-driven value chains are teetering on cannibalistic competition, it is exceedingly difficult for them to simultaneously achieve both the competitive cost advantage and the humane working conditions. This case explicates how competition and cooperation strategies impact on the behavior of rational and self-interested suppliers within Xintang. The game theory models and analyses of this case study indicate that the cooperation efforts here may point the way out for struggling suppliers to achieve the tricky balance between low prices, short lead times, and stringent working conditions. [PUBLICATION ABSTRACT]

Full text:

CASE DESCRIPTION

Operations Research, Management Science, and Decision Sciences courses help students understand quantitative approaches to decision making. However, it is more important for students to learn model-formulation and model-building skills; otherwise, students cannot apply their knowledge to real practices. Modified from a real consultant project, this tutorial case study emphasizes problem formulation under conditions. The case has a difficulty level of four. It is designed to be taught in two class hours and is expected to require two hours of outside preparation by students.

CASE SYNOPSIS

The background is Xintang International Jeans and Textile City, the largest manufacturing base of jeans in China. The specific focus is on Xintang's inferior labor conditions. This case analyzes the problems through a novel perspective: to some extent poor labor conditions are driven by suppliers' fierce competition and buyers' unfair procurement practices which trend to shorten lead times and squeeze prices. Since suppliers in the buyer-driven value chains are teetering on cannibalistic competition, it is exceedingly difficult for them to simultaneously achieve both the competitive cost advantage and the humane working conditions. This case explicates how competition and cooperation strategies impact on the behavior of rational and self-interested suppliers within Xintang. The game theory models and analyses of this case study indicate that the cooperation efforts here may point the way out for struggling suppliers to achieve the tricky balance between low prices, short lead times, and stringent working conditions.

INSTRUCTORS' NOTES

RECOMMENDATIONS FOR TEACHING APPROACHES

Subject: Clothing industry; Suppliers; Game theory; Competitive advantage; Business models; Case studies

Location: China

Company / organization: Name: Xintang International Jeans & Textile City; NAICS: 315224

Classification: 2600: Management science/operations research; 9179: Asia & the Pacific; 8620: Textile & apparel industries; 2310: Planning; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 97

Number of pages: 1

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

ProQuest document ID: 1286686341

Document URL: http://search.proquest.com/docview/1286686341?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 22 of 100

LARRY ELLISON AND ORACLE CORPORATION

Author: Finkle, Todd A; Scoresby, Richard B

ProQuest document link

Abstract:

The case examines the background, personality and rise of Larry Ellison, one of the most prolific entrepreneurs of our generation. Ellison, who co-founded Oracle Corporation, was the third wealthiest man in the United States in 2011 with an estimated net worth of $33 billion. The case further documents the startup, growth and current problems and opportunities confronting Oracle Corporation, the world's largest multi-faceted software company. Ellison got his start by working on a database project for the Central Intelligence Agency (CIA). Codename: Oracle. In 1977, Ellison went into the database business for himself and founded Oracle with Robert Miner and Edward Oates. Over the last 33 years the mogul grew Oracle into a dominant player in the database, software, and server industries. The current market cap was $150 billion and Ellison owns more than 20% of the company. [PUBLICATION ABSTRACT]

Full text:

INSTRUCTOR'S NOTES

DISCUSSION QUESTIONS

1) Discuss the background and personality of Larry Ellison.

2) Perform Porter's Five Forces Model of Industry Analysis on Oracle. What distinctive competencies and resources does Oracle have?

3) Calculate the financial ratios (key profitability, liquidity, and asset management ratios) for Oracle using the financial statements in the case for Oracle over the past five year period. Based on the financial ratios, is Oracle financially healthy? Why or why not?

4) What were the major problems and/or opportunities facing Oracle Corporation in 2011?

On September, 2010, Mark Hurd was named President. On November 23, 2010 Oracle won a $1.3 billion lawsuit against SAP, the largest software piracy judgment in history. In March, 201 1, Oracle announced that total revenues were up 37% to 8.8 billion.

Subject: Entrepreneurs; Startups; Business growth; Software industry; Personal profiles; Case studies

Location: United States--US

People: Ellison, Larry

Company / organization: Name: Oracle Corp; NAICS: 511210

Classification: 9160: Biographical treatment; 9190: United States; 8302: Software & computer services industry; 9130: Experimental/theoretical; 9520: Small business

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 105,115

Number of pages: 2

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1286686624

Document URL: http://search.proquest.com/docview/1286686624?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 23 of 100

DRINKING UP THE PROFITS: A FORENSIC ACCOUNTING CASE

Author: Shea, Vincent; Waldrup, Bobby; Slater, Robert

ProQuest document link

Abstract:

This case is based on happenings at Sullivan's Bar, a drinking establishment owned by Frank Sullivan. Over the past few years Frank has noticed a decline in profits from Sullivan's Operations, even though there seems to be more customers in the bar. Frank asks one of his regulars at the bar, Dr. Scott Graham for help. Dr. Graham is an accounting professor at the local university and teaches accounting information systems. Dr. Graham challenges a few of his graduate students to help determine what could be causing the decline in bar revenues. The case features Dr. Graham and his students as they explore operations at Sullivan's Bar. To determine where the lost profits may be hiding, Dr. Graham and his students examine the financial records, document operations, brainstorm on ideas, and do an onsite investigation and invigilation at the bar. [PUBLICATION ABSTRACT]

Full text:

INSTRUCTOR NOTES

CASE OBJECTIVES AND USE

Subject: Forensic accounting; Cost accounting; Bars; Case studies

Location: United States--US

Classification: 9190: United States; 8306: Schools and educational services; 8380: Hotels & restaurants; 4120: Accounting policies & procedures; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 8

Pages: 117

Number of pages: 1

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

ProQuest document ID: 1286686379

Document URL: http://search.proquest.com/docview/1286686379?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 24 of 100

Foregoing Paper and Faxes

Author: Kite, Shane

ProQuest document link

Abstract:

Situated in south-central Idaho's Magic Valley, D.L. Evans Bank was founded in 1904, a year before the westward flowing Snake River was first dammed and diverted to fill canals running north and south into the valley to turn what had been inhospitable desert into farmland. Nearly 28 percent of the crop production that makes Idaho the nation's number-one potato producer comes from the Magic Valley. The area also contributes greatly to Idaho's ranking as the country's third top dairy producer, and helps keep the Gem State tops in trout production. Buy trout in a restaurant or supermarket anywhere in this country, and there's more than a 70 percent chance it was raised on a commercial farm in Idaho. Recently, completing tasks critical to customer retention had begun to take longer than management could abide. The biggest problems occurred when opening new accounts, referring customers to investment personnel and reissuing lost or stolen credit cards.Munoz had long eyed a solution he thought could improve the situation: A business process automation tool from Laserfiche called Workflow. Since its deployment six months ago, no printed documents have been required for in-house processing

Full text:

Situated in south-central Idaho's Magic Valley, D.L. Evans Bank was founded in 1904, a year before the westward flowing Snake River was first dammed and diverted to fill canals running north and south into the valley to turn what had been inhospitable desert into farmland.

Nearly 28 percent of the crop production that makes Idaho the nation's number-one potato producer comes from the Magic Valley. The area also contributes greatly to Idaho's ranking as the country's third top dairy producer, and helps keep the Gem State tops in trout production. Buy trout in a restaurant or supermarket anywhere in this country, and there's more than a 70 percent chance it was raised on a commercial farm in Idaho.

This is the clientele D.L. Evans cultivates. The Burley, Idaho-based agricultural lender and community bank has diversified into commercial and small business lending, as well as residential mortgages across 21 full-service branches. In June, it reported $968 million in assets.

But recently, completing tasks critical to customer retention had begun to take longer than management could abide. The biggest problems occurred when opening new accounts, referring customers to investment personnel and reissuing lost or stolen credit cards.

"We were not necessarily losing customer confidence, but there were instances of customer problems where we were not addressing their needs as promptly as we should have been," says Gerardo Munoz, I.T. director for D.L. Evans.

Staff would fill out paper forms and scan the documents into an archiving system from Laserfiche, where the records were stored for regulatory purposes. Then they would fax the papers onward to the appropriate department. Employees had to then re-type customer details into the bank's customer relationship management system, 360 View CRM from inBusiness Services.

The CRM has "really nice" reporting features to help management understand business trends and opportunities, Munoz says, and would notify employees about which items still needed work. But it was the steps needed to fax and re-key data in the bank's front-end processes that were causing customer fulfillment tasks to be fumbled or waylaid, which led to delays in resolving relatively simple customer requests.

"We were looking to provide customers an immediate response," Munoz emphasizes. "So instead of a client calling up and saying, 'I stopped by your bank yesterday with $50,000 I was looking to invest and nobody got back to me,' an investment adviser could call a couple of hours later to follow up, providing options."

Munoz had long eyed a solution he thought could improve the situation: A business process automation tool from Laserfiche called Workflow. D.L. Evans had used Laserfiche for archiving records for 13 years, but Workflow's $60,000 price tag seemed expensive. However, the potential for losing clients had become likely enough to justify an upgrade. So the bank shelled out to license Rio, Laserfiche's enterprise content management system, which includes Workflow and other security, auditing and processing features, for $100,000.

Since deployment six months ago, no printed documents have been required for in-house processing. An employee enters customer data into the fields of a PDF on their computer, which the customer can sign using an electronic signature pad on the service rep's desk, similar to devices card customers use to sign at checkout for purchases at retail stores. The document is then electronically conveyed as a TIFF image using a Laserfiche tool called Snapshot and placed into the repository with the appropriate fields and folder structure. Or users can drag and drop it as a PDF into a processing folder.

Workflow automatically flows data from the electronic document directly into the CRM system with no additional employee input. The system identifies the type of document based on the fields and retrieves additional customer data from the CRM. "We create our own SQL scripts to create referrals or trouble tickets to place into the CRM based on the content of the PDF file," Munoz says. Rio has a script editor.

Workflow then alerts both the customer service representative and the appropriate department that there's an item needing processing via an email with a link to the document. Workflow will update the ticket or referral in the CRM after personnel complete their work. And if the document sits idle in a processing folder past a pre-determined deadline, Workflow automatically escalates the case to a supervisor.

Munoz says the time-saving process automation enables quicker service, which "gives customers more confidence in our institution."

CASEFILE

BANK: D.L. Evans Bank

PROBLEM: How to resolve delays in processing customer data?

SOLUTION: Automate business processes to boost customer service.

Credit: By Shane Kite

Subject: Banks; Software; Agricultural banking; Case studies; Customer retention

Location: United States--US, Idaho

Company / organization: Name: D L Evans Bank-Burley ID; NAICS: 522110

Classification: 2400: Public relations; 9110: Company specific; 5240: Software & systems; 8100: Financial services industry; 9190: United States

Publication title: Bank Technology News

Volume: 25

Issue: 11

Pages: n/a

Publication year: 2012

Publication date: Nov 2012

Year: 2012

Section: WORKFLOW: CASE STUDY

Publisher: SourceMedia

Place of publication: New York

Country of publication: United States

Publication subject: Business And Economics--Banking And Finance - Computer Applications, Business And Economics--Banking And Finance

ISSN: 10603506

Source type: Trade Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1125173043

Document URL: http://search.proquest.com/docview/1125173043?accountid=38610

Copyright: (Copyright c 2012 SourceMedia, Inc. All Rights Reserved.)

Last updated: 2013-09-06

Database: ABI/INFORM Complete

Document 25 of 100

Quest for Simpler Account Openings

Author: Kite, Shane

ProQuest document link

Abstract:

New Brunswick, N.J.-based Magyar Bank wanted a single system that could help the community thrift more easily open new accounts and be immediately compliant with know-your-customer and other reporting regulations. The platform also had to support the bank's commercial and retail businesses and provide electronic statements. So about a year before Magyar's contract came due on its legacy core banking system, the $528 million-assets bank began to research vendor options. Magyar aimed to streamline operations to boost its service as well as safety and soundness. Based on demos, onsite visits, good references from other banks and optimal communications between staffs, Magyar chose Fiserv's Cleartouch for hosted core banking.

Full text:

New Brunswick, N.J.-based Magyar Bank wanted a single system that could help the community thrift more easily open new accounts and be immediately compliant with know-your-customer and other reporting regulations. The platform also had to support the bank's commercial and retail businesses and provide electronic statements.

So about a year before Magyar's contract came due on its legacy core banking system, the $528 million-assets bank began to research vendor options. Magyar aimed to streamline operations to boost its service as well as safety and soundness.

Management formed a six-person technology committee comprised of staff from different areas of the bank to research and shortlist vendors, and to analyze difficulties the bank was having with its old platform to determine more precisely how these problems might be fixed by new solutions. Six vendor names were eventually whittled down to three contenders, which included the bank's incumbent core provider.

However, based on demos, onsite visits, good references from other banks and optimal communications between staffs, Magyar chose Fiserv's Cleartouch for hosted core banking. The bank also selected a bevy of other Fiserv solutions in the deal, including Director for electronic content management; Branch Source Capture and Merchant Source Capture for remote deposits; AML Manager for risk management; the Fiserv Clearing Network for image exchange; Relationship Pricing for relationship management; eStatements for electronic document delivery; and Fiserv's item processing solutions. The bank was already using CheckFree RXP for bill payment. Magyar converted to Fiserv's Cleartouch core on June 8.

"We really wanted somebody who could integrate all the various processes that revolve around general safety and soundness," says John Fitzgerald, president and CEO of Magyar Bank. "We were looking for an integrated system rather than having customer service reps go through a number of steps to open up an account."

Making compliance more efficient by integrating the tasks involved more directly into the account opening process was a focus for the bank. "For us to comply with various BSA regulations involving suspicious activity and currency transaction reporting, the accuracy of that information is paramount right now," Fitzgerald says. "The less our employees have to actually input data, the better the integrity of our data will be. This lets us input customer information one time on one system as opposed to having to input customer information multiple times on various systems," Fitzgerald adds. "So with Cleartouch we're able to populate all those other queries at the same time that we're just gathering account opening information. We basically cut in half the time it would take us to gather the information in the account opening process."

One near-term result of the conversion is that Magyar has 600 customers now receiving electronic statements by email after the bank rolled out in July a concerted effort to promote Fiserv's eStatements. "That's a huge savings for us," Fitzgerald says. "It also provides us another way to market to customers rather than stuffing an envelope with material that typically gets ignored."

Training was key to ensuring the conversion went smoothly and that the new systems are optimally used. "It was important that we had a committee of employees from all levels of the bank that were involved, because it really provided buy-in for the new system," Fitzgerald says. "We had people from our loan operations and our deposit operations departments help train throughout the bank, being that those are the two areas that this conversion probably affected most."

Post-conversion, "mobile banking is on the horizon for us now, because of the integration available with the Fiserv system," Fitzgerald says.

Magyar has turned several important corners recently. The bank has reported profitable quarters since posting a net loss of $249,000 for its fiscal year ended Sept. 30, 2011. This March, the bank announced that the FDIC and the New Jersey Department of Banking had removed a consent order issued in April 2010 that had required Magyar to reduce its exposure to loans considered risky and to boost capital. The regulatory order was issued after the bank suffered a $6.1 million loss for fiscal year 2009 due primarily to poor loan performance, and after the bank's former CEO resigned in December that year. Part of the order required Magyar to establish a compliance committee and "correct and prevent all unsafe or unsound banking practices, violations of law and regulations, and contraventions of federal banking agency policies, procedures and guidelines as discussed in applicable reports and take all steps necessary to ensure future compliance."

CASEFILE

BANK: Magyar Bank

PROBLEM: Tasks that should be easy, like opening new accounts and emailing statements, were difficult to accomplish using a legacy core system.

SOLUTION: Convert to a new core system and suite of services by the same provider.

Credit: By Shane Kite

Subject: Software packages; Banks; Compliance; Case studies

Location: United States--US

Company / organization: Name: Magyar Bank; NAICS: 522120

Classification: 9110: Company specific; 4310: Regulation; 5240: Software & systems; 8100: Financial services industry; 9190: United States

Publication title: Bank Technology News

Volume: 25

Issue: 11

Pages: n/a

Publication year: 2012

Publication date: Nov 2012

Year: 2012

Section: CORESYSTEMS: CASE STUDY

Publisher: SourceMedia

Place of publication: New York

Country of publication: United States

Publication subject: Business And Economics--Banking And Finance - Computer Applications, Business And Economics--Banking And Finance

ISSN: 10603506

Source type: Trade Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1125288768

Document URL: http://search.proquest.com/docview/1125288768?accountid=38610

Copyright: (Copyright c 2012 SourceMedia, Inc. All Rights Reserved.)

Last updated: 2013-09-06

Database: ABI/INFORM Complete

Document 26 of 100

Sustainable Case Study: United States Steel Corporation

Author: Marco, Gayle; Clinton, Steve; Manna, Dean R.; Matisz, Kiel

ProQuest document link

Abstract:

Overall, the North American Steel Industry has made significant strides to protect our environment and preserve our resources by: reducing overall energy consumption per ton of steel by 29% since 1990; reducing greenhouse gas (GHG) emissions (including CO2) by more than 25% from 1994 thru 2003; reducing air toxics volumes by more than 70% from 1994 thru 2003, and total air & water discharges by 69%; collecting and reusing of steel making by products such as: slag for road building, railroad ballasts, fertilizer, glassmaking, & other applications; coke oven & steel making gases for fuel/heat generation; increased steel manufacturing efficiencies now result in the production of 100 units of steel from 114 units of raw steel vs. 140 units previously, which has resulted in a yield improvement of 16% to 87% from 71%. These statistics indicate that the industry is doing an efficient job improving the environment in such a short span of time. Recently, United States Steel Corporation has been taking strides to improving sustainability within its corporation. Originally, U.S. Steel has always been a company that prides itself on good business practices. Today, they are taking further steps by incorporating sustainable measures to fit the trend developing in society. This is a study devoted to evaluating U.S. Steel's current successes and failures regarding their recent sustainability practices.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Steel industry; Corporate profiles; Sustainability; Corporate histories; Case studies

Location: United States--US

Company / organization: Name: US Steel Corp; NAICS: 331110

Classification: 9190: United States; 9130: Experimental/theoretical; 1540: Pollution control; 9110: Company specific; 8660: Metalworking industry

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 6

Pages: 543

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418711149

Document URL: http://search.proquest.com/docview/1418711149?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 27 of 100

BNY Mellon's Sustainable Outlook

Author: Marco, Gayle J.

ProQuest document link

Abstract:

This report investigates BNY Mellon's current sustainability program initiatives. To understand their initiatives, the report examines their sustainability statement. The statement taken from the BNY Mellon website specifically looks into the, "environmentally prudent management of [their] facilities around the world; collaboration with suppliers to improve [their] direct environmental impacts; environmental programs; and education for employees; green investments and socially responsible products offered to clients."[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Investment companies; Social investing; Social responsibility; Sustainability; Environmental impact; Case studies

Location: United States--US

Company / organization: Name: BNY Mellon Asset Management; NAICS: 523920

Classification: 9190: United States; 9130: Experimental/theoretical; 1540: Pollution control; 3400: Investment analysis & personal finance; 2410: Social responsibility; 8130: Investment services

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 6

Pages: 551

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418711015

Document URL: http://search.proquest.com/docview/1418711015?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 28 of 100

Valuing Coca-Cola And Pepsico Options Using The Black-Scholes Option Pricing Model And Data Downloads From The Internet

Author: Gardner, John C.; McGowan, Carl B.

ProQuest document link

Abstract:

In this paper, we demonstrate how to collect the data and compute the actual value of Black-Scholes Option Pricing Model call option prices for Coca-Cola and PepsiCo. The data for the current stock price and option price are taken from Yahoo Finance and the daily returns variance is computed from daily prices. The time to maturity is computed as the number of days remaining for the stock option. The risk-free rate is obtained from the U.S. Treasury website.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Soft drink industry; Put & call options; Case studies; Stock prices

Location: United States--US

Company / organization: Name: Coca-Cola Co; NAICS: 312111; Name: PepsiCo Inc; NAICS: 312111

Classification: 9190: United States; 9130: Experimental/theoretical; 3400: Investment analysis & personal finance; 8610: Food processing industry

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 6

Pages: 559

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Equations Tables References

ProQuest document ID: 1418710925

Document URL: http://search.proquest.com/docview/1418710925?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 29 of 100

Case Study: Strident Property Services

Author: Mento, Anthony J.; Buckheit, Peter; Mento, Barbara A.

ProQuest document link

Abstract:

Alex Jacobs has taken over the family business from his father. The company had grown in size and faced challenges that Alex must overcome for the company to remain a leader in the region. Challenges included working with a management team that was there prior to Alex's arrival, poor customer service, low professionalism, and a divided employee base. His attempts (i.e., identifying problems and informing staff; threats to demote or fire staff) to correct the problems were mostly unsuccessful. The only bright spot was exhibited by Joe Flack, the director of IT, who was able to make successful business decisions with the contacts provided by Alex. Alex needed to act quickly because more and more clients were not resigning contracts with Strident. In fact, the company's portfolio has decreased from over 200 properties to less than 100. Students are challenged to develop workable strategies to overcome some of the problems mentioned in the case, including a strategy for turning the situation around, if possible.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Motivation; Leadership; Teamwork; Case studies; Group dynamics

Location: United States--US

Classification: 9190: United States; 9130: Experimental/theoretical; 2200: Managerial skills

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 6

Pages: 565

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418711053

Document URL: http://search.proquest.com/docview/1418711053?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 30 of 100

From Horses To Log Cabins - A $9 Million Embezzlement Case: How Did The Owner Not Know?

Author: Ruggieri, Lynn

ProQuest document link

Abstract:

The recent economic recession has forced companies to tighten the reins on expenses and fraud is one expense that companies cannot afford. Fraud, however, is becoming a much larger problem for business. This actual fraud case by an employee at a privately held company details how a $9 million embezzlement fraud was committed and detected. This case highlights the identification of the fraud, analysis through the use of the fraud triangle and the weaknesses in the internal control of the organization. This case identifies auditing issues and fraud examination procedures.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Embezzlement; Fraud; Employee theft; Internal controls; Case studies

Location: United States--US

Classification: 9190: United States; 4130: Auditing; 5140: Security management; 6500: Employee problems; 4300: Law

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 6

Pages: 575

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418711234

Document URL: http://search.proquest.com/docview/1418711234?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 31 of 100

Sunrise Medical And The Quickie Wheelchair

Author: Houts, Lisa M.

ProQuest document link

Abstract:

This case profiles the Quickie Wheelchair, first developed by a group of entrepreneurs in Fresno, California and now manufactured by Sunrise Medical, the world's leading manufacturer of customized lightweight wheelchairs. Topics such as strategy, product design, location planning, quality control, and just-in-time systems make this case suitable for use in a production and operations management course.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Wheelchairs; Operations management; Lean manufacturing; Just in time; Entrepreneurs; Case studies

Location: United States--US

Company / organization: Name: Sunrise Medical Inc; NAICS: 339112

Classification: 9190: United States; 9130: Experimental/theoretical; 9520: Small business; 5310: Production planning & control; 8600: Manufacturing industries not elsewhere classified

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 6

Pages: 585

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418711151

Document URL: http://search.proquest.com/docview/1418711151?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 32 of 100

Shuttle Trading: Case Study From The Former Soviet Republic

Author: Abdukadyrov, A.; Daly, S.

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Abstract:

This case explores the experience of Mirlan Suyorov, one of thousands of entrepreneurs who started shuttle trading in Kyrgyzstan after the collapse of the Soviet Union. The goal is to show the effects of globalization in the lives of people in former Soviet republics since the 1990s. This research draws mostly upon primary sources such as personal interviews. Through showing the lives of shuttle traders, this study highlights the importance of international trade organizations in shaping the economy of newly independent countries and emerging markets.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Entrepreneurs; Globalization; Fabrics; Case studies

Location: Union of Soviet Socialist Republics--USSR, Kyrgyzstan

Classification: 9179: Asia & the Pacific; 9176: Eastern Europe; 9130: Experimental/theoretical; 8620: Textile & apparel industries; 1300: International trade & foreign investment; 9520: Small business

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 6

Pages: 591

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1418711269

Document URL: http://search.proquest.com/docview/1418711269?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 33 of 100

Lockout At American Crystal Sugar

Author: Campbell, Katherine; Helleloid, Duane; Schultz, Patrick; Vitton, John

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Abstract:

As a June 23, 2012, vote neared, union workers at American Crystal Sugar were deciding whether the time had come for them to approve the contract offer by the company. Workers continued to staff picket lines at factory entrances, although enthusiasm for consistently staffing the picket line was waning (Lee 2012(1)). Replacement workers had operated the factories for nine months, successfully processing the 2011 sugar beet harvest. The company reported that although there had been some minor problems, all plants were running at nearly full capacity without the union workers. Company leaders indicated they were "attempting to adjust what they consider an archaic labor contract with newer standards that are competitive with other union rates" (Porter, 2012). The union had consistently been voting down the company's contract offers for almost a year. Workers stated they were standing firm to protect their jobs, salaries, benefits, and promotion opportunities, and were not willing to give away "rights" they had been fighting for the past 50 years (Kolpack, 2011). Yet, many union workers knew that their bargaining power had been significantly eroded by the company's ability to operate with non-union replacement workers.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Labor unions; Labor contracts; Sugar; Contract negotiations; Stakeholders; Bargaining; Case studies

Location: United States--US

Company / organization: Name: American Crystal Sugar Co; NAICS: 311313

Classification: 9190: United States; 9130: Experimental/theoretical; 6300: Labor relations; 8610: Food processing industry

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 6

Pages: 595

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1418711349

Document URL: http://search.proquest.com/docview/1418711349?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 34 of 100

The J. C. Penney Company And Sephora USA Partnership: A Case Study

Author: Singh, Suresh

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Abstract:

J. C. Penney, one of America's largest department stores, and Sephora U.S.A. Inc., an affiliate of the French cosmetics chain, entered into a partnership in 2006. The agreement allowed Sephora to exclusively operate cosmetics stores within J. C. Penney stores and to service J. C. Penney online customers through a link from J. C. Penney web-site to Sephora web-site. The purpose of this case study is to stimulate a critical evaluation of the decision by these companies to enter into a partnership instead of a merger or an acquisition. The case can be used as a tool to facilitate broader discussion of various corporate strategies and their relative merits and demerits. The accompanying teaching note refers the reader to an analytical framework that can be used to determine when to go for corporate partnerships instead of mergers or acquisitions and applies that framework to this case.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Partnerships; Marketing agreements; Department stores; Cosmetics industry; Acquisitions & mergers; Case studies

Location: United States--US

Company / organization: Name: J C Penney Corp; NAICS: 452111, 454113; Name: Sephora USA Inc; NAICS: 446120

Classification: 9190: United States; 9130: Experimental/theoretical; 2330: Acquisitions & mergers; 7000: Marketing; 8642: Cosmetics industry; 8390: Retailing industry

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 6

Pages: 609

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418711276

Document URL: http://search.proquest.com/docview/1418711276?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 35 of 100

Political Ideology To Reduce Conflicts Of Interest In The Wetlands Of Thale Noi, Phatthalung Province, Thailand

Author: Chiramanee, Surachet; Churngchow, Chidchanok; Darnsawasdi, Rotchanatch

ProQuest document link

Abstract:

This article studies measures to ease conflicts between locals and government officials regarding consumption of natural resources in the Thale Noi wetlands. The problems incurred by the wetlands are a function of their physical properties, location, and the significance of their natural resources. Previously, the extent of these problems was measured by the failure of efforts to solve them. The new methodology proposed for solving problems is based on political philosophy. This study proposes the elimination of confrontations and legal punishment in favor of participatory, democratic, trustful, and reciprocal agreement among the conflicting parties. The conflict area is zoned based on the severity of each problem, the nature of the associated conflicts, and the potential of law enforcement to solve them. A participatory committee is formed to alleviate conflict and confrontation between locals and government officials. These measures can be applied to other conflict areas in Thailand.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Natural resources; Conflict management; Ideology; Politics; Law enforcement; Wetlands; Problem solving; Case studies

Location: Thailand

Classification: 9179: Asia & the Pacific; 9130: Experimental/theoretical; 4300: Law; 1210: Politics & political behavior; 1530: Natural resources

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 6

Pages: 613

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418710903

Document URL: http://search.proquest.com/docview/1418710903?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 36 of 100

Corporate Human Resource Management In An International Setting

Author: Fischer, Arthur K.

ProQuest document link

Abstract:

This Human Resource Management case deals with problems and issues of setting up an international subsidiary which aligns with corporate strategy. The discussion concerns how such a case can be used to exhibit the alignment between HRM and international strategy.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Human resource management; Subsidiaries; Corporate objectives; Case studies; Multinational corporations

Location: United States--US

Classification: 9190: United States; 9130: Experimental/theoretical; 9510: Multinational corporations; 2320: Organizational structure; 6100: Human resource planning

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 6

Pages: 621

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1418710931

Document URL: http://search.proquest.com/docview/1418710931?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 37 of 100

Developing a Social Business Model for Zero Waste Management Systems: A Case Study Analysis

Author: Zaman, Atiq Uz

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Abstract:

Waste is one of the major problems in every city around the globe. This study explores policy instruments in existing profit maximizing business systems and proposes an alternative business approach for the zero waste management systems. The paper proposes a conceptualized social business model for waste management systems based on a case study of two different organizations working in waste management systems in low and high consuming cities. "Waste Concern", on one hand, is a social business enterprise, promoting waste recycling activities through the community-based decentralized composting technology using public-private community partnerships model in a low consuming city i.e. Dhaka. "Finding Workable Solutions", on the other hand, is a non-profit organization that rehabilitates and empowers disabled peoples in high consuming city, i.e. Adelaide by collecting and transforming sellable household waste. This paper argues that waste management social business would be an opportunity for the corporate world to implement the strategy of extended producer responsibility in more successful way.

Full text:

1. Introduction

The current consumption-driven lifestyle in the high consuming world is environmentally damaging [2] and increasing inequity in society due to the disproportionate utilization of ecological systems [3]. On one hand, in- creasing utilization and depletion of natural resources in high consuming cities such as Adelaide, endorses ineq- uity in the society and copying of the current trend of western lifestyle and consumption pattern by the huge number of people from low consuming cities such as Dhaka on the other, increases the fear of indeterminate future of the world.

Many cities in the high consuming world, Adelaide for instance, are trying to be a "zero waste city" [4] by achieving 100% recycling and resource recovery of mu- nicipal solid waste. However, it is hard to achieve zero waste goals without proper management policies in place. A 100% recycling may not necessarily achieve the zero waste goal because of the key principles of zero waste goal is firstly, to prevention (through design, behaviour change) of unwanted waste at the first place, secondly to re-use functional waste material (through redistribution or consumptive behaviour) and thirdly, to recover all resources from the waste streams (through advance re- source recovery facilities). Recycling is the very first step to approach the zero waste goals. The study examines whether an alternative business model can be an effective instrument for the local authority to promote the zero waste goal. Therefore, the paper would primarily be in- terested to discuss whether or not a social business model can be a useful tool to increase the waste prevention, reuse and recycling efficiency in current waste manage- ment systems.

Among different policy instruments, green business policy is one of the most important economic tools to achieve economic and environmental sustainability. There are different business models available which em- brace core business values including social, economic, technological and environmental. Over the years, busi- ness models have transformed from single economic value chains to multiple value chains including social and environmental values in the core business manifesto.

Green marketing has flourished since the late 1990s where consumers chose to buy products or not based upon the environmental considerations of the design, production, packaging, use and disposal of the products [5]. The concept of corporate social responsibility [6-8] has emerged to respond to environmental issues in a more accountable manner by businesses. However, par- ticipation by the small and medium enterprises (SME) in corporate social responsibility issues has been found to be lacking [7].

There are various aspects involved in green business and marketing policy, such as equitable profit distribu- tion thorough fair-trade, green-label or eco-label [9-12]. However, all of these initiatives have received much criticism due to poor performance and not contributing significantly in establishing equity in the society [13-16].

The global environmental business market is rapidly flourishing. The market volume for environmental tech- nologies, mainly comprising products and services amounted to approximately $1370 billion in 2008, ac- cording to Germany-based Roland Berger, the Strategy Consultant, with a projected $2740 billion by 2020 [17]. Of this, the share of waste management and recycling is estimated at $41 billion in 2008, $63 billion by 2020 and the global waste-to-energy to reach $28.8 billion by 2015 [18]. Surprisingly, most of the business model working in the area of environmental management is either profit-maximizing organizations or non-profit organiza- tions which mainly rely on charity or subsidy.

Both profit-maximizing organizations and non-profit organizations have certain limitations and conflicts of interest when it comes to social or environmental bene- fits. Because profit maximizing organizations are primar- ily focused on the profit or economic benefit rather than social welfare; on the other hand, NGOs depend on the funding body to execute beneficial activities to the soci- ety. Thus, an alternate business model is studied in this paper to solve the common social problem in economic and environmentally sound manner. Social Business (SB) can be an alternative business model for solving social problems because it is not based on charity. It is a busi- ness in every sense. SB has to recover it full cost while achieving its social objective [19].

By recognizing "waste" as a social problem as well as a resource, the concept of how the social business model can be a helpful business model to eradicate "waste pro- blem" from our society and recover resources for further use are primary focuses of this paper. The aims of this study are to understand existing business trends and to develop a conceptualized social business model for zero waste management systems based on the lessons learnt from a case study analysis of two social enterprises. The case study is done to explore barriers and opportunities for establishing a new business model in the context of socio-economic and environmental development. The case study of two different enterprises analyses the proc- ess of experimentation [20] and learning a "discovery driven" approach [21] to overcome the existing barriers in the development of new business model.

"Waste Concern" on one hand, a social business enter- prise, is promoting waste recycling activities through the community based decentralized composting technology using public-private-community partnerships model in low consuming city i.e. Dhaka. "Finding Workable Solu- tions" on the other hand, a non-profit organization, reha- bilitates and empowers disabled peoples in high con- suming city i.e. Adelaide by collecting and transforming sellable household waste. Thus the study analyses two different waste management business enterprises work- ing in contrasting business contexts.

2. Material and Method

2.1. For-Profit vs Not-for-Profit Business

In a profit maximizing business, including small and me- dium enterprises or large firms, the owner or the investor is the key beneficiary of the company. However, in a social business enterprise, profit is non-dividend. There- fore, characteristics of the social business are different from the current style of profit maximizing business. However, it is essential to understand and cope with the traditional business practices for introducing a new busi- ness model like the social business model.

There are different types of businesses available with various business objectives. There are five broad object- tives [22] observed in current business practice: social, economic, human, national and the global objectives. Therefore, business objectives include profit maximizing, benefit of the society, human wellbeing and development, national goals and global benefits as core business objec-tives.

For-profit business is generally characterized as the business owned and operated independently. Owners contribute most of the investment and therefore, the main decision-making functions rest with the owners [23]. In traditional business, venture is driven by three forces: owner or entrepreneur, resources and opportunity [24].

Not-for-profit or simply non-profit enterprise is gener- ally known as a "social enterprise". The "Social Entre- preneurship" (SE) creates new model for the provision of products and services that cater directly to basic human needs that remain unsatisfied by current economic or social institutions [25]. In addition, social entrepreneur- ship combines the resourcefulness of traditional entre- preneurship with a mission to change society [25]. How- ever, SE is primarily based on charity or donor funds. In both for-profit and non-profit business organizations, economic benefits and social objectives are not practiced in a balanced way. Thus an alternative business model is needed to explore and implement methods of delivering economic, social and environmental benefits.

2.2. Social Business Model

The concept of social business is an emerging business concept. The concept was first proposed by the Nobel Peace Prize laureate Professor Muhammad Yunus in his book "Creating a World without Poverty". According to Yunus, social business is a "very specific type of busi- ness-a non-loss, non-dividend company with a social objective" [26]. Therefore, social business is designed and operated as a business enterprise, with products, ser- vices, customers, market, expenses and revenues but with the profit-maximization principle replaced by the so- cial-benefit principle [19]. Figure 1 shows the compara- tive structure of different types of business.

The principles of social business include social welfare, financial and economic stability, environmental benefit, company profit, ensuring joy while working with the aim of the social development [28]. Therefore, social busi- ness model not only focuses on the social welfare and economic benefit but also on the environmental advan- tage. Therefore, a holistic social business model includes tripled bottom line (also known as people, planet, profit or the three pillars) for balancing traditional economic goals with social and environmental concerns [29].

3. Literature Review

The Brundtland Report "Our Common Future" [30] brought the concept of sustainable development into the mainstream of business and political thought however, win-win outcomes seem unlike although the corporate environmental or sustainability strategies are becoming commonplace in the current for-profit business arena, they are not contributing significant global impact in regards to sustainability [31].

Corporate social responsibility (CSR) was an innova- tive tool for the corporate business market to contribute to society and at the same time work as a value adding mechanism to the consumers. Therefore, CSR is in- creaseingly seen as an imperative for sustainable busi- ness and there is a growing literature on the effect of CSR on corporate reputation [32]. However, the effect of CSR on business performance is varies widely [33] and most recently some start to believe that CSR, as a busi- ness, governance and ethics system, has failed [34]. Moving from the ages of greed, philanthropy, marketing and management using charitable, promotional and stra- tegic CSR approaches to the radical CSR using creativity, scalability, responsiveness, "glocality" and circularity is essential [34].

The futurist designer and philosopher Jacque Fresco coined the concept of a resource-based global economy where national boundaries will be made by realizing the declaration of the world's resources as being the com- mon heritage of all people [35]. The root cause of current problems in the monetary-based economy is the domi- nance of "Modern Money Mechanics" which creates structural classism and inequity in society. Although global gross domestic product (GDP) has increased by 40% from 1960 to 2000, poverty also increased by 17% over the same period [1]. Existing profit maximizing business has been significantly increasing social inequity due to undistributed access to global resources.

Concerns about corporate influence on democracy, the growing disparity in wealth and the absence of legal re- percussions following the recent global financial crisis [36] are growing and manifesting as protest movements such as "Occupy Wall Street" in New York and similar in many other cities around the world. The demonstra-tions claim that 99% of the population are suffering at the hands of the 1%; there should be more and better jobs, more equal distribution of income, bank reform, a re- ducetion of the influence of corporations on politics, and equitable distribution of benefits [37].

From Thomas Kuhn's work, step-change only happens when we can re-perceive our world, when we can find a genuinely new paradigm or pattern of thinking [34]. Therefore, a new paradigm of this existing corporate world is urgently needed. The social business model is one of the new paradigms though which we can shrink the gap between corporate and civil society, through which we can establish equity in society.

A number of studies [38-43] have already been done to elucidate different business models and their purposes in social and global value creation in addition to economic benefit. Darby and Jenkins [44] study of the company Wastesavers in the United Kingdom, proposed the inte- gration of sustainability indicators to the social enterprise business model. Wastesavers is a social enterprise that comprises of a charity and a not-for-profit business to establish, operate and develop a variety of community recycling services for the collection and sale of post- consumer wastes to:

* promote the environmental value of recycling, reduc-tion and minimisation of waste.

* involve unemployed, volunteers and people with spe- cial needs in recycling services.

* encourage and assist in the development of other ini- tiatives elsewhere in the United Kingdom.

Another related study, by Seelos & Mair [25] and ex- plained social entrepreneurship as a business model to serve the poor. The studies were based on the case study of three social business enterprises founded for social development goals. Even though SE is established by the charity, social entrepreneurship may also encourage es- tablished corporations to take on greater social response- bility.

A social business model can be developed and imple- mented for almost all types of business that serve certain social benefits. From micro-credit finance to the giant mega-port all can be a social business [19]. The present trend of social enterprise is based on charity. This is not always the answer because hand-outs may encourage de- pendence rather than self-help and self-confidence [19].

One of the most important and relevant studies in so- cial business has been done by Yunus et al. [27] based on the experiences of Grameen (creator of the micro-credit concept) organizations in Bangladesh. In the study, au- thors proposed a paradigm shiftof the conventional char- ity based social enterprise to a new business model called a self-sufficient social business (SB) model. One such example is "Grameen Danone" launched in 2006 and the first social business enterprises in the world to provide children with many of the key nutrients that are typically missing from their diet in rural Bangladesh. It is run on a "no loss, no dividend" basis [19]. The Adidas venture is the latest example of a social business model making shoes for as little as US$1 for Bangladeshis, particularly children who are exposed to skin-borne diseases [45]. The SB concept has been successfully implementing and promoting in poverty the reduction of poverty, the eradi- cation of malnutrition and improvement of healthcare in Bangladesh.

Extended Producer Responsibility (EPR) is a concept where the producers of consumer goods are required to take greater responsibility for managing the environ- mental impact of their products throughout their entire life cycle [46]. In the existing waste management prac- tices, producers have the limited access in the waste re- cycling and take back programmes. Social business can be an integral part of the producer in the role of product stewardship. Therefore, the SB is undoubtedly an impor- tant paradigm shiftand urgent needed for mainstream business practices. Therefore, this article aims to repli- cate the social business model for solving a social prob- lem such as the waste problem in our society.

It is evident from the literature review that there is no such business model available at this moment that oper- ates under the social business model to solve the "waste" problem from our society. As most of the waste man- agement experts are aware of the technological and socio-economic advancement in waste management sys- tem therefore, this paper tries to understand the business model in different perspective. Rather than looking through a traditional profit maximizing business model this paper primarily focuses on the alternative waste management business model such as social business model.

4. Case Study Analysis

4.1. Case of Finding Workable Solutions in Australia

Finding Workable Solutions (FWS) Inc. is a non-profit organization and predominantly based on Common- wealth funds providing assistance to job seekers with a disadvantage or disability in South Australia. FWS's vision is to responds to the needs of disadvantaged peo- ple in communities by providing innovative and flexible services complying with social and environmental sus- tainability. FWS was established in 1989 and has pro- vided employment and vocational training since then to the disabled people.

FWS collects economically valuable hard waste such as furniture, electronic items etc. which can be repaired, reused and re-sold to the community. From 2004 to 2010, a total number of 1130 clients have been supported in the whole business process of hard waste collection, repair and retail and the organization has increased from 23 full time employees in 2004 to 68 in 2010.

Collection of hard waste is basically done on a volun- tary basis by phone call or drop-offsystem. FWS pick-up the waste which has potential sells and reuse values. If the collected waste requires repair such as minor fixing or painting then the vocational employees, mostly dis- abled, complete the repairs and make the items more functional and economically valuable for selling.

It is evident from the FWS's business model that a sig- nificant volume of waste flow is reduced by the reusing after minor repair. However, there is no such guarantee for the user satisfaction on second-hand goods. Since the repair experts have the basic vocational training on re- pairmen of goods therefore, it is assumed that the elec- tive goods are safe to use. The study acknowledges that this is not the unique business model in selling second hand goods (there are many examples available in Europe, Asia or in USA) but significantly different from the other business organization in the context of profit maximization and business orientation.

Since, FWS is a non-profit organization; it has tax exempt status under Section 23 (e) of the Australian In- come Tax Assessment Act 1939. Total sales revenue has increased from $194,086 in 2004 to $690,638 in 2010 and total income has increased from$1,584,828 in 2004 to $7,124,860 in 2010 with an increment of 5% of the net asset. Figure 2 shows the resource flow in the business model of FWS, where,

* Hard rubbish or economically valuable and functional waste is collected from households.

* FWS adds value to the collected goods through repair or renovation.

* The goods are sold.

Even though FWS is a non-profit organization, it cre- ates money out of garbage materials, provides jobs to many disabled people and contributes to build a more promising society. FWS is collecting reusable and sella- ble products, giving them longer life spans and circulat- ing them within the society. By circulating the goods again and again, FWS contributes to the global environ- mental improvement and decreasing the depletion of the global resources.

4.2. Case of Waste Concern in Bangladesh

Waste Concern (WC) a "not-for-profit" social business enterprise was founded in 1995 in Dhaka, Bangladesh with the motto "waste is a resource". Over the time of the business is expansion, Waste Concern Group was formed and which has now both for-profit and not-for-profit en- terprises. WC primarily deals with a specific waste stream such as organic waste of the daily household waste. As more than 70 per cent of municipal solid waste in Dhaka is biodegradable (organic), therefore, WC is primarily interested in improving waste management systems as well as socio-economic and environmental benefits by recycling organic waste and organic waste is composted and sold as bio-rich fertilizer.

Organic wastes are collected by community based waste collection systems where household dwellers pay to have their waste collected. WC's collection vans then bring organic waste to the composting plant. WC serves the communities partially in Dhaka with its five com- posting plants of a total 20 tons/day (one 10 - 12 ton/day, two 3 ton/day and one 1 ton/day). Figure 3 shows the re- sources flow in business model of WC where, household waste are collected by community collection systems, collected waste are then transported to WC's composting plant, organic wastes are sorted out and processed for composting. Finally, the composted organic fertilizers are sent for retail to the local farmer.

Initial investment was US $14,300 for a 3 tons/day capacity plant. Annual financial savings were US $7218 for a 3 tons/day capacity plant (both from plants and carbon credits). WC arranges for fertilizer companies to purchase and market the compost-based fertilizer. Table 1 shows the comparative cost analysis of different com- posting plants in Dhaka operated by Waste Concern.

In a joint venture project with a Dutch company, WC has built a 700 tons/day capacity compost plant under the Clean Development Mechanism (CDM) of the Kyoto Protocol. This joint venture company is under the for-profit organization so the profit will be distributed and the investment of the project will be pay back after certain time period. The newly build plant has the com- post production capacity of 50,000 tons/year, reducing CO2 emissions by 560,000 tons over the next 6 years, benefiting more than 3.6 million people each year and directly creating jobs for 16,000 people from lower socio-economic backgrounds, especially women. The plan will reduce more than 18,000 tons of CO2 emissions each year in Bangladesh and will help to reduce the 52% of generated solid waste that remains uncollected in Dhaka.

5. Results and Discussions

Even though, social business is an emerging concept, it has already been accepted by the business expert very promptly especially in Asia and Europe due to its poten- tial impacts on economy, society and the overall envi- ronment. Most of the social businesses currently run in the world are working in the poverty and health sectors, for example, Grameen Danone and Grameen Veolia. Waste is one of the biggest human generated problems in every country around the world. Social business models can assist local authority to ensure a better closed-loop material flow within society by providing a platform of reuse, recycling and resource recovery facility to the lo-cal community.

However, it is important to keep in mind that SB is an emerging business concept and waste management sys- tems require long term investment. In addition, the tradi- tional waste management business model is facing vari- ous problems in the competitive business market. There- fore, potential barriers in formulating innovative business models like SB are essential to consider and finding pos- sible resolutions to overcome those barriers is a key driver in the success of SB in zero waste management systems.

5.1. Barriers and Opportunities in Waste Management Social Business

5.1.1. Potential Funding Partners or Investors

Potential funding partners or investors are the key factor in SB. Without appropriate funding partners SB cannot be established. In a profit maximizing company, the investor invests because of benefits. However, in social business, profit is non-dividend. Therefore, investor will not receive any profit margin from the company because of the SB principle which is to provide social, economic and environmental benefits to the society rather than personal benefit. There are many donors around the world who are interested in contributing significantly to change life and society through charity. Social enterprise is a business model which is based on charitable money and always depending on the charity organizations. In Australia, a total 7302 not-for-profit organizations re- ceived AU$10.5 billion in 2006-2007 and employed 110,482 people (ABS, 2009). However, there is a sig- nificantly low contribution by the donor in the waste management systems. Therefore, the potential funders or investors would come from different part of our society such as larger company, corporate company, government, regional or global development organization such as World Bank,, United Nations European Union and so on.

One of the potential strengths of the SB model is that SB can be a self-sufficient for-profit organization and can run independently without further assistance from the funding organization after running the business. Tradi- tional corporate business funds and assists different programmes around the world through corporate social responsibility. Therefore, it would be an opportunity for the corporate world to utilize their money in more appropriate ways and contribute to social, economic and environmental benefits though social business models.

Waste Concern's case is impressive in regards to the socio-economic context. Bangladesh is one of the least developed countries with diverse socio-economic, politi- cal and environmental problems. The Dhaka City Cor- poration (DCC) can't provide sufficient waste manage- ment services to the inhabitant of Dhaka city. Inspiringly, using community-based waste collection systems and partnership with international funding body, Waste Con- cern collects household waste and separates and sorts-out organic fractions by hand. Funding bodies especially the charity organization are interested to be involved with WC and allocate funds for composting organic waste because, the system improves the environment in Dhaka but also creates jobs for a thousand people and creates profit making products such as bio-fertilizer from house- hold garbage.

5.1.2. Social Acceptance

Social business is dependent on survival strength in the competitive business market and social acceptance. On one hand, the waste management social business model is primarily dependent on the collection of valuable re- sources from the waste streams, on the other hand, prof- itability of the business is also dependent on the social acceptability of purchasing the second-hand or repaired goods. Business credibility is also determined by the transformation of waste rubbish to a very attractive pro- duct.

In the recent past, community engagement has been amplified in different socio-economic and environmental movements due to the easy access of different social networks such as Facebook, Twitter and so on. Social acceptance has also been increased significantly for e-business like EBay or Amazon, where second hand functional products are reused again and again. Therefore, current society is progressing towards in shared values and collaborative consumption which leads to optimism in the waste management social business sector.

FWS sells their products to local consumers with a great deal of consumer satisfaction. Clients of FWS also feel good while buying products, not only because of the products are cheap but also because they are contributing to the society through reusing the products again and again. The case of Waste Concern is also positive when it comes to social acceptance. WC promotes their or- ganic-fertilizer through a continuous testing of the nutria- tion value to the soil and the productivity of organic foods. The local farmer find organic-fertilizer is more productive with low price and environmental benefits.

5.1.3. Community Engagement

Capacity building within society is an important aspect for the success of the SB model. The SB model for zero waste management systems will engage and provide training on resource collection, repair, and reuse to the local people. SB can be a training place for different groups of people and it will provide information on the benefits of resource recovery, reuse or sharing and trans- form a hyper-consumption society to a collaborative- consumption society.

Reuse the functional items such as re-usable electronic, furniture, equipment and so on can potentially prolong and indirectly prevent the waste generation. Thus the SB model can be useful to the local people to be engage with one another and make connection.

For instance, social business can be convenient place to resource drop offfacility in a community. Therefore, SB would potentially provide a common meeting place where people can meet each other. Social business can be treated as a social place or "third place" where every sin- gle individual in a society can be part of the resource recovery and reuse programmes. Various awareness pro- gramme can be run under the SB model where different age groups can be involved specially elderly people who needs opportunity to involve in social activates. The case of FWS and WC are good example of involving local people and creating social bonding.

5.1.4. Waste Infrastructure

Existing waste infrastructure is a vital component for success of the SB model in any particular geographical area. The location of waste facility and accessibility are the key factors to encourage local people to recycle waste to the drop-offfacility. In Adelaide, there are plenty of hard rubbish is produced every day and a significant por- tion of that waste is functional and reusable. People usu- ally leave drop offhard rubbish at the curb-side due to remote drop-offfacilities. People are not interested to take their hard rubbish to the remote drop offfacilities due to cost for per unit deposit system. In the Figure 4 shows the response of the free drop-offday in Adelaide where most of the e-waste can be repaired recycled.

Given the example of the drop offfacilities in Europe and many other countries around the world, where gov- ernment organize the drop offfacilities without any fees. A significant amount of funds needed to subsidies for such programme. SB can be a potential economic model for such kind of programme to run in profitable way.

Waste management social business can be used as a common drop-offcentre of all recyclables for the local community. Therefore, waste management social busi- ness can play an important supporting role to the local government in context of providing waste management drop-offfacility to the community. Repairable and reus- able waste will be repaired and then sold or exchanged to the local community. Local people can use social busi- ness as an exchange centre so that they can swap goods from the reusable product available in the shop. There- fore, social business can be more efficient and socially acceptable for promoting collaborative consumption to the society.

5.1.5. Competitive Waste Management Business Market

Waste business market structure is very competitive due to the profitability of waste to resource conversion. Waste businesses are also attractive to investors. Support from the local authority and policy makers is important for surviving in the business market. On one hand, social business model is a provider of social benefits to society. On the other hand, it is also a profit maximizing business organization. Therefore, to compete in the existing busi- ness model is comparatively challenging for social busi- ness. An innovative and profitable business plan can boost the business model and make it successful. The case of Finding Workable Solutions and Waste Concern are the examples of the waste management business with social benefits.

Both FWS and Waste Concern are profitable business enterprise. Therefore, social business would be more beneficial and socially acceptable to society and promot- ing recycling and resource recovery. Local policies such as container deposit legislation, landfill ban and extended producer responsibility could be supporting instruments for the waste management social business organizations.

5.1.6. Extended Producer Responsibility (EPR) and Social Business

EPR is an important strategy to promote products stew- ardship and products "take-back" by the producers in a responsible manner. However, the EPR strategies are not significantly implemented in every cities. Cities which are trying to be a "zero waste city" is still yet to reach a successful application of EPR for all product items such as electronic, paper and packaging and so on. One of the main barriers of implementing of EPR is the recycling or waste management infrastructure of the end-of-life pro- ducts. Social business can take the responsibility of the successful implementation of the EPR with the corporate social responsibility.

Knowing the fact that, EPR is still need a long way to go to be successful and producer will produce as much product as they can but changing current production de- sign to a more sustainable design such as "cradle-to cra- dle" design can improve the overall waste prevention at the first stage of waste creation. And at the end-of-life product, the SB can be used as important business part- ner to implement the take back or EPR policy successful. It is also important to acknowledge that as long as indi- vidual, community and society take the responsibility for the end-of-life products there will be very little achieve- ment in waste in regards to economic growth and envi- ronmental benefits.

Therefore, social business will developed by the pro- ducers and consumers for the proper take-back systems under the umbrella of social business. Social business will work as a joint venture of the corporate business to solve the waste problems in the current society and inte- grate CSR as an effective tool in the contribution of the social benefits. Therefore, there is a huge opportunity to integrate the CSR within the product life cycle and em- power the business responsibility with the help of social business models.

5.2. Waste Management Social Business Model

Waste management social business is an opportunity to contribute to socio-economic and environmental benefits in society and minimizing inequity. Waste management social business will not only provide job opportunities to local people but also it will be a platform to exchange ideas, promote environmental best management practices and share functional products. In the current business model, revenue is the prime concern and social or envi- ronmental benefits are the minor concern.

Waste management social business can work as a helping hand to the local council in collecting, recycling and providing resource recovery facilities. Waste man- agement social business need to develop in such a way that people would feel free to visit the store frequently. Moreover, social businesses would offer different aware- ness raising programme to the local community.

In the current linear society products are used on a very temporary basis with a very short life span. Even though many products have a longer life span and are functional, after certain period they treated as waste and disposed off, most of the household wastes are recyclable, reusable, shareable or recoverable through composting, however, due to limited faculties and awareness those usable products are being disposed of in landfill.

In this waste management social business model, the organization will act as a service provider to the commu- nity by recycling, reusing, repairing, composting and retailing goods to local people and circulating the mate- rial flow within society for a longer time period. Figure 5 shows the expansion of product lifecycle and transfor- mation of linear society to a circular society through the waste management social business model.

An experimentation and discovery driven approach based on new assumptions is required to overcome the existing barriers in current business practices and to de- velop an innovative new business model. Yunus's SB is developed based on three key components such as chal- lenging the conventional business model based on new assumptions, finding partners and undertaking experi- mentation. Table 2 shows the discovery driven waste management social business approach for the case of FWS and WC.

6. Conclusions and Further Studies

The zero waste management social business model is an innovative business concept where existing corporate business partners can invest to develop a new business within the scope of corporate social responsibility. The current trends of contribution of CSR in solving social problems and promoting sustainable development are insignificant. The proposed waste management social business can improve the current waste management problems in our society, provide jobs to local people and can save our global finite resource.

The conceptualized social business model can endorse closed-loop resource flow in the circular society and it can maximize resource utilization through recycling and reusing so-called "solid waste" and prevent environ- mental depletion. The proposed business model will not only promote resource utilization through recycling and reuse but will also create a social meeting place or a "third place" which is an opportunity for promoting live- ability in a city to its residents.

Key issues in the success of the zero waste social business are:

* Finding a potential funding partner is mandatory. Different corporate organizations can be potential in-vestors. Financial mechanism can be incorporated into the traditional CSR system to utilize and finance the most innovative business model that can contrib- ute to the transformation of society for the long term.

* Local authority and government should provide a common platform where donors or investors can eas- ily fund their projects under the social business model. Local government should play an intermediate partner of the donor and business organization.

* Waste management sector is very finance incentives in regards to long term investment. In addition current traditional waste business is dependent on incentives for profit maximizations. Social business can be an interesting plat form for the local authority to assist and build social capital by resource recovery and empowering people in the waste management sector.

* Public private partnership and maximum stakeholders involvement is important for the success of the SB. SB is an opportunity for the corporate world to be more responsible in the context of product and re- source stewardship.

* An appropriate and detailed for-profit SB plan with future vision can inspire corporate investors to ex-plore SB for zero waste management systems that solve our everyday waste problems by creating a zero waste society.

Further studies can be done to explore the existing business scenario, to identify potential business partners and to develop a social business plan for executing a real time waste management social business model in the existing business market.

7. Acknowledgements

This article was supported by the Zero Waste SA Re- search Centre for Sustainable Design and Behaviour (sd + b) at the University of South Australia. The Zero Waste SA Research Centre is an interdisciplinary research cen- tre with interest and expertise in a wide range of envi- ronmental and sustainability issues.

Subject: Studies; Business models; Waste disposal; Recycling

Location: Dhaka Bangladesh, Adelaide South Australia Australia

Classification: 1540: Pollution control; 9179: Asia & the Pacific; 2310: Planning; 9130: Experiment/theoretical treatment

Publication title: Journal of Environmental Protection

Volume: 3

Issue: 11

Pages: 1458-1469

Number of pages: 12

Publication year: 2012

Publication date: Nov 2012

Year: 2012

Publisher: Scientific Research Publishing

Place of publication: Irvine

Country of publication: United States

Publication subject: Environmental Studies

ISSN: 21522197

Source type: Scholarly Journals

Language of publication: English

Document type: Business Case, Feature

Document feature: Diagrams Photographs Tables References

ProQuest document ID: 1282110318

Document URL: http://search.proquest.com/docview/1282110318?accountid=38610

Copyright: Copyright Scientific Research Publishing Nov 2012

Last updated: 2013-09-06

Database: ABI/INFORM Complete

Document 38 of 100

Baton Rouge Music Studios: a case analysis

Author: Guidry, Krisandra

ProQuest document link

Abstract:

This case requires students to analyze the financial position of a small business on the verge of closing. This case is very flexible; how much of the solution should be given to the students is a function of the amount of time the instructor wants to devote to the case and the learning objectives to be achieved. This is also an opportunity to encourage students to employ sensitivity analysis via a spreadsheet. If time is at a premium, all of the preliminary financials can be provided, with the students only focusing on analysis of the statements and/or recommendations regarding continued operation of the venture. This case, with its core business content and subject matter, is likely to be of interest to sophomore and junior level business students. It can be used in varying capacities in the following classes: principles of accounting, principles of financial management, and entrepreneurial finance. [PUBLICATION ABSTRACT]

Full text:

PURPOSE OF THE CASE

This case is designed to introduce students to the operational difficulties experienced by a small business. Many issues would not be present if the firm were publicly-held, with audited financial statements and a secondary market for its securities. The firm being analyzed is a music school, an entrepreneurial venture of a professional musician. The case is also designed as an initial presentation of financial statements, allowing students to search for ways to increase revenue and decrease expenses, while still remaining viable. This is also an opportunity to encourage students to employ sensitivity analysis via a spreadsheet. By changing the value of one variable, students will be able to determine the effect on profitability. Students in accounting and/or finance classes may find the content challenging, yet enjoyable. However, the case is very flexible. All of the financials can be provided to students in an entrepreneurship or introductory management class, only making recommendations regarding continued operation of the business, without detailed knowledge of accounting or finance.

THE COMPANY

Baton Rouge Music Studios, LLC (hereafter, BRMS) is a "business dedicated to creating, developing, and implementing educational and performance based programs to Baton Rouge area youth" (Baton Rouge Music Studios website, 2011). Through private lesson offerings, students learn musical theory and technique. Unique group oriented programs enhance the student's learning experience; "instructors model motivation and communication techniques that provide students with the skills necessary to work with other musicians in a constructive, critical manner" (Baton Rouge Music Studios website, 2011).

BRMS was founded in 2006 by Doug Gay, a professional touring and studio musician. Between 2009 and 2011, Doug played drums for Tab Benoit, a Grammy©-nominated Louisiana Blues artist. Gay used $25,000 of savings to invest in computers and high-tech recording equipment. Income Doug earned as part of Benoit's band was used to offset BRMS expenses. Doug's wife, Courtney, remained at the studio while he toured. Prior to touring, Doug was the band director at a local high school and would tend to the studio after school dismissed. Growing weary of life on the road (250 days a year), Doug quit the Tab Benoit Band in May of 2011. However, the income earned as a touring musician helped to keep the studio afloat. After several months of poor financial performance, it was time to focus on business. The studio is open 5 days a week, 4 p.m. - 8 p.m. and is closed for all major holidays. The reception desk, which accepts payment from students and answers telephones, is maintained by Doug, Courtney, and the instructors at BRMS.

TEACHING PHILOSOPHY

The faculty at BRMS is comprised of professional musicians and educators. Besides Doug, there are seven instructors, teaching drums, guitar, bass, piano, voice, brass, and woodwinds. Each instructor executes what Doug has dubbed "purpose driven lessons." Traditionally, there are two schools of thought in regard to private music lessons. The first technique is used by many professional contemporary musicians. They use a laid-back approach to teach students parts of recognizable songs; sometimes, several students informally "jam" with other students. Unfortunately, there are no public performances or recitals. The second approach uses a rigid curriculum. Progression through a series of instructional books is used to structure each lesson. Once or twice a year, students perform for family and friends via recitals; however, students rarely play alongside others. Students at BRMS not only receive a sound musical education in technique and theory, but also have the opportunity to learn how to play with other students. Students are prepared for several performance opportunities per year in rock and roll concert settings, such as at malls, auditoriums, and local festivals. Doug's philosophy is that "music should be a tool that helps a student with self-discipline and accountability; but, music should also be fun" (Baton Rouge Music Studios website, 2011). Doug believes BRMS uses the best methods (and the most enjoyable ways) to teach these skills.

PROGRAMS

BRMS offers several programs. The following is a description of these programs and fee schedules:

Private instruction

BRMS offers both 1⁄2-hour and 1-hour private music lessons. Lessons are held on the same day and time each week during the course of a month. Fees for private lessons are $110 per month for 1⁄2-hour lessons, $200 per month for 1-hour lessons (the market rate for private music instruction in this community). Fees are paid via cash or check. Once signed up for lessons, clients must give a 30-day notice of withdrawal in order to stop the invoicing process. Private lessons are scheduled with the front desk (scheduled time will depend on instructor and student availability).

Rocklab

For beginner guitar and bass players, economical group classes called RockLab are available. Students, aged 6-11, have the opportunity to learn together under the leadership of a qualified group instructor. RockLab classes are one hour in length per week, and are scheduled according to student availability. The RockLab program is a five month program and is offered two times per year. The cost of RockLab is $110 per month for 5 months, plus a $50 rehearsal fee.

Young band nation

Young Band Nation (YBN) offers intermediate skill level students the opportunity to learn, rehearse, and perform together as a band. No more than six students, usually those with similar musical skill and interest, are grouped to form a young band (each young band usually includes at least the following: lead singer, drummer, lead guitarist, and bass guitarist.) Young Band Nation is offered three times a year - spring (January, February, March, and April), summer (June and July) and fall (September, October, November, and December). Each semester has a different theme. Recent themes have included "Songs of the 80s," "The British Invasion," and "Write an Original Song." Each semester has a syllabus and itinerary which gives the students and parents a clear timeline. Band lineups may change from semester to semester. Therefore, it gives the students the potential opportunity to play with many different students throughout the year. Band members meet at the studio once per week, for two hours. Students in YBN have a mid-semester, as well as, an end-of-semester performance. The current cost of YBN per student is $100 per month. Students enrolled in the YBN program must also be simultaneously enrolled in private lessons at BRMS, which is not included in the fee structure for YBN (i.e., private lessons are an additional cost.) The content of YBN is exclusively under the supervision of Doug Gay.

Punch card/giftcard system

This program allows clients to pre-purchase lessons. Clients must call 48 hours in advance to schedule a lesson. After completion of a lesson, the cost ($30 per half hour, $55 per hour) is deducted from the card's remaining balance. Cards are available in denominations of $30 and up.

One hit wonder

For adults and children unable to make a long term time and/or financial commitment to private lessons, BRMS offers the "one hit wonder" program. Clients must call 72 hours in advance to schedule a "one hit" lesson. The cost is $30 per half hour, $55 per hour.

PHYSICAL LOCATION

BRMS is housed in 2500 square feet of Class A office space in the southern part of the community, just south of the Louisiana State University (LSU) campus. Other tenants include doctors, attorneys, and insurance agencies. Most students enrolled in BRMS programs live in the general area. Doug has signed a month-to-month gross lease at the rate of $3,650 per month. Eight parking spots are included.

ADVERTISING

BRMS has relied primarily on word-of-mouth to promote its programs. Community performances by Young Band Nation students also serve as advertising for the programs offered by the studio. Several local television stations, as well as, the LSU student newspaper, have covered BRMS. Doug promotes his programs at several "fairs" held around town publicizing programs available for children. Social media marketing (Facebook, Twitter, etc.) has been pursued. BRMS is likely to attract new students through this avenue, since most teens are tech-savvy. Doug has always felt that a formal marketing plan for the studio would be his secret weapon to tap if times got tough; but, he is hesitant to pay for one.

CHALLENGES

BRMS has encountered numerous challenges over the last few months. Revenue is unstable during the course of the calendar year. For instance, participation in summer programs is usually low. Meanwhile, expenses during this portion of the year remain roughly the same Monthly profit and loss statements for March and June 2011 are presented in Tables 1 and 2 (Appendix); a balance sheet is presented in Table 3(Appendix). However, BRMS' landlord insists that demand is keen from other present tenants, and rent will be increased by 15% in 2012. To keep the studio operational, Doug and Courtney have borrowed $5,000 from family members (without interest) and do not take salaries; however, they are committed to remaining open. Future dreams for the studio include: CD and promotional packages for members of Young Band Nation as they begin to record their original music; live streaming performances for family and friends to see students perform in real time; in-house venue for Young Band performances and workshops; and, a full suite of rehearsal spaces open to the Baton Rouge music community (by the hour or by the month rentals).

QUESTIONS

1. Do BRMS' financial statements conform to generally accepted accounting principles (GAAP)? If not, what alterations are necessary to the income statements and/or balance sheet in order to achieve compliance?

2. Formulate a pro forma income statement for 2012, assuming that no changes are made in the present program.

3. Suggest ways in which BRMS can increase its revenue.

4. How can BRMS reduce its expenses?

5. Provide two years of pro formal financial statements using your suggestions from questions 3 and 4. All assumptions used to derive these statements should be noted.

TEACHING NOTES

1. The financials are unaudited statements; they do not conform to GAAP. Actually, adjustments need to be made prior to beginning the analysis and answers will vary. The income statement solution provided in Table 4 (Appendix) assumes that the March statement is typical for 75% of the fiscal year, while June represents 25% (with the exception of RockLab and YBN, each currently run for 10 months). It is also assumed that the Tab Benoit income is earned only through May of 2011. However, this should provide an annual view of the firm's current financial picture. It is an interesting exercise to tell students that there is something missing from the income statement (depreciation expense for the studio's equipment); it allows students to enhance their knowledge of basic financial statement structure. In terms of the balance sheet, the $25,000 invested in the equipment (5 year MACRS assets) 6 years ago will be worth zero in terms of book value. The goodwill account appears in order for the accounts to balance. Furthermore, the loans from family members may appear on the balance sheet; but, since they are without interest, they do not impact the income statement. The adjusted balance sheet is presented in Table 5 (Appendix).

2. A typical answer is presented in Table 6 (Appendix). Students should include the following in their presentations: (1) elimination of the Tab Benoit income stream, (2) increase in rent, and (3) zero depreciation expense.

3. In terms of revenue generation, there are several areas that could be addressed by students:

* The instability of student fees in the summer months is related to such things as family vacations, summer school and other activities. Some students are unwilling or unable to commit to an ongoing 2-3 month program during this time. An alternative revenue generating program would involve 1-2 week intensive band camps, available to students of different skill levels, instruments, and ages. The program could even be offered to adults, marketed as a rock and roll dream camp, with a performance at a local restaurant or coffeehouse as the program finale.

* The generation of revenue only occurs for four hours each day, Monday through Friday; however, the space is leased for 24 hours per day, seven days a week. Doug should investigate offering private music lessons or group lessons for preschoolers and their mothers/fathers/caregivers, as well as, to children who are homeschooled. Programs such KinderMusik© and Music and Me© have been very successful. Local daycares and school before care/after care programs should be approached; programs could be tailored to the needs of the client.

* Since the price point for private lessons is at the market rate, an increase would likely drive away students. However, the current rate of $100 per month for Young Band Nation students is too low, especially when compared to the amount of time each student spends at the studio in conjunction with the program. It is reasonable to believe that the program could continue to succeed at a rate of $150 per month. Also, the semester lengths should be standardized in order to generate income over the entire calendar year: Spring - January, February, March, April, and May; Summer - June, July, and August; Fall - September, October, November, and December.

* Doug should consider investing in a consultation with an attorney familiar with copyrights and franchising agreements. Since Doug's ideas regarding music education are novel, the market may be ripe to establish his programs in other communities.

* Institution of a new payment policy is necessary. All ongoing lesson programs (private lessons, RockLab, YBN, as well as, any new programs) should be paid through direct draft, eliminating any collection issues.

4. A couple of expenses are too large for a business of this size and drag down the studio's profitability:

* The studio is overpaying for rent. It does not need Class A office space. Retail space in a strip shopping center that is centrally located would offer a larger footprint and more parking at a lower rate. Furthermore, the landlord is likely to build out the space to the tenant's needs. The dream of housing rehearsal space, available for rent to the community, may be possible with a change in location. Currently, market rates for retail space in this area of the Baton Rouge community run between $10 and $20 per square foot per year. Many rents are negotiable. Other improvements, such as an in-house performance venue and recording studio will have to wait.

* Payroll expenses for instructors at the studio are astronomical. By the looks of the statements provided, the expenses barely cover the revenue generated by these instructors. It is likely that the studio's other programs have been subsidizing private lessons (and can hardly afford to). The studio treats these instructors as employees, rather than independent contractors. Thus, BRMS has been responsible for benefits, Social Security payroll taxes and Federal/state withholding. BRMS should avoid a knee jerk reaction such as elimination of private lessons, dismissal of current instructors, and/or eradication of all instructor benefits. Such a move would have a disastrous effect. Private lessons serve as a feeder for all of the other programs offered by the studio. Dismissal of beloved teachers would likely drive away many students. Elimination of benefits would force the resignation of many instructors. The solution may be to reduce the amount of benefits to current instructors and to ease in new instructors and treat them as independent contractors, thereby substantially lowering payroll expense.

5. Answers will vary. This is also an opportunity to encourage students to employ sensitivity analysis via a spreadsheet. By changing the value of one variable, students will be able to determine the effect on net income. The statements provided in Table 7 (Appendix) assume the following:

* A slight up-tick in demand for private lessons, as well as, RockLab and "other" programs.

* The YBN program increases its fee to $150/month; 2012: 50 students for spring and fall semesters, 25 students in summer; 2013: 65 students for spring and fall semesters, 35 students in summer.

* New morning program for toddlers - children attend once per week for 1 month, program run every month, $100 per month, 2 sessions per day; 2012: 5 children per session; 2013: 10 children per session.

* New summer program for children - $150 per child, 10 children per session; 2012: 8 sessions over course of summer; 2013: 16 sessions over course of summer.

* New summer program for adults - $200 per adult, 5 adults per session; 2012: 4 sessions over course of summer; 2013: 8 sessions over course of summer.

* The assumption is made that BRMS moves to 4,000 square feet at $15 per square foot per year. This move increases the studio's footprint and eliminates the need to rent storage space and provides more room for the studio's new programs (as well as, set the stage for rental of rehearsal space to local musicians). Utilities will increase.

* Direct debit for student fees increases cash flow and eradicates bank overdraftfees.

* The firm seems woefully underinsured; an increase in this expense is needed. Encourage students to research policies and premiums.

* Formerly, payroll represented between 85 and 90% of operating income. By reducing the amount of benefits to current instructors and easing in new instructors treated as independent contractors, a decrease in payroll of 25% is expected in 2012 and 30% in 2013.

* Minimal advertising investment in select local publications, $1,000 per year. Sustained profitability allows the firm to eventually eliminate debt and invest in new equipment. Answers will vary depending on student assumptions.

Subject: Financial analysis; Financial statements; Accounting; Recording industry; Business education; Case studies

Location: United States--US

Company / organization: Name: Baton Rouge Music Studios; NAICS: 512220

Classification: 8307: Arts, entertainment & recreation; 4120: Accounting policies & procedures; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-13

Number of pages: 13

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Tables

ProQuest document ID: 1041256001

Document URL: http://search.proquest.com/docview/1041256001?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 39 of 100

Social networking and civil discovery (a case study)

Author: Neil, Benjamin A; Neil, Brian A

ProQuest document link

Abstract:

Over the past few years, the use of social networking websites, like Facebook and MySpace, has exploded among the general population. However, the use of social networking information in litigation, such as personal injury suits and divorce cases, and the corresponding legal doctrines pertaining to discovery of that information, have unfortunately not kept pace with the technology or popular use of online social networking. Facebook is by far the most utilized website at this moment in time. As described by the makers of Facebook, it is a social utility that helps people communicate with their friends, family, and coworkers. [PUBLICATION ABSTRACT]

Full text:

Introduction

A recent law review article on social networking discovery notes that "it is unlikely. . .the civil litigant not only uses social networking sites, but also does so on a daily basis. . . .In civil lawsuits for damages, especially in the personal injury and insurance litigation context, potentially relevant discoverable information is often abundant on these sites." Even E. North, Comment, Facebook Isn't Your Space Anymore: Discovery of Social Networking Websites, 58 U. Kan. L. Rev. 1279, 1286, (2010).

Accordingly, the scope of discovery into social networking information "requires the application of basic discovery principles in a novel context," and the issue to be addressed by the courts in this regard is to "define appropriately broad limits. . . .on the discoverability of social communications. . . .and to do so in a way that provides meaningful direction to the parties."EEOC v. Simply Storage Mgmt., 270 F.R.D. 430, 434 (S.D. Ind. 2010).

No expectation of privacy exists in the social networking context, perhaps even on the Internet as a whole. A New York State trial court recently noted in Romano v. Steelcase Inc., 907 N.Y.S. 2d 650, 657 (N.Y.Sup. Ct. 2010), regarding Facebook's own terms of use:

You post User Content. . . . on the Site at your own risk. Although we allow you to set privacy options that limit access to your pages, please be aware that no security measures are perfect or impenetrable. . . .When you use Facebook, certain information you post or share with third parties (e.g., a friend or someone in your network), such as personal information, comments, messages, photos, videos. . .may be shared with others in accordance with the privacy settings you select. All such sharing of information is done at your own risk. Please keep in mind that if you disclose personal information in your profile or when posting comments, messages, photos, videos, Marketplace listing or other items, this information may become publicly available.

"Social networking sites, by their very nature, involve the sharing of personal information" North; 58 U. Kan. L. Rev. at p. 1289. Keep in mind that anything you post on the Internet or through social networking websites like Facebook might be disclosed to the public at some point.

Premise

Courts faced with ruling on discovery requests involving social media sites are forging new law. Courts can and do issue discovery orders compelling a party of a lawsuit to grant an opposing party access to his or her Facebook page or to permit in camera review of social media sites set to private settings.

Rules of Civil Procedure in most states provide for liberal discovery, e.g., Generally, discovery is liberally allowed with respect to any matter, not privileged, which is relevant to the cause being tried.

Scenario "A"

In McMillen v. Hummingbird Speedway, Inc., 2010 Pa. Dist. & Cnty. Dec. LEXIS 270, the plaintiffclaimed substantial injuries, including possible permanent impairment, loss and impairment of general health, strength, and vitality, and inability to enjoy certain pleasures of life, after he was rear-ended during a cool down lap following a July 7, 2007, stock car race. The court granted defendants' Motion to Compel Discovery and ordered the plaintiffto provide his Facebook and MySpace user names and passwords to counsel for defendants after defendants reviewed the public portion of plaintiff's Facebook account and discovered comments about his fishing trip and attendance at the Daytona 500 race in Florida, reasoning without more, the complete access afforded to the Facebook and MySpace operators defeats McMillen's proposition that his communications are confidential. The law does not even protect otherwise privileged communications made in the presence of third parties.

When a user communicates through Facebook or MySpace, however, he or she understands and tacitly submits to the possibility that a third-party recipient,

Scenario "B"

In Zimmerman v. Weis Markets, Inc., No. CV-09-1535 (Northumberland Co., May 19, 2011), the plaintiffhad claimed serious physical injuries from an on-the-job accident. Photos that he posted to social media sites cast doubt on the severity of his claimed injuries and whether they predated his work-related accident. The publicly available photos induced the defendant to believe that further relevant evidence might exist on the password-protected parts of the site accessible only by the plaintiff's "friends." The plaintiffclaimed that he had a privacy interest in the password-protected materials. In ruling against plaintiffon this issue, the court noted that "All the authorities recognize that Facebook and MySpace do not guarantee complete privacy. Facebook's privacy policy explains that users post any content at the site at their own risk and informs users that this information may become publicly available."

Scenario "C"

In Romano v. Steelcase Inc., 30 Misc. 3d 426, 907 N.Y.S.2d 650, 2010 N.Y. Misc. LEXIS 4538, 2010 NY Slip Op 20388 (2010), Defendant filed a motion for access to plaintiff's current and historical social networking pages and accounts, claiming that the plaintiffhad placed certain information on the sites that it believed were relevant to the extent and nature of her injuries, especially her claims for loss of enjoyment of life. The court found, inter alia, that in light of the fact that the public portions of the plaintiff's social networking sites contained material that was contrary to her claims and deposition testimony, there was a reasonable likelihood that the private portions of her sites might contain further evidence such as information with regard to her activities and enjoyment of life, all of which were material and relevant to the defense of her personal injury action. The plaintiff's right to privacy was outweighed by the defendant's need for the information. As neither of the social networking sites guaranteed complete privacy, the plaintiffhad no legitimate reasonable expectation of privacy. The defendant's attempts to obtain the information via other means were thwarted by the plaintiff's counsel. Consequently, the defendant was entitled to the information.

Discussion Questions

1. Where a litigant voluntarily posts pictures and information on social media sites to share with other users of the sites, he or she cannot claim to possess any reasonable expectation of privacy to prevent a defendant from access to such information. How would you advise a client regarding this problem?

Many social media site users are lulled into a false sense of security and anonymity based on the vast amount of data and information contained on the World Wide Web. People are generally unaware of how much information, which they considered to be private, can be viewed with a simple name search in one of the many online search engines. Although most social media sites have privacy and blocking features these can be notoriously hard to use and navigate so most people choose to ignore them all together. But beware of deleting your social media sites after litigation has commenced or is reasonably anticipated to commence since this could be viewed by the court as destruction of evidence and subject to fines or sanctions. Ultimately the only sure safe bet is to not use social media sites altogether but if you feel you must use them then you should operate under the principle that anything you post or allow to be posted could eventually be viewed by the public no matter how secure or private you feel the information may be.

2. Where a litigant puts physical condition at issue, he or she must anticipate reasonable discovery to rebut the claims. What would you advise a client under these circumstances. Both before and/ or during litigation.

Social media site users generally feel a need to update people about the daily or even hourly occurrences in their lives. Know that although you feel a need to stay connected to as many people as possible that the information you are relating to the public can be detrimental to litigation. Pictures of you out at the club or playing in a recreation sports league can be detrimental to a personal injury case especially if you are claiming damages from a debilitating injury suffered in an auto accident. Again destroying information from social media sites after litigation has commenced or is likely to commence can be viewed as destruction of evidence the best practice is to use the old-fashioned telephone to update friends and loved ones of your condition and avoid an embarrassing revelation in negotiations or court.

3. Courts will not permit a fishing expedition: discovery in the social media context requires a threshold showing that publicly accessible portions of a social networking site contain information that would suggest that further relevant postings are likely to be found by access to the non-public portions. See generally McCann v. Harleysville Insurance Company, 78 A.D.3d 1524 (N.Y.S.2d 2010) Do you believe this to be a fair statement of the law? Why or why not?

This is a fair statement of the law. The purpose behind discovery is to adequately prepare each party for trial not to publicly embarrass the opposing party. Although all discoverable evidence may not be admissible at trial all admissible evidence must be relevant. So if you take this game of logic to its ultimate conclusion although all discoverable evidence is not admissible but all admissible evidence must be relevant, and the ultimate purpose of discovery is to lead to relevant admissible evidence at trial, then all discoverable evidence should be reasonably calculated to either be relevant or lead to relevant evidence. This is why a threshold showing of relevancy is important and distinguishable from admissible evidence.

4. A court may decline to review materials in camera: 1) strain on court resources, 2) unfair to require court to guess at what may be germane to case. But see Barnes v. CUS Nashville, LLC, 3:09-cv-00764 (M.D. Tenn) (June 3, 2010) (court offers to friend witnesses) How would you address this concern when raised by a Judge ? Give a reasoned thoughtful response.

This should be a red flag for any attorney. By their very nature a Judge must remain a neutral and detached observer throughout the legal process. Their job is to call the "ball and strikes" in the courtroom. Anytime a judge can be viewed as preferring one side over the other before both parties have had an opportunity to present their entire case, as in this example, there should be a cause for concern about his/her ability fairly and impartially decide the issues between the parties. This may be an appropriate time to make a recusal motion. Recusal motions should never be taken lightly, but in a scenario such as this one where the judge appears to be favoring one side over the other by suggesting they should aid in the discovery process, a recusal by the Judge may be the only way to zealously ensure the proper and fair representation of your client.

5. How would you handle the issue of third party rights of confidentiality regarding material subject to a discovery request?

Third party confidentiality is always a concern for the Court. Because they are not a party to the case they enjoy a certain heightened sense of privacy that the parties to the litigation may not necessarily enjoy. Although third party witnesses are often times integral to the legal process the relevant evidence which they can present to the Court is often limited to a very specific area within the overall litigation itself. This is where a pre-trial motion for a protective order or motion in limine may be appropriate for a third party witness. This protective order should address the concerns of the third party witness to limit access to non-relevant information by the parties to the ligation while simultaneously balancing the needs of the Court and parties to elicit relevant information that the third party witness may possess in order effectuate the legal process. One common method employed by Courts is to redact non-relevant information from physical papers or documents or to limit the scope of a third party witness' testimony while on the stand.

6. What, if any, limitations would you place on discovery requests? This would apply to parties of the litigation, as well as non-parties.

Most limits on discovery requests are set forth in the individual states' Rules of Court. This is obviously a good place to start when considering such limitations. Beyond these established rules, and as we have previously discussed, discoverable evidence should lead to or reasonably be calculated to lead to relevant evidence. But as we have seen just because evidence is relevant and discoverable does not necessarily mean it is admissible. While admissibility is a question for the trial court relevancy should always remain the guiding principle of discovery.

Subject: Social networks; Litigation; Electronic discovery; Civil procedure; Case studies

Location: United States--US

Classification: 9190: United States; 5250: Telecommunications systems & Internet communications; 4330: Litigation; 8331: Internet services industry; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-6

Number of pages: 6

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1041256006

Document URL: http://search.proquest.com/docview/1041256006?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 40 of 100

Reconsidering a multi-channel strategy

Author: Dickinson, J Barry

ProQuest document link

Abstract:

Pat Byrne, the CEO of Intermec, Inc. has a dilemma on his hands. His firm has enjoyed a long period of success in the Auto-ID market (portable computers and printers, label printers, barcode scanners). It has always been recognized as an innovative (owning over 500 patents) and successful firm. Historically, the firm benefited from a very high market share in several key vertical markets. For instance, Intermec was the first company to develop a complete solution (hardware, software, communication devices, etc.) for the route accounting market in the 1980s. As such, it benefited not only from a first mover advantage but also an installed base advantage. However, the global economic slowdown that began in 2008 and aggressive moves by competitors have put dramatic pressure on these advantages. The firm goes to market through a complex, multi-channel strategy. It maintains a direct sales force, sells through distribution to several Auto-ID wholesalers, and has a network of over 500 value added resellers with whom it partners. The Board of Directors has saddled Mr. Byrne with the responsibility of turning around the firm, after several years of sagging revenues. He believes his best course of action is to reconfigure the channels of distribution. The case ends by presenting the strategic options from which Mr. Byrne will select a course of action and several questions for discussion. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

Pat Byrne, Chief Executive Officer of Intermec, Inc. (Intermec), sat back in his office chair and stared out the window. He felt uneasy about the firm's future, given its poor financial performance in 2009. One thing was starkly obvious; the number of employee cars in the parking lot had dwindled to an alarmingly low number. The cost cutting measures had kept the firm afloat but he was concerned whether it had turned the corner. Mr. Byrne, 49 years old, began his tenure as CEO of Intermec in 2007. His most recent experience was with Agilent Technologies' Solutions Group's Wireless unit. Agilent is a $5.0 billion, bio-analytical and electronic measurement company. He wonders if he made the right move to take over the helm at Intermec during a very challenging and turbulent time.

THE SETTING

The Firm

Intermec is a leading manufacturer of mobile computerized devices, used in the Automatic Identification and Data Capture (AIDC) industry. Deployment of technology sold by Intermec allows its customers to manage their supply chain more efficiently and effectively (Bose and Pal, 2005). Since first opening its doors in 1966, Intermec established itself as an innovator through introducing a steady stream of technological breakthroughs. As of 2010, Intermec held over 580 patents, as well as numerous copyrights, trademarks and trade secrets (Intermec, 201 0). These intangible assets represent a potent competitive weapon for the firm (Rivette and Kline, 2000). Many of today's most common technologies, such as barcode scanning and printing, were invented by Intermec. Barcode scanning technology has since become ubiquitous in the retail market and is virtually a requirement for any firm to remain competitive (White et aI, 2007). The headquarters are located in Everett, W A and the firm has a workforce of approximately 1,734 employees (Intermec, 2010). The firm has traded publicly on the NYSE since 1997 under the symbol of IN.

Products and Services

Intermec designs various computerized devices including rugged mobile computers, barcode scanners, wireless barcode printers and radio identification products (RFID). The firm has outsourced all manufacturing to a Singapore firm since 2007. Research has demonstrated that off-shoring manufacturing can streamline the supply chain (Guan and Liu, 2011). Intermec customers use these devices for mobility initiatives in a variety of applications including asset management, direct store delivery, field service, warehousing, and transportation/logistics. Beyond the hardware, Intermec also earns substantial revenue from selling after-sales repair and consulting services. Similar to other firms in the technology market, these services provide a substantial contribution to the firm's overall financial profitability (Saccani, Johansson, and Perona, 2007).

The Market

The market in which Intermec competes is highly fragmented and rapidly evolving due to changes in technology. There are only a few major market manufacturers, competing for a number of market segments, each of which has its own unique requirements. This industry concentration defines the competitive strategies available to firm and defines the environment in which decisions are made (Porter, 2009). Intermec's top competitor in the AIDC market is Motorola, Inc., a $20 billion behemoth. In particular, Intermec competes head-to-head with Motorola's wholly-owned subsidiary, the Enterprise Mobility Solutions unit (formerly Symbol Technologies, Inc., with sales of approximately $4.6B). Other much smaller competitors include Honeywell, DAP Technologies, Fujitsu Tablet Division, Zebra Techologies, Oneil Product Development, and Datalogic. Virtually all of the competitors in the market utilize the same hybrid marketing channel strategy; a combination of indirect and direct channels. The implications and challenges of managing such channel multiplicity are complex (Van Bruggen et aI., 201 0). The competitors in the market offer similar technology but differ in either their product breadth or product line depth. Motorola and Intermec offer the broadest product mixes, by far in the market. They also offer the most complete solutions for customer requirements. However, due to open system architecture (Bluetooth communications on all devices, for instance), customers are free to "mix-and-match" technology from multiple vendors. Open architecture changed the dynamics of many technology markets (Garud and Kumaraswamy, 2006).

Revenues

Intermec is a business-to-business marketer operating in a market space with a total domestic (US) market size of approximately $8 billion (Intermec, 2010). In 2009, Intermec's share of this available market was approximately 6% (2009 fiscal year gross revenue $658M) (Intermec, 201 0). Intermec revenues were trending in an upward trajectory during the preceding two years, until a major setback in 2009: $849M (2007), $891M (2008), $658M (2009). The 26% reduction in revenue from fiscal years 2008 to 2009, resulted in the first net income loss ever for the firm ($11.8M or $. 19/share) (Intermec, 2010). This was a bitter pill to swallow because the $891M revenue figure in 2008 was a record for the firm. This disastrous collapse was a result of a number of several key factors. These factors included a general contraction in demand for Intermec's products due to the global slowdown and substantial inroads made by larger competitors. The global slowdown affected all competitors in the industry; however, Intermec's revenues were more severally impacted because of its dependence on certain transportation industries (Zhang, Xu, Zhang, Yi, and Jian, 2010). These competitors (Motorola, in particular) were much better suited to weather the financial storm and were hungry enough to offer deep discounts to buyers to secure sales.

DISTRIBUTION

Intermec sells both its products and services through a hybrid (or multi-channel) distribution channel. Hybrid channels are often fraught with conflict (Milan, Dorion, and Matos, 2012). This channel is comprised of a direct sales force, an e-commerce website, and a network of resellers and distributors.

Direct Channel

The firm sells its offerings to enterprise-level customers (corporate sales exceeding $100M) via a direct sales channel that is manned by a professional sales force. Direct sales channels are often used in complex, enterprise-level markets (Zupancic, Neckermann, and Schagen, 2010). The direct sales channel accounts for approximately 30% of Intermec sales (Intermec, 201 0). Presently, there are sixty sales representatives, evenly allocated across four geographic territories. Geographic territory design is often a an effective management strategy when a firm's market is expansive (Zoltners and Sinha, 2005). Each territory has a district manager, to whom the sales representatives report. The district managers report directly to the Vice President of Sales. This management structure is often used in enterprise markets (DeeterSchmelz, Goebel, and Kennedy, 2008). There are also another twenty-five direct sales representatives (key account executives; KAE) who are assigned to either major accounts (A. C. Neilson, for instance), mission critical industries (RPID) or market segments requiring unique skill sets (government, education, etc.). Each of these KAEs reports directly to the Vice President of Sales. Key account executives are an effective way to understand the complete customer experience (Homburg, Workman, and Jensen, 2002). All of the sales representatives and KAEs have decades of experience in this marketplace, are college educated, have very deep and wide contacts in the industry and are very well paid. A representative's compensation package consists of a salary of $110,000 per year, a 9% commission on gross sales that are closed and booked, a $5,000 per month expense account (expenses must be qualified and submitted via an expense report) a competitive fringe benefit plan that is valued at 30% of the salary. To some, this compensation may appear excessive. However, sales representative compensation has a positive correlation with performance (Ahearn, Mathieu, and Rapp, 2005). The average gross margin on a sale through the direct channel is 31 %. All sales representatives can sell any product or service in the Intermec catalog; this includes hardware and proprietary software. Representatives are not compensated for selling after-sales service contracts or extended warranties (3- or 5-year). The literature is divided over whether sales representatives should be compensated for such sales (Chen, Kalra, and Sun, 2009). Each representative is assigned either a geographic territory or a specific account focus (market or major account). Sales representatives either operate from their home offices (if in remote regions) or make use of one of Intermec' s satellite offices located throughout the United States.

Another, less significant, part of the direct channel is Intermec's corporate website (http://accessories.intermec.com). Most enterprise-level companies utilize the internet sales channel and find it to be an excellent way to leverage global sales (Gabriels son and Gabrielsson, 201 0). One of the drawbacks of offering an electronic channel is competition is fierce (Forman, Ghose, Goldfarb, 2009). Customers simply log into the website with their customer number and order from the online catalog. Intermec does not actively advertise this option but approximately 15% of all direct sales are obtained online. The average gross margin on sales from the online catalog is 39%. One of the drawbacks of shopping online is customers must pay for their purchases with a credit card and cannot order items "on account" or using trade terms (Fabbri and Menichini, 201 0).

Indirect Channel

The firm also has an indirect channel of distribution. Indirect distribution channels pose unique challenges for manufacturers, especially concerning governance (Pas wan, Guzman, and Blankson, 2011). The indirect channel accounts for approximately 70% of Intermec sales (Intermec, 201 0). This consists of a variety of master distributors and resellers. The master distributors stock a variety of AIDC products and accessories from competing manufacturers. In the US, there are three main master distributors: Scansource (scansource.com), Blue Star (bluestarinc.com) and Ingram Micro (ingrammicro.com). Of the three distributors, Scansource is the most prominent and most dedicated distributor to the AIDC marketplace. Moreover, Scansource is strategically important to Intermec. Scansource accounted for more than 10% of all Intermec sales in 2007 ($lOS.7M), 200S ($l13.SM), and 2009 ($123.0) (Intermec, 2010). Intermec's average gross margin on sales to Scansource is 27%.

The indirect channel also includes approximately 300 resellers, integrators and independent software vendors (IS V). Resellers have a disproportionate influence on the purchase decision made by their customers concerning manufacturerlbrand (Vanyushyn, 200S). These companies have applied and been accepted into Intermec's Honors Program. The program provides access to training, a discount level based on purchase volume, access to technical and sales support, visibility through Intermec's partner portal, and access to other partners' solutions. The ISVs have developed a unique software application designed for a specific industry (route accounting, warehouse management, beverage distribution, etc.). The capabilities of the individual ISVs range from small programming groups that serve a local, niche market to very sophisticated, groups with a national footprint and complete sales staff. Typically, the ISV develops a seamless, add-on module that integrates into a standard enterprise resource planning (ERP) system (such as SAP or Oracle). In the eyes of the ISV, the application that runs on the mobile device is simply a data collection tool. Once the data is collected in the field, it is downloaded from the mobile device and pulled into the module for processing through an integration interface designed by the ISV. Therefore, the ISV is relatively "hardware agnostic;" that is, they do not really care which manufacturer's device is used to collect the data. As a reseller, their mobile device buying decision is typically driven by trade discounts, promotional offers, after-sales service/support and the relationship they have with the manufacturer's sales representative. The ISVs typically represent multiple mobile device manufacturers but might lead with one due to incentives. The ISVs can either purchase equipment through distribution (Scansource, etc.) or directly from Intermec. Only high volume ISVs have the ability to buy direct from Intermec . .If the ISV buys directly from Intermec, it receives a deeper discount than it would get through distribution and Intermec earns an average gross margin of 31 %.

The resellers and integrators do not develop their own software applications. They are "solution providers." They have relationships with local companies and are called on when equipment requirements arise. Resellers represent multiple manufacturers and purchase equipment from the distributors. Small resellers are essentially order takers. When a buyer needs equipment, it contacts various suppliers to get the best price. After being contacted, the reseller gets a price from a distributor and develops a proposal for the buyer. The reseller typically does not get involved with installation, integration, configuration, or after-sales support.

Integrators, on the other hand, pull in other partners to build a complete solution. If software is required, they will bring in an ISV. If installation or configuration is required, the integrator will either handle it or outsource it to a sub-contractor. Often times, the reseller/integrator that wins the bid is the one that can either provide a more complete solution or has the best price. Since most of the prices from the distributor are the same to all resellers , the winning proposal boils down to who is willing to take the lowest margin on the overall sale. The ISVs and distributors are also able to make additional margin on a sale when they add "service packs." These are extended warranties, either 3- or 5-year, that are sold at the time any hardware is sold to a customer. These service packs can add as much as 20% of incremental revenue to a sale. The value-added reseller simply sells the service pack, which entitles the purchaser to use the manufacturers' after-sales service for the time specified. The VAR does not have to be involved with the repair process at all. It becomes the responsibility of the manufacturer. The V AR buys the service pack from distribution, marks it up (usually by 20- 30%), and transfers it to the buyer. Intermec earns an average of 32% gross margin on the service packs sold through distributors. Since the ISVs, resellers, and integrators purchase equipment to fill orders through the distributors, they do not have a direct buyer-seller relationship with Intermec. That is, Intermec's margin on sales through the channel to these partners is the same as it earns selling to a distributor.

THE DILEMMA

Mr. Byrne has been saddled with the responsibility of righting the ship. The board of directors has indicated it will require Intermec to achieve a minimum of $900 million in gross revenues for the fiscal year 2012 budget. The overall economy is expected to recover and the BOD is under fire by institutional shareholders to regain the 2008 level of sales. Mr. Byrne has had nearly six months to gather information and make his strategic recommendation to the BOD. He feels strongly that the best way to turn things around rests squarely on a distribution decision. He has developed the following strategic alternatives from which to make his decision:

1. Eliminate the manned direct sales channel (sales representatives and KAEs) and put his faith in the indirect channel partners and distributors. This would reduce costs dramatically but also reduce control of the channel and key strategic accounts.

2. Eliminate all indirect and manned, direct sales channels and push all sales through the online catalog. This would reduce costs substantially throughout the system and make the distribution of products more streamlined.

3. Outsource the manned, direct sales channel to independent manufacturers' representatives and have them work with the present indirect channel structure.

4. Eliminate the distributors (Scansource, etc.) and manage all sales fulfillment from Intermec's corporate headquarters in W A. This would drastically increase margins on all sales and maximize control and visibility of every order.

DISCUSSION QUESTIONS

1. Mr. Byrne will present a recommendation to the board of directors that revolves the firm's channels of distribution. Do you agree that this is the area of concern? Why or why not?

2. Do you think Mr. Byrne's list of strategic channel alternatives is complete? Are there other channel options that he has not considered? Reconsidering a multi-channel strategy, Page 6 Journal of Business Cases and Applications

3. Regardless of the decision he makes, Mr. Byrne is bound to cause conflict when his decision is implemented. What parties might feel alienated, and why? How can Mr. Byrne minimize this reaction?

Subject: Value added resellers; Distribution channels; Salespeople; Distribution; Strategic management; Case studies

Location: United States--US

Company / organization: Name: Intermec Inc; NAICS: 334119, 334419

Classification: 9190: United States; 7300: Sales & selling; 8651: Computer industry; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-8

Number of pages: 8

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1041256008

Document URL: http://search.proquest.com/docview/1041256008?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 41 of 100

ChillOut's standard costing system: Is it working for them?

Author: Fredin, Amy J; Venkatesh, Roopa

ProQuest document link

Abstract:

Given the prominent role that standard costing plays in the manufacturing environment, among others, it is crucial that users comprehend its far-reaching capabilities (and drawbacks). This case provides an opportunity to identify problems within the existing standard costing system of a frozen foods company, where variance information is used in its reward structure. At the same time, users are asked to consider whether at least two different, alternative costing systems (actual costing and normal costing) might 'fix' the problems. The primary purpose of this case is to provide an opportunity to explore the behavioral and ethical implications of a standard costing system. In the process of working this case, it is hoped that users will see beyond the technical aspects of these costing systems, realizing that the information they generate may affect multiple decision contexts within the company. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

Erica Simpson, junior cost analyst at ChillOut Corporation, a company that sells frozen food orders, was reviewing data pertaining to the company's standard cost variances. She and her supervisor, Henry James, noticed that all of the direct material and direct labor variances for the past two years had been favorable in one of their three departments, "Healthyfreeze". Erica commented, "That's a good thing, right?" "This could be a good thing Erica, but I think we may need to take a closer look at this," said Henry as he pointed to the most recent financials. "It just strikes me as odd that our direct material and labor variances are all favorable, despite the Healthyfreeze department experiencing reduced sales in this tight economy."

Erica thought, too, that it seemed like an unusual scenario. She entered the standard information herself, though, and was certain that the variances were correct. The standard-costing software that she had been using on a daily basis was now in its second year of use, and she felt very confident about using the software. Healthyfreeze was the highest revenue generating department of the company, and this unusual trend of variances was a point of concern for Erica and Henry. There are two other departments in the company, "Veggiefreeze", with variance information for one year since it was started a year ago, and "Veganfreeze", which has no variance information yet, because ChillOut started this department in the current year 2010. Erica and Henry knew that if the Healthyfreeze managers continued to see only favorable variances, they may go on thinking that everything is operating smoothly, even when in reality, the company is just trying to survive this economic downturn. Henry suggested, "Erica, could you conduct a formal investigation of this issue and give me a detailed report of the costing information for the Healthyfreeze department to understand the occurrence of favorable variances whilst department sales are dropping?" "Certainly, I think this situation needs immediate attention" Erica agreed and she immediately started searching for the underlying causes of the favorable variances.

CHILLOUT CORPORATION

Company History

David Buckley founded ChillOut Corporation in Mountain View, California, in the year 2000 to produce custom frozen food orders (by the case) for group homes where patients/clients have special dietary requirements. ChillOut had a successful start and has continued to grow and prosper because of the heightened awareness among people about leading a healthy lifestyle in the past ten years. In order to cater to a wider consumer base, the company has added new products to include a vegetarian and a vegan diet, and started the Veggiefreeze department in December 2009 and the Veganfreeze department most recently in December 2010. Thus, the company has three departments, Healthyfreeze, Veggiefreeze and Veganfreeze, which produce a variety of frozen foods including desserts.

Annual revenues in the past have approximated $8 million, and operating profit margins have usually been between 15% and 20%. The frozen meals prepared by the Healthyfreeze department are very popular and the department usually generates the highest revenues of the three departments of approximately $5 million. With the business growing at a rapid pace, ChillOut decided to change its costing methods from normal costing to standard costing two years ago. It was hoped that the standard costing system would allow better control for a growing business and allow management to identify any variances from budgets or identify areas for improvement. The company also planned to utilize the standard costing information for employee incentive purposes - to better align the employees' goals with the goals of the entire organization.

Competitive Position in the Frozen Food Industry

ChillOut has tried to position itself as the high-quality supplier of fresh-tasting, healthy frozen meals, catering to a select group of customers. ChillOut's line of products from the Healthyfreeze department are popular and are purchased in large quantities by group homes such as retirement communities and a couple of the major supermarkets. It has enjoyed this niche position in the market for the past several years.

The major buyers within the US frozen food market are considered to be supermarkets and hypermarkets (about 85.5% of the total distribution) which offer frozen food products to their customers. Usually, retail supermarkets stock their shelves with brands of frozen foods that are most popular with their customers and purchase large quantities of those frozen products from manufacturers such as ChillOut Corporation, so that they can negotiate prices. Competition from new companies or entrants is minimized due to high capital investments and the need to compete with popular and well established brands.

Frozen food manufacturers face a moderate level of threat from fresh produce such as fresh vegetables, fish, etc. as well as canned and dried goods. Since frozen food products are undifferentiated, it is hard to retain buyers and maintain brand loyalty. Exit barriers are also high in the frozen food industry because exiting this industry would warrant the liquidation of substantial and specialized assets. However, automated processes of production are conducive to an increase in production when necessary. (Frozen Food Industry Profile) ChillOut's focus on healthy foods and the addition of vegetarian and vegan frozen foods has allowed them to differentiate themselves amongst stiffcompetition in the frozen foods industry and also use their existing specialized assets and resources in a beneficial manner in the hopes of increasing future revenues.

Source of Raw Materials

ChillOut Corporation has entered into a yearly fixed contract with three of its local farmers for its primary raw materials: vegetables, fruits, grains, meat (they purchase much lower quantities of meat than their competitors since they focus on catering to consumers who are required to be on a special diet for health reasons; Much of their meat purchases include chicken and turkey) and fish. It is the purchasing manager's responsibility to negotiate the prices for these raw materials periodically.

ChillOut may purchase these essential raw ingredients from farmers or from the open market. If ChillOut purchases its raw materials in the open market, its purchasers have little control over prices, and often use techniques such as hedging to mitigate the impact of price fluctuations. Alternatively, they may enter into fixed-term contracts with periodically negotiated prices with farmers, thus, strengthening supplier power to some extent. Dairy products, meat, sugar and other sweeteners including high fructose corn syrup, spices, flour and certain other fruits and vegetables are generally purchased in the open market. (Frozen Food Industry Profile)

The purchasing manager at ChillOut has not formally reported any conflicts or grievances with the existing farmers ChillOut has contracts with; in fact, the purchasing manager is very pleased with this relationship, as the local farmers often offer ChillOut discounted prices when they have excess and/or slightly damaged products to move. (Frozen Food Industry Profile) However, purchasing managers at ChillOut have been advised to exercise caution when purchasing farmers' excess products or slightly damaged products because in the past ten years, the purchasing manager in the Healthyfreeze department has reported abnormal spoilage costs ranging between 3% and 6% of the department's gross margin.

Spoilage could be a result of inefficient operations (abnormal spoilage), or a result of the normal production process (inherent or normal spoilage). The costs of normal spoilage are incorporated into the standard costs when they are determined. Units that are defective due to abnormal spoilage at ChillOut are discarded as they are perishable items and they cannot be refined and re-used. Therefore, it is also not possible to sell them at reduced prices or earn any revenue from these products because customers will not purchase spoiled food. The costs of abnormal spoilage under the standard costing system are written offas a loss of the accounting period.

Purchasing managers have been advised to refrain from focusing on the discounts that farmers offer for purchase of their excess/slightly damaged raw materials, because maintaining an excess amount of perishable inventory would be defined as inefficient operations. Any spoilage costs due to inefficient maintenance of inventory levels is regarded as abnormal spoilage in the company. Although purchasing managers are advised to exercise prudence in their raw material purchases, there is no formal evaluation or quality control system in place to assess their raw material purchase decisions.

New Costing System

The Company invested in a high-end software package two years ago to implement the standard costing system. This software package has made it possible for ChillOut to automatically send alerts to the responsible department when unfavorable variances occur at a level that is significant; if a variance is favorable, no notice is sent, as it is assumed that all is well. Management has used a participative approach to determine that an unfavorable variance of greater than 5 percent would be considered significant. That is, managers and employees from all three departments were consulted in order to determine these levels. Further, the department managers, the purchasing managers and the production managers also help set the quantity/usage and cost standards for all the products in their respective departments. ChillOut also hired a full-time junior cost analyst, Erica Simpson, to operate and manage the standard costing system using this software. Exhibit 1 (all exhibits are in the Appendix) contains the standard costs and the actual costs for the month of December 2010 for the Healthyfreeze department. The standards specified in Exhibit 1 for HealthyFreeze have been in place since ChillOut first implemented its standard costing system, two years ago. The HealthyFreeze department was well established by that point in time, and management continues to feel that these standards remain valid today.

Bonus System

ChillOut revised the employee incentive or bonus scheme when it implemented the standard costing system two years ago. The department managers, the purchasing manager, the production managers and the employees on the production line were awarded bonuses semi¬annually based on the new bonus system. The bonuses were calculated and awarded semi¬annually on the following basis for the department managers:

* A base bonus is calculated at 3% of the department's gross margin. This bonus is then adjusted in the following manner:

* Increased by $2,000 if their respective departments reported favorable variances for Direct Materials, Direct Labor and Overhead.

* Increased by $2,000 if sales returns are less than or equal to 1.5% of sales

* Decreased by 50% of excess of sales returns over 1.5% of sales.

The bonuses were calculated and awarded semi-annually on the following basis for the purchasing managers:

* A bonus of $2,000 is awarded to each of the purchasing managers if they report favorable direct material variances for their respective departments.

The bonuses were calculated and awarded semi-annually on the following basis for the production managers:

* A base bonus of $2,000 is awarded to each of the production managers if they report favorable direct labor and overhead variances for their respective departments. This bonus is then adjusted in the following manner:

* Increased by $ 1,000, if they are able to earn revenues from the sale of the scrap materials that are between 3% - 6% of the department's gross margin.

* No adjustments are made if they do not earn any revenue from the sale of scrap material.

The bonuses were calculated and awarded semi-annually on the following basis for the production line employees:

* A base bonus of $500 is awarded to the employees if their respective departments report favorable direct labor variances.

* No bonuses are awarded if there are unfavorable direct labor variances.

If the calculation of the bonus results in a negative amount for a particular semi-annual period, the managers and employees simply receive no bonus, and the negative amount is not carried forward to the next period. Table 1 (all tables are in the Appendix), below, provides background information for the incentive scheme for the past two years in relation to the Healthyfreeze and Veggiefreeze departments. It illustrates the success of the company's incentive program utilizing standard costing information.

Sales in Healthyfreeze

Despite the previous sales growth forecast and favorable cost variances, the department's sales dropped to approximately $4 million in 2010. The marketing team at ChillOut has forecasted that sales could drop even further to around $3.25 million in the year 2011. ChillOut CEO, Dave Buckley feels that this drop in revenue is much more a reflection of tough economic times than a reflection of customers' satisfaction with ChillOut's most popular line of products. It has been over two years, however, since the company has received formal feedback from its customers.

Preliminary Research done by Cost Analysts

Erica Simpson and the senior cost analyst, Henry James, have started to investigate the root causes for HealthyFreeze's streak of favorable variances during a period of decreasing sales. Since these favorable variances were not automatically communicated to others within the company, Erica and Henry began to wonder whether ChillOut was even utilizing its standard costing system effectively. Another question came about as a result of the favorable variance trend: to what extent might the employee incentive program be driving performance? In their preliminary research, Erica and Henry came across several articles that looked important to the investigation at hand, but they were unsure of how to use them. Details related to two of these articles are presented in Exhibit 2.

After realizing that this investigation may uncover some ineffective policies, practices, and behavior at various levels within HealthyFreeze, Henry and Erica feel that the company should hire an expert - an independent managerial consultant - to investigate the situation from an unbiased perspective. They have forwarded their suggestion to the company CEO, Dave Buckley, and have conveyed the urgency and importance of this matter. Dave Buckley has agreed with this recommendation, and has hired you as a consultant because you come highly recommended from other frozen food companies in the industry. Exhibit 3 presents the memo/engagement letter from Dave Buckley to you outlining the consultant engagement.

PROJECT REQUIREMENTS

Part I - Evaluation and Recommendation

* Prepare a written report (for the company's management team and board of directors) of your assessment of the company's current situation. Your report should address any concerns regarding ChillOut's current policies and practices within its existing standard costing system, how you suggest it deal with those concerns - assuming that it continues to use standard costing, and whether it may or may not be appropriate for ChillOut to consider switching to a different costing system (such as normal or actual costing) altogether. You should make a recommendation as to which costing system would be most appropriate to address the concerns that you have identified.

* Your written report should address the following questions:

1. What were the variances this month (December, 2010)? Do they extend (or end) the previous trend of favorable variances? What are the likely causes of these variances?

2. What are the strengths and weaknesses of the current employee incentive program? Are the performance measures used in the employee incentive program appropriate for evaluating employees? How could the current bonus system be modified to better evaluate employees and align the company's goals with those of the department managers' goals of division profitability?

3. Explain how the current implementation and use of the standard costing system at ChillOut encourages inefficiencies in the company's operations or inappropriate employee behavior. Discuss how a standard costing system could be used to address the inefficiencies or concerns that you have identified and what would need to change within ChillOut in order for the company to realize all the advantages and benefits of the standard costing system.

4. [Only if Part II is assigned]

Are the unit costs (as calculated under actual, normal, and standard costing) informative to the sales situation at ChillOut? Are the ending balances (as calculated under actual, normal, and standard costing) surprising? Do they support continued use of a standard costing system?

5. Are there any ethical concerns at ChillOut? Is the IMA Statement of Ethical Professional Practice applicable to ChillOut employees?

6. Overall, you may recommend continued use of standard costing (with or without adjustments); you may recommend the implementation of normal costing or actual costing; you may also recommend the implementation of a costing system other than the three mentioned above. If you recommend a system other than the three mentioned above, please substantiate your recommendation with appropriate evidence. Whichever costing system you recommend, however, be sure to address the following points:

* How will the costing system you recommend be more beneficial in addressing the problems you have identified in this company than the current costing system used by the company? Please be specific.

* How will the costing system you recommend influence or change the current employee incentive program? Please be specific.

* Please include any supplemental analysis as an appendix. You may include as many appendices as you need to provide appropriate evidence for your recommendation.

Part II - Cost Analysis

* Prepare journal entries to account for the specific transactions noted below, during the month of December; prepare them independently for each of the following costing systems: (round to the nearest cent if necessary)

1. Actual costing

2. Normal costing

3. Standard costing

* Specific December journal entries to account for:

1. Purchase of Direct Materials

2. Transfer of 28,000 pounds of Direct Materials into production

3. Payment for Direct Labor

4. Incur Overhead costs

5. Transfer/allocate Overhead costs into production

6. Transfer completed units to Finished Goods

7. Sale of units on credit

8. Account for any Overhead variances (the company does this on a monthly basis)

9. Closing any variances (and/or any under- or over-applied Overhead) using the most accurate approach given the information provided (the company does this on a monthly basis)

* Determine ending balances in the following accounts for each costing system (actual, normal, and standard costing):

1. Direct materials

2. Work in process

3. Finished goods

4. Cost of goods sold

Subject: Frozen foods; Costing; Business ethics; Case studies

Location: United States--US

Classification: 9190: United States; 8610: Food processing industry; 2410: Social responsibility; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-8

Number of pages: 8

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1041256012

Document URL: http://search.proquest.com/docview/1041256012?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 42 of 100

Experiential learning with student created cases: Using financial autopsies

Author: Hays, Fred H; Ward, Sidne Gail

ProQuest document link

Abstract:

Generation Y learners present unique challenges in the university classroom. These technologically savvy multi-tasking students can become easily bored with traditional cases and exercises. This paper describes the use of student created cases in a commercial bank management courses. Students are required to conduct a financial autopsy on a recently failed "real world" bank. This autopsy utilizes data from the Federal Deposit Insurance Corporation (FDIC) and the Federal Financial Institutions Examination Council (FFIEC). The skills developed in creating a unique case allow students to understand the financial analysis of banks both now and in the future. This application stresses a systematic process for financial analysis along with critical thinking, teamwork and effective communication skills. With a hands-on project students develop a sense of ownership in the final product. They also see the similarities as well as the differences in failures of financial institutions, especially in a period of severe financial distress. [PUBLICATION ABSTRACT]

Full text:

Introduction

Financial education at the university level has always been challenging. Rapidly changing technology, the sheer rate of accumulation of new knowledge and a population of predominately "Millennial Learners" has increased the challenges in recent years. When the effects of a lingering financial crisis are added to the mix, the task is daunting.

This paper presents a stimulating experiential learning exercise that challenges students by requiring them to create their own case as a team, examining a recently failed commercial bank, conducting a financial autopsy to determine the cause(s) of failure and presenting their results at the financial equivalent of a coroner's inquest. The project exposes students to "real world" data, technology, tools of financial analysis and the application of critical thinking skills while honing their presentation and communication skills. It is both fun and educationally rewarding.

Background

The lingering effects of the Financial Crisis of 2008 are still being felt with sluggish economic growth, high unemployment, expanding budget deficits and a declining dollar. While the origins of the crisis are the subject of continuing debate, it is clear that the banking industry has suffered through numerous bank failures. ( (Kolb, 2010); (Acharya & Richardson, 2009); (Acharya V., 2011) )

According to the Federal Deposit Insurance Corporation (FDIC) there were no bank failures in 2005 or 2006, only 3 in 2007, 25 in 2008, 140 in 2009 and 157 in 2010. (Federal Deposit Insurance Corp., 2011) Through September 2, 2011 there have been 70 failures for this year. Included in this total is the First National Bank of Olathe, Kansas which recently failed on August 12, 2011. (FDIC, 2011) This bank is used as an illustration of the principles of financial autopsy in this paper.

Students are often curious about why banks fail especially when banks have engaged in securitization of loans that they have originated and have presumably transferred risk from the bank's balance sheet to investors. While it is true that much of the credit and interest rate risk was shifted offthe balance sheet, many banks engaged in making commercial real estate loans that were not easily transferable. This is especially true for construction and land development loans. (Hays & Ward, 2011)

The Challenges of Millennial Learners

The Millennial Generation (variously known as Gen Y, the Boomerang Generation and the Peter Pan Generation among others) includes approximately 76 million individuals born from 1981 to 2001. (Black, Winter 2010) Howe and Strauss who originated this label in Generations in 1990 are the leading authorities on inter-generational differences. (Howe). For a detailed discussion of the history and content of Strauss-Howe generational theory see Wikipedia (a favorite source of Millennial everywhere). (Strauss-Howe generational theory)

Some members of the Millennial Generation were born to parents from Gen X (generally born in the 1960's and 1970's). Other Millennial, sometimes referred to as "Echo Boomers", are largely the children of Baby Boomers. Time magazine in a 1982 cover story described this as "a floodtide of thirty something Boomers choosing at long last to become moms and dads". (Denny, 2004)

The distinguishing traits of Millennial as described by Howe and Strauss in Millennials Rising: The Next Great Generation are: special; sheltered; confident; team-oriented; achieving; pressured and conventional. (Denny, 2004) (Howe & Strauss, Millennials Rising: The Next Great Generation, 2000). This generation is technologically oriented. The IBM personal computer was first introduced in August, 1981 making the Millennials the first generation raised entirely in the PC era. They were nurtured and raised on educational software and entertained by video games. They communicate in real time around the globe via cell phones and across social networking sites like Facebook and Twitter. They watch videos on YouTube and Netflix using their computers or mobile phones. They are instantly connected to the latest information of all varieties via the Internet. Pew Foundation reports in 2009 and 2010 provide additional insights (Pew Foundation, 2009) (Pew Foundation, 2010) regarding Millennials:

They are the first generation in human history who regard behaviors like tweeting and texting, along with websites like Facebook, YouTube, Google and Wikipedia, not as astonishing innovations of the digital era, but as everyday parts of their social lives and their search for understanding.

The term "digital natives" is increasingly used to describe the technologically savvy Millennials. Coombes raises the concern that rather than being "digital natives", the Millennials have become instead "digital refugees", using search engines like Google almost exclusively and rarely going past the initial results. (Coombes, 2009)

Providing relevant educational learning opportunities is challenging for Baby Boomer professors who must transcend generations. (Black, Winter 2010) A recent study concluded "Effective educators realize the need to adapt assignments, delivery, and methods to the expectations, preferences, needs and characteristics of each new generation that enters the classrooms". (Bracy, Bevill, & Roach, 2010) Fortunately, such opportunities abound, many of them created by the financial crisis. This paper focuses on the possibility of harnessing the energy, enthusiasm and technological prowess of the Millennials to provide their own self-created learning applications. In the remainder of the paper we describe an exercise in which groups of undergraduate Finance students in a commercial bank management class are assigned the task of performing a financial autopsy on a recently failed bank. The assignment requires that they obtain and analyze financial performance data from the Federal Deposit Insurance Corporation (FDIC) and the Federal Financial Institutions Examination Council (FFIEC). They must determine the cause(s) of death and report and defend their findings in an oral presentation at a coroner's inquest.

Bank Autopsy Project

The Bank Autopsy Project was developed and used in FIN 428 Commercial Bank Management, an undergraduate course with about 30 students per semester. It has also been used successfully in the equivalent graduate course, Management of Financial Intermediaries.

The project has the following learning objectives:

-acquaint students with bank financial statements and performance metrics

-utilize FDIC and FFIEC data to critically evaluate bank performance

-understand the interrelationships between performance variables

-develop critical thinking and presentation skills

This project is used early in the course in a section titles "Understanding Bank Performance" which immediately follows an introductory overview of the environment of commercial bank management. In this section students are exposed to bank balance sheets and income statements with a discussion of the key differences between corporate and financial institution financial statements.

Six teams of approximately five persons per team are selected by the students. Each team must then select a US commercial bank that has failed since January 1, 2008. A current list can be found on the FDIC website at: http://www.fdic.gov/bank/individual/failed/banklist.html

The instructor can set selection parameters on size of bank, location and other variables and can assure that teams avoid selecting the same bank. Each team is guided in performing a financial autopsy by reading "What Killed This Bank? Financial Autopsy as an Experiential Learning Tool" (Hays & DeLurgio, 2010) which outlines a five step process: 1) gathering the essential data 2) a preliminary screening analysis 3) the "drill-down" 4) reconciling the findings and 5) the "cause of death".

An Illustration: The First National Bank of Olathe, Kansas

As an application of the bank autopsy study assume that the student team selects the First National Bank of Olathe, Kansas which failed on Friday, August 12, 2011. (FDIC, http://www.fdic.gov/bank/individual/failed/fnbo.html) The bank was closed by the Office of the Comptroller of the Currency with the FDIC appointed as receiver. The bank reopened the following Monday under the ownership of Enterprise Bank & Trust Company of Clayton, Missouri.

The bank as recently as the end of 2008 held average assets in excess of $1 billion. As of the most recent Call Report of June 30, 2011, bank assets had fallen to just over $500 million. The bank is located in Olathe, an area of Johnson County, Kansas, an affluent suburb within the Kansas City Metropolitan Statistical Area (MSA). Johnson County, Kansas was the 19th highest income county in the US based on the 2000 Census. http://en.wikipedia.org/wiki/Highest-income counties in the United States

First National Bank of Olathe was originally formed in 1887 as the first nationally chartered bank in Johnson County, Kansas. (https://www.fnbolathe.com/default.aspx?v=a787176e-98d1-4d65-8065-4a5a3f4d34e4). It had a reputation as an innovative community bank with stable leadership as evidenced by having only eleven CEOs in 120 years.

Step 1: Gathering the essential data

Students begin by learning to use the Statistical Data Interchange feature of the FDIC website (http://www2.fdic.gov/sdi/). This site provides students with current and historical financial performance data for every bank and bank holding company in the US back to the early 1990's. It also provides the ability to select peer data in either standardized or customized format. The Internet-based data is virtually error-free (there are substantial fines for reporting inaccurate data), in a common reporting format for all banks, timely (available just over two months after the end of the reporting period) and best of all-free. There is an on-line tutorial to assist in accessing the data.

The SDI system provides a simple data retrieval system utilizing convenient drop-down menus. Banks can be found using individual institution names or by specifying location (state, city, county, etc.) Once the initial bank data is found, the system reports an FDIC certificate number which can be used to easily retrieve that bank's data for alternate time periods. Users are permitted to view four columns of data at a time. This permits comparisons between time periods (again using drop-down menus to select the time periods) or comparisons between the bank and its peers. Peer data is available for several different size categories and charter types. Data is available in both total dollar amounts by asset, liability and capital categories as well as in pre-calculated ratio format. In the drop-down menu there is a category for Performance and Condition Ratios that is quite handy for doing preliminary screening. (See Table 1 for a sample report for First National Bank of Olathe with comparative ratio data for the bank and a standard peer group for 2011.3 and 2008.4) Using this simple one page summary with approximately 25 financial ratios students can quickly begin to see the changes in a bank's performance over time and comparisons with peer institutions.

Step 2: Preliminary Screening Analysis

Table 2 "Financial Autopsy: Preliminary Screening Analysis" contains a summary of the performance of First National Bank of Olathe for four time periods: 1) 2007.4 (before the financial crisis hits), 2) 2008.4 (the depth of the crisis), 3) 2009.4 (the crisis wanes), and 4) 2011.2 (the last report prior to the bank failure).

As part of the classroom discussion about bank financial performance students are introduced to the CAMEL rating system using by state and national financial institution regulators and bank analysts. The system has gained almost universal acceptance as a method for assessing the key dimensions of bank performance. Regulators evaluate each bank on a scale of 1-5 with 1 being outstanding performance and 5 being in danger of imminent failure. Banks rated 4 or 5 are categorized as "problem banks". As of June 30, 2011 there are 865 such banks, down from 888 in the previous quarter. See Table? for data on problem banks since year-end 2003. (FDIC...) Banks are not legally permitted to disclose their CAMEL ratings to the public nor are banking regulators allowed to reveal them for fear of creating a panic.

CAMEL is an acronym for Capital adequacy, Asset quality, Management, Earnings, Liquidity. Proxy measures are included for each in Table 1. Students examining the data for the first time should immediately recognize several serious problems:

-bank capital has seriously eroded over time and in comparison with peers; by 2011.2 capital was almost non-existent with both capital measures at less than 2%.

-non-current loans to loans rose to almost 27% in 2011.2; charge-offs exceeded 5%; At year-end 2007 the bank's non-current loans were less than 1%, lower than the peer average. Charge-offs in 2007 were 0.22%, again lower than their peers.

-the efficiency ratio soared to 208% from about 54%. This is a proxy for management's control of overhead expenses. Lower numbers are preferable.

-return on assets and return on equity plummeted as losses mounted. ROA fell from around the industry average of 1% in 2007 to -3.87% at 2011.2; ROE went from 14.32% (above the peer average of 10.9% in 2007) to -186.78% in 2011.2.

-liquidity (as approximated by the loan to deposit ratio) was on a roller coaster ride. It rose from 58.34% in 2007 to a peak of 90.48% in 2009 back to 52.36% in 2011.2. The higher the loan to deposit ratio, the higher is loan demand and the less available liquidity.

Step 3: The "Drill-down"

Obviously from the initial inspection this bank performed well through the end of 2007. Spring 2008 is normally associated with the beginning of the Financial Crisis of 2008 with the first clear indicator being problems with Bear Stearns. As the year progressed further problems arose in the form of the conservatorship of Fannie Mae and Freddie Mac, the collapse of Lehman Brothers, the rescue of AIG, the freezing of credit markets, Congressional action in the form of the Troubled Asset Relief Program (TARP), capital infusions into the largest banks, conversion of investment banks such as Goldman Sachs into regulated bank holding companies, and the problems in the auto industry. The Federal Reserve was active with numerous programs to provide liquidity to the financial system through "quantitative easing" measures.

Against this backdrop, the First National Bank of Olathe saw its performance erode. Asset quality problems emerged, efficiency dropped, liquidity shrank and earnings were cut in half by year-end 2008. But what was happening? The answer lies in closer inspection of the numbers. To examine the numbers in greater detail, students are introduced to the Uniform Bank Performance Reports (UBPR) available on the website of the Federal Financial Institutions Examination Council (FFIEC) (http://www.ffiec.gov/ubpr.htm) The UBPR provides detailed data across categories. Although the basic information is compiled from the same reports of condition and income as the FDIC website, there is more detail in the UBPR reports especially in lending categories and in areas such as liquidity and interest rate risk. (See Tables 3 A and 3 B for "drill down" detailed data).

Clearly there is a developing asset quality problem in this bank. Students quickly find the source-construction and land development loans that are past due or on a non-accrural basis have climbed from less than 1% in 2007 to almost 45% in 2011.2. Similarly "other construction and land development loans" have an even higher past due experience. These are loans made to commercial real estate developers for the purchase of land and the initial construction. In the past these loans have permitted rapid growth in cities such as Olathe. They represented a source of solid profits because revenues from the projects allowed timely repayment of the loans. During a sharp economic downturn however, demand for these commercial properties evaporated.

To make matters worse, commercial and land development loans because of their heterogeneous properties are not good candidates for securitization. They therefore remain on the bank balance sheet and become a source of potential credit and interest rate risk. This problem is not unique to the First National Bank of Olathe. Indeed, as shown in Exhibit 3, the delinquencies of commercial and land development loans has become a national problem and lies at the heart of the rapid rise in bank failures. For a further discussion of commercial and land development lending problems see (Hays & Ward, 2011).

Step 4: Reconciling the findings

So, what is the story to be told about the demise of the First National Bank of Olathe? Here we have a bank founded 124 years ago, with stable management, a history of earnings growth, an anchor institution in a growing and affluent suburb of a major metropolitan area. And now it is gone. But why?

It appears the bank made decisions based on faulty assumptions. Management and directors assumed, as did so many, that real estate was a safe bet and that real estate prices only went in one direction. They forgot the Banking and S&L Crisis of the late 1980's and early 1990's. They forgot the repeated warnings from banking regulators about avoiding undue concentrations of credit, especially in areas such as commercial real estate.

The storyline is too many loans in one basket, a declining economy, global market exposure to securitized assets backstopped by unregulated over-the-counter derivatives, especially credit default swaps and questionable credit ratings that led to a global financial crisis. The consequence has been an economic downdraftcharacterized by stagnant growth and persistent unemployment of lengthy duration.

The bank became involved in a downward death spiral. Deteriorating credit quality forced increases in the Provision for Loan and Lease Losses which depleted earnings and the replenishment of capital. Declining loan demand reduced loan volume while decreasing interest rates reduced yield on loans. Decreases in overhead expenses did not keep pace with declining volume so the efficiency ratio rose. Even with declining cost of funds, the loss in volume led to shrinking profits. Dividends were eliminated to preserve capital. The decline in performance led to regulatory enforcement actions and increased restrictions by the regulators on permissible bank activities. Depositors reacted by withdrawing funds. Eventually the size of the bank was cut in half.

Step 5: Cause of Death

The apparent cause of death for the First National Bank of Olathe was massive losses associated with non-performing construction and land development loans. Could this failure have been avoided? Possibly if management and the board had followed prudent lending practices by limiting exposure to specific types of loans.

Benefits of the Bank Autopsy Project for Millennial Students

The bank autopsy project was designed to challenge Millennial students. Available bank management cases tend to be out-dated in a rapidly changing world. Students become passive learners, reacting to cases that others have created. When available, many cases are focused on single topics like making a loan to an individual company. Some cases contain volumes of data, some of which is largely irrelevant. By contrast, student created autopsy projects are current with active participation of students in the learning process. These students are engaged throughout the process and take ownership of their analysis and conclusions. As a result there are a number of advantages for Millennial learners. In short, the student created bank autopsy project:

-is an effective method for analyzing bank performance

Although no systematic analysis has been done to assess learning outcomes from this project, students have general indicated that the project is effective in learning techniques for analyzing bank performance. They realize that although the focus is on failed banks, it is applicable for analyzing banks in general. Since they know where to find bank financial data and how to analyze it, they are equipped to examine banks today or ten years from now.

-appeals to the technological orientation of Millennial students

Since the FDIC and FFIEC data are available on the regulatory websites, students can pull it up from virtually anywhere there is Internet access on a variety of devices including cell phones, tablets, netbooks, laptops, desktops and other devices and at any time of the day or night. It becomes essentially virtual knowledge. Data can be imported into Excel or other software for further analysis. Macro data in the form of predefined graphs are available quarterly from the Graph Book at the FDIC website.

-promotes teamwork

As noted earlier Howe and Strauss found Millennials to be team-oriented. The bank autopsy project permits students to engage in interactive problem solving. They can discuss, debate and interpret data as they reach conclusions related to the demise of their project bank. They can challenge opposing views and develop their skills at compromise.

-builds confidence

The project not only requires skillful analysis of large quantities of financial data but also requires critical thinking and a well-designed presentation. At the end of the presentation students engage in an extensive question and answer period with tough questioning from the course instructor and class participants. This is a learning opportunity in which a thoughtful dialogue clarifies, extends and applies key concepts.

Some additional pedagogical observations

Financial autopsy projects provide rich experiential learning opportunities to challenge Millennial learners. There are many directions that individual instructors might wish to take the classroom discussion. One possibility could be a "Back to the Future" exercise in which the students go through the autopsy process doing the required analysis then enter the magical time machine that allows them to travel back in time to when the bank was prosperous. With the benefit of hindsight, what would they do differently? What limits on concentrations would they set? What regulatory guidance would they heed? What risks would they accept? This can and has provided meaningful dialogue, critical thought and valuable managerial insights.

This is especially fruitful when the project is used in a graduate Finance course where MBA/MSF students, often with banking industry or bank regulatory experience have the opportunity to engage in discussion. This might also be a possible exercise for EMBA or other executive level classroom discussions.

Some instructors may wish to require that students provide more background information about the board of directors and senior management of the bank selected for analysis. This may also include discussion of the relevant bank market, competition, demographics (including the Census and the FFIEC Geocoding websites) along with relevant economic data. Students sometimes search local media archives for articles related to the bank, especially those related to regulatory enforcement actions against the bank.

The FDIC, in an effort to reduce resolution costs associated with bank failures and to avoid being the bank liquidation business (a lesson learned from the 1980's Banking and S&L Crisis), often enters loss share arrangements with acquiring banks. It is potentially interesting to follow the post-acquisition performance of banks that have acquired failed institutions to determine whether the result long-term has been positive or negative.

Finally, in the bank management courses in which the autopsy project is used, it is a prelude to students participating in an on-line computer simulation called ProB anker, developed by Bank of America Professor Mark Flannery at the University of Florida and his associate, Mark Flood. (Flannery & Flood) While the autopsy project uses discrete static data at various points in time, Pro Banker provides a fast-paced interactive challenge where students simultaneously make a wide variety of bank management decisions. The two learning opportunities are complementary. Both provide challenges, even for those in the Millennial Generation.

Subject: Generation Y; Experiential learning; Economic crisis; University students; Bank management; Case studies

Location: United States--US

Company / organization: Name: Federal Deposit Insurance Corp; NAICS: 524128; Name: Federal Financial Institutions Examination Council; NAICS: 926150

Classification: 9190: United States; 8306: Schools and educational services; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-15

Number of pages: 15

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Graphs Tables References

ProQuest document ID: 1041256021

Document URL: http://search.proquest.com/docview/1041256021?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 43 of 100

An introductory case in feasibility and exit strategy assessment for entrepreneurship

Author: Green, Kimberly M; Smith, Monica Williams

ProQuest document link

Abstract:

This case is designed to demonstrate the usefulness of a feasibility analysis in the early stages of evaluating an idea for a new business and the importance of an exit strategy as part of the analysis. The business opportunity being evaluated relies heavily on the abilities of the founder entrepreneur. The entrepreneur is contemplating whether he can build a business in historical interpretation, or impersonating an historical character for educational and cultural performances. This context can be useful both for business majors and for non-business students who take entrepreneurship courses to help them build businesses in their fields. The case shows how reliance on the founder affects the scalability, growth prospects, and exit options for the business. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

The opportunity exploitation process of entrepreneurship involves analysis and planning. Entrepreneurs are advised not to skip the opportunity analysis steps (Mullins, 2006), although these are typically not the most exciting and hands-on parts of starting a business. Entrepreneurs in the initial analysis stages are also advised to consider their exit strategy for the business (DeTienne, 2010; Feld, 2009; Zuccarello & Davis, 2012), a suggestion that may seem counterintuitive and premature, particularly to students in an introductory course on entrepreneurship. This case is designed to demonstrate the usefulness of a feasibility analysis in the early stages of evaluating an idea for a new business and the importance of an exit strategy as part of the analysis.

A feasibility analysis is "a preliminary assessment of a business idea that gauges whether or not the venture envisioned is likely to succeed" (Longenecker, Petty, Palich & Moore, 2010: 84). This analysis is different from the business plan. Completed prior to the business plan, the feasibility analysis may save the entrepreneur money and time by revealing a fatal flaw that might assure failure of the business, or demonstrate that the idea could work if modified from its initial conceptualization, or provide added encouragement and confirmation that the idea is sound (Mullins, 2006).

This case describes a small business opportunity that relies heavily on the abilities of the founder entrepreneur. Specifically, the entrepreneur is contemplating whether he can build a business in historical interpretation or impersonating a figure from history in order to bring the past to life for educational or cultural purposes. This focus offers insight into a business for which resources are closely tied to the entrepreneur. The case shows students how this reliance on the founder may constrain the scalability, growth prospects, and exit options for the business. While historical interpretation is likely not a field most students will enter, this concept of a business that is dependent on the personality and unique skills of the founder is found in numerous other examples. For example, the same issues would apply for an interior decorator with a unique style and a keen eye for trends or a fishing guide who builds a steady business on knowledge of fishing streams. How do these businesses grow if customers prefer the direct services of the entrepreneur rather than other employees hired by the entrepreneur? Will those businesses survive once those personalities are no longer involved? What is the value of the business if the founder tries to retire or leave for other reasons?

By examining an opportunity in historical interpretation, this case presents a context that may differ from what students in an introductory entrepreneurship course would be expecting as a typical business. This context is helpful for several reasons. First, it may expand students' perspective to appreciate the wide range of potential business opportunities. Students can see how to approach a business built around themselves as the founder and, perhaps, sole employee. Numerous examples of businesses facing these same issues exist, and several are mentioned in the teaching note. Second, this context shows how the feasibility analysis is applied on a relatively small scale so that the potential revenue opportunities can be imagined during a class session. Finally, this context makes the concepts accessible to non-business majors who may be taking an entrepreneurship course to help turn an idea in their own field into a business. For example, an art student may be thinking of opening an art gallery, a business which would be dependent on the student's knowledge of and skilled eye for art as well as the personal network of contacts with artists and customers.

The historical interpreter example that serves as the focus of the case is a figure from American history. However, the case could be re-framed using historical figures from different nations and cultures to make the case more relevant to the particular set of students in the class. Such adaptation of this case is readily encouraged.

THE CASE: "BEING BEN FRANKLIN"

Russ was enjoying dinner with friends on a well-deserved break from a busy week early in the semester. Russ and his roommate Kevin were seniors majoring in journalism. Their friend Ellen was a senior majoring in education and spending the current semester completing her student teaching requirement at a local middle school. Specializing in history education, she was filling her friends in on her current assignment teaching American history. "The parts of history I remember most easily are those that I associate with some real experience, such as visiting a battlefield, touring a museum, or listening to a speaker who lived through the event," Ellen noted. "I wish I could bring some of that reality of history into my classroom."

"Or, better yet, have an historic figure pop in as a guest speaker," offered Russ, jokingly. "Once this time travel thing is figured out, your problem is solved."

"Maybe it doesn't have to be that complicated," said Kevin. "With those new glasses he's wearing, Russ there bears a striking resemblance to . . ."

"Who?", interrupted Russ. "A movie star? A dignitary? Harry Potter, maybe? "

Kevin continued, "Ummm - no. I was thinking more along the lines of a young Benjamin Franklin. You know the one - the picture on the $100 bill. Give me one and I'll show you."

Russ laughed. "When did you last see me carrying around any $100 bills? And if I did have one, I'm not sure I'd hand it to you."

After a quick Internet search produced several pictures of Benjamin Franklin, Kevin handed his iPad to Russ and Ellen. Ellen admitted that maybe, just maybe, Kevin was on to something. "We might have to 'modify' your hairstyle, but with the right clothes, Russ could play the role of Ben Franklin. I'd pay you with one - no, two - free dinners if you'd do it."

Russ didn't hesitate. "Two free meals. That's a reasonable profit for a few hours of work. More importantly, I could write about this experience for one of my journalism classes. I need a project." Russ agreed to speak to Ellen's middle-school history class the following month. That gave him time to study some details of the life of Benjamin Franklin. A friend in the university's theater program helped him create a costume of clothes appropriate to the American Revolutionary period.

Outfitted in his Revolutionary-era attire, his Franklin-esque hairstyle, and his wire-rimmed glasses, Russ explained to Ellen's students - in character - how Franklin contributed to drafting the Declaration of Independence and to securing financing for the colonies during the Revolution. He was a big hit. As Ellen was escorting him down the hall after class, they met one of the school's science teachers who asked if Russ could develop a presentation about Franklin's scientific contributions such as his work with electricity and oceanography. Russ readily agreed.

Word of his success in classrooms spread to other organizations who realized that they, too, might have real use for "Benjamin Franklin." And these organizations paid in cash, not in free meals. The local historical society was hosting a series of lectures on American history and invited Russ to participate. As Independence Day approached, Russ was contacted by the committee organizing celebratory events in the community. They had planned a dinner of foods typically served in 1776 and could think of no better guest host for the event than "Benjamin Franklin." They were also coordinating a fashion show with the local clothing stores that would display current fashions alongside Revolutionary-era fashions. Russ/Ben was getting busier and found that there were many opportunities to use his developing skills in historical interpretation.

In the meantime, he had graduated with his journalism degree and had begun a full-time job as a newspaper reporter. He hoped one day to write a book and was finding that his experiences as Benjamin Franklin might provide useful material. He was already getting some writing experience. The local community theater had signed him up to deliver a one-man, one-act play for President's Day. Of course, Franklin was never President himself, but he could comment on his experiences with several of them when the nation was new.

Russ wondered if historical interpretation was a viable way to earn money long-term, not just for a few years. He was impressed by performances he had seen by "Thomas Jefferson" and "Rosa Parks" figures and knew that such characters had been successfully speaking at schools, historical societies, and museums. There were fixed sites where tourists could visit historical figures, such as Colonial Williamsburg in Virginia. Mount Rushmore would stage events in which impersonators of the four presidents depicted in the carving would visit with tourists. Not all of the figures came from politics, as it was apparent from his web searches that one could hire Mark Twain, Louisa May Alcott, P.T. Barnum, or Galileo, among many others (Solo Together, 2012). Of course, there were the Elvis Presley impersonators in Las Vegas, but that was a different business and not the direction Russ was headed - not with his limited singing skills. There were even Broadway shows built around historical impersonation with award-winning one-person shows staged about figures such as Thurgood Marshall and Golda Meir (Marks, 2010; Atlanta Theater Fans, 2011). That, also, differed from his strategy, since those shows were headlined by accomplished actors, and he was not really prepared for the theater. His ideas were more educational than theatrical, although he had already come to realize just how much acting was an element of his performances if he hoped to excel at convincingly speaking as an historical figure.

His preliminary research took him to the website for an impersonator of Theodore Roosevelt who was booked for over 100 dates that year at locations around the United States, including an event for the Smithsonian Institute (Teddy Roosevelt Show, 2012). And those dates did not include the twelve solid weeks of performances of the Teddy Roosevelt Show all staged in Medora, North Dakota. Russ was reaching the conclusion that this impersonator was highly regarded and quite successful. As further evidence, this particular Teddy Roosevelt had performed at the White House in 2008 to commemorate the 150th birthday of the real Teddy Roosevelt (Teddy Roosevelt Show, 2012; The White House Archives, 2008). But did this success translate into a livelihood? While the booking fees were not disclosed on the Teddy Roosevelt Show website, further search yielded a booking intermediary website suggesting that the event fee for this Teddy Roosevelt was about $2,500 (Gig Salad, 2012). Russ was not sure if this fee was accurate, and if it was, whether it included travel expenses. He also realized that he might not be able to charge this price, especially just as he was getting started. And should he take a focused or broad perspective on the size of events and types of audiences he would address? He would need to investigate what fee he might reasonably expect to charge and how he might establish his reputation and begin to raise the fees for his services.

His research showed him that there are organized groups and associations of historical interpreters and impersonators. The field includes a variety of participants, ranging from those who reenact past battles to rangers who lead tours at historical sites or museums (Living History Association, 2012; National Association for Interpretation, 2012). Some associations offer certification and training programs (National Association for Interpretation, 2012). Russ thought he could benefit from talking to others in the field and learning from their experience. Connecting with an organization might also help him build credibility and his network of contacts. There are international, national, and regional organizations (Association for Heritage Interpretation, 2012; National Association for Interpretation, 2012; Solo Together, 2012). His initial impression was that the groups of impersonators tended to be regional (Solo Together, 2012, Association of Lincoln Presenters, 2012). This observation suggested to him that while there were others doing business as interpreters, the head-to-head competition among them might be limited if impersonators tended to operate in their own geographic regions, portray different characters, and focus on specific audiences (e.g., adult historical societies vs. school groups). It was also encouraging to find numerous websites for the associations and other individual interpreters because it suggested that there was some market for this type of activity. But how big was that market and how formidable was the competition?

Russ was beginning to get more organized in his efforts to establish his business. He had developed a website that advertised his skills. He still visited the history classes of his friend Ellen, but he was exploring ways to reach a wider audience. He was considering recording short presentations and selling them via download from his website. Or, perhaps, he could schedule Skype sessions with interested groups. He could construct a background setting that fit Franklin's era and conduct these teleconference visits from Ben's print shop, for instance. But how much should he charge for bringing history alive with today's technology? Would his audiences be willing to pay enough for his service to cover his expenses?

As Russ sat at his computer juggling his schedule, he wishfully thought about hiring someone to manage his schedule and maintain his website for him. Would the revenue he was bringing in support such an expenditure? If he had an employee - even part-time - could he expand this business? Russ wondered just how big his business could become. Could he make a living in historical interpretation? Would this work permit him to quit his job as a newspaper reporter? If he established this business, what exit options would be available to him if and when he chose to exit this business? What was the feasibility of this business of being Ben Franklin?

He remembered a quote attributed to Benjamin Franklin - "Energy and persistence conquer all things (Quotations Page, 2012)" - and resolved to apply that attitude to the analysis of his business opportunity.

QUESTIONS FOR DISCUSSION

1. Can the business be Russ's sole means of support? What products or services would you recommend as the basis for his business revenues? What additional research could Russ undertake in order to better answer this question?

2. Can this business grow? If so, how? If not, why not? What are the limits to growth, if any?

3. What are viable exit strategies for this business?

4. Is the business feasible? If you were Russ, would you proceed with this business? Why or why not?

5. Was this opportunity discovered or created?

TEACHING NOTE

1. This question begins the feasibility analysis at a very basic level - determining if the business could generate sufficient income for the entrepreneur. Starting at this foundational level can help the students see what the feasibility analysis is designed to accomplish. It is useful to begin this step by asking students what income level they would like to earn or feel they need to earn. Since Russ in this case is a recent graduate, students can assume his situation would be similar to their own. This income estimate can be developed by asking them to list the personal living expenses their income would need to cover. Using Excel, they can estimate a monthly mortgage payment for the house they want to live in and the monthly loan payment for the car they want to drive. The list should include utilities, food, insurance, entertainment, taxes, and other expenses that students will itemize during class discussion. If the estimates of living expenses span a wide range, it can be helpful to proceed with "high" estimate and a "low" estimate scenario.

With their estimate of the income needed to support their lifestyles, students can then analyze how this business could generate that revenue. If student work in small groups on this analysis, the class discussion that follows typically reveals a variety of approaches in estimating the revenue potential for this business. As the different revenue sources are mentioned, the instructor should ask questions that bring to light the issues associated with actually generating revenue with these approaches. How many performances would be needed at what price each year? Would Russ be able to charge the same price for each customer? Or would he offer different prices for different programs? What would these different programs involve? Would presentations to student groups be priced differently than those to community organizations or to businesses? Or would the price depend on the length? How reliable would these sources of revenue be? Students may also include revenue-generating items mentioned in the case, such as DVD's or downloads of presentation segments, or they may generate their own ideas. As they estimate the number of presentations or other products that would need to be sold each year, they should then be asked to consider how they would secure these customers. Are they expecting repeat customers each year or will the business need to develop sufficient contacts to have almost an entirely different set of customers each year? Similar issues exist for many other small businesses, such as a dentist, accountant, or hair stylist opening a solo practice.

In addition to the living expenses discussed at the beginning of this analysis, Russ would need now to consider the costs of the business, such as travel expenses to his scheduled performances. Presumably, while he is the only employee, this business could be operated from his home so that he would not incur rent and related expenses for a commercial location. If the business grows, those assumptions might change. This point can offer a lead-in to the discussion of growth in Question 2.

2. This case is not proposing a business that manufactures a product and that grows by ramping up production. Manufacturing operations can be designed to produce consistent quality and can be scaled up relatively predictably as demand increases. A business this dependent on the knowledge and skills of the entrepreneur is different from a business that manufactures a product. Much of the revenue for the business in the case is generated by personal appearances of the founder, Russ. Entrepreneurship is explained at its basic level as assembling a unique combination of resources to exploit an opportunity (Edelman, Brush & Manalova, 2005; Greene & Brown, 1997). The main purpose of this Question 2 is to explore the characteristics of the resources on which a business is based and how they factor in to the growth prospects for the business. Students can be asked to list key resources of this business - for instance, Russ's knowledge, research ability, personality, even his physical appearance are key resources of the business. The resources on which a business is based may not be easily scalable. Interesting discussion can be generated by asking students to list other businesses that are also dependent on the skills and even the personality of the entrepreneur. Just a few of the many examples include interior decorator, hair stylist, or financial advisor with specialized stock-picking skills. Restaurants are also a good example, since many depend either on the chef who creates unique dishes or on a unique atmosphere. Attempting to recreate these elements in additional locations of the restaurant is often difficult. Then, think of the significant growth restaurants pursue through franchising and the constant efforts at standardizing the food and experience across all of the outlets. It is difficult to replicate what makes a service business unique as it grows larger and larger.

The service requires the time of the entrepreneur, so the amount of revenue that can be generated is limited by the number of customers who can be served in a given amount of time. There are limits to how many times he can perform - depending on the locations and the time to travel there. He also needs time to prepare, especially if he grows the business by expanding the topics he covers in his presentations. He also has to sleep. A discussion of the demands on entrepreneurs and who they would trust to run the business while they are away either on business or vacation is useful. If it is the specific skills of the entrepreneur that the customers would be interested in, adding employees would not necessarily increase the revenue. If he chooses to hire additional impersonators, would it be best to hire other "Ben Franklins" or some other characters? Additionally, those characters would want to be paid, and Russ needs to consider whether he would be able to claim a sufficiently large percentage of the revenues to make it worth his while to oversee an expanding business of characters. Whose responsibility would it be to secure the bookings? How damaged would Russ's reputation be if one of these characters performed poorly, was unprepared, was disrespectful of audience members, or created some other unforeseen problem?

To grow this business, Russ can find new ways to deliver his services. Many of the ideas generated in response to Question 1 may be scalable depending on the delivery method - e.g., sell more DVD's. Through class discussion of the revenue-generating ideas determined by each group, all groups will likely hear ideas they had not considered. They can consider how these different ideas would fit in to their vision of this business in their feasibility analysis. Ideas generated by different groups may offer growth opportunities. Many are mentioned in the case.

Growth of businesses often requires capital. Would Russ need money to support an expansion? What factors would create a cash need? The discussion here can cover payment terms and whether Russ would be paid up-front or carry Accounts Receivable. Depending on how far in advance he accepts bookings, he may incur costs for travel plans before he is paid, possibly creating a cash shortfall. If Russ needed money to expand this business, could he borrow it?

It is also the case that many entrepreneurs who start small businesses have no aspirations for significant growth. A business that supports only the entrepreneur is a feasible business, and that size and style of business may be the entrepreneur's aim.

This question of growth potential also offers the chance to discuss the competitiveness of this market. The greater the income potential, the more attractive the field may be to competitors. If the business depends very little on the unique skills of the entrepreneur, it will be easier to imitate the business and easier for competition to take some of the customers. Earlier, the discussion had focused on the limits to growth for a business that is heavily dependent on the unique skills of the entrepreneur. Here, in the evaluation of the ability of competitors to win customers, the unique skills of the entrepreneur become a factor limiting competition. This point also allows for a broader discussion of industry attractiveness and the likelihood of increasing competition if the instructor wishes to take the conversation in this direction.

3. The size and growth issues discussed in Question 2 affect the exit options that are available. For instance, it is unlikely that this business would grow large enough to be a candidate for an initial public offering (IPO). However, selling the business can be examined as an option. If Russ tires of this business or finds new opportunities that he wishes to pursue, is there any value that he could capture by selling the business? Or if he is successful in supporting himself with this business for his entire career, how would he exit the business when he is ready to retire? Would he have to simply close the business or could it be sold? Who might buy it and how would a value be determined for the transaction? What exactly would the purchaser be acquiring? Some businesses sell only their assets instead of selling the business as a going concern. Businesses that have no fixed assets may sell their customer contact list, such as a florist or chiropractor, for example. Would Russ's client list be of any value to a prospective buyer?

Students should be asked to consider whether he can expect to sell this business. If he is at retirement age and cannot sell the business, what source of funds would he live on in retirement? Did students include any retirement savings in the estimate of costs and funds flow in the analysis begun in Question 1? Such an estimate can be discussed at this point in the analysis.

A related point is that many businesses that do grow quite large still have issues similar to these. This dependence on one person as the driving personality behind or the face of the business also exists for businesses with celebrity entrepreneurs, for instance. These issues of the exit of the entrepreneur affect far more than just the smallest of businesses. Examples include businesses built around the expertise of chefs such as Bobby Flay or Rachael Ray or the media businesses of Oprah Winfrey. These businesses should have value when these faces retire, but through what methods do the businesses continue when they do leave?

4. The discussion up to this point will have touched on the various components of a feasibility analysis, but students may not realize that they have considered some standard categories that can be used in feasibility analyses they undertake in the future. The issues considered so far include market feasibility issues, human resource feasibility, technical feasibility, and financial feasibility. Specifically, they have considered market feasibility by examining whether customers would pay for the services and products, how many customers would buy, and whether the customers would likely be repeat or one-time purchasers. The discussion has considered human resources feasibility by considering what services Russ is able to provide, whether other employees could be found who could contribute productively to the business, and whether those employees could be adequately compensates. There are also aspects of technical feasibility that emerge in this case, such as the technology-enabled services Russ could consider like the DVD's or interactive Skype sessions with an audience. Financial feasibility is considered in questions such as whether the quantity of business generated will be sufficient to cover the expenses (including Russ's salary to pay for all of his living expenses) and whether growth of the business would require financing.

Students should be asked to commit to a conclusion about whether this business is feasible or not. They can frame their rationale for their conclusion in terms of the categories of feasibility. The students who conclude that the business is feasible should be asked to support their conclusion. Those students who conclude that the business is not feasible should be asked to specify along which dimensions of feasibility it fails. They should also consider whether any problem they identify is fatal flaw in the logic of the business. A fatal flaw is a circumstance or development that alone could render a new business unsuccessful (Longenecker et al., 2010).

5. An interesting debate has developed in entrepreneurship research regarding whether opportunities are discovered by entrepreneurs or created by entrepreneurs (Alvarez & Barney, 2007). This may be a nuanced issue for many students, and some implications of the two different positions can be illustrated here. The discussion can be introduced by a quick explanation of the perspectives or more detailed questions that elaborate on the distinction: How much does the existence of the opportunity depend on the entrepreneur who exploits it? Do all opportunities arise and exist due to the environment and just require someone to recognize and take advantage of them, such that any opportunity is available to any entrepreneur who recognizes it? Or does opportunity emergence depend on a specific entrepreneur taking action to create the opportunity, such that the opportunity exists only because of that entrepreneur's perceptions and actions?

Students can then be asked to list the implications of the two perspectives. For example, there are implications regarding how long windows of opportunity will remain open and regarding who might be the viable competition in exploiting opportunities. The class discussion will not resolve this question for this case, but it can introduce the students to the issue.

Subject: Entrepreneurship; Business education; Market exit; Feasibility; Startups; Case studies

Classification: 8306: Schools and educational services; 9520: Small business; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-10

Number of pages: 10

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1041255953

Document URL: http://search.proquest.com/docview/1041255953?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 44 of 100

Property taxes: Are owners getting their money's worth?

Author: Jones, Travis L; Weeks, H Shelton; Ritchie, William J

ProQuest document link

Abstract:

The purpose of this case is to demonstrate the impact of special assessments on real property values. This case also provides an opportunity for the instructor to review the proper use of special assessments by communities and the impact that these assessments can have on the marketability of properties. In this case, students are asked to examine real world data to determine the impact of special assessments on property values. The case setting immediately follows four years of accelerated growth, in both market values and taxes, on vacant lots in Cape Coral, Florida, for the period 2003 to 2006. The findings of the case indicate the impacts of special assessments on real property values are significant and should be carefully considered when municipalities attempt to balance the cost and benefits of projects using this contentious funding source. Policy makers must consider the property value implication of using special assessments to fund projects as their use may have significant negative consequences for property owners. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

The city of Cape Coral, FL was developed in the 1950's by two land speculators, the Rosen brothers, who planned to capitalize on the area's Gulf Coast location and tropical climate by developing a city that would feature an unusually high number of buildable waterfront lots. After the brothers purchased the property, the community was platted and developed. This process resulted in the creation of over 350,000 residential lots and approximately 400 miles of canals (see Cape Coral History). Exhibit 1 provides a map of the city that shows the numerous canals that run throughout the city and the extent of waterfront lots available.

The city is the 2nd largest city in the state of Florida, by landmass, with a total area of approximately 115 square miles. The city's population of 154,000 makes it the state's 11th largest city in population (see State of Florida.com). Initially, most of the residential lots in Cape Coral were sold to out-of-state investors. As a result, many of the lots remain vacant today (see Cape Coral History).

During the late 1990's, the population of Cape Coral underwent a rapid expansion, growing by more than 100% in a 10-year period. Predictably, during this time, the city struggled to keep up with the increased demand for extension of key infrastructure services to areas within the city that had not been previously built out. In particular, the demand for expanded utilities services was very strong. In response to this demand, special assessments were used to fund the extension of services into areas of the city that were experiencing rapid build out. These special assessments ranged from several hundred dollars to over $10,000 per lot. Given the size of the special assessments and the variation across lots, city officials and many landowners questioned the relationship between the extension of utilities services and land value (see Liberatore, 2009 a,b,c).

SPECIAL ASSESSMENTS

Unlike ad valorem taxes, which are levied to pay for services that benefit a community as a whole, special assessments are used to finance improvements that benefit a particular parcel or number of parcels. The costs of improvements are divided on a pro rata basis to determine the special assessment for each parcel. For example, the extension of sewer services to 20 comparable residential lots located in a particular area would result in a special assessment for each lot of approximately 5% of the total costs of the project. Since special assessments are levied only against the owners of properties that benefit directly from the construction of the improvements, they provide an increasingly popular method for financing capital improvements.

While special assessments are intended to cover cost of capital improvements, which will provide benefits to a specific parcel or group of parcels, there is no guarantee that these benefits will result in an increase in market value equal to their costs. In theory, the decision to proceed with a project and use a special assessment to finance the improvements is based on the assumption that the benefit will exceed the cost (see Chapter 8, Government Controls and Real Estate Markets, of Ling and Arthur, 2008), for more information on special assessments. The Appraisal of Real Estate (2001) provides the following comment on special assessments:

"Sometimes the level of special assessments in a location can become so heavy that the marketability of property is seriously affected. The benefits resulting from theses assessments may not enhance the sale prices that can be obtained for properties in proportion to their costs; nevertheless, the cost must be offset. As a rule, properties that are subject to special assessments can be expected to bring lower sale prices than comparable properties that are not subject to these taxes."

Based on the statement above, the situation in Cape Coral provides an excellent opportunity to examine how special assessments impact the market value of residential lots.

DATA

A search of public records from the Lee County Property Appraiser resulted in the formation of a data set consisting of 93 sales of vacant lots with utilities and 346 transactions involving lots without utilities. These transactions took place between January 2003 and May of 2006. The market activity declined significantly during 2006 with only 13 transactions involving vacant lots identified. Of the lots with utilities, 43 had unpaid assessments at the time of sale.

CASE REQUIREMENTS

This case places, you, the student, in the role of the real estate appraiser with the assignment of analyzing the impact of special assessments on the market prices of vacant lots in Cape Coral, FL, during the period under consideration. In order to complete the assignment, you should examine the average price of lots with and without utilities during each year, examine the difference in the means of the two groups for each year to determine if the differences were significant, and construct scatter plots of each subset of data for each year with a line of best fit for each of the two groups.

Subject: Property taxes; Real estate financing; Impact analysis; Property values; Case studies

Location: Cape Coral Florida, United States--US

Classification: 4210: Institutional taxation; 9190: United States; 8360: Real estate; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-12

Number of pages: 12

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Tables Maps Graphs References

ProQuest document ID: 1041255959

Document URL: http://search.proquest.com/docview/1041255959?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 45 of 100

Napoli Pizza wants to determine its optimal capital structure

Author: Stevenson, Brad; Bauer, Daniel; Collins, David; Richardson, Keith

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Abstract:

This case is based on an actual business decision that was made by a small, closely-held company. Napoli Pizza is a popular pizza restaurant and bar located in a mid-sized, Mid-Western city. It has been very successful serving outstanding food and beverages in a trendy atmosphere and location. Napoli successfully caters to a working-professional lunch crowd, a family-oriented dinner crowd, and a young night-life bar crowd. The business has been entirely financed with equity since inception and the owners are investigating obtaining debt financing to improve return on equity and allow the owners to take some cash out of the business. The case is designed to give undergraduate and MBA students exposure to the determination of an optimal capital structure in a small business setting. The case will also introduce students to the concept of levered betas. The capital asset pricing model (CAPM), the weighted average cost of capital model (WACC), and levered beta estimates are used to estimate per share stock values at a variety of debt levels. The borrowed funds are used to pay a one-time, special cash dividend to current stockholders. It is recommended that the case be assigned as an advanced topic, following a discussion of the development and use of beta, CAPM, and WACC. [PUBLICATION ABSTRACT]

Full text:

EVA IS INDIRECTLY ASKED TO FIND AN OPTIMAL CAPITAL STRUCTURE

Eva Perez was recently hired as Business Manager of Napoli Pizza and she is anxious to show offher MBA skills to her new employers. Once settled into her job, Eva realized that this very successful, family-owned business was financed entirely with equity. While there can be appropriate reasons for this type of capital structure, Eva knew from her finance course that most equity holders would be financially better offif the capital structure included some level of debt. The interesting question is: how much debt relative to equity? Being new, and not being part of the ownership family, Eva was not sure whether to raise this question with her employers.

Unknown to Eva, Joseph Romano, patriarch and principal owner of Napoli Pizza, had been approached by several family members. While Napoli Pizza's earnings (and cash flows) provide the family with supplemental income, most of its value is in the common equity shares held by the family. The family wondered if there was a way to enjoy the financial benefits of that equity. Joseph didn't know, but he wondered if Eva's MBA education could help them find an answer.

Eva smiled when Joseph Romano spoke with her the next day. He was asking the question that she wanted to ask. Eva exclaimed, "Mr. Romano! That is the very thing I had been wondering about."

Remembering her finance training, Eva explained that there is an optimal relationship between debt and equity; a point at which the market value of equity will be maximized. Eva was certain she could perform the necessary calculations and the amount of debt raised would provide the financial benefit that the family desired. If Napoli recapitalized with debt, the borrowed funds would be used to pay a one-time, special cash dividend to its current stockholders. The family members would receive a cash payout and the company would attain an optimal capital structure. "The best of all worlds!"

NAPOLI PIZZA

Napoli Pizza is a popular pizza restaurant and bar located in a mid-sized, Midwestern city. It has been very successful serving outstanding food and beverages in a trendy atmosphere and location. Napoli caters to a working-professional lunch crowd, a family-oriented dinner crowd, and a young night-life bar crowd. Due to its success, the company's earnings before interest and taxes (EBIT) was $500,000 last year and, because the business has settled into a comfortable market position and no expansion is planned, earnings are expected to remain constant (in real terms) over time.

Joseph Romano started Napoli Pizza ten years ago with his family members as the initial employees (his children and his siblings and their children). As the business prospered, allowing Joseph to hire non-family employees, many of the original family group leftfor college and other pursuits. However, over the years, Joseph has given stock to each member of the family, and he has regularly paid out all earnings as cash dividends. Joseph owns 30% of the outstanding shares, and his three sons each own 10% (although Joseph holds the voting rights on those shares). Paul Romano and his two sons each own 5%, as does Carlo Romano, Carlo's two daughters, Lorraine Romano and Lorraine's son.

Eva's review of the company's financial records showed that Napoli is currently financed with all equity and has 100,000 shares outstanding. Napoli is in a 40% federal plus state tax bracket. The company leases all of its equipment and its building. Therefore, Napoli has no depreciation expense.

One problem Eva has is that Napoli Pizza is not publicly traded and, therefore it has no market price. Eva knew from her finance training that she can use estimated cash flows, weighted average cost of capital (WACC), and the capital asset pricing model (CAPM) to estimate the current value of the stock. She can use the same approach to estimate the debt and equity relationship that would maximize equity value. This is the optimum debt to equity ratio. A second problem Eva has is that because Napoli Pizza is not publicly traded, and therefore it has no market price, she cannot directly calculate the company's beta. She does recall her finance professor saying that a firm that is not publicly traded, like Napoli, may estimate its beta using betas from similar firms in the same industry that are publicly traded.

ESTIMATING CURRENT UNLEVERED BETA

Searching through her old MBA notes, Eva found the following:1

Levered Beta = Unlevered Beta*[1 + (Debt/Equity)*(1 - Tax Rate)]

Eva saw that unlevered beta reflects the firm's operational (business) risk and would be used to compute cost of equity if the firm had no debt. Levered beta combines the firm's operational risk and its financial risk (the risk due to leverage).

Eva had to ponder this for a while. It slowly became clear, if a firm that is not publicly traded wants to calculate its cost of equity and examine the impact of a change in capital structure on its firm value, it can use this formula to estimate its own beta. First, she could unlever betas for firms like Napoli to find a beta for Napoli that would reflect its operational risk. She could then relever the beta to see the effect of leverage on the value of Napoli.

Eva estimated Napoli's current unlevered beta, as follows: Using Yahoo! Finance, Eva found the betas, tax rates and debt-to-equity values for two publicly traded firms in the same industry, the first with .86, 40% and 0%, respectively, and the second with 1.73, 40%, and 36%, respectively. Using the levered beta formula, Eva un-levered and averaged their betas to estimate an all equity beta for Napoli Pizza. Eva rearranged the formula as follows:

Unlevered Beta = Levered Beta / [1 + (Debt/Equity)*(1 - Tax Rate)]

Firm A Unlevered = 0.86/[1+0*(1-.4)] = 0.86

Firm B Unlevered = 1.73/[1+.36*(1-.4)] = 1.42

Un-levered, all equity beta = (.86 + 1.42)/2 = 1.14

A large publicly traded firm with similar operational risk (the risk of being in the casual dining business) to the two firms Eva identified with no debt might be expected to have a beta of 1.14. However, Eva knew that Napoli may have greater operational risk than these firms because: 1) it is a small, regional firm more susceptible to swings in the local market, and 2) it lacks the economies of scale that these larger national firms have. Based on this, Eva subjectively revised the estimate of the unlevered beta upward (more risk, higher beta) to 1.5.

ESTIMATING CURRENT MARKET VALUE

With this estimated beta, Eva was able to estimate the market value of the stock using estimated cash flows, weighted average cost of capital (WACC), and the capital asset pricing model (CAPM). Eva used www.bondsonline.com to find a proxy for the current risk-free rate of 4.50% (the 30-year Treasury bond rate). Also, based on the differences in historical returns between the S&P 500 and the 30-year Treasury bond rate (Market Return - Risk-free Rate), she estimated the market risk premium to be 7%. Her calculations were as follows:

Risk-free Rate + Beta (Market Risk Premium) = CAPM (Cost of Equity) 4.5% + 1.5 (7%) = 15%

(Weight of Debt * Cost of Debt) + (Weight of Equity * Cost of Equity) = WACC Because there is no debt, WACC = CAPM (15%)

(Earnings before Interest and Taxes (EBIT) - Interest) * (1 - Tax Rate) + Depreciation = Estimated Cash Flow ($500,000 - $0) * (1-.40) + $0 = $300,000 (No Interest or Depreciation)

Estimated Cash Flow / WAAC = Estimated Asset Value - Liabilities = Estimated Equity Value $300,000 / 15% = $2,000,000 - $0 = $2,000,000 (No Liabilities)

Estimated Equity Value/ Shares Outstanding = Estimated Market Value per Share $2,000,000 / 100,000 shares = $20.00 per share

ESTIMATING LEVERED BETAS

Eva next read her old MBA notes to remind herself about the relationship between debt and equity. Yes, two things were very clear. Although a firm benefits from the tax shield provided by debt (interest payments reduce the firm's tax burden), increasing levels of debt also increase the firm's chance of becoming financially distressed.2 Also, common shareholders are residual claimants and in bankruptcy they are paid only after all other claimants, including debt holders, are paid. For both of those reasons, as debt increases so does equity risk. Eva knew from the risk/return relationship, as the risk of an investment increases investors demand a higher return. So, as debt increases, equity holders should demand a higher return.

The notes on risk and return led Eva back to the Capital Asset Pricing Model (CAPM). In CAPM the risk of a company's stock is measured relative to the risk-free rate (the return on Treasury securities) by: 1) beta, which measures the stock's return relative to the market's return (usually the S&P 500), and 2) the market risk premium.3 Because risk increases as debt increases, CAPM showed Eva that beta will increase as debt increases.

Now, Eva is able to compute Napoli's levered beta at various proposed debt levels. For instance, if Napoli raises its level of debt to $200,000, the levered beta would be:

Napoli's Beta @ 10% Debt = Unlevered Beta*[1 + (Debt/Equity)*(1 - Tax Rate)] = 1.5*[1+$200,000/$1,800,000*(1-.4)] = 1.60

ESTIMATING DEBT RISK PREMIUMS AND INTEREST RATES

Eva knew that the risk/return relationship also applied to debt. As debt increases so does the likelihood that the firm will default on the debt, and so does the required return on debt. In the U.S. there are rating agencies that estimate the risk of default and assign ratings to a firm's debt issues. As an example, here is a description of the BBB rating issued by Standard & Poor's:

"BBB: An obligor rated 'BBB' has adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments."4

Firms with bond ratings, even if their debt it not actively traded, can determine their cost of debt by observing actively traded bonds which match their rating. Also, leverage increases as ratings move from least risky (AAA) to high risk (C). Firms know that increasing their debt will increase their risk. Doing so will lower their bond rating and increase the required yield on their bonds.

Eva returned to www.bondsonline.com to find the debt risk premiums associated with different bond ratings (see table below). The debt risk premiums are the average yield for a bond with a given debt rating less the current risk free rate. The seven scenarios will be used to determine (estimate) the optimal debt-to-equity ratio for Napoli Pizza.

The debt risk premium may be used to calculate the interest rate Napoli would be expected to pay at the various levels of debt. For example: If Napoli were to borrow up to $200,000 its before tax interest rate would be 4.50% + .65% = 5.15% The after tax cost of debt would be (Treasury Bond Rate + Risk Premium) * (1 - Tax Rate). (4.50% + .65%) * .40 = 3.09%

CALCULATING THE OPTIMUM DEBT-TO-EQUITY RATIO

Your task is to determine which of the seven scenarios, above, is the best (optimal) debtto- equity ratio for Napoli Pizza. You will want to use the information and formulas which Eva Perez has accumulated for you. When you work through the following steps, you will see that this is a relatively straight-forward process. Now, sit down with your favorite pizza (anchovies and onions) and set out to determine the capital structure that will maximize Napoli's stock value.

REQUIRED: ESTIMATE AND ANALYZE NAPOLI'S STOCK VALUE

a. What will be the amount of equity after the special dividend under each scenario? (000s)

b. What will the debt-to-equity ratio (%) be under each scenario?

c. What will be the weights of debt and equity under each scenario?

d. What will be the after-tax cost of debt under each scenario?

Cost of Debt = (Treasury Bond Rate + Risk Premium) * (1 - Tax Rate)

e. What will be the levered beta under each scenario?

Levered Beta = Unlevered Beta*[1 + (Debt/Equity)*(1 - Tax Rate)]

f. What will be the cost of equity (CAPM) under each scenario?

CAPM = Risk Free + Beta * (Market Risk Premium)

g. What will be the weighted average cost of capital (WACC) under each scenario?

WACC = (Weight of Debt * Cost of Debt) + (Weight of Equity * Cost of Equity)

h. What will be the special cash dividend per share issued to Napoli Pizza's shareholders?

Dividend per Share = Debt Issued / Outstanding Shares

i. What is the estimated total asset value and total equity value under each scenario?

Estimated Asset Value = Cash flow / WAAC

Estimated Equity Value = Estimated Asset Value - Liabilities

j. What is the estimated market value per share including the special cash dividend?

k. It is also useful to determine the effect of recapitalization on earnings per share.

Calculate the EPS under each debt scenario. EPS = Net Income / Outstanding Shares

l. Which scenario provides the optimal debt-to-equity ratio for Napoli Pizza? Why?

m. Briefly explain the trade-offs between debt and equity financing.

n. Suppose you discovered Napoli's had more business risk (operating leverage) than you originally estimated. Describe how this would impact your analysis. What if they had less business risk than originally estimated?

Subject: Capital structure; MBA programs & graduates; Debt to equity ratio; Restaurants; CAPM; Case studies

Location: United States--US

Company / organization: Name: Napoli Pizza-St Peters MO; NAICS: 722110

Classification: 9190: United States; 3100: Capital & debt management; 8306: Schools and educational services; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-7

Number of pages: 7

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Equations Tables

ProQuest document ID: 1041256041

Document URL: http://search.proquest.com/docview/1041256041?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 46 of 100

A tough start to the day

Author: McDonald, Michael; Leaptrott, John; Wilson, Jerry; Randall, James

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Abstract:

This case presents a real life episode in the day of a pulp and paper mill general manager who receives a most unusual call. The call disrupts an important daily production meeting and the manager must make a decision about what to do. The mill he is in charge of is attempting to implement a major reengineering project and, at the same time, transform the way in which all of the wood yard employees work together. In short, the employees are being expected to learn how to work as "self-directed work teams". However, the union employees think that they are all being "set up to fail" so that the plant can get rid of them all. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

David Sprague (General Manager of Southeast Georgia Pulp and Paper) started his 8 a.m. daily production meeting like most days. His meeting routine was to have each of his mill superintendents report on what was occurring in hislher respective area of the mill. Only this day was a bit different than any David had ever experienced. Wes, the wood yard Superintendent, had just leftthe meeting. This was not unusual in that frequently one or two Superintendents might leave the meeting for a few minutes to respond via radio to ongoing problems out in the mill. Wes returned with a puzzled look on his face and interrupted the meeting with this statement: "David, the consultant we hired to work with our wood yard employees is on the phone. He wants to talk with you right now. In fact, he is insistent that you talk with him. He is telling me that he will not go any further with the seminar that he is teaching unless you drop what you're doing and go over to the meeting room at the hotel and meet with him and the wood yard employees in his class."

This surely wasn't the way that David normally conducted business, but he leftthe meeting to talk with the consultant. He tried to imagine just what might be going on to cause the consultant to pull him out of an important meeting. After all, he had come highly recommended to David from a friend in another company that was the General Manager of a paper mill similar to David's operation. The consultant has a great deal of experience in the industry. In background calls to other businesses, David learned that Jim Dixon (the consultant) had a good reputation for helping companies adapt to newer employee relationships involving work teams. David intended to organize the wood yard employees into work teams and hired Dixon as a first step in implementing that change.

The consultant was teaching a series of classes for all of the wood yard employees. The classes were intended to help the wood yard employees learn how to work with minimum supervision. The Southeast Georgia mill was trying to move to "self-directed work teams" and had decided to begin this transformation in the wood yard. Along with this major change, David's mill was redesigning the entire wood yard's methods for handling and processing incoming wood. This "reengineering" effort had being planned for about a year. The cost of reengineering the methods and processes, designing and building a new chipping machine, and construction of the new wood yard was estimated to be between $22 million to $24 million.

There was a tone of frustration in Jim Dixon's voice as he spoke to David: "David, I know this isn't how you like to do things but I have a real problem over here with the participants in the class. I have been working with them for three days now on getting them to understand what self-directed work teams are all about. It's been tough to get them to buy into the concept. Most of them just seem to be very resistant to even considering the idea of changing how they do things back in the wood yard. Today I noticed that they were especially tense and non-responsive. Finally I took one of the most senior employees in the class aside to ask him what was going on that might be causing such tension. The response stunned me. He didn't mince any words. He said that this entire reengineering project (including the idea of selfdirected work teams) is a big phony exercise that is being set up in order to cause big time failure. He said that the real purpose of the project is to prove that the wood yard employees can't manage the wood yard with minimum supervision. Furthermore he said that this entire reengineering project is designed to fail and that when it does, the company will fire everyone working in the wood yard."

"He also believes that once the wood yard fails, the mill will either outsource-lease the entire wood yard operation to another company who will then sell chips to the mill, or else the mill will start buying chips directly from companies that specialize in this. Either way, the company will get rid of everyone in the wood yard. I went back into class after the break and asked them what they really thought about this and most of them who were willing to speak up were in agreement with what I was told. In fact, another one of the senior employees told me that he thinks that I am in on this hoax and that they are not going to be sacrificial lambs. I told them that I had no idea what they were talking about and that I was going to call you and get you to address this concern with them."

THE CONSULTANT

Jim Dixon had worked as a consultant-trainer for about 25 years and welcomed the opportunity to work with the Southeast Georgia Pulp and Paper Mill. Jim's primary job was teaching in a business school at a large regional university in the area. His own training was in organizational behavior and applied psychology. He had completed his Ph.D. many years ago and had worked with numerous industrial companies throughout the Southeastern U.S. that were attempting to empower their workforces. On several occasions he had helped companies train operating employees to work in a self-directed work team structure with minimum supervision. While not always successful, most of these companies had experienced fairly good results. Success was not usually immediate. Normally such a change had to have the unwavering support and commitment of senior managers. Jim's experience also taught him that mistakes would be made by both the work teams and by upper level managers. Both groups had to recognize that patience and mutual support are both necessary to ensure a successful transformation.

The most successful transformation that Jim had been a part of took about six months, but most required a year or more. Jim knew the mill fairly well in that he had grown up in the town in which the mill was located. In fact, he had worked there one summer while he was in college. While not working directly for the mill, he had worked with a large engineering/construction company as a "rod man" on a surveying team. The mill was expanding its operations. The summer job taught Jim the real importance of working with the unions that had been at the mill since its early days after World WarII. Jim knew that several of his childhood friends worked there and were now union leaders. A few were engineers and one was even the Superintendent of Maintenance. One of his very best childhood friends was a senior crane operator in the wood yard. Jim figured that this particular consulting/training job had all of the necessary conditions in place for a successful transformation: commitment from senior managers, highly experienced employees, support of the union leaders, and competitive conditions pushing the company to look for ways to decrease operating costs.

SOUTHEAST GEORGIA PULP AND PAPER

The mill had been built in the early 1950's shortly after World War II and has had its ups and downs. Within a year of starting operations, the International Paper Makers Union successfully mounted a campaign to organize a union. The parent company tried hard to stop the union's efforts. However, many of the employees who were then working at the mill had been in the war and were a tough group. Within the next three years, two more unions were voted in: the International Brotherhood of Electrical Workers and the International Brotherhood of Laborers. Ownership of the mill had changed hands three times over its life time. Currently, the local mill is owned by one of the largest paper and lumber products companies in the world.

For the most part, union relations have been stable at the local mill. However, in recent years, the parent company had been demanding continuous cost reductions and productivity improvements across the entire company. These efforts had hit the local mill hard, resulting in many layoffs. In the last two years, the parent company has spent over $100 million on new technologies for making "fluffpulp". Such pulp is used for baby diapers, disposable wipes, absorbent materials, cleaning supplies, etc. While these are growing markets, the basic product is a difficult to differentiate commodity. This means the local mill must always be looking for ways to cut costs, improve productivity and improve the quality of its products. The mill always has to be concerned about the selling price of its pulp and paper. If other companies beat them on price, they can lose business fairly quickly. To be profitable the local mill must run at about a 95% utilization rate. It basically never shuts down except for brief required maintenance periods. With the productivity enhancements, the local mill was "down-sized" from 1200 employees to about 900 over the last three years prior to the current wood yard reengineering project.

THE WOOD YARD

The mill wood yard works as many mills do throughout the U.S. Independent loggers cut pine trees in forests in the region and haul the wood into the mill wood yard. At the local mill, "short logs" have always been brought in for use in the pulp and paper process. Short logs are basically a pine tree that has had all limbs removed and then the tree is cut into shorter logs averaging about four to five feet in length. The logger loads the short logs onto the truck using specially designed steel racks to hold the logs in place as they are hauled. However, David Sprague (the General Manager) and his engineers came up with a plan to take a lot of costs (potentially) out of the process of making pulp and paper.

Essentially, their plan was to have an outside vendor design a giant machine that would be capable of taking an entire tree (minus limbs) and then grind the tree up into chips. The chips would then be carried into the mill on conveyor belts/chutes and end up in the digester operations for cooking. The cooked chips or slurry then flows into the bleaching area, and eventually the bleached slurry is processed into either fluffpulp or paper. By using such a unique chipping machine and reengineering the entire wood yard, David's reengineering team estimated that $9 million could be saved annually at the mill. However major changes were necessary to accomplish the savings. Initially, the biggest single cost was building the "one of a kind" giant chipping machine. No other mill in the U.S. had such a machine. The machine was to be built in Mississippi, broken down, hauled to Georgia and reassembled on site. The other major costs were for rebuilding the entire wood yard with hard surface roads, massive concrete pads, reconfiguring the conveyor and chute system for handling the chips, and the loss of productivity during the time in which the wood yard would be down. Another cost would be purchasing chips to keep the mill operating during the time taken to rebuild and set up the new wood yard. The total cost estimate for the giant machine, construction of the new wood yard, and downtime was between $22 million and $24 million.

These costs were just part of the changes necessary to achieve the $9 million in annual savings. The other more difficult to achieve costs had to do with the unions and employees. In order to save $9 million per year, the wood yard work force had to be reduced. From the very beginning, David had kept the union leaders informed about what was being planned. While somewhat apprehensive about it, the leaders of the unions had promised that they would support the reengineering. The union presidents stated publicly that they understood the need for cutting costs and would be willing to renegotiate the contract for the employees in the wood yard. However, the biggest changes fell on the shoulders of the wood yard workers. To obtain the annual savings, the Wood Yard Superintendent (Wes) and his shiftsupervisors agreed that the new configuration could be run with 52 workers, rather than the 77 currently on the payroll. These 77 employees had to cover three shifts per day with a fourth "swing" shiftto cover scheduled time off. The current 77 included laborers, crane operators, machine operators and skilled maintenance persons.

The move to self-directed work teams though, meant that there would be no more shiftsupervisors on each shift. There would only be Wes (the Superintendent) and one Assistant Superintendent. Both would basically work during the day. The other four current supervisors would be reassigned to other parts of the mill. The biggest change would be with the 77 current union employees. Decreasing the numbers from 72 to 52 meant that 25 people would need to be laid off. Using the union seniority system, Wes announced who would be staying and who would be leaving. Most of the workers who were then laid offhad only been at the mill for less than four years. Of the remaining 52, most had finished high school but several were "functionally illiterate" meaning that they could barely read and write. The "survivors" varied from four years to twenty-eight years experience working in the wood yard. The average age was about 38 and varied from 25 to 55. About two thirds were white and the remaining third were African American. In the new configuration, 13 workers per shiftwould be expected to manage the wood yard and keep it running without the benefit of a formal shiftsupervisor. The workers would basically be on their own and would need to learn how to coordinate their efforts, trouble shoot and solve problems and deal with occasional conflicts and interpersonal issues that might arise.

TEACHING NOTES

Questions for discussion

1. What should David Sprague (the General Manager) do as a result of the call from the consultant?

Obviously, the wood yard employees in the class are convinced that they will lose their jobs as a result of the reengineering program. There is some logic to their argument, in that most recent changes have resulted in reductions in the mill work force.

What is needed is for David to immediately address all of the wood yard employees about the process, honestly answering all of their questions. Jim Dixon will not be able to successfully complete the training sessions until these workers issues are dealt with. It appears that the changes were either poorly explained or not explained sufficiently to the wood yard staff. They have seen multiple waves of layoffs and know that the mill is under constant pressure to increase productivity and lower cost. Management must proactively inform all of the mill workers that, rather than failure, the purpose of the changes is to produce the increase in productivity and decrease in cost that the senior level of mill management requires.

2. What might have caused the wood yard workers to think that the entire project is an "exercise designed to fail"?

Remember that most of these workers have little formal education and have a natural mistrust for management. They tend to believe what they can see. What they have seen in the recent past is regular changes in processes and procedures to make the mill more profitable. Each one these changes has also resulted in a reduction in the work force at the mill. This most recent wood yard redesign cost 25 of their friends and coworkers their jobs.

At least some of them feel that they are headed in the direction of outsourcing chip production for the mill. If this is true, and mill management is just making the changes to convince top management that the wood yard operation is too costly to continue, regardless of intent, the remaining wood yard employees will eventually lose their jobs.

3. What causes resistance to change?

Fear of the unknown is one of the most obvious causes of resistance to change. As this case certainly demonstrates, the changes at this paper mill led to angry and uncooperative employees. They fear that the focus on change will continue to force mill management to seek ways to produce at least the same amount of product with fewer and fewer human resources.

Ignorance also increases resistance to change. As stated previously, while the workers had been informed of the reengineering project and the resulting decrease in the work force, they obviously were not convinced that these changes would benefit them.

Perhaps a more detailed explanation of the plan, and how it would lead to stability and growth in both productivity and revenue, would convince the workers of the need for success of the plan, not failure.

The wood yard staffalso needs to be convinced of the honesty of David Sprague and his managers. Believing in the mill leadership is a necessary step to reduce the resistance to the changes taking place.

4. What is the best way to get changes implemented successfully in a situation like a wood yard?

A good first step in a situation like this is to make an honest presentation to the employees, detailing the need for the changes, how the changes will positively impact both the mill operations and the employees over time, describing all negative aspects associated with the changes (employee downsizing, early retirement, reduction in rank or pay, etc.) and honestly addressing any and all questions and concerns they may have. A second important step, that Jim Dixon was hired to address, is to provide adequate employee training in support of the changing work environment. Each employee must understand both the overall changes taking place and how his/her work role will be affected.

Third, the process of change is dynamic rather than static. The management of the mill should provide information and progress feedback to the wood yard employees as the reengmeenng process progresses.

An overarching consideration in any such change management process is to create "buy in" among all of the organizational groups. The steps above provide a platform for changing the attitudes of the wood yard group.

5. What potential problems would you anticipate in a transformation like this? What would be the best ways to deal with such problems?

The most common problem in such transformations forms the basis for this case. People are the most important barrier to deal with in organizational change. People are resistant to change generally, and particularly resistant when the change is considered unnecessary, difficult and harmful to the people involved.

Another common problem with process reengineering involves variance from expected outcomes. A simple example related to the wood yard case could be that the new wood chipping machine, designed and built for this mill, generates 10% less volume of product than expected and costs 10% more per year to operate and maintain than was anticipated. This results in a reduction in the annual savings from the process redesign from $9 million per year to $2 million per year. Such a large change from projections could precipitate the outcome that the wood yard workers feared. The parent company may decide to outsource the wood chip supply side of the operation, resulting in the closing of the wood yard and the loss of the remaining 52 jobs.

What is the best way to deal with such problems? First, anticipate implementation problems and ensure accuracy of the data used to develop the plan. Second, build a sensitivity analysis model into the plan. In other words, how much variation from expected outcomes can take place before the entire plan is compromised. Sensitivity analysis is a quantitative approach to "management by exception." Finally, develop contingency plans for the problems that may arise during implementation.

POSTSCRIPT

What actually happened is that David Sprague (the General Manager of the mill) did come over to the training class. He addressed the employee concerns very directly in a non defensive manner. He explained that the corporate management did not want him (David) to spend $22-24 million on the reengineering/conversion. In fact, he stated that corporate wanted him to shut down the wood yard and to begin buying chips from chip makers in the region. David went on to say that he finally convinced corporate that he and his employees could successfully convert the wood yard and that major cost savings would ensue. David candidly told them that if this project failed, he and several other senior mill managers would likely be fired. He spent about an hour with them and answered all of the questions they had.

From Jim Dixon's (the consultant) perspective, the wood yard workers seemed to be mostly inclined to believe David. Over the remaining classes, the group was markedly less hostile toward Jim and the conversion. At the end of the wood yard conversion there were a few costly errors and mistakes during the "learning curve" period of readjustment. However, at the end of the first year David Sprague was able to document a cost savings of almost $9 million in comparison to the "old" wood yard costs. This was an annual savings of $9 million. His initial estimate of savings was $7 million per year. The huge success of this project and other achievements eventually led to David being promoted to the Vice President level of one of the largest pulp and paper products companies in the world.

Subject: Leadership; Business process reengineering; Labor relations; Organizational behavior; Human resources; Pulp & paper mills; Case studies

Location: United States--US

Classification: 9190: United States; 8630: Lumber & wood products industries; 6300: Labor relations; 2200: Managerial skills; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-7

Number of pages: 7

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1041256042

Document URL: http://search.proquest.com/docview/1041256042?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 47 of 100

Rent-A-Car: an integrated team-based case study for managerial economics

Author: Chulkov, Dmitriy; Nizovtsev, Dmitri

ProQuest document link

Abstract:

Courses in Managerial Economics face the challenge of having theoretical focus different from more applied disciplines in business school curricula. The case study method has been proposed as a means of enhancing student learning and motivation in these courses. This article presents an integrated case designed for a Managerial Economics course at the M.B.A. or the upper undergraduate level. The case study covers multiple learning outcomes and consists of several assignments designed to enhance understanding of both theoretical concepts and quantitative methods featured in the course over a semester. This case is particularly appropriate for a team-based learning curriculum. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

Managerial economics courses at the M.B.A. level encounter several pedagogical challenges, including the fact that the economics component in business curriculum is a theoretical standout compared with more applied business disciplines. The students may fail to see the applicability of course concepts, which leads to a lack of motivation. Furthermore, employers value quantitative and communication skills in M.B.A. graduates but the traditional lecture-based delivery model makes it difficult to address these skills within one course. Case study method has been recommended as a way of increasing student involvement, motivation, and learning in the economics classroom at both the undergraduate and the graduate levels (Becker and Watts, 1995, 1998; Carlson and Schodt, 1995; Carlson and Velenchik, 2006). Cases have become an accepted part of popular Managerial Economics textbooks (Baye, 2010).

The case study project described herewith aims to enrich and solidify students' understanding of the course material by letting them apply it to a specific case and exchange ideas and approaches within a group. The goal of the project is to make students more comfortable with the use of various quantitative techniques and their application in an environment where creativity is encouraged. This case is designed to take advantage of the principles of team-based learning (TBL). TBL is a teaching method that involves students working together in specially formed groups for the purpose of promoting more active and effective learning (Fink, 2002, p. 5). Using the TBL approach encourages students to learn from their peers, not solely from the instructor. The role of the instructor is transformed to that of a mediator (Fry et al., 2009). TBL has been used effectively in medical and science education (Michaelsen et al., 2002), as well as business schools (Hernandez, 2002).

This case study is also building upon the problem-based learning approach popular in European higher education (Gijselaers and Tempelaar, 1995). With this approach, not all assignments have a uniquely correct answer. This provides the students an opportunity to solidify their knowledge of theoretical concepts by trying various solutions without being punished for mistakes. The questions in this case often ask students to select among several alternatives, for instance among variables available for analysis. The need to compare and contrast the alternatives develops critical thinking, encourages creativity, and allows the instructor to facilitate learning by focusing on the analysis process and the assumptions used.

This case study project is fully integrated in the Managerial Economics course and contains ten assignments for use over the typical semester. The integrated format works best if the case becomes part of the course syllabus from the beginning (Carlson and Velenchik, 2006). Assignments in this case are not isolated. Students are encouraged to revisit their earlier findings and conclusions and either reuse or revise them. This allows the students to develop a more holistic approach to each question and the case in general at the final submission stage. This approach also provides the instructor with the opportunity to revisit course concepts multiple times and improve student learning.

CASE DESIGN AND PEDAGOGICAL APPROACH

This case study is integrated around a common theme and presents a series of assignments designed to cover the entire range of learning outcomes in a Managerial Economics course at the M.B.A. or upper undergraduate level. The data used for the assignments are synthesized. The assignments are presented in the form of 'memos' simulating communication with the upper management. Each assignment is handed out after the relevant theoretical foundation is discussed in class. The instructor has flexibility in choosing questions to assign, and does not have to complete the entire sequence. In order to avoid the need to assemble student teams every week, and to minimize the class time losses resulting from switching between traditional lecture format and team discussion, the case "memos" can be assigned every three-tofour weeks in combinations the instructor deems appropriate.

This case has been tested in M.B.A. Managerial Economics classes at two business schools over several semesters. Class sizes ranged from fifteen to thirty-six students. The best practices for using the case study involve the TBL approach. The assignments have been tested in teams of three to five students. Another best practice involves team presentations and discussions of each team's findings in class at several points of the semester. As the teams work on the assignments, the instructor provides feedback on each submitted or presented part of the case. The teams are allowed to make changes to their work based on that feedback. The project grade is based on the final written summary of all answers to the case assignments due at the end of the semester.

Quantitative assignments ask the students to perform statistical analysis using some of the variables defined in Table 1 and presented in Table 2 of the Appendix. One way in which the case promotes critical thinking, is that the teams need to select appropriate variables for their analysis, and the instructor provides only a subset of the entire dataset to each team. In the end, no two teams have exactly the same results. This provides the instructor with the opportunity to discuss the methodology of analysis in Managerial Economics and its impact on results. The full text of the case introduction and assignments is presented in the following sections.

CASE INTRODUCTION

Rent-a-Car is one of the two car rental agencies serving a small regional airport in the U.S. Midwest. Forty percent of its customers are airline passengers and the remaining sixty percent are dwellers of the nearby college town who use rental cars for business and leisure trips. The airport is within two miles from campus and approximately six miles from the city center. It is easy to reach by car, taxi, or city bus.

You are a manager of Rent-a-Car. Your fleet consists of 72 cars, of which 47 fall into the 'economy' class and 25 in the 'luxury' class. Whenever demand for cars in some class exceeds the number of cars available, additional vehicles can be delivered from the nearest company hub in the state capital located 70 miles away. Alternatively, some customers unable to rent an economy-class car may be upgraded to a luxury-class car at no extra cost to them.

Your only competitor at this location has a more sophisticated system of car category tiers, which consist of Compact, Economy, Mid-size, and Large cars. More detailed data will be provided to you at a later stage. Upon receiving the data, you will be asked to examine various ways to improve the performance of this enterprise.

CASE ASSIGNMENTS

Assignment 1

In order to better understand your unit's operating environment, you are asked to provide your estimate of the demand equation that would account for various factors that affect your customer traffic. This will be done by using regression techniques. Estimating the demand equation is useful for future analysis of your unit performance.

You need to request the data for your empirical study. Specifically, (1) What are you planning to use as the dependent variable in your regression? What units of measurement for that variable are you going to adopt? (2) What other data would you need and can realistically get? You may request information about up to five independent variables.

For each variable you request, provide reasons why you expect it to be important for your analysis and explain the expected sign of the relationship between the proposed independent variable and the dependent one.

Assignment 1 Teaching Notes

This assignment requires familiarity with demand and supply analysis, demand and supply functions, and regression analysis. The assignment forces students to think critically about the design of their empirical study instead of including every possible variable in a nondiscriminatory "kitchen-sink" fashion. In the process of working on this assignment, students will: (1) explain the difference between dependent and independent variables; (2) support their variable selection and explain why the variables are expected to be significant and relevant; (3) justify the expected sign of each variable's relationship with the dependent variable; (4) use their creativity in selecting appropriate proxy variables if desired data is not available; (5) examine the limitations of linear regressions which tend to work best on monotonic relationships; (6) recognize that there has to exist a sufficiently large variation in a variable in order for it to play a meaningful role in a regression (such metrics as the population of the town/county are not likely to be particularly helpful in explaining week-to-week changes in customer traffic); (7) use their common sense and understanding of causal, economic, and functional relationships between variables.

This exercise provides an opportunity to remind students that revenue or profit are not good choices for dependent variables, due to the complexity of factors involved in deriving those metrics and their resulting non-monotonic relationship with the price charged. A superior approach is to focus on clear-cut, easy-to-understand relationships whenever possible. In this case, the best candidate for the dependent variable would be some proxy for quantity demanded.

Sometimes, students request data that would be hard or impossible to obtain in a realworld business setting. The role of the instructor is to help them understand that. After an inclass discussion of Assignment 1, each team is given one opportunity to alter the set of variables they request. Based on the final request, students are provided the parts of the dataset that most closely match their request. Some of the data is intentionally made 'fuzzy' to ignite student creativity and critical thinking while they perform data analysis.

Assignment 2

Is there any way to use last year's data to forecast the demand for our "economy" vehicles in a specific week? (Week number is selected by the instructor as appropriate.) It would be even better if you could suggest a specific rate that we should charge for the "economy" category to maximize revenue. How many vehicles do you expect to be rented at the rate you are suggesting? Do we need to worry about increasing our fleet if we follow your demand forecast?

Assignment 2 Teaching Notes

This assignment requires familiarity with demand equations, the concepts of elasticity, total and marginal revenue, and revenue maximization techniques. In the process of working on this assignment, students get an opportunity to: (1) Practice regression analysis techniques; (2) Recognize and interpret the economic and statistical significance of regression variables; (3) Evaluate regression results and present them in the form of a demand equation; (4) Practice the relevant course material by performing revenue maximization.

Students are expected to select appropriate dependent and independent variables, use correct procedures for step-by-step elimination of insignificant variables, and select the best regression model from many possibilities, using such metrics as adjusted R-squared and pvalues. Students are also expected to formulate the demand equation and present it in the form appropriate for forecasting. The demand equation may include variables that are exogenous and not controlled by the manager. The students have to develop their judgment on the appropriate assumptions about these variables in forecasting demand, and perform revenue maximization correctly. The data set described in Table 2 provides the choice between the two proxies for quantity demanded - the number of rental agreements initiated (QE) and the total number of rental days (Q_length). Students face the need to choose the most appropriate data variable among these. A possible conclusion here is that there is lack of correlation between a consumer decision about the length of rental and their decision to rent from a specific firm. There are numerous ways to demonstrate this idea, which helps the instructor to encourage student creativity and at the same time provide a basic introduction to alternative data-analysis techniques and approaches.

Provided the analysis is done correctly, the resulting demand equations and revenuemaximizing prices obtained by different teams are usually similar, even when they start with slightly different subsets of variables selected in Assignment 1. The advantage of this approach is that students are made aware of suspicious discrepancies in their results and therefore possible mistakes in their analysis not via the instructor's verdict but by comparing their results including demand equations and revenue-maximizing prices with those of other teams.

Depending on the variables selected by the students (teams) in Assignments 1 and 2, the instructor can lead the discussion in the desired direction by asking the following additional question: The variable Q_length is the product of the number of customers (QE) and the length of the contract. Perhaps separating the number of customers from the average length of a contract and studying each separately could provide us with additional insights. I am asking you to do that and report any interesting patterns that could help explain the behavior of total sales. If you find anything worth mentioning, can you suggest any strategies that would utilize that information to increase your overall sales?

Presenting the question in this format allows the instructor to achieve the following learning objectives: (1) Show how "data visualization" may reveal striking patterns in the data; (2) Demonstrate how breaking a composite variable down into simpler ones makes the analysis cleaner, produces more intuitively clear results, and helps with understanding complex relationships; (3) Discuss correlation analysis and potential multi-collinearity problems.

Another possible follow-up to this assignment involves the following questions: While making the recommendation to adjust our own price, what assumptions did you make regarding the competitor's pricing? How realistic are those assumptions? Can you suggest a better way to perform the analysis?

In answering these questions, the students are expected to realize that changes in own pricing may induce a response from a competitor. Ideally, this response needs to be incorporated into forecasts. Allowing the teams to share their thoughts on the issue may serve as a good opener for the discussion of game theory.

Assignment 3

We've been going back and forth on our philosophy regarding local advertising. As you know, each branch currently gets a $20,000/month advertising allowance but not everyone uses it completely. Does it make sense for us to spend money on advertising locally? Why or why not?

Assignment 3 Teaching Notes

Students are expected to be familiar with regression analysis and be able to read and interpret regression results. In the process of working on this assignment, students will: (1) Review regression analysis techniques; (2) Derive the demand specification from the regression model; (3) Interpret the economic and statistical significance of the estimated coefficients; (4) Apply cost-benefit analysis to business decision-making.

Assignment 3 requires the students to examine and interpret the effect of a single variable - advertising - on quantity demanded. The students are expected to rely on quantitative analysis while developing their recommendations. For this case study's data set, the estimated coefficient for the TotalAd variable in a multiple regression has low statistical and economic significance. This leads to a discussion of the optimality of advertising spending. Students are expected to relate the advertising expenses to the increase in revenue it brings about.

Those students who follow the stereotypical notion that advertising is always a good idea are led to think about advertising critically. When their preconceived notion is not supported by the data, the students either accept the empirical result or are forced to look for alternative explanations and missing variables. One potential explanation for the lack of significance is that advertising has a lagged effect. Another possible explanation is missing information on competitors' advertising expenses. It is possible that competitors' advertising actually negates the positive effect of own ads. Once again, this discussion may help the instructor transition to game-theoretic topics.

A possible extension for Assignment 3 includes the following question that requires the parts of the data set that describe advertising spending on various media: If advertising looks like a good idea, then what media would work the best for our advertising needs and what aspects of our product offering should we highlight the most?

Assignment 4

Previously, we established our revenue-maximizing price. What if we want to maximize not revenue, but profit? Would the revenue-maximizing price do the trick, or should we raise or lower it? What additional information do we need to answer that question accurately?

Assignment 4 Teaching Notes

This assignment offers an opportunity to show the effectiveness of the marginal approach in obtaining intuitive answers. In the process of working on this assignment, students will: (1) Review the concept of marginal revenue; (2) Recognize the relationship between marginal revenue and price for an imperfectly competitive firm; (3) Identify relevant components of marginal cost for a business unit; (4) Analyze and contrast revenue and profit maximization in a graphical format.

For a firm that operates in an imperfectly competitive market, the marginal revenue (MR) is decreasing in quantity produced and sold. Total revenue is maximized when MR=0, whereas the profit maximizing quantity corresponds to MR=MC. Since the marginal cost (MC) of renting the vehicle is always positive, a firm facing a smooth demand curve will always maximize its profit at a smaller quantity (and therefore higher price) compared with revenue maximization. Therefore, students are expected to recommend a price increase, the exact size of which is open for discussion.

This assignment also initiates the discussion of what the marginal cost of renting a vehicle out includes. Some students incorrectly claim that, since the vehicle has already been purchased by the company, its cost is sunk and MC=0. This is incorrect and allows the instructor to review the concept of opportunity cost. The vast majority of rental vehicles are later resold in the secondary market, and the resale value of a vehicle depends heavily on the mileage. (As an option, the instructor can ask students to research the effect of mileage on a vehicle resale value using web sites such as www.kbb.com or www.edmunds.com .) Additionally, every vehicle has to be serviced periodically and re-conditioned for each new customer. Coming up with an allencompassing estimate for the marginal cost of each rental is a useful exercise in data mining.

In cases when time constraint is an issue in managing the project, this assignment can be modified, merged with the next one, or dropped entirely.

Assignment 5

When we develop our pricing recommendations, do you think we should focus on maximizing revenue or profit? Please provide your thoughts and argumentation for which approach is better and make recommendations for pricing our economy vehicles in these weeks of the year (weeks are selected by the instructor as appropriate).

Our accounting department estimated that the cost of a rental is $16.37/day for an economy vehicle and $24.34/day for a luxury vehicle, plus $8.70 per rental contract for reconditioning, for either type of vehicle. Delivering an additional vehicle from our state capital hub costs the company $35 on top of all of the above.

Assignment 5 Teaching Notes

In the process of working on this assignment, students are expected to: (1) Use the demand equation obtained from Assignment 2 above to derive the analytical expression for marginal revenue as a function of quantity; (2) Analyze unstructured data to quantify marginal cost; (3) Use the marginal revenue to marginal cost comparison to arrive at the profitmaximizing price-quantity combination.

This assignment presents a chance to remind students to exercise care distinguishing between average and marginal costs. Students can either use the estimates for the marginal cost of each day of rental they obtained for Assignment 4, or rely on data provided by the accounting department. In the latter case they should be reminded that reliance on average costs can produce misleading results in terms of profit maximization. First, the average cost figures may include fixed costs independent of the decision to rent the vehicle out. Second, they are often based on aggregate historical data and therefore fail to accurately reflect the cost to the firm of the decision to rent out an additional vehicle, which should be the focus of cost-benefit analysis.

Assignment 6

Currently, all our customers are charged the same daily rate. (The only exception is customers under 25 years of age who have to pay the $12.50 daily surcharge according to the company policy.) What are your thoughts on our chances to increase our revenue and profit charging different prices to different groups of customers? If you think we should explore such a possibility, make sure to include the details of the implementation plan.

Assignment 6 Teaching Notes

This assignment follows the discussion of pricing strategies and requires familiarity with the concept of consumer surplus, as well as various pricing strategies, including price discrimination, volume discounts, and tiered pricing. The following pedagogical objectives are achieved by this assignment. Students will: (1) Recognize the necessary conditions for successful price discrimination; (2) Compare and contrast cost-based and value-based pricing approaches; (3) Apply theoretical foundations to forecast the expected outcomes of various pricing strategies.

The biggest potential shortcoming of student work submitted in this assignment is the lack of depth in applying pricing models. Some student teams may claim a certain pricing strategy is bound to be successful simply because other firms, sometimes from entirely different markets, employ it. Ideally, the students need to apply economic theory along with critical thinking and take the product and market characteristics into account to develop their conclusions. A good answer to this assignment would test the proposed pricing schemes for feasibility and profit potential. This requires a review of necessary conditions for price discrimination and the rationale for the beliefs regarding price elasticity of demand for various groups of customers.

One possible additional discussion question is: Is the 'under-25' surcharge an example of price discrimination?

For this question, students are expected to recognize the fact that younger customers are likely to have lower income than general population, which may affect the elasticity of their demand. The instructor may facilitate a discussion of the optimal number of pricing tiers in this context.

Assignment 7

Our customers who choose to keep a car for an extra day are currently paying the same base daily rate. Do you see any potential in exploring alternative schemes? If so, what changes should we implement - price those extra days at a higher rate? Lower rate? What considerations are involved in this decision? Provide your thoughts on this issue.

Assignment 7 Teaching Notes

This assignment builds further on the topic of pricing strategies. Learning outcomes for this assignment include the following. Students will: (1) Explain the reasoning behind volume discounts; (2) Recognize the impact of increasing marginal cost on supply; (3) Describe the negative impact of uncertainty on firm's operations.

Students are expected to contrast the volume discount philosophy with the need to account for increasing marginal cost due to uncertainty resulting from customers keeping a car for an extra day. The former consideration suggests the optimality of charging a lower rate for additional days whereas the latter one calls for an increasing rate to cover the rising inventory costs. Both considerations are valid and need to be weighed against each other. Students may also be able to reflect on the possibility of moral hazard created by consumers who would take advantage of the lower-extra-day-rate scheme by renting a vehicle for a short term at the base rate and then extending the length of the rental as needed, reducing the company profit potential. The best answers would recognize and explore the distinction between attracting customers willing to rent a car for a longer term and spontaneous decision to extend the lease. The discussion of uncertainty issues serves as a preamble to an in-depth coverage of the economics of uncertainty and information typically done later in the course.

Assignment 8

Our competitor has launched an aggressive ad campaign, advertising the $24.99/day rate for an economy car starting next week. This is a sharp $8 decrease from their average price over the last four months. Based on their prior pricing patterns, we expect the same price reduction to occur in their other vehicle categories.

How strong of an effect, if at all, do we expect this announcement to have on our weekly revenues if we maintain the price you have recommended previously? Should we try to respond to their price reduction with one of our own, or should we ignore it and proceed doing business as usual? If we decide to reduce the price, how deep should our discount be?

Assignment 8 Teaching Notes

In this assignment students will: (1) Reinforce the understanding of the demand function and revenue maximization methodology; (2) Apply the best-response technique and other gametheoretic concepts.

In order to answer this question properly, students are expected to go back to the demand equation that included the competitor's price (Pcomp) as one of the independent variables. The procedure is no different from the one used in assignment 2. In both cases, students have to pick a value for Pcomp to plug into the demand equation before they proceed to revenue maximization. In the present assignment, the lower value of Pcomp will result in a smaller vertical intercept of the demand curve for Rent-A-Car vehicles and consequently in the lower optimal price it should charge.

Optional additional questions include the following: (1) Estimate the maximum attainable revenue we can achieve if the competitor offers a discount and if they don't.

This question reminds students they should carry out the revenue maximization procedure.

(2) Would your answer differ if the forthcoming week is expected to be heavy in the volume of rentals?

This is an intentionally 'tricky' question. Students need to realize that an increase in demand would be reflected in the demand equation. Therefore, this question de facto overrides the preceding quantitative analysis done for the 'regular' demand conditions. While students should be able to answer the question based on intuition, a quantitative approach based on a modification of the demand equation is also possible and preferred.

These questions also give the instructor the opportunity to highlight the differences in optimal behavior of a firm in monopolistic and duopolistic markets. For a monopoly, higher demand always calls for higher profit-maximizing or revenue-maximizing price. For a duopoly, during the periods of higher demand, market share is important, which contributes to the possibility of a price war.

Assignment 9

Trying to avoid the need to assemble our think tank every time our competitor alters their price, could we possibly come up with some sort of a magic formula than would help us quickly pick our price in response to theirs?

Assignment 9 Teaching Notes

This assignment works well as a follow-up to an in-class discussion of Assignment 8. It utilizes a more general approach to revenue maximization, suitable for more quantitatively inclined students. Student will: (1) Practice the best-response technique on a general-form demand function; (2) Apply quantitative analysis skills.

It is possible to carry out the entire revenue maximization procedure while keeping the competitor's price (Pcomp) in the equation as an unknown parameter. The resulting own optimal price will then be a function of Pcomp. Another possibility is to try several levels of Pcomp and find corresponding optimal own prices using a spreadsheet. This method is more labor intensive but some less advanced students may find it easier to understand. The utilization of this approach also provides the instructor with an opportunity to demonstrate that the formula obtained through the use of the more general approach produces the same result as a spreadsheet but does it in a more concise way.

Note that Assignments 8 and 9 are stated in the context of revenue maximization. If the students' quantitative proficiency allows, both assignments can be easily modified to include profit-maximization.

Assignment 10

One of the board members inquired about the use of a "price match guarantee" which would mean we promise to match our competitor's price for a certain vehicle category if their price happens to be lower than ours. I need your opinion about the viability of such a policy in our case - would it be a good idea? Separately, how widely should we advertise such a policy if we decide to adopt it?

Assignment 10 Teaching Notes

In this assignment students will: (1) Recognize the theoretical basis for price matching; (2) Apply game-theoretic concepts to pricing decisions.

Two themes tend to prevail in the discussion of price-matching policies. On one hand, a price-matching policy can serve as a tool for price discrimination between informed and uninformed customers. The rationale is that price-sensitive customers put more effort into searching for discounts and are more likely to receive the reduced price matching that of a competitor. Groups with less elastic demand continue to pay the price that may exceed that of the competitor. According to this logic, the availability of information should be limited.

On the other hand, price-matching guarantees may help facilitate implicit price collusion and avert price wars in concentrated markets. This is because once a merchant adopts this marketing tactic, its rivals can no longer lure away its customers by charging a lower price, and therefore have little incentive to initiate a price cut. According to this logic, it is better to make the price-matching policy widely known. Once advertised, it effectively places the responsibility for pricing policy onto the competitor. An important caveat to this approach is that it is effective only if the firm offering the price-matching guarantee has a cost advantage over the competitor. Otherwise, commitment to such a policy can be self-destructive in the case of a price war.

Current theoretical and empirical research on the issue recognizes both sides of the argument and is inconclusive on this issue. Students would benefit from a discussion involving both points of view. For best results, the assignment should follow a discussion of repeated prisoners' dilemma type pricing games.

Additional readings on this topic may be recommended to students including Korts (1997), Jain and Srivastava (2000), and Moorthy and Winter (2006), among others.

CONCLUSION

The case described above contains a mix of quantitative and qualitative questions that are designed for integration within a Managerial Economics course at the M.B.A. or upper undergraduate level. These assignments focus on the application of the course's theoretical base to applied questions and develop a variety of skills including quantitative analysis, critical thinking, writing, presentation, and group work.

In addition to the assignments presented and discussed above in detail, this case can be extended in various additional directions at the discretion of the instructor. The modular nature of the case assignments allows for certain flexibility in terms of order of questions that can be grouped into blocks and assigned in different order after a corresponding topic is discussed.

Subject: MBA programs & graduates; Learning; Automobile rentals; Economics; Case studies

Location: United States--US

Classification: 9190: United States; 8306: Schools and educational services; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-14

Number of pages: 14

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Tables References

ProQuest document ID: 1041255964

Document URL: http://search.proquest.com/docview/1041255964?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 48 of 100

The rise and fall of Circuit City

Author: Hart, Amy; Matulich, Erika; Rubinsak, Kimberly; Sheffer, Kasey; Vann, Nikol; Vidalon, Myriam

ProQuest document link

Abstract:

Circuit City paved its way in the consumer electronics retail market by committing to its Five S's operating philosophy - selection, savings, service, satisfaction, and speed. However, the company fell victim to several poor business decisions in the early 2000' s that eventually led to the filing of Chapter 11 bankruptcy in 2008 and its closing in 2009. This case highlights the importance of identifying appropriate product differentiation strategies, building a distinctive competence, monitoring the competitive landscape, and making sound business decisions. It will also aid the student's understanding of the role and impact of management and explain the importance of employee engagement, satisfaction, and retention. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

This case covers the time period in Circuit City's history between the decision of CEO Alan McCollough to halt the sale of appliances in 2000 and the decision of CEO Philip Schoonover to layoff3,400 employees in 2007. The case also highlights the importance of sound strategic business decisions, target marketing, and customer input. Moreover, the case points to the need for a retailer in such a competitive marketplace, with both brick-and-mortar and online competitors, to find its competitive advantage and adhere to it. Differentiation and customer value are keys to success.

This case is suitable for both undergraduate and graduate courses in Marketing and/or Business Administration or Management, in areas where the students are studying Marketing or Business Strategy or Marketing Planning.

BRIEF HISTORY

Circuit City opened its doors to the public in 1949 under the name of Wards Company. This date marked the beginning of the electronics superstore concept in the United States (BCRC, 2009). Within 10 years, Wards became a four store chain with total sales of $1 million per year (BCRC, 2009). In 1965, the company began its expansion through the acquisition of several television and home appliance stores in the United States (BCRC, 2009). In 1970, Wards came under new management and the focus shifted to consolidating the business. Wards closed all unprofitable stores and invested the revenues generated in a $2 million electronics superstore (BCRC, 2009). The store shifted Ward's focus from home appliances to the growing consumer electronics market. It offered more than 2,000 products, including video and audio equipment and major appliances. Due to the company's high volume sales, it was able to offer lower prices than its smaller competitors. In addition, the stores offered service incentives, such as home delivery and in-store repairs (BCRC, 2009).

Based on the success of its superstore model, Wards began to streamline its operations and transformed many of its small stores into full-service electronics specialty stores. With this new concept, Wards opened six new stores in the Washington, D.C. area. Each store was 6,000 to 7,000 square feet, featured brand name video and audio equipment, and consistently offered in-store service capabilities. This new business strategy allowed the company to end 1979 with $120 million in sales (BCRC, 2009).

In 1984, Wards changed its corporate name to Circuit City Stores, Inc. and became publicly traded on the New York Stock Exchange (BCRC, 2009). At this time, Circuit City operated 113 stores and had become the leading specialty retailer of brand name consumer electronics (BCRC, 2009). The company's growth continued and its profits were increased by the launch of innovative electronics products. The company was expanding rapidly and opening a large number of superstores in new markets, which were heavily advertised at once.

In February 1987, Circuit City's annual sales reached $1 billion for the first time, driven mainly by the demand for VCRs, which also pushed up demand for complementary items, such as new televisions and other audio equipment (BCRC, 2009). However, as the demand for this core product decreased and competition from other electronics superstores such as Best Buy heated up, the company faced a difficult future. Despite these threats, the company did reach $69.5 million in profits by 1989 (BCRC, 2009). Many observers attributed the success of the Circuit City concept to its strong management, customer service focus, and a good merchandising formula which capitalized on innovative electronic consumer products. Based on this success, the company continued to follow the concept of the superstore, which led to overall sales of $2 billion by 1990 (BCRC, 2009).

SCENARIO

As newly elected Circuit City CEO Alan McCollough sat on his back porch on a summer evening in early August 2000, drinking a fresh glass of iced tea and wearing his favorite Saluki tshirt, he pondered the tough decision ahead regarding his company's involvement in the appliance business. He knew that Circuit City had been selling appliances nearly since its inception in 1959, but Lowe's and The Home Depot were hot on the company's trail, threatening to take its place in the appliance retail market. McCollough knew that despite Circuit City's standing as the second largest appliance retailer next to Sears just the year prior, the company could realize big savings in warehouse storage and delivery costs by exiting the appliance business. He had an important decision to make, and soon. So, he weighed the pros and cons.

Appliances, McCollough believed, didn't have the same growth potential as the consumer electronics category and the sales cycle was cyclical. Eliminating the appliances line would also provide more open space on the selling floor, allowing for more product categories. However, appliances had accounted for $1.6 billion in Circuit City sales revenue in 1999 (Wells, 2005).

McCollough had accumulated 13 years of experience in merchandising and store management, joining Circuit City in 1987 as a general manager of corporate operations, moving up to president and COO in 1997, and eventually taking over leadership of the company in June 2000. As his first strategic move since being named CEO, the decision to eliminate the appliance line had serious implications for his future with the national retailer. As the sun set and McCollough took his last sip of watered-down tea, his decision was made. He jotted down the statement he would deliver to his Board of Directors and investors the next day.

STRATEGIC DECISIONS

Selection, savings, service, satisfaction, and speed - the Five S's - was Circuit City's operating philosophy in 1984 when the name Circuit City was born. This was a time when customers could choose from a wide variety of merchandise; receive 110 percent back if they found a better deal; enjoyed the peace of mind of a 30-day money back guarantee; received expert advice from a commissioned sales force; and had the convenience of service and repairs in the store. The company's point-of-sale systems facilitated quick transactions and kept management apprised of inventory needs. During this time, Circuit City also utilized customer satisfaction surveys to track progress in all areas (Wells, 2005).

Exits Appliance Market in 2000

The decision by Alan McCollough in 2000 to eliminate major appliances from main locations resulted in the closing of six distribution centers and the elimination of 1,000 jobs. The decision was made as a result of increased competition in the appliance segment and the potential savings in warehouse storage and delivery costs (Wells, 2005). Prior to withdrawing from the appliance market, appliances accounted for 14 percent of Circuit City's total sales and Rise and fall, Page 3 Journal of Business Cases and Applications took up 20 percent of its selling space (Johnson, 2001). To make up for appliances being shifted out, Circuit City began to expand the number of its imaging and entertainment products (Wells, 2005).

Store Restructuring in 2000

The exit in appliances was accompanied by the announcement of an ambitious store remodeling program and new real estate investments. By 2004, Best Buy had aggressively pursued "A" quality locations and strategic lease negotiations that resulted in the chain having better real estate than Circuit City (Reingold, 2005). On the contrary, Circuit City failed to secure prime real estate and instead opted for low cost leases in inferior "B" and "c" locations that were sometimes inconvenient for consumers (Eames, 2009). To identify and secure better store locations, the company began testing "strategically differentiated" pilot stores by working with new master brokers under the direction of the recently named real estate vice president, Steven Jackson (Twice, 2005). Part of the restructuring program consisted of closing underperforming locations and focusing on the better executed expansions. Circuit City planned to build 20,000 and 30,000 square foot stores as opposed to continuing with its wide array of store sizes, which at the time, ranged from 2,000 to 50,000 square feet (Shalfi, 2006). The stores that were not scheduled for relocation were instead scheduled for remodeling.

In response to the store's restructuring initiative, many observers commented that Circuit City's new format looked more like a Best Buy store (Wells, 2005). The new stores reflected an open warehouse-style floor plan with an overall brighter look and colorful signage. More products were stocked on the store floors and registers were placed near the entrances, allowing customers to help themselves and navigate the store in a more efficient manner (Wells, 2005). However, in January 2001, McCollough announced that instead of the 140 stores that were originally planned for remodeling in 2001, only 20 to 25 stores would be remodeled. The reasoning was said to be based on costs, the amount of time the remodeling effort took, and disruption to the stores. Scaling back the remodeling efforts would reduce costs by $1 million per store and the rollout would be completed over a longer time period (Wells, 2005).

Commissioned Sales End in 2003

Circuit City's largest competitor, Best Buy, had operated without a commissioned sales force since 1989. By fiscal year 2003, Best Buy's market capitalization was 10 times that of Circuit City. Circuit City's commissioned sales force was clearly a major differentiator and was said to be a competitive advantage, not only by Circuit City, but by competitors alike (Wells, 2005).

Despite such an advantage, in February 2003, due to falling sales and reduced profitability, Circuit City announced that 3,900 commissioned sales staffwould be laid offand replaced with hourly employees. Before the layoffs, approximately 60 percent of Circuit City's sales associates were paid on commission; the rest on hourly pay. The desired outcome of the decision was to simplify store operations, create a united customer service objective, and reduce operating costs. Circuit City estimated there would be no sales and margin disruption beyond one month (Wells, 2005).

Firedog Launched in 2006

Best Buy's Geek Squad launched in 2002 and quickly grew into the number one national electronics service organization. To challenge the Geek Squad, Circuit City launched Firedog in August 2006 to provide in-store, in-home, and online computer and home theater technical support, as well as installation services (Eames, 2009). In September 2006, the Firedog workforce was approximately 4,000 strong and growing, and staffed by a mix of in-house and out sourced tech crews (Wolf, 2006). Firedog in-store and in-home PC support was available through all 632 Circuit City stores and home theater installations were available within 25 miles of Circuit City locations (Wolf, 2006). It was estimated in the company's 2007 Annual Report that Firedog generated above average margins and had annual revenues of $200 million in 2007. This number was expected to double in 2008 to more than $400 million (Circuit City, 2007).

Firing of 3,400 Employees in 2007

In 2004, Philip Schoonover, a former executive vice president of Best Buy, was appointed executive vice president and chief merchandising officer of Circuit City. In 2005, Schoonover replaced McCollough as president and CEO. Other senior management talent was also upgraded and repositioned at this time. In 2007, Schoonover, facing declining sales and profits, decided to reduce labor costs by firing 3,400 employees that the retailer determined were paid too much. Schoonover said the cuts were necessary to save money; however, several months later, the company awarded retention bonuses to top executives (Mui, 2008). Among those laid offwere the most tenured, knowledgeable, and highly compensated employees. Circuit City replaced the laid offemployees with less experienced people that could be hired at the lowest wage possible (Eames, 2009).

Circuit City Closes Its Doors

On November 3, 2008, Circuit City announced that it would close 155 stores and layoff17 percent of its workforce by year-end as a result of its ongoing struggle for profitability (Popken, 2008). Days later, 700 corporate employees were laid offfrom headquarters in Richmond, Virginia. The 1,000 remaining corporate employees were merged into a single building in an effort to further cut costs and improve profitability (Llovio, 2008). On November 10, 2008, Circuit City filed for Chapter 11 bankruptcy protection. Bruce H. Besanko, Circuit City's chief financial officer, wrote in the court filing, "Without immediate relief, the Company is concerned that it will not receive goods for Black Friday and the upcoming holiday season, which could cause irreparable harm to the Company and its stakeholders" (Sorkin, 2008). The company asked the court for a loan of $1.1 billion to buy new inventory and pay wages (Hamilton, 2008). Together with the $400 million from a previous credit line, Circuit City believed it would have enough financing to push through the busy holiday season.

Court filings showed the company had $3.4 billion in assets, $2.3 billion in debts, and more than 100,000 creditors (Sorkin, 2008). The company's goal was to emerge from bankruptcy protection by mid-year 2009. However, Wall Street analysts believed that the prospects of long-term survival for the chain were bleak.

The court set a January 16, 2009 deadline for Circuit City to find a buyer. Otherwise, the company would have to shut its doors. It was rumored that two unnamed buyers were interested; however, an agreement between the creditors and lenders was not reached in time. On January 16,2009, Circuit City announced its plans to liquidate. CEO and acting president, James A. Marcum, stated, "We are extremely disappointed by this outcome," calling the liquidation "the only possible path" for this 60-year-old company (Rosenbloom, 2009).

LEARNING OBJECTIVES

The purpose of this case is to identify various areas of strategic marketing planning and decisionmaking, including:

1. Identifying appropriate product differentiation strategies

2. Understanding the importance of building a distinctive competence

3. Understanding the importance of monitoring the competitive landscape

4. Understanding the importance of implementing:

a. Creative growth strategies

b. Short-term and long-term objectives

5. Being able to perform a SWOT analysis

6. Defining a clear positioning statement

7. Understanding the role and impact of management

8. Explaining the importance of employee engagement, satisfaction, and retention

DISCUSSION QUESTIONS

1. Evaluate the influence of Circuit City's organizational management beginning in 2000.

2. Who was Circuit City's target market? Did that change after the decision in 2000 to remove appliances from its product offering?

3. How would the store remodeling effort play into customer satisfaction levels? What impact did the remodeling have on the company's financial strength and profit levels? What about the role of Circuit City's real estate decisions?

4. How did the end of commission-based sales affect Circuit City's once main competitive advantage in customer service?

5. In 2007, Circuit City participated in two actions of controversy: the laying offof 3,400 employees and the awarding of bonuses to top executives amid declining sales and profits. How did this controversy impact the public perception of the brand? Did it contribute to its eventual demise?

TEACHING SUGGESTIONS

1. Ask students if they have been a customer of Circuit City, of Best Buy, of Wal-Mart, of online retailers, for their consumer electronics purchases. Why did each student prefer each retailer? What influenced their choice of retailers?

2. Of those students who had been a customer of Circuit City, do any remember when Circuit City offered appliances? Did their parents purchase appliances? What did they/their parents think of Circuit City? What was Circuit City "known for?"

3. Would students' purchases be affected if they found a retailer was taking customer service shortcuts and firing low- and mid-level employees, while rewarding management? What is considered important in a retailer?

4. Do students believe there is enough of a market for consumer electronics to support a Best Buy and Circuit City (given the other competitors in the marketplace)? What if Circuit City had stuck to its original product offerings with appliances in the mix?

DECISION-MAKING QUESTIONS

1. If you were Alan McCollough, would you have exited the appliance business? Why or why not?

2. From a customer perspective, did Circuit City provide a product or service offering that differed from competitors? What was its strongest Point of Differentiation?

3. How would you have evaluated the option to exit the commission-based pay schedule? Do you believe Circuit City made the right decision, given that Best Buy operated under this structure and held market leadership?

4. Considering Circuit City's financial crisis, do you believe Schoonover should have laid off3,400 employees in 2007?

5. Do you believe, after filing for Chapter 11 bankruptcy protection in 2008, that Circuit City could have successfully reorganized its business? How?

Subject: Consumer electronics; Bankruptcy reorganization; Product differentiation; Corporate management; Retail stores; Case studies

Location: United States--US

Company / organization: Name: Circuit City Stores Inc; NAICS: 443112, 443120, 551112

Classification: 8390: Retailing industry; 2310: Planning; 9190: United States; 3100: Capital & debt management; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-7

Number of pages: 7

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1041255966

Document URL: http://search.proquest.com/docview/1041255966?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 49 of 100

Provocative teaching examples versus more traditional case studies for finance and economics courses

Author: Waldman, Joel A; Heneghan, James C; Litzinger, Patrick J

ProQuest document link

Abstract:

A current economic situation in the United States prompts interest among students in a variety of business courses. The $700 billion bank bailout bill passed by Congress and signed by the President in 2008 and its aftermath continues to draw students' attention. This paper offers information about the bank bailout used in teaching examples for finance and economics courses. It also presents a teaching scenario of Pennsylvania statutes and case law demonstrating how private companies can avoid certain liabilities by shielding themselves behind the legal concept of governmental immunity. The latter scenario is used to show how a more traditional case study of legal and ethical concerns in business can be presented to students as part of the broader context of study for currently newsworthy events. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

Provocative news stories are a mainstay of modern reporting. Cable and internet news outlets seek to report news of most common interest, to identify minute details of stories that remain in the common interest, and arguably to direct the common interest. Whether identifying or proscribing common interest, the $700 billion bank bailout bill enacted in the United States in October 2008 is an example of provocative news. It is also a continuing story which provides provocative teaching examples in college level business courses. Perhaps by the nature of the reporting by the news media, students are aware of the "bank bailout". Such examples in classes allow for a continuation of student interest in other examples like a case study of the possibilities for and the limits of private companies avoiding certain liabilities by shielding themselves behind the legal concept of governmental immunity.

THE 2008 BANK BAILOUT

After debate between members of the House of Representatives and the Senate, a bank bailout bill that was essentially the plan submitted earlier to Congress by then Treasury Secretary Henry Paulson was enacted in the United States in 2008. The agreement in Congress was prompted by a precipitous decline in the Dow Jones Industrial Index and sharp declines in global financial markets generally. The Paulson recommendation and the Congressional debate followed the situation of a record $140 billion being taken out of money market accounts in the United States. Those funds were being transferred to U. S. Treasuries which was causing the yields for those to drop to zero. [1]

The most memorable feature of the bill was the Troubled Assets Recovery Program (TARP). The original program provided for banks to submit bid prices to sell their assets to TARP as part of a reverse auction. The auction program took too long to develop, however. The U. S. Treasury then provided $115 billion to banks by purchasing preferred stock. The U. S. Government stepped in:

because banks were afraid to lend to each other. This fear caused LIBOR rates to be unnaturally higher than the Fed Funds rate and stock prices to plummet. Financial firms were unable to sell their debt. Without the ability to raise capital, these firms were in danger of going bankrupt, just as Lehman Brothers did, and AIG and Bear Stearns would have without Federal intervention. [1]

Approximately $245 billion was actually used to help some 700 banks under TARP. As of September 30, 2011, most of the bank bailouts were paid back. The U. S. Treasury reports that when dividends and interest are counted taxpayers got back $275 billion. In a quarterly report to Congress issued in October, 2011, the Special Inspector General for the Troubled Asset Relief Program

says taxpayers are still out $186.8 billion, from bailouts made to American Insurance Group (AIG, Fortune 500) and Chrysler, as well as other programs aimed at helping homeowners with underwater mortgages, small businesses and the automakers. [2]

In addition to the mechanics and history of the bank bailout, the program allows for discussion of the "Occupy Wall Street" and "Tea Party" movements. In an article for FOXBusiness, Dunstan Prial asserts:

At their core both groups formed in response to populist anger in the wake of the U. S. government's decision in 2008 to bail out the nation's largest banks. ... The Tea Party organized in 2009 and gained momentum through nationwide rallies and widespread media coverage. By the fall of 2010 Tea Party-backed candidates were appearing on Congressional ballot boxes across the country, their platforms unified in their disgust for excessive government spending in general and taxpayer-backed bailouts in particular, not least those targeting big banks. ... Occupy Wall Street jumped on the bandwagon only recently, encamping in a Lower Manhattan park in late September, just a block away from the symbolic home of their perceived enemies. [3]

PROVOCATIVE TEACHING EXAMPLES

The history of the bank bailout to date and the continuing interest in questions raised by that history generate student interest in financial matters. The Tea Party and Occupy Wall Street movements confirm that interest. Teaching examples that speak to that interest include interest rates and yields, preferred versus common stocks, LIBOR and Fed Funds rates, underwater mortgages, and a number of other topics. The authors of this paper prefer students in business classes individually research financial institutions involved in the bank bailout. Given the hundreds of financial institutions involved in the bank bailout, students can find an interesting story that is based on an institution of geographic location, size, or other characteristic of their liking. The authors suggest a common starting point for students in a class. ProPublica is a non-profit newsroom funded by philanthropic contributions - most notably from the Sandler Foundation with Herbert Sandler chairing the Governing Board of the 501(c)(3) organization. "ProPublica was a recipient of the 2011 Pulitzer Prize in National Reporting and a 2010 Pulitzer Prize in Investigative Reporting." [4]

Their website reporting includes a "bailout recipients" list intended to track every dollar and every bailout recipient. It is an excellent starting point for student research. To give a sense of the information, Table 1 presents the five institutions on the bailout recipients list that received the smallest amounts in amount committed to them. The list gives institutions in their roles as banks, mortgage servicers, or special recipients. Therefore, institutions can be listed more than once in separate roles. The list is extensive, but Table 1 shows the only five institutions that received $15,000 or less. [5]

Using current, interesting teaching examples allows the authors to integrate more easily some of their established business case studies into classroom work. One such example is given next. It is an example that allows for discussion of legal and ethical questions in a specific setting. It also gives the authors an opportunity to engage students in a broader discussion of the interplay of business decision making and government policy. The authors relate the case to questions raised by government intervention in the bank bailout program.

In Pennsylvania there are distinct statutes that encompass governmental immunity. Under the Sovereign Immunity Act, immunity is granted to the Commonwealth of Pennsylvania, its agencies and officials acting within the scope of their authority except as provided in the exceptions outlined in the legislation. [6] Additionally, the Political Subdivision Tort Claims Act protects against any monetary liability when a local agency or anyone thereof causes harm to person and/or property unless the conduct in question comes within one of the granted exceptions. Under statute, "a local agency" is defined as a governmental unit other than the Commonwealth government. An employee of a local agency may claim such immunity when the employee's course of conduct "was authorized or required by law, or that [the employee] in good faith reasonably believed the conduct was authorized or required by law." [7]

In Jones v Southeastern Pennsylvania Transporation Authority [8], it was pointed out by Supreme Court Justice Cappy that since the Sovereign Immunity and Tort Claims Acts involve the same issue of governmental immunity, the court will interpret them in the same manner. The court in Jones went on to state that the exceptions to the governmental immunity shield should be narrowly construed. Additionally, in Smith v City of Philadelphia [9], the Pennsylvania Supreme Court indicated the main reason behind governmental immunity is to protect the public's money from massive monetary awards in tort liability cases.

EMPLOYEE IMMUNITY

Some court cases have focused on parties attempting to claim immunity by trying to prove that the party is an employee of a governmental entity. In Helsel v Complete Care Services [10], a wrongful death lawsuit was brought by the estate of the deceased against an administrator of a county owned nursing home located in Cambria County, Pennsylvania. The facility was managed by Complete Care Services, L.P., a privately owned profit motivated Pennsylvania corporation. This corporation was in the business of providing nursing care and health services and described itself as "the leader in the privatization of county nursing homes". Complete Care tried to assert a governmental immunity defense. This assertion was based upon the premise that since this business entity was working on behalf of the county and looking out for its interests, it qualified as an employee of the "local agency" (Cambria County).

However, the Pennsylvania Commonwealth Court held that the nursing home operator was not an "employee" of the county, but instead was a private independent contractor. Furthermore, the court pointed out it was illogical to assert that it should be able to have a governmental immunity shield merely because this nursing home manager was acting in the interest of the government and on behalf of the government. The court stated "contracts between public county entities and private actors should not constitute bridges (emphasis added) by which immunities intended to protect public funds are extended to private actions". [10] Finally, the court noted that simply because the county would have been entitled to immunity if it had managed the nursing home does not mean that the private contractor performing the management would be entitled to such immunity.

QUASI GOVERNMENTAL AGENCIES

At the same time, there has been a long line of cases involving volunteer fire companies and their attempt to be considered a "local agency" for purposes of governmental immunity. In Regester v Longwood Ambulance Co., Inc. [11], the estate of the deceased of George E. Regester III sued Longwood Ambulance Company, Inc., which provided fire protection services and ambulance service, for negligently failing to arrive at deceased's residence in a timely fashion and from preventing his death due to cardiac and respiratory problems. The Commonwealth Court held that a volunteer fire company is a local agency having governmental immunity. The decision pointed out that "local agency status is awarded to volunteer fire companies not because they are otherwise deemed agents of the local government unit under traditional concepts of principal-agency law but rather are traditionally 'accorded local agency status because of the duties performed by fire fighters are of public character' ". In the decision, the court cited the Pennsylvania Supreme Court case of Guinn v Alburtis Fire Co., [12], which held that if a volunteer fire company was established by law and recognized under the law as the fire company for a political entity then it would be considered to be a "local agency". Regester was appealed to the Pennsylvania Supreme Court, but the appeal on this issue was not granted.

Likewise, the Pennsylvania Supreme Court in Sphere Drake Insurance Company v Philadelphia Gas Works and Philadelphia Facility Management Corporation [13], held that a non-profit corporation that was the manager and operator for a Philadelphia run gas facility was a "local agency" that had immunity. The decision was based upon the fact that the city's control over the non-profit corporation was extensive. Factors that the court examined highlighting this control were the following: the city created this entity and appointed the corporate board members, the city exercised a great deal of control over it, the corporation's only revenue stream came from the city, the reason for its existence was to help the city, the breaking up of the corporation would result in its assets being vested in the city, the city indemnified the people employed at the company and these employees were eligible to participate in benefits provided to other city employees.

BUSINESS CONTRACTORS UNDER GOVERNMENTAL CONTRACTS

Other court cases involve attempts by contractors attempting to use the immunity defense when working in conjunction with government contracts. Once classic case in this area is Ference v Booth & Flinn Co. [14] Booth & Flinn Co., the defendant, was a road contractor that had entered into a contract in 1944 with the state highway department of the Commonwealth of Pennsylvania to extend Ohio River Boulevard in Allegheny County, PA. The terms of the contract specified a requirement to create a 50 foot wide divided highway near a hillside located close to the Ohio River. In order to accomplish this, there was a need to excavate at the bottom of the hillside. While doing so, Beaver Road, located at the top of this hill, was severely damaged and necessitated its closure. The plaintiffs, Ohio River Motor Coach Company, operated a bus line between Aliquippa and Pittsburgh and had been permitted to use that portion of Beaver Road in its transportation route. As a result of Beaver Road's closing, the plaintiffs lost passengers and incurred additional mileage to get around its shutdown. The plaintiffs brought suit against the defendant, a road contractor, for economic loss.

The defendant, an independent contractor, attempted to avoid liability by arguing that when a contractor performs work on behalf of a state entity following the language and specifications of its contract, it has not committed a tort and should be immune from liability for any damages that have occurred. In Ference, there was no dispute that the defendant performed its excavation work in a non-tortuous manner. However, the plaintiffs countered by stating that the Defendant did not clear Beaver Road within a reasonable time frame. The Pennsylvania Supreme Court held that the defendant was not liable for economic loss to the plaintiffs as it had sovereign immunity protection. The Court based this holding on the finding that the defendant was carrying out the specifications of the contract with the Commonwealth of Pennsylvania's entity, the State Highway Department, when the excavation occurred and it was not tortuous when doing this or in its eventual clearing of the roadway.

In 1956, the Pennsylvania Supreme Court again dealt with a similar issue that arose in Ference, when it decided Valley Forge Gardens, Inc. v James D. Morrissey, Inc. [15] The defendant, like in Ference, was a road contractor that had entered into a contract with a Pennsylvania entity, the State Highway and Bridge Authority, to construct a portion of the "Philadelphia Expressway". Very importantly, under the terms of the construction contract, the defendant was required to build a fill, which eroded and caused the dirt and silt to enter a stream that deposited the debris in plaintiffs cemetery ponds. The plaintiffsustained financial loss from dredging the ponds and constructing the property site in such a manner to prevent this from reoccurring. The plaintiff, accordingly, sought monetary damages from defendant to cover it from such expense.

In this case, the court found that the defendant, also in an independent contractor like in Ference, had proven that its work was done in accordance with the government construction contract specifications and, thus, defendant was not negligent in its work performance. In this case, Justice Jones specifically cited the remarks of Chief Justice Drew in Ference, stating "it is hornbook law that the immunity from suit of the sovereign state does not extend to independent contractors doing work for the state. But it is equally true that where a contractor performs his work in accordance with the plans and specifications and is guilty of neither a negligent nor a willful tort, he is not liable for any damage that might result". The Pennsylvania Supreme Court in Valley Forge pointed out that every state in the United States which decided this issue followed the same legal outcome (the Court noted cases in the states of Illinois, Kansas, Iowa, Minnesota, California, Indiana, Kentucky, New York, North Carolina, Tennessee, Virginia). Interestingly, the Court pointed out it was clearly a matter of "semantics" that the "contractor who performs work for it [the state] in conformity with a contract and without negligence... may not plead such immunity. But, if the contractor, in privity with the state or its instrumentality, performs the contract work which the state is privileged to have done, the privilege operates to relieve the contractor from liability to third persons except for negligence or willful tort in performance of the work." Finally, the Court noted that this outcome is essential or otherwise the contractor would be subject to unknown monetary damage claims by adjoining landowners.

In May 2000, the Pennsylvania Supreme Court in Conner v Quality Coach, Inc. [16] again sat in judgment on the issue at hand. Bruce Conner, whose legs were paralyzed and who had only some movement ability in his arms and hands, obtained a specially equipped van through the Office of Vocational Rehabilitation (hereinafter "OVR"). This motor vehicle had a "throttle/brake control" which contained a "palmer cuffwith D-ring on Velcro" that helped to hold the driver's hand on the control. OVR had asked for bids on this type of specially equipped van and accepted one from Quality Coach, Inc., the latter of which had obtained advice on this special equipment from Moss Rehabilitation Driving School. Quality Coach, Inc. purchased the above special device from Creative Controls, Inc. and installed it in the van according to the contract requirements with OVR. Subsequently, Mr. Conner was involved in a serious accident while driving this van and sued a number of parties, including Quality Coach, Inc., Moss Rehabilitation Driving School and Creative Controls, Inc. The basis for the lawsuit claimed that the device in question was defective.

In Conner, the Pennsylvania Supreme Court cited, but distinguished the U.S. Supreme Court case of Boyle v United Technologies, [17] Boyle involved a U.S. Marine's estate suing the Sikorsky Division of United Technologies, alleging that there was a defective design in one of its manufactured helicopters that caused the marine's death. United Technologies raised the defense of a "federal government contractor", attempting to shield itself behind U.S. governmental immunity. The basis for this defense centered on the contractor manufacturing and supplying military equipment according to specifications present in the U.S. Military contract. Justice Scalia, although reluctant to supplant state tort law with "federal common law" did so, not just because of "federal interests" present in the procurement of U.S. military equipment, but also as a result of the belief that the U.S. governmental immunity would be weakened if federal contractors, fearing legal liability, passed on additional costs to supply such equipment to the federal government. Justice Scalia stated, "it makes little sense to insulate the government against financial liability for the judgment that a particular feature of military equipment is necessary when the government produces the equipment itself, but not when it contracts for the production". The holding in Boyle was that a federal government contractor could use a U.S. government immunity defense for defective designs in U.S. military equipment when: (1) the U.S. government had placed "reasonably precise" specifications in the contract, (2) the equipment followed these specifications, and (3) the federal contractor had put the U.S. government on notice of any danger it had found in the equipment's use that had not been known by the U.S. government.

In Conner the Pennsylvania Supreme Court cited the precedent cases of Ference and Valley Forge as cases standing for the legal principle that a public works contractor is insulated from liability provided there was no negligence by such contractor, that there has been governmental control and guidance over such party's work and this contractor had followed the contract's specifications when performing the work. The Conner court explained that federal law in this area prior to the Boyle case seemed to mirror Ference/Valley Forge, but was then extended and broadened by Boyle. As Justice Saylor pointed out in Conner, "The threshold question in this appeal may be framed as follows: Should this court, like the United States Supreme Court in Boyle, undertake to declare a new, substantive rule of law insulating from exposure to product liability law government contractors who lay no claim to actual agency for the Commonwealth, may have actually participated in the design of the portion of the product alleged to be defective, and/or are alleged to have been negligent in the design aspect? Obviously, as a matter of federal preemption, this court is bound by Boyle concerning immunity from state tort law conferred by a contractor's status as a federal government contractor. The present case, however, does not involve a federal contractor - OVR is a Commonwealth agency".

The Pennsylvania Supreme Court held in Conner that since there is no Pennsylvania common law supporting sovereign immunity, the sole basis for such immunity is under statutory authority. Accordingly, the court reasoned the issue was whether legislators intended to include contractors working for a governmental authority in the language of the state's sovereign immunity statute. The court in Conner declined to find such coverage for all contractors, noting the clear straightforward language of the statute could not support such inclusion and pointing out that the legislative branch never chose to pass a separate state statute granting such immunity to these contractors. Finally, in refusing to follow Boyle, the Connor court indicated that even if the Commonwealth would gain economic advantage in government purchases by shielding contractors with governmental immunity this could be outweighed by other factors such as a state government procurement official not being adequately concerned with public safety issues thinking that the state was protected from such financial costs arising therefrom.

Therefore, in Conner, the Pennsylvania Supreme Court refused to extend immunity to contractors working under government contracts when these contractors were liable under tort law. The court in its decision distinguished Ference/Valley Forge principles noting that the present case was not a public works project and that Quality Coach, Inc. did not carefully follow the specifications of a governmental contract under governmental supervision, but instead involved itself in the decision making process concerning the "throttle/brake control". Accordingly, the court refused to extend government immunity for tortuous conduct including strict liability for defective products to contractors working with the government. However, the court in Conner did state "we do not here foreclose the possibility that state government contractors who have strictly adhered to government-generated specifications under close government supervision might avail themselves of the Ference/Valley Forge construct in defense of product liability claims, since these are not the facts before us". (Emphasis added).

Finally, the case of Coolbaugh v Com., Dept. of Transp. [18] involved a plaintiff, Joyce Coolbaugh, sustaining a horrendous permanent spinal injury when her automobile "hydroplaned" on Interstate Route 81 in Pennsylvania. She sued the Pennsylvania Department of Transportation (PennDot) for failing to construct and maintain the highway in such a manner to allow for proper and adequate water drainage on it. At the trial level, PennDot settled with the plaintiffs, but had filed a complaint against Slusser Brothers, a road contractor, joining it in the lawsuit. PennDot asserted in this complaint that Slusser Brothers had been negligent in its road work on Interstate Route 81 and did not follow the specifications of the construction contract it had with PennDot. In turn, the contractor denied these allegations and contended that since it had followed all of the contract specifications in a workman like manner, it was entitled to immunity under the Pennsylvania Sovereign Immunity Statute.

The appeal of this case to the Pennsylvania Superior Court centered on whether the trial court's summary judgment motion for the contractor against the plaintiffs was proper. Justice Johnson in the opinion pointed out that under Conner v Quality Coach, Inc. the Pennsylvania Supreme Court failed to grant immunity to a contractor working under a contract it had with a government entity when such contractor was liable for defectively manufacturing a product. Justice Johnson then analyzed the Ference and Valley Forge cases and stated that the Pennsylvania Supreme Court in these cases found the contractors not liable because of their lack of tortuous conduct in following the specifications of the government contract.

In light of the above, the Pennsylvania Superior Court in Coolbaugh held that a contractor can only assert an immunity defense if the contractor had followed the specifications of the government contract and was not liable for negligence. (See also Lobozzo v Adam Eidemiller, Inc. [19]) As Justice Johnson stated in Coolbaugh "fulfillment of the contract specifications does not necessarily satisfy the standard of care owed to the plaintiffin a negligence action".

Accordingly, the court reversed the trial court's decision in granting the summary judgment for the contractor, Slusser Brother, on the basis that the court record showed that there was an open issue of whether or not factually, the contractor was negligent when performing the roadwork.

CONCLUSION

Course activities and classroom discussion can be based on interesting and provocative stories, cases, and current information. Course examples adapted from currently popular cable and internet news stories interest most students. The students readily can find additional information for those news stories. Often they can be asked to add information to the examples using electronic devices they have with them in the classroom. With that involvement, instructors can associate a more structured case study to the questions concerned in the more provocative examples. The result is a more satisfying teaching/learning process for instructors and students.

Subject: Economics education; Government agencies; Government contracts; Bailouts; TARP funds; Case studies

Location: United States--US

Classification: 9190: United States; 8306: Schools and educational services; 9550: Public sector; 9130: Experiment/theoretical treatment

Publication title: Journal of Business Cases and Applications

Volume: 6

Pages: 1-10

Number of pages: 10

Publication year: 2012

Publication date: Oct 2012

Year: 2012

Publisher: Academic and Business Research Institute (AABRI)

Place of publication: Jacksonville

Country of publication: United States

Publication subject: Business And Economics

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Tables References

ProQuest document ID: 1041256050

Document URL: http://search.proquest.com/docview/1041256050?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Oct 2012

Last updated: 2013-09-19

Database: ABI/INFORM Complete

Document 50 of 100

The Role of an SME's Green Strategy in Public-Private Eco-innovation Initiatives: The Case of Ecoprofit

Author: Hansen, Erik G; Klewitz, Johanna

ProQuest document link

Abstract:

Increasingly, eco-innovation is a major challenge for small and medium-sized enterprises (SMEs). To diffuse eco-innovation, public support programs have been established as inter-organizational networks between local authorities and smaller companies. Based on seven public-private partnership cases from the eco-efficiency Ecoprofit initiative, we identified three behavioral patterns (hold-up, step-up, and frontrunner) developed by the companies within the partnership. These were the result of an interaction between the companies' green strategy and their related level of absorptive capacity, which influenced their ability to respond to the handholding processes offered in the partnership. Reactive companies mostly benefit from agent-based instruments (e.g., individual consulting). More proactive companies can also capitalize on peer-based handholding (e.g., 'clubs'). The longitudinal research design shows that public-private partnerships can stimulate adaptations in a company's green strategy over time. Propositions and an integrated framework are developed with implications for policy makers. [PUBLICATION ABSTRACT]

Full text:

Introduction

Eco-innovation has been the topic of research for some time, but usually with a focus on large enterprises (Rennings, 2000). Undertaking more research with small and mediumsized enterprises (SMEs)-here defined as companies with fewer than 250 employees (TCEC, 2003)-is important, as they make up the majority of companies in the European Union (ECEI, 2010). Additionally, eco-innovation in SMEs functions differently than in large companies. First, they are not just smaller versions of large companies (Welsh and White, 1981). Second, they are equipped with characteristics that are both advantageous for eco-innovation (flexibility to market demands) and disadvantageous (lack of financial capital) (Bos-Brouwers, 2010; del Brío and Junquera, 2003). Overall, eco-innovation in SMEs occurs to varying degrees as a result of different green strategies, ranging from reactive to more proactive strategies (Noci and Verganti, 1999).

To nurse an SME's innovation capacity for environmental sustainability, the construct of absorptive capacity is important as it describes a company's ability to identify, assimilate and exploit external knowledge (Cohen and Levinthal, 1989; 1990; 1994), which is crucial in reinforcing or complementing an existing knowledge base (Lane, Koka and Pathak, 2006). Hence, a company's strategy and related absorptive capacity determines how they can obtain and transform valuable external eco-innovation knowledge. However, companies are limited in their ability to gather and process all the relevant information and knowledge (Cooke, 2005) and even though innovative SMEs use both internal and external linkages for the innovation process, the establishment of external links results in high opportunity costs (Rothwell and Dodgson, 1991). The ways in which way SMEs with different eco-innovation strategies can efficiently and effectively seek out external knowledge sources remain unclear.

Research suggests the formation of collaborative relationships (Clarke and Roome, 1999; Roome, 2001), that is, to diffuse eco-innovations, inter-organizational relationships in the form of public-private partnerships (PPPs) can be established which support SMEs through various handholding instruments (Friedman and Miles, 2002). Examples are the National Cleaner Production Centres (Luken and Navratil, 2004), the Small Business Support Program (van Berkel, 2007), and the Ecoprofit initiative (Martinuzzi, Huchler and Obermayr, 2000; Sage, 2000). Studies in this field mostly focus on aggregated program success (see, for example, Luken and Navratil, 2004), but to the best of our knowledge, the literature is incomplete in terms of a focus on the inter-organizational dynamics at the micro level. Accordingly, this paper relates to a multiple case study conducted in order to answer the following questions:

What is the role of an SME's green strategy pattern in public-private eco-innovation partnerships and how is it transformed?

How do an SME's green strategy, absorptive capacity and the type of PPP handholding processes interact?

Seven local PPPs based on Ecoprofit® (a registered trademark: ECOlogical PROject for Integrated Environmental Technology; we simply refer to Ecoprofit), a program established across Continental Europe to support companies in eco-innovation processes, will be analyzed. The main contribution of this paper lies in demonstrating the relationship between three independent but related constructs, namely, green strategies (Noci and Verganti, 1999), absorptive capacity (Cohen and Levinthal, 1990; 1994), and handholding processes provided within PPPs (Friedman and Miles, 2002). We provide an integrated framework with implications for policy makers.

The remainder of the paper is structured as follows: after the introduction, we present the literature on eco-innovation in the context of SMEs, with a particular focus on green strategy patterns, absorptive capacity, and PPPs. The multiple case study research design is then shown. Subsequently, the findings are presented, discussed, and integrated into a visual framework. Finally, concluding remarks indicate directions for future research, policy implications, and the limitations of the present study.

Literature Review

Eco-innovation in SMEs from a strategy perspective

Eco-innovation includes new or enhanced processes, products, technologies, services, and business models that are beneficial to the environment in that they reduce or avoid negative environmental impacts (Beise and Rennings, 2005; Hansen, Große-Dunker and Reichwald, 2009; Rennings, 2000; van Hemel and Cramer, 2002). For eco-innovation and broader sustainability issues in SMEs, extant research shows a range of advantageous and disadvantageous characteristics (Bos-Brouwers, 2010; del Brío and Junquera, 2003; Jenkins, 2009; Perrini, 2006; Russo and Tencati, 2009; Spence, 1999). For instance, resource constraints (lack of time, personnel, financial capital, or knowledge) may result in a reluctance to invest in and implement eco-innovations (Noci and Verganti, 1999). On the other hand, lean and flexible organizational structures may allow for fast responses to customer and market demands for eco-innovations (Bos-Brouwers, 2010; Jenkins, 2009). Identifying an SME's specific eco-innovation strategy helps to understand why it chooses to engage in eco-innovation, for example, increasing the eco-efficiency of their production processes, and in which ways this influences organizational, product, and/or process innovations. As pointed out by Hansen, Sondergard and Meredith (2002: 39):

"Environmental innovations are decided upon within the context of the strategic horizon and overall business strategy of the enterprise. Specific decisions on environmental innovations are, therefore, subject to strategic interpretation and assessment of the effects on future business opportunities."

The literature suggests that an SME's eco-innovation strategies can range from reactive, to anticipatory, to innovation-based strategies (Aragón-Correa et al., 2008; Noci and Verganti, 1999; Tilley, 1999). Why an SME may choose to follow a certain strategy type depends on internal (competencies and strategic attitude) and external factors (competitive environment) (Noci and Verganti, 1999). Reactive SMEs respond to external stimuli, that is, regulation, green movements, and benchmarking (Noci and Verganti, 1999), and/or external pressure (Tilley, 1999). Incremental changes in processes and end-of-pipe solutions are to be expected. An anticipatory strategy (Noci and Verganti, 1999) describes an 'early mover SME' which makes strategic choices based on possible competitive advantages offered through the adoption of green technologies. Such SMEs may develop eco-efficiency processes, technologies, and products. Innovation-based SMEs are able to translate environmental issues into innovation-based solutions (e.g., new green technologies), and to successfully create a consistent green image (Noci and Verganti, 1999). They make use of the SME characteristics in such a way as to fully leverage the advantages. In order to advance sustainability, they may shape or create new markets and introduce radical process and product innovations (Noci and Verganti, 1999). Accordingly, ecopreneurs and sustainable entrepreneurs would also belong to this category (Schaltegger and Wagner, 2011).

To nurse an SME's innovation capacity for environmental sustainability, the construct of absorptive capacity holds explanatory power.

Absorptive capacity for eco-innovation

With Cohen and Levinthal's seminal work (1989; 1990; 1994) on the construct of absorptive capacity, it was understood as a company's 'ability' to identify, assimilate, and exploit external knowledge, primarily operationalized in terms of R&D activity and/or patents. Since then a broad literature base dealing with absorptive capacity has been developed (Lane and Lubatkin, 1998; Van den Bosch, Volberda and De Boer, 1999; Zahra and George, 2002), as well as means for its measurement (e.g., dominant logic, and potential and realized absorptive capacity). In an extensive review of 289 absorptive capacity papers, Lane, Koka and Pathak (2006: 856) rejuvenate the concept and develop a more comprehensive perspective on absorptive capacity and define it as firm's ability to:

"utilize externally held knowledge through three sequential processes: (1) recognizing and understanding potentially valuable new knowledge outside the firm through exploratory learning, (2) assimilating valuable new knowledge through transformative learning, and (3) using the assimilated knowledge to create new knowledge and commercial outputs through exploitative learning."

With this definition, absorptive capacity becomes learning process-oriented and moves beyond mere expenditure on R&D (which reduces absorptive capacity to a static resource). In order to analyze the absorptive capacity for eco-innovation in SMEs, three dimensions are necessary. First, knowledge identification is the company's ability to recognize and understand new external knowledge, which is also described as exploratory learning (Lane, Koka and Pathak, 2006). Secondly, knowledge assimilation describes the process of transforming the new (valuable) knowledge by connecting it to the prior existing knowledge on eco-innovation, also known as transformative learning (Lane, Koka and Pathak, 2006). Thirdly, knowledge application is the actual implementation of the knowledge, also described as exploitative learning, whereby ideally the application of knowledge then leads to knowledge outputs (Lane, Koka and Pathak, 2006), for instance, in the form of ecoinnovation.

In this paper we adopt this learning process view of absorptive capacity, as it relates much more to the SME context than a more limited definition. SMEs usually lack formalized structures (e.g., separate R&D departments), are seldom in the position to handle any significant number of patents and, from the viewpoint of ability to innovate, the skills and capabilities of the workforce in an SME may be more important than pure R&D (Varis and Littunen, 2010). Furthermore, it encompasses the established view of innovation as an increasingly non-linear but iterative and multi-agent process (Kline, 1985; Perkmann and Walsh, 2007; von Hippel, 1987).

As companies are limited in their ability to gather and process all the relevant (external) information and knowledge (Cooke, 2005), research suggests collaborative relationships be formed (see, for example, Clarke and Roome, 1999; Roome, 2001), as thereby platforms for knowledge development and learning are created which lead to innovation and adaptation (Roome, 2001). An SME's absorptive capacity for eco-innovation may thus be nursed through engaging in inter-organizational relationships, for example, in collaboration with public partners, to receive active support in terms of education (Parker, Redmond and Simpson, 2009).

Public-private partnerships for diffusion of eco-innovations in SMEs

SMEs are increasingly recognizing governments, trade associations, and professional and business networks as catalysts for future change in terms of active support for absorbing eco-related knowledge (Biondi, Iraldo and Meredith, 2002; de Bruijn and Hofman, 2000; Hoevenagel and Wolters, 2000; Revell, Stokes and Chen, 2010). Here, local authorities are attributed a special role in implementing technology transfer and other diffusion programs that encourage and educate SMEs (Bradford, Fraser and Evan, 2008). More specifically, in public knowledge transfer programs, local authorities can establish a public-private partnership (PPP) with SMEs. Because PPPs are loosely defined, comprising various partnership constellations (e.g., management contracts or licensing), this paper understands PPPs as a "constitutional arrangement" (Hodge and Greve, 2007: 545) between a local authority and an SME with the aim of sharing risks, costs, and resources and leading to a long-term partnership (Hodge and Greve, 2007; Malmborg, 2003; Martinuzzi, Huchler and Obermayr, 2000).

The effective diffusion of knowledge within participating SMEs requires some level of absorptive capacity, but it also depends on the specific handholding provided by the PPP (Friedman and Miles, 2002). It is through the PPP's handholding processes that SMEs are guided through the processes for adopting (or absorbing) external knowledge. Both 'agent-assisted' handholding processes (direct support of SMEs in terms of lectures, site visits, award schemes) and 'peer-assisted' processes (interactive workshops and loose assistance in terms of networks or clubs) can spur learning in SMEs (Bessant, Tsekouras and Rush, 2009). In peer-assisted learning networks, SMEs can exchange expert knowledge throughout the duration of the program and, more importantly, after it has ended (Bessant, Kaplinsky and Morris, 2003; Clarke and Roome, 1999; Friedman and Miles, 2002).

As will be presented in the next section, we chose to study the case of Ecoprofit as a PPP that aims to diffuse eco-innovations amongst SMEs through offering various levels of handholding.

An introduction to the Ecoprofit initiative

The Ecoprofit initiative was developed in Austria in the early 1990s by the Environment Department of the City of Graz and is a diffusion-oriented public program based on a PPP concept to diffuse eco-innovation. Through education and customized problem solving it aims to improve the eco-efficiency of processes, products, practices, and services in organizations (Krenn and Fresner, 2009), including SMEs.

Ecoprofit is recognized as a Best-Practice example by the European Union (ECE, 2011; EUCOM, 2004), has received international rewards (Ecoprofit, 2008), and has spread to countries such as Germany, the Netherlands, Hungary, Slovenia, Russia, Italy, and China (Balcázar, 2010). In Germany, Ecoprofit has been implemented in around 80 locations with at present over 2000 participating organizations. With the foundation of the 'Ecoprofit network Germany' in 2000, the program itself is continuously being developed. At present, Ecoprofit has three modules: the beginner program (module 1), the Ecoprofit club (module 2), and 'from Ecoprofit to EMAS/ISO' (module 3).

The beginner program (of one year's duration) covers about 15 organizations, which can range in size, sector, and prior involvement in eco-innovation. It consists of eight to ten workshops, five individual on-site consulting sessions, and the Ecoprofit award process. To facilitate SMEs acquiring new knowledge, despite different levels of prior knowledge of and experience with eco-innovation, various handholding instruments are employed. The workshops, for instance, can range from cleaner production strategies to eco-control and monitoring of indicators (Krenn and Fresner, 2009; Sage, 2000). More individualized support in applying the knowledge assimilated in the workshops is given through on-site consultations which may include a material flow analysis, the setting up of eco-control systems, or the implementation of a new waste management system (Sage, 2000). After a one-year period, the Ecoprofit award is given if certain measures have been accomplished, such as a legal compliance audit, the institution of an environmental policy, and the development of an environmental program for the following year (Krenn and Fresner, 2009; Sage, 2000).

To continuously enable SMEs to identify and apply new knowledge on eco-innovation, the Ecoprofit club is based on network relations, with a regular program structure of common workshops, on-site consultation, and opportunities for informal exchange (Krenn and Fresner, 2009; Sage, 2000). As the Ecoprofit certificate can only be used for a limited time, club membership also includes the opportunity for recertification.

Methodology

Though the use of PPPs to diffuse eco-innovations has been the topic of research for several years (confer Introduction) and is thus moving towards the development of intermediate theory (Edmondson and McManus, 2007), we chose a multiple case study design for a "freshness in perspective to an already researched topic" (Eisenhardt, 1989; confer Yin, 2003).

Case sample

The case selection is based on theoretical sampling (Eisenhardt and Graebner, 2007) with three embedded units of analysis (Yin, 2003), in that each case represents a unique PPP setting of a regional Ecoprofit initiative. Accordingly, each case consists of a local authority administering Ecoprofit, a participating company, and the consultants involved in the implementation of eco-innovations in the company. With this approach we are able to increase the validity of the study by using "numerous and highly knowledgeable informants who view the focal phenomena from diverse perspectives" and thereby including perspectives outside the individual organization (Eisenhardt and Graebner, 2007: 28).

As SMEs are heterogeneous in terms of sector diversity (Hillary, 2006), we chose a sector- specific focus to ensure better comparability between cases and define limits for generalizing the findings (Eisenhardt, 1989), as we can better control for industry-specific contingencies as well as external influences. The metal and mechanical engineering industry was chosen as it is one of the five major industries in Germany (Kritikos and Schiersch, 2010; VDMA, 2010) and is a key supplier to industries such as the automobile industry, electronics, and construction (Steier, 2009), and thus faces pressures to implement sustainability.

With SMEs at the heart of our analysis, the companies for this study were selected from a privately owned but publically accessible database (www.arqum.de/datenbank/) listing Ecoprofit certified companies between 1998 and 2010. Our aim was to choose companies with different longitudinal patterns concerning their green strategy. Through an iterative process moving between (preliminary) data collection and theory building, we selected seven different PPP cases (see Table 1). All of the SMEs included are family businesses, operate in the metal and mechanical engineering sector in a business-to-business environment, were among the first companies to participate in the respective regional programs (first-movers), and completed the Ecoprofit beginner program successfully (module 1).

Data collection

We used multiple methods. First, we used data from the Ecoprofit database, as mentioned in the previous section, to analyze the type of eco-innovation in the individual companies achieved through participation in the beginner program.

Second, we conducted semi-structured interviews in two phases. In the first phase (August 2010), we interviewed managers from the seven companies. We were able to conduct interviews with the person responsible for Ecoprofit and, in three companies, interviews were conducted with the owner-managers. In all cases the respondents were responsible for multiple tasks to increase the breadth of the individual respondents (see Pagell and Wu, 2009). The subject of the interviews was the distinct sustainability and eco-innovation approach of the SMEs as well as their role in and perceptions of the Ecoprofit program. In the second phase of the interviews (July 2011), we broadened the scope of interviews to establish embedded cases in that we interviewed the companies again, but also the local authorities and the consultancies involved in the Ecoprofit initiative (see Table 2). One exception is EN4, which decided not to participate again because of time constraints. The semi-structured interviews conducted were digitally recorded and transcribed.

Third, we used archival data, such as publications on Ecoprofit, company websites, and internal protocols from the Ecoprofit network Germany (from 2006 to 2010) provided by some of the interviewees.

Data analysis

It should be mentioned that a long period elapsed between initial Ecoprofit participation and the time we collected data. Even though this allows us to analyze only in retrospect (and with full awareness of the related limitations, confer van de Ven and Poole 1990), the time lag is helpful to understand the development of the SME's eco-innovation behavior before, during and after Ecoprofit participation. This is important to consider because significant changes in an SME's environmental behavior should be expected with a delay of between three and five years after program participation (Altham, 2007; Hennicke and Ramesohl, 1998; Rosenfeld, 1996).

The data were analyzed first using within-case analysis and then cross-case analysis (Yin, 2003). Based on the within-case analysis (data structuring, defining, reduction, and contextualization), we were able to conduct a cross-case analysis to identify differences and patterns (Eisenhardt and Graebner, 2007). The research process was characterized by iterations between preliminary theory, inductive reasoning from data, and new data collection. Our contribution to theory development lies in putting forward explicit theoretical propositions and developing a visual summary in the sense of a framework (Eisenhardt and Graebner, 2007).

Findings

This section presents and discusses the findings of the cross-case analysis undertaken to analyze the relationship between the three constructs of green strategy, absorptive capacity, and handholding processes in a PPP for eco-innovation. On the basis of this, we develop an integrated framework for eco-innovation in the context of PPPs. We first provide an overview of the three patterns observed in the PPPs.

An overview of the three patterns of green strategy development in PPPs

Amongst our sample we found three longitudinal patterns of SME behavior with regard to eco-innovation in PPPs, as summarized in Table 3 (detailed findings provided in Table 4).

Pattern 1: hold-up: SMEs in this pattern (EN1, EN2, EN3, and EN4) remain fixed on their cost perspective with regard to environmental issues. Before and after Ecoprofit participation they have limited internal resources and competencies available for eco-innovation, lack owner-management commitment, and wait for external stimuli to arise before engaging in eco-innovation. They are within a PPP context where the public partner (local authority) exhibits a low - and, at best, medium - degree of proactivity.

Pattern 2: step-up: these SMEs (EN5 and EN6) started their participation with a similar reactive strategy to the prior pattern. However, we will show that the specificities of their participation, such as owner-manager involvement and a medium degree of PPP proactivity, enabled them to develop from a reactive towards an anticipatory green strategy. Ecoprofit pushed these SMEs out of their initial comfort zone by enabling them to recognize and develop a more explicit strategic interpretation of future opportunities for eco-innovation (see Hansen, Sondergard and Meredith, 2002). Moreover, the SMEs made competencies available, engaged in some networking activities, and continued to engage in eco-innovations years after Ecoprofit participation.

Pattern 3: frontrunner: this pattern is represented by one SME (EN7) in our sample. Prior to Ecoprofit, this SME already pursued an innovation-based strategy, that is, both process and product eco-innovations were already part of their conventional business. In this pattern, Ecoprofit is used as an instrument to further deploy innovation-based strategies.

In order to understand these three patterns in more detail, this section is structured as follows: first, we present the analysis of green strategy as found prior to Ecoprofit. We then proceed to explain the eco-innovation processes in the PPPs as an interaction between an SME's prior strategy, related level of absorptive capacity, and the handholding processes provided by the public partners. Finally, we turn to the actual impacts of Ecoprofit on the SMEs' green strategy.

Strategies prior to participation in Ecoprofit

We determined the SMEs' implemented green strategy with reference to (a subset of) dimensions suggested by Noci and Verganti (1999): competitive arena, key technologies, networking infrastructure, and green image. Furthermore, we used the SMEs' stated motivation to participate in Ecoprofit (e.g., cost reduction) as an indicator for their strategic stance.

Concerning prior strategies, the SMEs in pattern 1: hold-up and pattern 2: step-up both followed a reactive strategy and demonstrated broadly the same characteristics prior to Ecoprofit. They operate in competitive international (pattern 1: hold-up) and national (pattern 2: step-up) niche markets. In these patterns, the SMEs' most pressing concern regarding the environment prior to Ecoprofit was to comply with regulations and, sometimes, to reduce costs through eco-efficiency. These SMEs also did not see any specific pressure or demand for eco-innovations from the external environment. Hence, environmental sustainability was perceived as irrelevant to their industry and not as something demanded by their customers (in a business-to-business context); accordingly, no green image was pursued by the SMEs:

"And to them [business customers] it doesn't matter at all if a machine has any environmental features. They are only interested in whether the machine can produce cogwheels efficiently. When you have machines on offer that save energy it becomes more interesting, but this is a question no one usually asks." (EN1, executive manager)

Before participation in Ecoprofit, SMEs in these patterns only invested to a limited degree, at best, in key technologies in the sense of eco-innovations. For instance, some of the SMEs (EN2, EN3, and EN4) implemented incremental process innovations (e.g., in the area of energy efficiency). No significant prior external networking infrastructure for eco-related knowledge existed in the SMEs, with Ecoprofit being the first type of structured approach to eco-innovation. The need to receive an external stimulus to engage in eco-innovation in the form of the proactive approach by the local authority further demonstrates their reactive strategy.

In pattern 3: frontrunner, the SME followed an innovation-based strategy long before participation. What is similar to the prior patterns is that the SME did not perceive pressure for managing ecological issues from the external environment. However, in all other aspects the SME's behavior differed. The company mainly operates in a regional market (though to some minor extent in the national market) and, as the owner-manager explained, the SME had gained significant prior technological experience in the area of process and product innovations with improved eco-efficiency:

"We started with the area of green innovation about 20 years ago, I mean before participation in Ecoprofit. For example, in the 1990s we started developing alternative waste water treatment systems." (EN7, owner-manager)

The company also maintained one business area with environmental technology and gained prior experience with environmental aspects in their core business. They also considered factors other than costs and profits in relation to eco-innovation: that is, the ownermanagers, based on normative reasons (personal and family values), had consciously decided to make ecological issues an integral part of their business:

"Really, we [the two owner-managers] have been environmentally oriented for a long time, primarily due to personal reasons. We are two leaders, my brother and I." (EN7, owner-manager)

The SME seems to be able to create a win-win situation, which is demonstrated, for instance, by their perceived impact of their green image on employee performance:

"[We] think that we want to work and live in a community, that it is worth it, for ourselves and for our employees [...] that really is a win-win situation, you have satisfied employees and improved performance." (EN7, owner-manager)

Their focus on regional markets may also have led to more tangible opportunities to actively pursue a green image. Finally, also in line with their proactive strategy, instead of simply reacting to a one-offexternal stimulus by the local authority, the owner-manager pointed out that the company deliberately decided to be one of the first companies to participate in the program.

Discussion: the relationship between green strategy and absorptive capacity

Green strategies have been identified as an important antecedent for eco-innovations (Noci and Verganti, 1999). We have shown that participating SMEs had implemented different green strategies prior to their participation in the PPP (reactive and innovation-based; in our sample no SME with an anticipatory strategy was identified). Given that a firm's strategies are one of the key antecedents of absorptive capacity (Lane, Koka and Pathak, 2006: 856), we would also expect that these strategic investments in eco-related competencies, technologies, and networking infrastructure prior to the PPP initiative would influence ecorelated absorptive capacity-either directly or as a 'by-product' (Cohen and Levinthal, 1990; 1994). Depending on which green strategy SMEs have pursued before Ecoprofit, they can be expected to have different starting levels of absorptive capacity (low, medium, high) at the beginning of the PPP. Next to the chosen strategy itself, it is probably also in relation to absorptive capacity that knowledge transfer into companies intended by a PPP is generally easier for the more proactive companies (anticipatory and innovation-based) (Macpherson and Holt, 2007: 182).

Proposition 1: depending on the green strategy (reactive, anticipatory, or innovationbased) followed prior to involvement with the PPP, SMEs enter the PPP with a related level of absorptive capacity (low, medium, or high, respectively).

Next, we turn to the PPP set up and the ways in which the green strategies and the related level of absorptive capacity interact with the handholding mechanisms.

Green strategies, absorptive capacity, and the SMEs' response to PPP handholding

Through the analysis of the data of the overall PPP, we identified that the prior existing green strategy and the related level of absorptive capacity are together an important antecedent for the SMEs' behavior in the PPP, but not the only one. Another is the specific PPP setup, particularly with regard to the public partner's level of proactivity, which can make SME behavior differ. The remainder of this section further analyzes the role of green strategy, prior absorptive capacity, and local authorities' level of proactivity by looking at individual handholding processes in relation to the three key dimensions for knowledge absorption (identification, assimilation and application) (Lane, Koka and Pathak, 2006; Zahra and George, 2002).

Handholding processes and the identification of knowledge

With its focus on eco-efficiency, Ecoprofit 'preselects' specific external knowledge in order to increase the overlap with the SMEs' existing knowledge base, which generally eases knowledge identification. The PPP provides two different types of handholding to facilitate knowledge identification with its beginner and club programs. This provides the necessary incentives for company representatives to participate and thereby contributes to their individual competency development. This is important as the actual identification of knowledge occurs at the individual level (Cohen and Levinthal, 1990). For each pattern, SME behavior differs.

In pattern 1: hold-up, due to their prior reactive green strategy, the SMEs started participation in the PPP with a low level of absorptive capacity. With their limited prior knowl edge base related to environmental issues, there was limited overlap with the new knowledge offered by the PPP. Accordingly, they strongly requested sector-focused knowledge, which had the potential for direct application in their specific organization. This was shown in the concern often raised by the SMEs in this pattern (and pattern 2: step-up) that the handholding offered was not always (sector) specific enough:

"Well you would really need an offer [referring to the club], if it ever came again, with a group of companies that share the same interests; something that is tailormade. We don't need to talk about waste with someone who has to get rid of hollow needles or, I don't know, that is dealing with plastics. We have different topics. [...] For us the problem is that, as an industrial company, we had basically nothing in common with the people at the table there [referring back to beginner and club programs]." (EN1, executive manager)

"In the meetings of the trade associations [in contrast to Ecoprofit] it is really of advantage that you have companies from the same sector with similar problems." (EN2, executive manager)

In many of the PPPs in this pattern, the club program was not offered, discontinued, or offered at a later stage by the local authority, and therefore could not serve as an immediate means to continuously identify new knowledge (EN1, EN3, and EN4). If the club was offered, the owner-managers of the companies (EN2) denied the environmental team further engagement in the club.

Initially following the same reactive strategy, pattern 2: step-up shows similar behaviors in many respects, particularly, the demand for sector specificity. However, it also differs: the owner-managers were the main contact person for the Ecoprofit program. We found that there are various reasons for this: first, the SMEs in this pattern were still small enough (all had fewer than 65 employees) that the owner-manager(s) could deal with it directly. Additionally, we find that in contrast to pattern 1, pattern 2: step-up is characterized by PPPs with an overall medium level of activity by the local authority, which might also have influenced the decision of owner-managers to participate directly in the initiative. As one owner-manager states:

"I was motivated really through an external hint from the city where we were contacted personally to get involved." (EN6, owner-manager)

That, next to prior strategy, both SME size and the local authorities' level of activity is important for owner-management involvement is perhaps best shown from the example of one SME from pattern 1: hold-up (EN3) which is also small (50 employees), but participated in a PPP with a rather unenthusiastic local authority which cancelled the program shortly after initiation, much to the dismay of the company, as the manager explains:

"It was basically enough [the beginner program]. You could have continued [...] maybe with two meetings a year to keep at it [eco-innovation] better." (EN3, manager)

Proposition 2: green strategy, SME size, and level of activity by the local authority influence whether an SME's owner-management decides to become personally involved in the PPP's handholding processes.

Even though the local authorities with a medium level of activity managed-with limited success-to offer the club program, the SMEs in this pattern also demonstrated a strong need for focused, sector-specific knowledge (as in pattern 1: hold-up). Hence, the SMEs' absorptive capacity stemming from their prior reactive green strategy is simply not enough to engage in such a peer-to-peer handholding process which is more or less unstructured, of cross-industry nature, and has a high diversity of actors and knowledge. Besides lack of absorptive capacity, the SMEs also did not participate because they simply "had no time." Again, this is directly related to the rather small size of the SMEs in this pattern (24 and 65 employees)-a fact also recognized by the local authorities: "for such small companies it is just too much to participate in the club" (LA6).*

The SME from pattern 3: frontrunner, in clear contrast to the request for focus and sector specificity in earlier patterns, easily absorbed the information given in the beginner program, sought out networks to further deploy its strategy, and saw a benefit from exchanging knowledge with a high diversity of actors:

"Generally networks are really important, not just a buyers' network but really any kind, like round tables or with the local chamber of handicraft. This also goes for the trade association, really important. Really a network is important because during daily work you don't think of these things [eco-innovation, and in a network you stay on top of things and get new ideas continuously." (EN7, owner-manager)

The SME was located in a PPP context that was proactively driven by the local authority. The local authority had successfully designed and maintained a peer-to-peer-based club program, in which the sample SME has been participating for over 10 years. This handholding process is rooted much more strongly in knowledge exchange between participating firms. The high diversity of partners offered in the club is important as the potential for problem solving is constrained if actors are too similar (Boons and Berends, 2001), as is also reflected by the owner-manager's comment:

There is no competition because you are from different sectors, which is an advantage [for open exchange] [...]. In this area [eco-innovation] an exchange is really wanted and aimed for. [...] Being more sector-specific may have some advantages but I think overall the disadvantages outweigh them. I mean then you think more or less the same stuffand you have the same development-jams. [If it is not sector-specific] you look more openly what is he doing and maybe it's not such a bad idea. For example, a cleaning company thought about converting its fleet into a fleet with only electro mobiles, as they have many short distances to cover. Well, we also do this [...] surprisingly you find we have the same challenges." (EN7, owner-manager)

The Ecoprofit club was also rather unstructured and the participants needed to steer the agenda themselves rather than being told what to do. According to both the local authority and the consultant involved, the club facilitated implementation of measures from the beginner program, continuous improvement, generation of new ideas, and ways simply to stay ahead:

"The club functions after plan-do-check-act with the goal to secure and implement the basic knowledge acquired in the beginner program. The clubs helps to do so with its structure and regular meetings to initiate continuous improvement towards environmental management. The networks are important for the exchange of new ideas and new solutions. They also motivate you to look for new potential measures [...]." (CO7, Consultant)

The difference between the patterns with regard to the SMEs' participation in the club program leads us to the following proposition:

Proposition 3a: even though SMEs can benefit from basic handholding processes which deliver (semi-) structured and more focused knowledge, their absorptive capacity for ecoinnovation determines to what extent they can cope with unstructured and less industryspecific knowledge offered in the PPP setting.

Proposition 3b: an SME's ability to participate in peer-to-peer handholding processes ('clubs') characterized by unstructured, unfocused knowledge and idea generation through mechanisms of self-organization requires a high level of absorptive capacity (and a more proactive green strategy in prior periods).

Handholding processes and the assimilation of knowledge

The second dimension of absorptive capacity, assimilation, is also supported by the PPPs. First of all, the participation in workshops, as explained earlier, makes company participants switch between a company's internal and external spaces. Coming back from workshops and related handholding processes, they transfer the knowledge back into the organization, which may lead to an assimilation of knowledge through informal exchange. These appointed individuals are champions of communication or boundary spanning individuals, roles that have been recognized as a very important element for innovation (Tushman, 1977). As different people are involved in the three patterns, this facilitates assimilation accordingly.

A more formal approach to knowledge assimilation also required by Ecoprofit is the establishment of an environmental team. The patterns demonstrated different setups (confer identification dimension) due to a mix of prior green strategy and SME size. In pattern 1: hold-up, the SMEs appointed only one or two persons to the environmental team, without owner-management involvement. These were managers from the areas of maintenance, purchasing or sales. For SMEs in pattern 2: step-up, the major difference was that ownermanagers were part of the environmental team. Size-wise the diversity increased: one SME installed a team with four members, the other-the smallest SME-initially had a 'team' consisting only of the owner-manager (enlarged at later stage). In pattern 3: frontrunner, the environmental team consisted of one owner-manager and two other managers. The formation of the environmental team is important as it collaboratively evaluates the new knowledge in the context of the specific organization and searches for potential applications, a process in which further organizational members are ideally involved. Through this process, the individual knowledge expansion is slowly translated into organizational knowledge and new absorptive capacity becomes available in subsequent periods.

In pattern 2: step-up and pattern 3: frontrunner, with their larger size and with various functions being represented, the environmental team usually represented a cross-functional team or, in the case of owner-management involvement, a team crossing hierarchical levels. Both characteristics are important for knowledge assimilation across organizations (Lane, Koka and Pathak, 2006), dissolving knowledge islands, and ultimately successfully pursuing eco-innovations (Hart, 1995). In contrast to previous research (e.g., del Brío and Junquera, 2003), our findings regarding the environmental team suggest that, even in SMEs, a certain degree of formal structure for environmental management can be established.

Proposition 4: the formation of the environmental team with regard to functions represented and hierarchical levels is an important antecedent for effective knowledge assimilation.

Handholding processes and the application of knowledge

The application dimension is operationalized here in three aspects: general fit with the dominant logic, handholding in the form of consultancy services, and-as result of the former aspects-the eco-innovations actually implemented.

First, the overall orientation of Ecoprofit, with its focus on eco-efficiency and process innovation ('preselected knowledge'), means that this new knowledge remains close to even the most reactive SME's 'dominant logic' (Lane and Lubatkin, 1998). This generally increases the likelihood that the knowledge will be applied (actual eco-innovation).

Second, the PPPs' beginner program provides agent-based handholding in the form of customized consultancy services in order to support the implementation of the knowledge gained directly ('application for commercial ends') in each of the SMEs. Thus, our findings support the notion that agent-assisted handholding helps in terms of guiding SMEs individually through the innovation process (Friedman and Miles, 2002). Sending consultants into the target organization has also previously been recognized as an effective practice for knowledge transfer (Dyer and Singh, 1998). As a by-product of these implementation projects, new absorptive capacity is developed.

Third, concerning actual eco-innovation, all the SMEs were able to reap the benefits of participation in the Ecoprofit program: that is, they realized economic gains coupled with environmental improvements. The majority of eco-innovations implemented by all the SMEs related to eco-efficiency improvements of their processes.

Whilst the latter demonstrates some of the more general characteristics, which we found to be rather similar across the sample, we also found several differences regarding the SMEs' patterns. The SMEs from pattern 1: hold-up remained fixed on the idea that environmental issues were only relevant if they lead to a reduction of costs in processes:

"It's not about continually getting new ideas; instead we want to optimize existing processes, that is the manufacturing costs, so that we can guarantee the survival of the company." (EN1, executive manager)

In this pattern, the SMEs particularly stressed the high importance of the consultant to support the eco-innovation implementation process. Still, despite this support, only a limited number of process improvements (energy-efficiency, waste management, and replacement of hazardous materials) were implemented. For one SME, we could explicitly recognize how the green strategy pattern hindered eco-innovation: plans for more energyefficiency through a thermal heat plant were not implemented for several years due to a lack of owner-management support (EN2). This shows that, despite proper knowledge processing in the identification and assimilation dimensions, the ultimate absorption of knowledge can be hindered when there is a reactive strategic posture and a lack of ownermanager involvement. This sometimes renders the PPP's most basic handholding to be ineffective. In other words, without direct or at least indirect owner-manager support, it is difficult to "unfreeze" the dominant logic. Instead, the SMEs enforce their deliberately chosen reactive green strategy and, consequently, hinder further development of absorptive capacity.

The SMEs in pattern 2: step-up were similar to those in the reactive hold-up pattern in that, during the initiative, only a couple of process innovations were implemented. However, their dominant logic "unfroze" to some extent in the later stages of the program as they developed awareness of a business case for corporate greening:

"We realized it was only the first step to deal with the topic [eco-innovation] and then to deduce measures which can also be turned into a competitive advantage." (EN5, owner-manager)

We theorize that it is the direct involvement (or at least support) of owner-managers in the application phase that allows for timely changes in the top manager's perception of environmental issues.

The SME in pattern 3: frontrunner already exhibited a strong dedication to environmental sustainability before Ecoprofit. It entered the PPP with an eco-benign dominant logic and demonstrated openness towards all types of eco-innovation. In this pattern the SME implemented the highest number of process innovations. Further, in contrast to the other patterns, it had already implemented an organizational innovation (a monitoring system) showing its orientation towards continuous improvement.

Discussion: handholding processes and absorptive capacity

Through the direct linkage of the PPP's handholding processes to each of the three dimensions of absorptive capacity (identification, assimilation, and application), knowledge transfer into SMEs is improved. Hence, although from the standpoint of an independent company it would be expected that SMEs would be constrained by their actual absorptive capacity (as an outcome of deliberate strategy choice in earlier periods), the handholding processes offered during the PPP's runtime enable them to absorb more knowledge. Basically, an SME's absorptive capacity is 'temporarily enhanced' through the concerted handholding efforts of the PPP.

Proposition 5: the effectiveness of knowledge transfer into SMEs and the degree to which new absorptive capacity is developed as a by-product depends on the concerted offering of handholding processes directed at each of the three dimensions of knowledge absorption: identification, assimilation, and application.

In all of the three dimensions of absorptive capacity, owner-manager involvement is crucial. It is represented by the aggregation of involvement in participation in workshops (identification), the making of appointments to the environmental team (assimilation), and decision-making regarding actual implementation of eco-innovations (application). Thus, our findings further specify those of Macpherson and Holt (2007: 181) that the entrepreneur (or owner-manager) mediates the creation of absorptive capacity. We propose the following:

Proposition 6a: owner-manager involvement in handholding processes in knowledge identification, assimilation, and application drives the development of absorptive capacity.

Proposition 6b: if owner-manager(s) are involved in knowledge identification and assimilation, they are sensitized to ecological issues, facilitating application and the transformation of the firm's dominant logic.

The PPP is an inter-organizational structure providing strong ties between the local authority and the participating SMEs and it can therefore be understood to be part of the "firm's [inter-organizational] structures and processes" and thereby as antecedent of absorptive capacity (Lane, Koka and Pathak, 2006: 856; see also: Hansen, Sondergard and Meredith, 2002). More specifically, as absorptive capacity is cumulative, by this process of PPP-facilitated knowledge transfer through handholding processes, new absorptive capacity is developed as a by-product (Cohen and Levinthal, 1994) and is then available in subsequent periods for improved knowledge absorption. This then contributes to the formation of expectations (Cohen and Levinthal, 1990; Hansen, Sondergard and Meredith, 2002) and subsequently enables an SME to better evaluate the role of (ecological) factors for the future development of technology and markets (Cohen and Levinthal, 1994). New knowledge can alter the way in which companies define their industry and competitive strategy, lead to strategic flexibility, and thereby enable strategic change (Lane, Koka and Pathak, 2006; Zahra and George, 2002: 190), particularly when owner-managers are involved directly in the handholding processes. Eventually, this temporary elevation could lead to the transformation of routines and behavioral patterns, even beyond the runtime of the PPP.

These mechanisms related to green strategies are what was observed after Ecoprofit's beginner program and is presented in detail in the next section.

The impact of participation in Ecoprofit on SMEs' green strategies

As is evident from Table 3, we identified a significant change in green strategies only in pattern 2: step-up (that is from a reactive to an anticipatory strategy), whereas for pattern 1: hold-up and pattern 3: frontrunner, their green strategies were further reinforced (reactive and innovation-based, respectively). Each pattern is described in greater detail by making reference to knowledge identification, assimilation, and application.

Pattern 1: hold-up

In pattern 1: hold-up, SMEs implemented few eco-innovations and after the beginner program maintained their reactive stance. They still perceived ecological issues to be related to cost and efficiency in nature, without recognizing the potential for business opportunities:

"For us the ultimate goal is to make the processes as cost-efficient as possible [...]. If environmental things cause costs, we undertake measures to avoid that [...]. But the environment itself is not a driver [for us]. [...] We don't wish to reorganize everything ecologically." (EN1, executive manager)

With regard to identification of new knowledge after Ecoprofit, pattern 1: hold-up SMEs did not actively seek further eco-related knowledge sources. They rather lamented that they missed further support from Ecoprofit after the beginner program. This is partly reasonable, as in two cases the local authority terminated the complete program (EN1 and EN3). Concerning the knowledge assimilation dimension, pattern 1: hold-up SMEs to a certain degree reduced the time the environmental team could invest in further ecoinnovations after the initiative's termination (EN1, EN2, and EN3). Concerning application, the SMEs did not implement any significant further eco-innovations, except for one SME (EN2), which, as mentioned earlier, did finally implement one of the eco-innovations originally planned within the beginner program.

A major barrier to further innovation and strategy development lies in the continued lack of owner-management support, as one manager explained:

"There is a lot of potential here. [...] This is the decision of the owner-manager; it's a question of doing either just the basics or the optimal thing. I mean you could really get in a person on a part-time contract who would pick out [and implement] projects that are in the area of environmental management, but [in our case] often just the minimum is done and not necessarily what would be optimal." (EN2, executive manager)

Pattern 2: step-up

In contrast to the prior pattern, the SMEs in pattern 2: step-up were able to develop further absorptive capacity based on whether they adjusted their dominant logic and realized that addressing environmental issues could lead to competitive advantages:

"We have realized that you can use it [eco-innovation] for an image advantage for the main customers."(EN5, owner-manager)

That there is indeed a strategic change, not only at the level of owner-management perception, but also at the level of company action is demonstrated when looking at how SMEs dealt with knowledge some time after participation in the beginner program.

With regard to knowledge identification, the SMEs in this pattern further collaborated with other (network) initiatives and partners. For instance, one SME (EN6) tapped into another environmental initiative in its federal state, which facilitates SMEs in monitoring their environmental improvements and provides support through guidelines, workshops, and cooperation with capacity-building institutions. This opportunity for further networking was also actively supported by their local authorities with their overall medium level of activity. Most importantly, in pattern 2: step-up, the local authorities provided long-term stability in what they offered compared to pattern 1: hold-up, as the local authorities realized that coordinating or even cooperating with other environmental networks (in this case with the environmental network of a trade association) is important in terms of sharing resources and maintaining offers in the long term.

Proposition 7: the long-term continuation of (some part of) the public partner's handholding processes is an important factor in the development and transformation of participating SMEs.

Concerning knowledge assimilation, the SMEs partly increased their environmental teams. One owner-manager brought his son, who will take over the company in the long term, into the team (EN6). His responsibility was then to focus on the integration of ecoindicators into the ISO 9001 quality management system. Bringing additional family members into the team demonstrates the increasing strategic relevance given to eco-innovation and, more broadly, demonstrates the role unique family dynamics (and values) play in the choice of the eco-innovation strategy (Sharma and Sharma, 2011).

Also regarding the application dimension, the SMEs in this pattern changed. They all implemented further process innovations in the areas of energy, water, waste, or hazardous materials. Moreover, as the former example (EN6) demonstrates, at least some of the SMEs engaged in organizational innovations (in this case, the ISO 9001 management system). Based on the positive experience of receiving individualized handholding, some SMEs subsequently sought other third party support. For example, EN5 now has a consultant coming in twice a month funded by their own budget, also to deal with environmental issues.

Overall, the changed behaviors on all dimensions of absorptive capacity demonstrate how the SMEs further developed their individual competencies, networking capacity, and key technologies to 'step up' from a reactive to an anticipatory green strategy (Noci and Verganti, 1999).

Proposition 8: an SME's owner-manager involvement in handholding processes and a proactive public partner best enables more reactive SMEs to develop new absorptive capacity, change the formation of expectations regarding ecological issues, and step-up their green strategy.

Pattern 3: frontrunner

The SME (EN7) in pattern 3: frontrunner benefited from the handholding process from both the beginner and club programs, established a sturdy environmental team, and engaged most strongly in eco-innovation. Thereby, it was able to use Ecoprofit to deploy its innovation-based strategy to a greater extent. Basically, this pattern shows that SMEs can go even further than relating eco-innovation to competitive advantage and actually aim to make the business 'as green as possible':

"We [my brother and I] have made it our goal to make the company as green as possible." (EN7, owner-manager)

Ultimately, through Ecoprofit participation, the two owner-managers became more strongly committed to their values and able to develop a broader vision of sustainability for their company:

"For the future, we think we have a social responsibility as entrepreneurs of a smaller company and that we must stand up for and make use of the possibilities to shape the [societal/institutional] framework." (EN7, owner-manager)

Concerning the identification dimensions of absorptive capacity, they saw the Ecoprofit club in particular as an opportunity to ensure continuous learning, monitor future opportunities for eco-innovation (product, process, and organizational), and to expand their business network:

"Yes, we are very interested in this [continuing to expand the area of green technologies] and through Ecoprofit [the club] we are able to expand our contacts." (EN7, owner-manager)

Beyond the club program, and similar to pattern 2: step-up, the SME in this pattern also started to engage in other external networks for knowledge sourcing. Comparable to pattern 2: step-up, the local authority proactively contributed to this by offering information about or even partnering with other sustainability network initiatives. For example, a collaboration with a neighboring Ecoprofit initiative led to a joint club offer where participants from both initiatives came together in order to discuss issues beyond eco-efficiency and gain a deeper understanding of more comprehensive sustainability issues.

Concerning assimilation, in this pattern it became clear that Ecoprofit had an impact on employees beyond the environmental team:

"If we had leftthe club five years ago we would not be anywhere near as active as we are now." (EN7, owner-manager)

Concerning application, EN7 not only further pursued basic efficiency-related process innovations, but also was active in the area of renewable energies. For example, it planned to upgrade their car fleet with electric mobiles. Moreover, the SME became involved in citizenship projects within its community for which it received an award in 2009 from the federal state for its exceptional societal commitment. This further stresses how the SME, as part of its strategy, systematically integrated sustainability into its green (sustainability) image.

Based on the above presentation of our findings and the subsequent discussion, we are able to develop an integrated framework for eco-innovation in the context of PPPs, which we will briefly present in the next section.

An integrated framework for eco-innovation in the context of PPPs

This paper contributes to the literature on eco-innovation in SMEs by demonstrating the relationship between three independent but related constructs, namely green strategies (Noci and Verganti, 1999), absorptive capacity (Cohen and Levinthal, 1990; 1994), and handholding processes provided within PPPs (Friedman and Miles, 2002). As such, our research goes beyond looking at the effects of mere membership in an inter-organizational network on absorptive capacity, but rather focuses on "the nature of the links in terms of structures and processes" (Lane, Koka and Pathak, 2006: 849) and is an attempt to shed more light on knowledge transfer and learning in inter-organizational collaborations. By covering the above-mentioned constructs in a single approach, we also contribute to Lane, Koka and Pathak's (2006: 857) call for integrating firm strategies into empirical research on absorptive capacity.

Based on our findings, we first showed that green strategies play an important role in an SME's participation in a PPP. The SMEs' chosen green strategy before participation in the partnership determines their level of absorptive capacity and, accordingly, which types of handholding processes they are able to respond to. By addressing the various dimensions of absorptive capacity (identification, assimilation, application) we were able to demonstrate the function of handholding processes and how they need to be combined to deliver appropriate support for knowledge absorption. We also found that prior green strategy, SME size, and the proactivity of the public partner all influence whether owner-managers directly participate in handholding processes and how this influences strategy transformation. Finally, we also showed that, more generally, the local authorities' level of activity is an important moderator in terms of the SMEs' response to handholding processes (see Figure 1).

Conclusion

From our study we conclude that PPPs can result in an SME engaging in a structured manner in eco-innovation, or intensifying existing efforts. In some cases a transformation of the SME's green strategy is even possible. We therefore disagree with the recent findings of Varis and Littunen (2010) who suggest that the role of regional support organizations is only marginally important. Still, as our case analysis shows, more often than not, an SME's strategic pattern remained constant over the time of the PPP, which reflects Cohen and Levinthal's (1990: 138) observation that "reactive and proactive modes of firm behaviour should remain rather stable over time." In the few cases where a change of strategic pattern could be observed, we identified several combined factors, including the SME's owner-management involvement and the local authority's level of activity as key determinants. The owner-manager involvement is necessary to "unfreeze" the dominant logic of companies, which confirms research highlighting distinct SME characteristics, such as being managed by owners (see, for example, Bougrain and Haudeville, 2002; Spence, 1999) and, as Varis and Littunen (2010: 132) deduce from the literature (not confirmed in their empirical results), that "innovativeness may translate into the innovativeness of the entrepreneur." Future research could shed more light on the role of the individual entrepreneur in handholding processes, their interaction with other organizational members, and how this changes the formation of expectations and strategy choice. Given the family factor of our sample, it would also be worthwhile to discuss further how 'family involvement' as an intangible factor of company behavior (see, for example, Habbershon, Williams and MacMillan, 2003; Moores, 2009) actually influences the deployment of more holistic sustainability strategies.

From our analysis we can further suggest that strategy changes benefit from a high degree of proactivity on the part of the local authority. This relates to recent research by Mu, Tang and MacLachlan (2010) on disseminative capacity, which stresses the need to focus not only on the receiver but also on the sender of knowledge in inter-organizational partnerships. Whilst we realize that disseminative capacity is somewhat under researched, this study further contributes to research on absorptive capacity in inter-organizational collaborations.

Implications for policy makers

With this we are able to derive several implications for policy. First, despite the need to limit the runtime of PPPs, it is important that some are established with a long-term vision, that is, provide companies with the opportunity to continuously access basic handholding processes (e.g., information services, club offers).

Second, policy makers should consider that support programs need to be customized to the (green) strategies employed by SMEs because poorly matched communication will be disregarded by SMEs (Hansen, Sondergard and Meredith, 2002). Therefore, either various types of handholding processes need to be offered within the same program (e.g., beginner vs. club programs) or programs need to be directed exclusively at groups of SMEs with the same strategy pattern. Last but not least, policy makers should emphasize that support programs are designed in a way that encourage (or even mandate) the involvement of the entrepreneur (e.g., the owner-manager), as this significantly increases the potential for strategy transformation.

Limitations

This study is limited in various ways. First, as we explained earlier (see data analysis), our longitudinal research design represents "retrospective case histories" (van de Ven and Poole, 1990). Future longitudinal case designs should also be considered that scrutinize how the innovation process itself unfolds (van de Ven and Poole, 1990), for example, by using participatory or action research. Second, we interviewed only one participating SME in each of the PPP initiatives. Third, in this study we analyzed the SMEs across all strategic patterns with an emphasis on eco-efficiency. More research is needed into how SMEs can achieve radical process, product and business model innovations with research on entrepreneurship and sustainable development being a promising path (see, for example, Hall, Daneke and Lenox, 2010; Schaltegger and Wagner, 2011). Fourth, we have assumed a rather positive link between inter-organizational structure and the SMEs' absorptive capacity. However, other studies (Lane, Koka and Pathak, 2006) also show that inter-organizational structure could lead to the deterioration of absorptive capacity, in that reliance on PPP handholding processes weakens the individual SME's competencies in identifying external knowledge as a dependence structure is established. Nonetheless, a customized PPP setup that recognizes the different green strategies found in the heterogeneous group that SMEs make up may trigger change for eco-innovation.

Acknowledgements

An earlier version of this paper received the best paper award at the CCSBE conference 2010 in Calgary, Canada. We would like to thank the anonymous reviewers and the academic committee of the CCSBE for this acknowledgement. We thank Anica Zeyen for her support in writing the earlier version of this paper. We also thank our student researcher, Svenja Stropahl, for supporting us in the data collection process.

Subject: Small & medium sized enterprises-SME; Public private partnerships; Sustainable development; Case studies

Classification: 1540: Pollution control; 2430: Business-government relations; 9520: Small business; 9130: Experiment/theoretical treatment

Publication title: Journal of Small Business and Entrepreneurship

Volume: 25

Issue: 4

Pages: 451-477,533-534

Number of pages: 29

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Taylor & Francis Ltd., Journal of Small Business and Entrepreneurship, Taylor & Francis Ltd.

Place of publication: Regina

Country of publication: United Kingdom

Publication subject: Business And Economics--Small Business

ISSN: 08276331

Source type: Scholarly Journals

Language of publication: English

Document type: Business Case, Feature

Document feature: Tables Diagrams References

ProQuest document ID: 1312503898

Document URL: http://search.proquest.com/docview/1312503898?accountid=38610

Copyright: Copyright Journal of Small Business and Entrepreneurship 2012

Last updated: 2013-10-01

Database: ABI/INFORM Complete

Document 51 of 100

Proud to Be Distinctively Different: Peter Bonac and His Mobiado Luxury Mobile Venture

Author: Wong, Ken Kwong-Kay

ProQuest document link

Abstract:

On April 5, 2011, Mobiado's founder and CEO Peter Bonac announced that his Vancouver-based luxury mobile phone company would collaborate with Aston Martin to launch a special edition of the Mobiado phone. This brand licensing agreement caught the attention of industry players because Mobiado is a small market entrant. Unlike Vertu which is financially supported by Nokia - the world's largest telecommunications equipment maker - Mobiado was founded in 2004 by a 28-year-old Engineering Physics graduate using his own savings. Without a strong financial background and a long history in business, signing a global licensing deal with a British luxury sports car brand was a milestone for Bonac, a Canadian entrepreneur who had aimed to do things differently from the beginning. [PUB ABSTRACT]

Full text:

Introduction

It all comes down to risk and return, and I want to do things on my own.

- Peter Bonac

Mobiado's founder and CEO, Peter Bonac, was delighted. After six months of hard work, his Vancouver-based luxury mobile phone company announced on April 5, 2011 that it would collaborate with Aston Martin to launch a special edition of the Mobiado phone. "There is a good fit between the two brands," said Bonac. "Like Aston Martin, Mobiado prides itself on design innovation and technological excellence."2, 3 This brand licensing agreement caught the attention of industry players because Mobiado is a small market entrant. Unlike Vertu, which is financially supported by Nokia, the world's largest telecommunications equipment maker, Mobiado was founded in 2004 by a 28-year-old Engineering Physics graduate using his own savings.4 Without a strong financial background and a long history in business, signing a global licensing deal with a British luxury sports car brand was a milestone for Bonac, a Canadian entrepreneur who had aimed to do things differently from the beginning.

Origin of Mobiado

You need to learn the manufacturing process in order to design things.

- Peter Bonac

Bonac Innovation Corporation turned profitable soon after. These successes were driven by the fact that Bonac had produced a very unique product in the market: the world's first mobile phone produced through Computer Numerically Controlled (CNC) machining from aircraftaluminum.1 Bonac decided to brand his luxury mobile phone the "Mobiado," a conversion of the word "mobile" to give it a European flare reflecting his background and family heritage. His desire to produce the finest and most technologically advanced telecommunication product did not happen overnight. The origin of Mobiado could be traced back to the late 1990s, when Bonac was still a student at the University of British Columbia (UBC). He studied Engineering Physics with a specialty in mechanical engineering, a niche field that usually attracted about 30 students to a class. At UBC, Bonac was exposed to a variety of mechanical engineering techniques. He developed a strong interest in design and participated in several interesting school projects with his classmates during the fourth and fifth years of undergraduate study.

As the son of a wood engineer who operated his own machine shop, Bonac had been given the opportunity to learn about various CNC machining techniques from his father. The process of turning a simple-looking aluminum block into sophisticated manufacturing parts excited him. During his fourth year of undergraduate study, Bonac was working on a project on chip recycling. He had an idea to design a product that would help machine shops recycle aluminum waste chips and reduce harmful chemicals during the recycling process. Working with his classmates Jeffrey Chang, Vincent Kwong, David Moffat and Craig Wilkinson, Bonac's concept was brought to life. Their design was so appealing that it won not only the first prize in the PATSCAN Environmental Innovation Contest, but also the Molson Prize for best recycling concept in 1997.2 The success of these school projects encouraged Bonac to become a great designer. After graduating from UBC, he did a brief stint at his father's machine shop to sharpen his mechanical engineering skills. In the late 1990s, Nokia's launch of a luxury mobile brand called Vertu caught Bonac's attention. Sensing a great market opportunity, he became interested in the luxury mobile phone market. His desire to develop innovative design and become distinctively different from others led him to establish Bonac Innovation Corporation in Vancouver. Acting swiftly to enter the market, Bonac launched his first product, the Mobiado Professional, in 2004. Mobiado became the world's second commercially available luxury mobile phone brand after Vertu (see Appendix 1 for Luxury Mobile Phone Launch Timeline).

Market Overview

In the luxury mobile phone business, you develop great external around current or even obsolete internal.

- Peter Bonac

In the years since the first mobile phone was commercially launched in 1983, it had evolved quite a bit.1 The mobile phone had become smaller, lighter and more fashionable, and it was no longer merely a business communication device. Although a few jewellers started to decorate their clients' mobile phones with diamonds and precious stones in the 1990s,2 the commercial luxury mobile phone sector did not really exist until Vertu launched its £5,350+ Signature series in 2002.3 In addition to Vertu, companies such as Mobiado, GoldVish, GRESSO, Givori and Aesir subsequently entered the market to target the urban rich who are willing to spend a fortune on their mobile phones (see Appendix 2 for Mobiado Competitive Matrix).

High-end fashion brands such as Christian Dior, Giorgio Armani, Prada and Versace also took advantage of this niche market by launching their own luxury mobile phones via brand extension.4, 5, 6 A premium wristwatch maker, TAG Heuer, introduced a luxury mobile phone with the help of a Customized Design Manufacturer (CDM) called ModeLabs in France.7 The market is a small yet highly lucrative one; famous designers such as Peter Aloisson8 and Stuart Hughes9 are well known for their phone customization customization service, helping clients to decorate their mobile phones with diamonds and gold. Institutional investors were also betting on the market by funding start-ups such as Celsius X VI III of France. "The intersection between technology and luxury is one of our investment themes in the coming years," said Olivier Sichel, a partner at venture capital firm Sofinnova, "We are well placed to capitalise on this trend."10 The luxury mobile phone market has grown rapidly not only in the oil-rich Middle East region, but also in emerging markets such as Russia, China, and Vietnam. In 2009, the annual sales revenues of the global luxury mobile phone market had reached US$11 billion.1 Vertu, the pioneer and leader of this market, sold about 300,000 phones from 2002 to 2010.2

Beginning the Mobiado Journey

From day one it has always been Mobiado's goal to make a phone that is unique and to use innovative manufacturing techniques to build a superior, quality product.

- Peter Bonac3

Unlike typical start-ups that rely on angel financing, bank loans, or investment from family members, Bonac Innovation Corporation was funded by Peter Bonac himself using his own savings. "I was very lucky to become profitable soon after launching the first Mobiado phone to the market," said Bonac, "My phone was unique at that time and distributors around the world came to seek my products."

When other luxury phone makers were busy encrusting their phones with precious materials such as diamonds and gold, Bonac took a different approach to differentiate his phones from the crowd. The Mobiado phones did not share any "bling-bling effects" like others. Instead, Bonac focused on innovative design, superior craftsmanship and advanced production processes to differentiate his Mobiado phones. CNC machining, a production process that Mobiado is famous for, is the same technology used by aerospace and car racing industries for producing parts with precision up to 0.001mm.4 Bonac's insistence at being unique had paid off. He achieved a few world firsts, including the use of exotic wood, mother-of-pearl, meteorite and mechanical watch pieces for phone production (see Appendix 3 for Mobiado Product Highlights).

Filling a Pricing Gap

The general public often perceives the luxury mobile phone as a very expensive item that most cannot afford. This is not surprising considering that GoldVish's Le Million Piece Unique5 and Peter Aloisson's diamond-encrusted smartphone6 sold at over US$1 million million each. According to Bonac, his phones are priced strategically to fill a pricing gap.

Mass-produced mobile phones are usually sold for a few hundred dollars (excluding wireless carrier subsidies) while an entry-level Vertu phone begins at US$5,000; this creates a price gap that Mobiado can take advantage of. The first Mobiado phone was priced at US$1,200 before tax and it was well received by the market. The current product line of Mobiado phones is priced in the US$2,000 to US$5,000 range, with the exception of some top models such as the 105GMT Gold, whose selling price is around US$10,000. The relatively affordable price point, together with the fact that most Mobiado phones are produced in limited editions, made Bonac's creation a highly sought-after product in the market.

Satisfying Demanding Customers

Defined by its distinctive straight lines, perfectly flat surfaces, and circular buttons, Mobiado phones are regarded as an icon of modernism.

- Mobiado1

To a certain extent, Mobiado is competing in a totally different segment of the luxury mobile phone market. While GoldVish targets the ultra-luxurious customers who like to be admired with their diamond-encrusted phones, and Vertu targets the high-profile celebrities and busy professionals, Mobiado targets those who simply want to stand out from the crowd with a unique phone. "People who buy my phones are repeat customers mainly in the 25 to 45 age group," said Bonac. "They appreciate our engineering excellence and view Mobiado as a piece of modern art. The fact that our mobile phones are 'Made in Canada' also appealed to them" (see Appendix 4 for Mobiado Product Portfolio).

Mobiado follows the approach of other luxury mobile phone manufacturers by acting as a packager, making mobile phones with commercially available wireless chipsets and circuit boards. Mobiado phones are often produced in limited quantity, with just a few hundred units made over the product life cycle. The phone's external metal frame is uniquely designed by Bonac and individually handcrafted in Mobiado's workshop in Vancouver, while the internal electronic parts that cannot be made locally are sourced from overseas suppliers. The phone's software is customized to reflect the Mobiado branding elements.

Bonac pays careful attention to quality control and product design. "The way people look at your brand is all about the quality. Our customers are extremely picky," said Bonac. When asked if Mobiado should launch phones with stitched leather like those of GoldVish and Vertu, he replied "No" confidently and without any hesitation. "I'm not interested in copying others. My Mobiado phones are unique and my customers like it that way." It seems Bonac has figured out a successful formula and he is satisfied with the way Mobiado is growing.

Promoting the Mobiado Brand

If your product is different enough, they will write about it.

- Peter Bonac

With limited financial resources, Bonac made use of several marketing tactics to promote his luxury mobile phone brand. In the early days of Mobiado, Bonac mainly promoted his brand online. His first step was the establishment of a company website in 2004 to showcase his mobile phone collection and design philosophy. On his site, a section titled "mobiadoMUSEUM" was created to display his early product prototypes. To help people better understand Mobiado's unique CNC production process, detailed explanation and video clips are provided on the website. Following the branding approach of its competitors in the luxury mobile phone market, black and white colours are used for the Mobiado livery.

Bonac maintains good relationships with 300-400 journalists who have experience in reporting on the luxury goods market; this is often helpful in getting the word out about his new Mobiado innovations. By distributing press releases directly to these journalists, Bonac is able to create a "win-win" situation because the launches of his Mobiado phones are often newsworthy. These journalists in turn write articles about Mobiado in their own magazines, online discussion forums and blogs. For example, the announcement of Mobiado's concept phones in 2010 and 2011 garnered a lot of media attention because of their unique design and the material used (see Appendix 5, Mobiado Concept Phone). For the seven years since 2004, Bonac successfully gained free press coverage in 12 languages, in over 112 magazine articles.1

Similar to other luxury consumer brands, Bonac participated in major industry events such as Baselworld, the Golden Globes, Art Basel Miami, and Couture Fashion Week to promote his brand.2 These events gave Bonac the opportunity to promote his products and express the Mobiado brand values (see Appendix 6). In addition, Bonac also made use of other marketing tactics, such as product placement, to promote his brand. In 2011, his phone was seen on CBS' popular TV series CSI: NY and this became a hot topic for discussion among Bonac's fans on Facebook (see Appendix 7 for Product Placement on TV).

Presence on Social Media

To build a successful brand, it takes a lot of time and money.

- Peter Bonac

Social media users engage in a wide range of online activities such as blogging (e.g., Wordpress), microblogging (e.g., Twitter), media sharing (e.g., YouTube), news aggregation (e.g., Digg), social bookmarking (e.g., Delicious), and social networking (e.g., Facebook). Prior study has shown that having a presence in the social media not only helps companies to reduce marketing expenses, but also increases their sales leads due to higher visibility on search engines.1 Through the use of the "Like" button on social networking platforms and the "re-tweeting" function on micro-blogging services, product information can be distributed to hundreds, if not thousands, of people in a matter of seconds. With the increasing presence and global acceptance of social media, many organizations have established Facebook and Twitter accounts to better interact with their customers.

Although Bonac relied heavily on the Internet to promote his brand, the company has not actively participated in the social media world and there is no discussion forum or blog available on Mobiado's company website. Sensing a need to build a better relationship with his customers and friends, Bonac set up an official YouTube channel,2 Facebook page,3 and Twitter account4 for his Mobiado brand in January 2012, approximately a year after its rival Vertu established the same (see Appendix 8 for Mobiado's Social Media Presence).

Channel Development

A good advertisement for Russia may look terrible in France. Let the distributors do their job to market the products in their region.

- Peter Bonac

Mobiado's luxury mobile phones can be sourced not only directly from its Vancouver head office, but also through Mobiado's exclusive distributors around the world. By 2012, Bonac had established distribution agreements with companies in 12 countries. All of these distributors operate on an "exclusive" basis, meaning that they are responsible for all sales and marketing initiatives within a particular country or region. Some of these distributors work with upscale retail stores to promote the phones, while a handful of them operate Mobiado-branded boutiques themselves. As of February 2012, there were two Mobiado boutiques in Russia (Moscow and Ekaterinburg), one in Vietnam (Hanoi) and two in China (Beijing and Kunming)5 (see Appendix 9 for Mobiado Boutiques).

Bonac firmly believes that his distributors in foreign countries are the people who know the market the best. For example, his entry into the fast-growing Chinese market was made possible in 2010 with the help of his distributor, Shanghai Qi-Hao Industrial Company. By partnering with a Chinese company that is well known for having marketing expertise in serving the high net worth individual (HNWI) market, Bonac was able to get his products mentioned in 13 Chinese magazines, 1 giving Mobiado a good start for its entry into China.

Creating trust with channel partners is essential to growing one's business. Bonac empowers his distributors to come up with proposals on sales and marketing initiatives. His distributors are responsible for developing creative briefs, choosing the media outlets for advertisement, and organizing local sales events. The distributors also look after the interior design, site selection, and day-to-day operation of the Mobiado boutiques. Bonac maintains a good relationship with the distributors and lets them participate in key decision-making. In order to maintain a consistent global image for the Mobiado brand, Bonac is ultimately responsible for approving all sales and marketing materials before they go out the door.

Combatting the Counterfeiters

Only qualified experts from Mobiado company after detailed phone's analysis can find out that this model is a replica. Nobody else will know about your small secret.

- An online store promoting fake Mobiado phones2

The counterfeit mobile phone market has proliferated in recent years, increasing from 37 million units in 2005 to 145 million in 2009. According to research firm IHS/iSuppli, replica phones amount to approximately 12.9% of legitimate mobile phone shipments worldwide.3 Despite efforts made by the Chinese government to crack down on these illegal manufacturers, the counterfeit market is estimated to be growing at an unprecedented rate, reaching 225 million units in 2011.4 Contrary to belief, replica phones are no longer cheap plastic phones that can be distinguished from the real ones easily. On the Internet, one can find fake Mobiado phones selling for just a few hundred dollars. Many of these phones carry the official Mobiado logo, personal serial numbers, and unique IMEI phone identification codes.5 Some even have the exact same dimensions and weight as the genuine Mobiado phone. 1 "We offer the finest quality Mobiado replica mobile phones at an affordable price. Our Mobiado replicas feature 99% original markings and are carefully crafted by our engineers in our factory," claimed one of the Mobiado sellers.2 The counterfeiters even put up press releases to give an appearance of legitimacy to their replica phones and online operations3 (see Appendix 10 for Mobiado Replicas).

Faced with these growing concerns, Mobiado took several measures to fight back against the counterfeiters. First of all, with the assistance of the World Intellectual Property Organization (WIPO), Mobiado was able to shut down a few fake Mobiado websites that were hosted in China. Second, Mobiado adopted the VeroPass online service in 2010 to help users verify the authenticity of their Mobiado phones.4 "With VeroPass, a user is required to enter the phone's IMEI number and also a serial number, as found in the Mobiado package, during the product registration process," said Bonac. "This solution helps us to identify the problematic geographic area immediately, so that appropriate investigation and legal actions can be taken" (see Appendix 11 for VeroPass). Furthermore, Bonac launched a new Mobiado logo in 2011 as a means to increase production costs for counterfeiters5 (see Appendix 12 for Mobiado Logo).

Partnership with Aston Martin

Like Aston Martin, Mobiado prides itself on design innovation and technological excellence.

- Peter Bonac6

The year 2010 marked the beginning of a business partnership between Mobiado and Aston Martin, a luxury sports car manufacturer based in the United Kingdom. Appreciating the unique design of Mobiado mobile phones, a licensing agent of Aston Martin approached Bonac in late 2010 to see if he was interested in becoming an Aston Martin brand licensee. "There is a very good match between the two brands," said Bonac. After nearly six months of back-and-forth negotiation, a licensing deal was finally inked allowing Bonac to design some exciting phones with Aston Martin. The first co-branded product, a QWERTY-type smartphone called "Grand 350 Aston Martin" was launched in August 2011 1 (see Appendix 13 for The Aston Martin Collection). This product generated a lot of interest among journalists, and the product received wide press coverage. Subsequent models on the road map include a touch-screen smartphone and a bar-type feature phone. These co-branded products were planned for a global launch in 2012.

The Fight to Stay on Top

As an entrepreneur, Bonac's ability to convert the Mobiado concept into reality can be considered a great achievement, particularly given the high rate of failure of start-up companies in general.2 However, these successes did not come easily. Although the global economic downturn of 2008-2010 had little impact on Bonac's luxury mobile phone business, and he was busy keeping up with the demand for his phones, competition has intensified as other high-profile brands have entered this fast-growing market. As Mobiado's spokesperson, Bonac spends a significant amount of time attending trade shows and meeting business partners across the continents. Working together with a team of dedicated employees who share his vision, Bonac is busy designing the next Mobiado phone, managing supplier relationships, approving creative briefs, and handling press enquiries.

The collaboration with Aston Martin provided Bonac with a great opportunity to take his brainchild forward in this niche luxury mobile phone market. However, deep-pocketed luxury brands and venture capital-funded start-ups are eager to grab their share of this lucrative market. Can Bonac handle the growing pressure without getting himself burnt in this competitive market? Does he have the right marketing mix to take Mobiado to the next level? How fast should Bonac scale up his business? Now is the right time for Bonac and his team to answer these questions.

2012-08-27

Subject: Cellular telephones; Licensed products; Agreements; Business growth; Luxuries; Case studies

Location: Canada

Company / organization: Name: Mobiado; NAICS: 334220

Classification: 9130: Experimental/theoretical; 2310: Planning; 8330: Broadcasting & telecommunications industry; 9172: Canada

Publication title: International Journal of Case Studies in Management (Online)

Volume: 10

Issue: 3

Pages: 1-23

Number of pages: 23

Publication year: 2012

Publication date: Sep 2012

Year: 2012

Publisher: HEC Montréal

Place of publication: Montréal

Country of publication: Canada

Publication subject: Business And Economics--Management

ISSN: 1911-2599

Source type: Reports

Language of publication: English

Document type: Feature, Business Case

Document feature: References Tables

ProQuest document ID: 1040835569

Document URL: http://search.proquest.com/docview/1040835569?accountid=38610

Copyright: Copyright HEC Montréal Sep 2012

Last updated: 2013-09-26

Database: ABI/INFORM Complete

Document 52 of 100

The "Sacred Cow" at Lunix Corporation: When Getting Rid of an Incompetent Employee Becomes Risky Business

Author: Fernandez, Susana

ProQuest document link

Abstract:

A rapidly growing educational technology company hires a young and savvy professional, Frank Atwood, to head and restructure its Web Services Department. Atwood's enthusiasm is quickly dampened by long work hours and, worst of all, by an unqualified and unwilling employee, Charles Johnson, who is even resistant to being trained in current technology. To Atwood's dismay, his boss, Megan Moore, hints at the need to fire Johnson, but she is not eager to be responsible for making the decision. The reason for this reticence is Johnson's status as a long-time close friend of the President and CEO and his family. When the situation becomes intolerable, Atwood realizes that he needs to "sacrifice the sacred cow," but the question is: how can he do it in a way that benefits everyone involved? [PUB ABSTRACT]

Full text:

Case Summary

A rapidly growing educational technology company hires a young and savvy professional, Frank Atwood, to head and restructure its Web Services Department. Atwood's enthusiasm is quickly dampened by long work hours and, worst of all, by an unqualified and unwilling employee, Charles Johnson, who is even resistant to being trained in current technology. To Atwood's dismay, his boss, Megan Moore, hints at the need to fire Johnson, but she is not eager to be responsible for making the decision. The reason for this reticence is Johnson's status as a long-time close friend of the President and CEO and his family. When the situation becomes intolerable, Atwood realizes that he needs to "sacrifice the sacred cow," but the question is: how can he do it in a way that benefits everyone involved?

History and Background of the Case

At 34 years of age, Frank Atwood has packed 11 years of experience working in the area of information technology. He has been both a witness to and a participant in the many changes that companies have undergone with the advent of the Internet. Although young, he already has accomplished quite a bit educationally and professionally. Not only does he have advanced degrees in technology, but he also has an MBA with a concentration in finance. His experience in strategic technology caught the eye of Megan Moore, Vice President of Marketing and Communication at Lunix, who had worked with Atwood in another organization.

Moore had been recently appointed to her position. Lunix, a family-owned, educational entertainment company, hired her when they realized that their rapid growth required the services of a more seasoned person at the helm of their Marketing and Communication Division. With over 25 years of experience, Moore is well-known among media types locally, which made her the perfect candidate. However, her expertise is in media relations and communication strategy, not in technology. Unlike at her previous job, Lunix has its Web Services Department under the Marketing and Communication Division she now heads, so she soon realized that to truly succeed in her new position, she would need to hire someone with the right type of experience to head the Web Services Department for her.

Although Moore and Atwood had worked for the same organization at one point, they had worked for different divisions. Nevertheless, they knew each other and had collaborated more than once on different types of projects. When Moore called on Atwood to consult for her at Lunix, Atwood delivered a complete strategic Web technology plan to re-design and centralize Lunix's Web services. The plan was presented to a select group of Lunix officials, including Lunix's new President and CEO, Ralph Kondrat.

Kondrat had inherited the presidency from his father, who had presided over Lunix for close to 30 years. With a more modern vision, he immediately saw the necessity of implementing Atwood's plan, and when Moore suggested that they hire Atwood full-time, Kondrat enthusiastically agreed.

Moore's Marketing and Communication Division is divided into three clear departments, all of which report to her: Media Relations, headed by Sarah Silverman, is the department in charge of pitching and writing releases and stories about the company, its employees and its products to the press; Web Services, headed by Atwood, is the department in charge of working with the entire company on the creation, implementation, and maintenance of Lunix's Web site; and Publications, headed by Anna Allbury, is the department responsible for the graphic design, illustration and production of brochures, magazines, ads, etc., for the company. Silverman, Atwood and Allbury are all directors of their respective departments. Overall, the division works very closely with the Office of the President and the Office of the Chief of Staff, as the division is responsible for articulating the overall vision, image and strategic plans for the different publics of the organization as a whole. This makes its members privy to sensitive information and issues otherwise handled at the executive levels only.

When Atwood joined Lunix, the Web Services Department was solely staffed by Charles Johnson, the 60-some-year-old Webmaster, who happened to be an old family friend of the Kondrats. He had started his tenure at Lunix as head of its original communication services. As the organization grew, more specialized skills were needed, so other professionals were hired, and Johnson's duties began to morph little by little until he was named Webmaster, a position that no one gave much attention to at the beginning, but that now had become strategic for the organization.

Moore was not at all happy with Johnson, since his Web skills were practically nonexistent. In fact, due to his lack of interest and expertise in the subject, he had decided to outsource Web duties to an external company, and he simply acted as a liaison between it and Lunix. This resulted in a confusing and unprofessional Web presence, where divisions and departments submitted any type of content with no overall cohesiveness or strategy. Whatever Johnson received, he passed on to the external company that posted it without checking it. Soon after Moore became Vice President, she realized outsourcing was not only an unnecessary cost, but one that prevented Marketing and Communication from designing the strategically customized approach Lunix needed to become a major industry player. By hiring Atwood, she was able to bring Web duties in-house and have someone with the necessary skills to give direction to Johnson.

When Kondrat gave Moore the approval to hire Atwood full-time, she felt she was finally making some progress towards the achievement of her divisional goals. Besides, with Atwood hired as Lunix's new Director of Web Strategy, Johnson no longer reported to her (he would now report to Atwood), and so she no longer had to deal with this unqualified "sacred cow."

It has been three months since Atwood joined the organization, and Lunix's Web re-design is well under way. Slowly and systematically, Atwood has been making real progress towards creating an informative, striking and very customer-centric Web presence for the organization. However, the journey has not been without obstacles. Mostly, these obstacles can be summed up simply: Johnson's lack of technical knowledge and interest, as well as his blatant disregard for direction, and Moore's lack of support whenever Atwood disciplines Johnson. It has become evident to Atwood that Moore's lack of support any time he approaches her regarding Johnson's behaviour results from something else: she wants Atwood to be the one to fire Johnson without having to involve herself in the decision in any way. That's why whenever Atwood meets with Moore to discuss Johnson's performance, she hints as to the need for Atwood to fire him.

Despite Johnson's affable demeanour, it has become quite difficult for Atwood to delegate assignments to him, or even to trust Johnson to complete any assignment that he does give him. His lack of technical expertise is only made worse by his complete disinterest in learning or being trained in Web design, which forces Atwood to do the work of at least two other people. Moreover, Johnson's well-known status as a "sacred cow" within the organization gives him access to the Kondrats at will, and no one seems to be willing (or able) to curtail his visits, favours and extra-curricular assignments for the "first" family (the Kondrats). Often, Atwood finds himself not knowing where to locate Johnson, only to learn later that he is doing something for the elder Kondrat instead of meeting a deadline on a job-related assignment. Although there is no doubt that Johnson has a vested interested in the well-being of Lunix, as well as extensive knowledge of its organizational culture and stakeholders, he certainly acts as an obstacle instead of as an asset within the Web Services Department.

What can Atwood do?

Problem

Atwood's situation has become problematic. The first problem he faces is how to deal with an unqualified and unmotivated employee. This leads to his second problem, which is how to separate Johnson from his department when Johnson is considered a "sacred cow" within the organization. This issue is further compounded by his third problem, which comes from the lack of support from Moore, since she does not want to terminate Johnson herself. And, of course, his final concern is how to address these three issues in a way that will benefit all parties involved.

Dealing with an unqualified and unmotivated employee has become increasingly difficult for Atwood. Just last week, Atwood had to re-do every single Web update that Johnson had worked on. Not only did that set Atwood back on completing his own assignment-heavy schedule, but it also meant that he had to apologize profusely to a couple of vice presidents for Johnson's sketchy work. In both cases, the departments called to complain once they discovered that the information featured on their department's Web site was garbled or featured old data that should have been discarded.

Furthermore, since Atwood has to do his own job plus the job of at least two other people, including reviewing and re-doing most of Johnson's work, this routine leaves him exhausted. There is so much work to do that, without any real help from a qualified professional, he often finds it impossible to leave the office any earlier than 8:00 pm or 9:00 pm, and his own personal life is suffering as a result. Besides, due to his tenure in the company, Johnson's salary is definitely preventing Atwood from hiring anyone else to help Web Services. Atwood knows that if he finds a way to free up Johnson's salary, he will be able to hire at least two qualified Web developers.

And just this morning Johnson missed another deadline, yet when confronted, he nonchalantly disclosed that it was because he was coordinating the taking of aerial photographs of the company grounds for a project in which he was helping the elder Kondrat. Atwood had not approved Johnson's participation on this "special project" - he did not even know about it! - yet he felt at a loss of words as to how to discipline Johnson. In any other case, this repeated behaviour would have been enough to terminate the employee, but in this case, how can Atwood separate Johnson from Lunix when he is considered an untouchable "sacred cow" within the organization? After all, how do you tell your employee that they cannot do something for the former President and CEO, and father of the current one?

Atwood knows he has to find a way to separate Johnson from his department, but since Moore is not supporting him and does not want to terminate him herself, Atwood needs to find a solution on his own. Whatever the solution, it not only has to satisfy his own needs, but also the organization's needs. He has to find a way to separate Johnson from his department without jeopardizing his own standing within the organization. After all, Atwood is still pretty new at his job and does not want to antagonize anyone, especially since his job requires him to collaborate constantly with the entire company.

Besides, he also realizes that, although Johnson is not an asset to his department, he certainly could be an asset to the organization in another capacity. He seems to have a vested and demonstrated interest in Lunix. For example, he is credited with being the promoter of at least two of the most cherished company traditions: the Employees-in-Need Relief Fund, which lends emergency money to employees on short notice, and Founders' Sunday, a family event that takes place the Sunday before Thanksgiving, where employees and their families come together to celebrate and recognize one another. The highlight of the event is that every employee receives the giftof a turkey for the holiday as a parting favour. It is evident that Johnson is regarded as an organizational "fixture" of sorts, and people would be quick to dislike anyone responsible for his separation from the company regardless of the reasons.

There is also no doubt that Johnson has excellent interpersonal skills and knows the organizational culture inside-out. Because he knows so many of the stakeholders, he is often the de facto choice to be the master of ceremonies (MC) at company events and parties, and his voice-over work in products and television or radio commercials is highly praised any time he collaborates with the Technical Media Development. In fact, his first-hand knowledge of broadcast media would probably make him very useful to the company in the right environment.

As a manager and leader, the decision Atwood faces is not only personnel-related, but it also has the potential to be as transformational for the organization as it is delicate for both him and Johnson. As Lunix engages in the first steps of its strategic planning process, any change will need to create a win-win situation for all involved, including Web Services, Marketing and Communication, and the organization as a whole. If not done correctly, Atwood's efforts to find a solution will probably fail, and he will either end up being stuck with Johnson, have him fired and get burned organizationally as a result, or worse, get himself fired for not performing. Atwood knows that he has to find a way to maximize the return on the investment that Lunix has made in Johnson during his 30-year tenure. At the same time, he also has to reduce any potential resistance from the organization or its key players, and even from Johnson himself. Therefore, navigating the power structure and effectively dealing with the established chain of command must be key elements in his plan if it is to work. Upon exploring possible solutions to this dilemma, Atwood quickly concludes that he needs to consider the following points when evaluating his options and alternatives:

1. Johnson's strengths in order to determine where, if anywhere, he would fit best within the organization;

2. Overall organizational needs and interests based on legitimate reasons;

3. Overall organizational structure;

4. Organizational politics and Johnson's status as a "sacred cow";

5. Sources and reasons for possible resistance among key players;

6. Identification of an organizational ally willing to act as a change agent in helping Atwood bring about the change;

7. Obtaining overall approval from Moore and, more importantly, from anyone else who is needed, through proper channels.

After thoroughly analyzing and weighing each aspect, Atwood hopes to find a solution to separate Johnson from Web Services, while still benefitting the organization and Johnson.

Feeling much more confident, Atwood proceeds to review Johnson's current job duties as well as Lunix's organizational structure. He hopes that by doing this, he will be able to better identify his alternatives and possible options, so he immediately gets to work. This is the information that he reviews:

Johnson's current job duties

These are Johnson's current job duties, as per the job description that Moore gave to Atwood after he joined the organization. As mentioned earlier, Johnson devotes more time to his "additional" duties and to plastering the office with photos of his grandchildren than to performing his main duties.

Job duties

* Oversee and train Web content developers to ensure consistency;

* Work with departmental Web content providers to ensure that content is updated frequently;

* Create Web content when no department representative exists;

* Present Web plans to senior management;

* Maintain hyperlinks;

* Chair the Web developer team;

* Respond to questions, requests, complaints from users;

* Other duties as assigned.

Additional duties

* Write and produce radio/TV spots and any Public Service Announcements (PSA) for the company;

* Write, edit and narrate company productions and telephone network on-hold messages;

* Perform voice-overs and lip-sync for varied animated products.

Organizational Chart

Lunix's organizational structure is very hierarchical, with a very formal structure. It is also quite paternalistic, as family companies can in some cases be. The organizational chart that Atwood was given looks as follows:

Atwood's Organizational Analysis

This is Atwood's overall assessment of each area in the organization. It includes the most evident duties for each area, as well as obvious issues or challenges each needs to overcome or address.

Office of the President: Ralph Kondrat, President and CEO

Duties:Craftthe overall vision for the company;

Communicate the overall direction of the company to his vice presidents.

Issues: Craftand communicate his strategic vision (which is quite different from that of his father). To do this, he and the Chief of Staffhold strategic planning meetings with the Division of Marketing and Communication to decide the content of the messages shared with the organization and how to distribute them;

Garner respect from varied stakeholders;

Make his youth work for him instead of against him.

Office of the Chief of Staff: Christopher Cass, Chief of Staff

Duties:Serve as a representative for the President;

Aid the President in guiding the company;

Serve as Board liaison;

Serve as community liaison.

Issues: Help people understand what his job (this is a new position) truly entails. To do this, he and the President hold strategic planning meetings with the Division of Marketing and Communication to decide the content of the messages shared with the organization and how to distribute them;

Avoid being perceived as the "ombudsperson" for the organization, which is a problem that has been brought up at the strategic planning meetings with the Division of Marketing and Communication;

Avoid showing or giving preferential consideration to any one member of the organization.

Division of Customer Service: Abraham Alden, Vice President

Duties:Set policies and direction for proper customer service protocol;

Address customer service training needs for all company employees;

Address customer service grievances and complaints;

Survey customers and measure customer service satisfaction.

Issues:Help employees understand the value of customer service among departments.

Division of HR Administration: Bert Benson, Vice President

Duties:Set recruitment, selection, retention, promotion and termination standards for the company;

Support and provide company-wide training for employees and managers;

Support divisions in their personnel-related needs;

Provide organizational culture guidelines.

Issues: Provide office space for new hires;

Provide competitive salaries and appropriate promotions to employees;

Work with the Office of the President to subtly shiftthe old organizational culture to the new version set by Kondrat;

Train all supervisors so they can be used as a resource in personnel issues before decisions are made, rather than informing them after the fact;

Request that supervisors review and submit updated job descriptions with proper job analysis.

Division of Marketing and Communication: Megan Moore, Vice President

Duties:Set the communication marketing strategy for the company in support of the strategic plan;

Oversee Web Services for Lunix;

Monitor and implement the overall image of the company among constituents, including that of the President and Chief of Staff;

Produce and distribute magazine, brochure, package and all graphic design needs for the company;

Address all media and promotional needs;

Communicate the President's vision.

Issues: Establish an effective Web presence that matches the new President and CEO's commitment to advancement and technology;

Considerably increase the company's media presence;

Produce cutting-edge materials;

Constantly scout the organization and its talent for media-worthy stories;

Protect the overall visual image of the company.

Division of Technical Media Development: Daniel Donaldson, Vice President

Duties:Develop and design educational media products;

Produce demos and sample products of interactive and electronic games and videos;

Produce final prototypes to be sent to Production and Distribution for manufacturing;

Research educational and technical trends.

Issues: Meet the technical requirements of any product in attractive, effective and professional ways;

Hire media professionals capable of delivering top-notch performance in design, animation and media talent, including recording, video and 3-D modeling;

Anticipate customer needs and desires;

Create a way to coordinate talented, young, artsy media talent-types who may not understand the bigger administrative or organizational picture.

Division of Legal Affairs: Ellen Egan, Vice President

Duties:Oversee the legal compliance of the company;

Address any legal issues with regards to patents, copyright, grievances and government;

Support HR in its legal function.

Issues:Avoid being seen as an enforcer;

Avoid being involved in every minor decision;

Inform employees of duties and rules in a non-threatening way.

Division of Finance: Frances Ford, Vice President

Duties:Oversee the company's financial matters;

Manage company investments;

Approve and allocate budgets throughout the company.

Issues: Creatively allocate budgets with resourcefulness in mind;

Train budget managers to use their budgets judiciously;

Find a balance between financial disclosure and non-disclosure with respect to the financial realities of the company.

Division of Information Technology: Gerald Gomez, Chief Technology Officer

Duties:Oversee administrative technology systems;

Oversee the company's network systems;

Provide all employees with the software and hardware necessary to perform their jobs;

Provide support for software and hardware used at the company;

Purchase necessary licenses for software packages.

Issues:Maintain updated data by proactively working with employees;

Develop and/or improve the relationship with the Division of Technical Media Development, as well as with the Web Services Department so as to provide them with cutting-edge software and hardware, as well as technical support;

Increase the amount of employee training.

Division of Production and Distribution: Harriet Heinz, Vice President

Duties:Manufacture products;

Manage relationships with suppliers of raw materials;

Manage relationships with vendors.

Issues: Educate company employees about the production process;

Create ways to increase task significance for employees of this division;

Avoid feeling disconnected from the rest of the company.

2012-08-31

Case prepared by Susana FERNANDEZ1

1 Dr. Susana Fernandez is an adjunct faculty member of the H. Wayne Huizenga School of Business and Entrepreneurship, Nova Southeastern University, and of the College of Business, Florida Atlantic University, both in the USA.

Une " vache sacrée " au sein de Lunix Corporation : Lorsque se départir d'un employé incompétent devient périlleux

Résumé du cas

Une entreprise de technologie éducative en pleine croissance embauche un jeune professionnel dégourdi, Frank Atwood, et lui confie la direction et la restructuration du Service Web. L'enthousiasme dont fait preuve F. Atwood est vite refroidi par les longues heures de travail et surtout, par l'incompétence et le manque de bonne volonté d'un des employés, Charles Johnson, qui refuse même de recevoir de la formation sur les technologies actuelles. F. Atwood est déçu de constater que sa patronne, Megan Moore, laisse entendre qu'il faudrait congédier C. Johnson, mais qu'elle n'ose pas prendre la responsabilité de le faire. Il faut dire que C. Johnson est un ami de longue date du président et chef de la direction et de sa famille. Mais la situation se détériore à un point tel qu'Atwood se rend à l'évidence... il devra " sacrifier la vache sacrée ". Mais comment s'y prendre pour que cela soit à l'avantage de chacun?

Mise en situation

Âgé de 34 ans, Frank Atwood a derrière lui onze années d'expérience dans le domaine des technologies de l'information. Il a assisté et participé aux nombreux changements que les entreprises ont dû instaurer avec l'arrivée d'Internet. Malgré son jeune âge, il a déjà un parcours fort impressionnant tant du point de vue des études que du travail. Non seulement a-t-il fait des études poussées en technologie de l'information, mais il a également un MBA en finance. Son expérience en technologie stratégique a attiré l'attention de Megan Moore, vice-présidente au marketing et aux communications chez Lunix, avec laquelle il a déjà travaillé au sein d'une autre organisation.

Megan Moore occupe ses nouvelles fonctions depuis peu. Lunix, une entreprise familiale de divertissement éducatif, ayant connu une croissance rapide, a dû nommer une personne plus expérimentée à la tête de la Division du marketing et des communications. Megan Moore, bien connue dans le milieu des médias de la région et comptant plus de 25 années d'expérience, s'est révélée la candidate parfaite. Toutefois, elle est spécialisée en stratégie des relations médiatiques et des communications, et non en technologie. Le Service Web de Lunix relève de la Division du marketing et des communications, ce qui n'était pas le cas où elle travaillait auparavant. Elle a vite compris que pour vraiment exceller dans le cadre de son nouveau poste, elle devait recruter une personne possédant les qualifications requises pour diriger le Service Web sous son autorité.

Megan Moore et Frank Atwood ont travaillé pour la même entreprise à une certaine époque, mais au sein de services différents. Ils se connaissent toutefois bien, car ils ont collaboré à différents projets. Lorsque Megan Moore a fait appel à F. Atwood à titre de consultant pour Lunix, celui-ci a remis un plan technologique stratégique détaillé qui proposait une nouvelle réorganisation et la centralisation des services Web de Lunix. Le plan a été présenté à un petit groupe de dirigeants de Lunix, dont le nouveau président et chef de la direction, Ralph Kondrat.

R. Kondrat succédait à son père, lequel avait été président de l'entreprise pendant près de trente ans. Démontrant une vision plus moderne, il reconnut immédiatement la nécessité de mettre en oeuvre le plan élaboré par F. Atwood; aussi, lorsque sa vice-présidente lui proposera d'embaucher à temps plein le jeune consultant, il acceptera avec enthousiasme.

La Division du marketing et des communications comporte trois services distincts, tous sous la responsabilité de Megan Moore. Le Service des relations avec les médias, dirigé par Sarah Silverman, est chargé de la rédaction des nouvelles et articles portant sur l'entreprise, ses employés et ses produits, et de leur diffusion à la presse. Le Service Web, dirigé par Frank Atwood, est responsable du développement, de l'exploitation et de la maintenance du site Web de Lunix. Enfin, le Service des publications relève de Anna Allbury et est responsable du design graphique, des illustrations et de la production des brochures, magazines, annonces et autres communiqués de l'entreprise. S. Silverman, F. Atwood et A. Allbury dirigent tous trois leur service respectif. La Division dans son ensemble travaille en étroite collaboration avec le Bureau du directeur général et le Bureau du directeur du personnel, car elle doit voir à la mise en place de la vision globale, de l'image et des plans stratégiques s'adressant aux différents clients de l'entreprise dans son ensemble. De ce fait, les membres de la Division sont au courant de renseignements et de problèmes délicats qui ne concernent normalement que la direction.

Lorsque F. Atwood se joint à Lunix, le Service Web ne compte qu'un seul employé, un webmestre d'une soixantaine d'années, Charles Johnson, un vieil ami des Kondrat qui avait débuté chez Lunix comme chef du Service des communications d'origine. Au fil des années, à mesure que la compagnie croÎt, de nouvelles expertises sont requises et d'autres professionnels sont embauchés, de sorte que les tâches de C. Johnson changent peu à peu jusqu'à ce qu'il soit nommé webmestre, un poste qui passait plutôt inaperçu au début, mais qui est maintenant devenu d'une grande importance stratégique pour l'entreprise.

Megan Moore est très insatisfaite du rendement de C. Johnson, qui n'a pour ainsi dire aucune compétence en matière de Web. Et c'est justement à cause de son manque d'intérêt et d'expertise dans ce domaine que C. Johnson est amené à confier les services Web à une firme externe, ne devenant qu'un simple agent de liaison entre celle-ci et l'entreprise. Cela a comme résultat de créer de la confusion et un manque de professionnalisme, de sorte que les services et divisions lui soumettent des informations exemptes de cohésion et de stratégie. C. Johnson envoie tout ce qu'il reçoit à la firme externe, laquelle le diffuse sans aucune vérification. Peu après son entrée en fonction à titre de vice-présidente, Megan Moore se rend compte que l'externalisation non seulement entraÎne des coûts inutiles, mais aussi qu'elle empêche la Division du marketing et des communications de mettre en place l'approche stratégique personnalisée dont Lunix a besoin pour devenir un joueur clé de son domaine. Le fait d'embaucher F. Atwood lui permettra de ramener les services Web à l'interne, et de compter sur une personne qui possède les compétences requises pour encadrer C. Johnson.

Lorsqu'elle obtient l'autorisation du président d'embaucher F. Atwood à plein temps, elle se réjouit à l'idée de faire un pas dans la bonne direction pour atteindre les objectifs de sa division. Par ailleurs, ce sera désormais à F. Atwood, le nouveau directeur du Service Web de Lunix, que C. Johnson devra rendre des comptes; elle n'aura plus à gérer le rendement de cet employé incompétent, considéré comme une " vache sacrée " dans l'entreprise.

Il s'est écoulé trois mois depuis l'arrivée de F. Atwood, et la mise en valeur du Service Web de Lunix semble bien amorcée. Lentement et systématiquement, F. Atwood a beaucoup avancé dans la mise sur pied d'un service Web instructif, attrayant et résolument axé sur le client. Il y a tout de même quelques embûches sur son parcours, les principales étant le manque de connaissances techniques et d'intérêt de C. Johnson et l'indifférence totale que celui-ci affiche à l'égard des directives, ainsi que le manque de soutien de la part de Megan Moore lorsque vient le temps de rappeler à l'ordre C. Johnson. Il appert clairement pour F. Atwood que si Megan Moore ne l'appuie pas lorsqu'il lui fait part des problèmes concernant C. Johnson, c'est qu'elle ne veut pas être mêlée au congédiement de celui-ci. Elle désire que ce soit F. Atwood qui prenne la décision de le remercier, et c'est pourquoi elle lui en fait subtilement la suggestion chaque fois qu'il la rencontre pour discuter du rendement de C. Johnson.

Désormais, F. Atwood ne peut plus faire confiance à C. Johnson, en dépit de ses manières affables, et être certain qu'il s'acquitte des tâches qu'il lui confie. Non seulement son employé manque-t-il de compétences techniques, mais en plus il n'est absolument pas intéressé à apprendre ou à recevoir une formation en conception Web, ce qui oblige F. Atwood à accomplir lui-même les tâches d'au moins deux autres personnes. Par surcroÎt, son statut de " vache sacrée " bien connu au sein de l'entreprise autorise C. Johnson à s'entretenir avec les Kondrat quand il le veut, et personne ne semble vouloir (ni pouvoir) mettre un frein à ces visites, à ces faveurs et à ces petits services rendus aux Kondrat. Il arrive souvent que F. Atwood ignore où se trouve C. Johnson pour finalement apprendre qu'il accomplissait une tâche pour Kondrat père, au lieu de s'affairer à terminer un travail qu'il lui avait confié. Il ne fait aucun doute que C. Johnson a à coeur les intérêts de Lunix et qu'il connaÎt bien la culture de l'entreprise et les parties prenantes, mais il constitue plutôt un obstacle qu'un atout pour le Service Web.

Que peut faire F. Atwood?

Le problème

La situation est devenue problématique pour F. Atwood. La première difficulté à surmonter est de déterminer ce qu'il faut faire dans le cas d'un employé qui ne possède ni les compétences ni la motivation requises pour effectuer ses tâches. Ceci mène à la seconde difficulté qui est d'arriver à se départir de C. Johnson malgré le fait qu'il soit considéré comme une " vache sacrée " au sein de l'entreprise. Une troisième difficulté en découle, celle de composer avec le manque de soutien de la part de Megan Moore qui ne veut pas s'acquitter elle-même du congédiement de C. Johnson. Et bien sûr, la difficulté ultime, celle de trouver une solution à ces trois problèmes qui puisse satisfaire toutes les parties concernées.

Il est devenu de plus en plus difficile pour Frank Atwood d'avoir à s'occuper d'un employé non qualifié et démotivé. Déjà, la semaine dernière, F. Atwood a dû reprendre toutes les mises à jour Web effectuées par C. Johnson. Ce faisant, non seulement F. Atwood a été retardé dans l'exécution de ses propres tâches alors qu'il est lui-même débordé, mais il a également dû s'excuser à maintes reprises auprès de plusieurs vice-présidents pour le travail peu soigné de C. Johnson. Des services avaient appelé pour se plaindre lorsqu'ils ont découvert que l'information figurant sur leurs sites Web était soit mal présentée, soit périmée, et qu'à la limite, elle aurait dû être supprimée.

En outre, étant contraint de s'acquitter à la fois de ses tâches et de l'équivalent de celles de deux autres employés, en plus de revoir et de refaire la plupart des travaux menés par C. Johnson, Frank Atwood est au bord de l'épuisement. Le volume de travail est tel, qu'en l'absence d'aide d'un employé véritablement qualifié, il quitte rarement le bureau avant 20 h ou 21 h chaque jour, ce qui nuit à sa vie personnelle. De plus, le salaire élevé de C. Johnson ne lui permet pas d'embaucher quiconque pour le Service Web. Il sait qu'en libérant son service du salaire versé à C. Johnson, il serait en mesure d'embaucher au moins deux développeurs Web qualifiés.

Pas plus tard que ce matin, C. Johnson a encore dépassé un délai, et lorsque F. Atwood le lui a fait remarquer, il a répondu avec nonchalance qu'il était occupé à coordonner des photographies aériennes de terrains destinés à un projet d'entreprise pour lequel il aidait Kondrat père. Frank Atwood n'ayant pas autorisé la participation de C. Johnson à ce projet spécial - dont il ignorait même l'existence! - n'a pas trop su quoi dire pour le rappeler à l'ordre. En temps normal, ce genre de comportement récurrent justifierait à lui seul un congédiement, mais dans le cas présent, comment pourrait-il se départir de C. Johnson qui est considéré comme une " vache sacrée " dans l'entreprise, à qui l'on n'a pas le droit de toucher? Comment dire à un employé qu'on lui interdit de faire un travail pour l'ancien président et chef de la direction, père du PDG actuel?

F. Atwood sait qu'il doit trouver un moyen pour que C. Johnson quitte le Service Web. Comme Megan Moore ne l'appuie pas et refuse de le congédier elle-même, c'est à lui de trouver une solution. Quoiqu'il en soit, cette solution devra non seulement satisfaire ses propres besoins, mais également répondre à ceux de l'entreprise. Frank Atwood doit trouver une façon pour que C. Johnson quitte son service, sans compromettre toutefois sa propre position au sein de Lunix. Après tout, il occupe ses fonctions depuis peu, et il ne voudrait pas se faire d'ennemis, surtout qu'il doit travailler en collaboration avec tous les autres membres du personnel.

Par ailleurs, il est conscient que C. Johnson peut constituer un atout ailleurs dans l'entreprise, même s'il représente un fardeau pour son service. C. Johnson a démontré un intérêt sincère envers Lunix. On lui doit entre autres deux des traditions les plus chères au personnel de l'entreprise : le " Fonds d'aide aux employés dans le besoin ", grâce auquel des prêts d'urgence sont consentis dans un court délai à des employés; et le " Dimanche de grâce ", une activité familiale qui se déroule le dimanche précédant le jour de l'Action de grâce et au cours de laquelle les employés et les membres de leur famille se rencontrent pour célébrer et échanger. Le clou de la journée est sans contredit la distribution de dindes à tous les employés, en guise de cadeau de présence. Il est évident que C. Johnson est considéré comme faisant partie du mobilier, si l'on peut dire, et que quiconque serait responsable de son départ serait pris en grippe par les autres membres du personnel, peu importe les motifs le justifiant.

Il ne fait aucun doute que C. Johnson possède d'excellentes aptitudes de communication et qu'il connaÎt bien la culture de l'entreprise. Comme il connaÎt un grand nombre de parties prenantes, c'est automatiquement à lui qu'on s'adresse pour agir à titre de maÎtre de cérémonie à l'occasion des événements organisés par l'entreprise, et ses commentaires en voix hors champ dans les commerciaux diffusés à la télévision ou à la radio sont toujours très appréciés du Service de développement des médias. En fait, ses connaissances de première main en matière de diffusion par les médias pourraient probablement en faire un employé très utile s'il occupait un poste dans le bon service.

En tant que directeur et chef de service, F. Atwood a une décision à prendre qui aura des répercussions non seulement sur le plan du personnel, mais aussi sur l'organisation dans son ensemble; il s'agit donc d'une décision délicate à la fois pour lui et pour C. Johnson. Lunix venant d'amorcer les premières étapes de son processus de planification stratégique, il faut que le changement proposé ait des conséquences positives pour toutes les parties concernées, dont le Service Web, la Division du marketing et des communications et l'ensemble de l'entreprise. S'il s'y prend mal, F. Atwood échouera dans ses efforts pour trouver une solution et pourrait soit être contraint de garder Johnson au sein de son service, soit réussir à le faire congédier et être pris en grippe par le reste du personnel, ou pire encore, être lui-même congédié pour n'avoir pas atteint ses objectifs. Frank Atwood sait qu'il doit trouver un moyen de maximiser l'investissement que Lunix a fait en gardant à son emploi C. Johnson pendant trente ans. Parallèlement, il doit chercher à prévenir toute résistance de la part de l'organisation ou de ses joueurs-clés, voire de la part de C. Johnson lui-même. Par conséquent, s'il veut arriver à ses fins, il doit se frayer un chemin au coeur de la hiérarchie et établir une communication efficace avec les décideurs. En explorant diverses solutions possibles à son dilemme, il en vient rapidement à la conclusion qu'il doit prendre en considération les éléments suivants :

1. Les forces de C. Johnson pour pouvoir déterminer s'il est possible de le muter au sein de l'entreprise et le cas échéant, dans quelles fonctions;

2. Les principaux besoins et intérêts fondés sur des motifs légitimes de l'organisation;

3. La structure globale de l'entreprise;

4. Les politiques de l'entreprise et le statut de " vache sacrée " de C. Johnson;

5. Les sources et les motifs d'une possible résistance de la part des joueurs importants;

6. Le repérage d'un allié au sein de l'organisation qui serait prêt à servir d'intermédiaire pour aider F. Atwood à mettre le changement en place;

7. L'obtention de l'approbation de Megan Moore et surtout celle de toute autre personne devant donner son accord, en respectant les voies hiérarchiques.

Frank Atwood espère que l'analyse et l'évaluation de chacun de ces éléments l'aideront à trouver une solution qui permette au Service Web de se départir de C. Johnson et qui soit avantageuse pour celui-ci comme pour l'organisation.

Se sentant beaucoup plus confiant, F. Atwood entreprend sur-le-champ l'étude des tâches actuelles de C. Johnson ainsi que de la structure organisationnelle de Lunix. Il espère ainsi être en mesure de mieux déterminer les solutions possibles.

Tâches actuelles de C. Johnson

Voici les tâches actuelles que devrait faire C. Johnson selon la description de poste que Megan Moore a remise à F. Atwood à son arrivée chez Lunix. Mais C. Johnson consacre davantage de temps à ses tâches " supplémentaires " et à l'affichage des photos de ses petits-enfants dans son bureau qu'à l'exécution de ses tâches principales.

Description des fonctions

* Superviser et former les développeurs de contenu Web pour assurer l'uniformité;

* Travailler en collaboration avec les fournisseurs de contenu Web des divers services pour s'assurer que le contenu est mis à jour fréquemment;

* Créer un contenu Web lorsqu'un service n'a pas de représentant désigné;

* Présenter des projets Web à la haute direction;

* Assurer la maintenance des hyperliens;

* Diriger l'équipe des développeurs Web;

* Répondre aux questions, aux demandes et aux plaintes des utilisateurs;

* Exécuter d'autres tâches au besoin.

Autres fonctions

* Écrire et produire des publicités pour la radio et la télévision et d'autres communiqués d'intérêt public au nom de l'entreprise;

* Rédiger, réaliser et narrer les productions de l'entreprise et les messages téléphoniques d'attente;

* Servir de voix hors champ et assurer le doublage pour diverses productions animées.

Organigramme

La structure organisationnelle de Lunix est très hiérarchisée et très formelle. Elle revêt également un aspect assez paternaliste, à l'instar de plusieurs entreprises familiales. Voici à quoi ressemble l'organigramme remis à F. Atwood :

Analyse organisationnelle de F. Atwood

Frank Atwood a fait une analyse globale de chaque secteur de l'organisation. Cette analyse indique les tâches les plus courantes pour chacun de ces secteurs, et fait ressortir les principaux problèmes ou défis à surmonter.

Bureau du président : Ralph Kondrat, président du conseil et PDG

Tâches : Définir la vision globale de l'entreprise.

Communiquer cette vision à ses vice-présidents.

Défis : Créer et communiquer sa vision stratégique (qui est fort différente de celle qu'avait son père). Pour y parvenir, il doit, de concert avec le chef du personnel, convoquer les membres de la Division du marketing et des communications à des réunions pour décider du contenu des messages s'adressant à l'organisation et du mode de diffusion.

Attirer le respect des diverses parties prenantes.

Tirer profit de sa jeunesse.

Bureau du personnel : Christopher Cass, directeur du personnel

Tâches :Agir à titre de représentant du président.

Aider le président à diriger l'entreprise.

Servir d'agent de liaison avec le conseil.

Servir d'agent de liaison avec la communauté.

Défis : Aider les gens à comprendre ce en quoi consiste sa tâche (il s'agit d'un nouveau poste).

À cette fin, en collaboration avec le président, il organisera des réunions de planification stratégique avec la Division du marketing et des communications pour décider du contenu des messages s'adressant à l'organisation et de la façon dont ils seront communiqués.

Éviter d'être perçu comme l'ombudsman de l'entreprise, problème qui avait été mentionné lors des réunions stratégiques avec la Division du marketing et des communications.

Éviter d'afficher ou d'accorder sa préférence à l'égard d'un membre de l'organisation.

Division du service à la clientèle : Abraham Alden, vice-président

Tâches :Établir des politiques et une orientation pour un protocole de service à la clientèle approprié.

Veiller à répondre aux besoins de formation de tous les employés en matière de service à la clientèle.

Répondre aux plaintes et aux griefs qui ont trait au service à la clientèle.

Sonder et mesurer le niveau de satisfaction des clients à l'égard du service à la clientèle.

Défis : Aider les employés des divers services à comprendre l'importance du service à la clientèle.

Division de la gestion des ressources humaines : Bert Benson, vice-président

Tâches :Établir les normes de recrutement, de sélection, de rétention, de promotion et de cessation d'emploi de l'entreprise.

Prévoir et assurer la formation pour tous les employés et les directeurs de l'entreprise.

Répondre aux besoins des divisions en matière de personnel.

Fournir des directives à propos de la culture d'entreprise.

Défis : Fournir un espace de travail aux nouveaux employés.

Offrir des salaires concurrentiels et les promotions qui s'imposent aux employés.

Travailler de concert avec le Bureau du président pour passer progressivement de l'ancienne culture d'entreprise à la nouvelle culture proposée par Kondrat fils.

Assurer la formation de tous les superviseurs pour qu'ils puissent intervenir dans toute question relative au personnel avant que les décisions ne soient prises, plutôt qu'après.

Demander aux superviseurs de revoir et de mettre à jour les descriptions de poste accompagnées d'une analyse adéquate des tâches.

Division du marketing et des communications : Megan Moore, vice-présidente

Tâches : Établir une stratégie de marketing et communication en lien avec le plan stratégique.

Superviser le Service Web de Lunix.

Surveiller et mettre en relief l'image globale de l'entreprise au sein des divers services, y compris l'image du président et chef du personnel.

Produire et distribuer les magazines, les brochures, la documentation et tout le matériel graphique requis par l'entreprise.

Répondre aux besoins en matière de médias et de promotions.

Communiquer la vision du président.

Défis : Assurer une présence Web efficace qui soit à l'image de l'engagement du nouveau président et PDG en matière de progrès et de technologie.

AccroÎtre considérablement la visibilité de l'entreprise dans les médias.

Produire du matériel de pointe.

Rester à l'affût de ce qui se passe au sein de l'entreprise et des événements ou réalisations dignes d'être soulignés dans les médias.

Protéger l'image visuelle globale de l'entreprise.

Division du développement des médias techniques : Daniel Donaldson, vice-président

Tâches :Concevoir du matériel éducatif destiné aux médias.

Produire des articles de démonstration et des échantillons de vidéos et de jeux électroniques interactifs.

Produire des prototypes qui seront acheminés au Service de la production et de la distribution en vue de leur fabrication.

Suivre de près les tendances dans le domaine technique et éducatif.

Défis : Satisfaire aux exigences techniques pour tout produit, de sorte qu'il sera attrayant, efficace et de haut niveau.

Embaucher des spécialistes des médias qui fourniront un rendement de premier ordre en design, animation et média, y compris l'enregistrement, la vidéo et la modélisation 3D.

Prévoir les besoins et les désirs des clients.

Trouver une façon de coordonner le travail des employés jeunes et talentueux des médias, qui saisissent peut-être mal la vision administrative ou organisationnelle d'ensemble.

Division des affaires juridiques : Ellen Egan, vice-présidente

Tâches : S'assurer que l'entreprise se conforme aux lois.

S'occuper de toute question juridique ayant trait aux brevets, aux droits d'auteur, aux griefs et au gouvernement.

Appuyer les RH en ce qui a trait aux questions juridiques.

Défis : Éviter d'être perçue comme un policier.

Éviter d'avoir à intervenir dans chaque petite décision.

Informer les employés de leurs obligations et des règlements d'une manière non menaçante.

Division de la finance : Frances Ford, vice-présidente

Tâches : Superviser les questions de finance de l'entreprise.

Gérer les investissements de l'entreprise.

Approuver et répartir les budgets dans l'ensemble de l'entreprise.

Défis : Allouer les budgets de façon ingénieuse.

Former les gestionnaires de budgets pour qu'ils en fassent une gestion judicieuse.

Trouver un équilibre entre la divulgation et la non-divulgation d'informations financières relatives à l'entreprise.

Division des technologies de l'information : Gerald Gomez, directeur des TI

Tâches :Superviser les systèmes technologiques administratifs.

Superviser les systèmes du réseau de l'entreprise.

Fournir aux employés les logiciels et le matériel nécessaires à l'exécution de leurs tâches.

Assurer le soutien technique nécessaire pour les logiciels et le matériel.

Voir à l'acquisition des licences d'utilisation des progiciels.

Défis : Mettre les données à jour grâce à une collaboration proactive avec les employés.

Établir et entretenir des liens plus étroits avec la Division des médias techniques ainsi qu'avec le Service Web de manière à leur procurer du matériel et des logiciels de pointe ainsi que le soutien technique nécessaire.

Offrir encore plus de formation aux employés.

Division de la production et de la distribution : Harriet Heinz, vice-présidente

Tâches :Voir à la fabrication des produits.

S'occuper des relations avec les fournisseurs des matières premières.

S'occuper des relations avec les vendeurs.

Défis : Expliquer le procédé de production aux employés.

Trouver des façons d'accroÎtre l'importance des tâches pour les employés de cette division.

Éviter de se sentir déconnecté du reste de l'entreprise.

2012-09-04

Cas1 produit par Susana FERNANDEZ2

1 Traduction de l'anglais du cas no 9 40 2012 019, intitulé " The "Sacred Cow" at Lunix Corporation: When Getting Rid of an Incompetent Employee Becomes Risky Business ".

2 Susana Fernandez enseigne à la Nova Southeastern University et à la Florida Atlantic University aux États-Unis.

Subject: Strategic planning; Employee management relations; Terminations; Management decisions; Information technology; Case studies

Classification: 6300: Labor relations; 5220: Information technology management; 2200: Managerial skills; 2310: Planning

Publication title: International Journal of Case Studies in Management (Online)

Volume: 10

Issue: 3

Pages: 1-10

Number of pages: 19

Publication year: 2012

Publication date: Sep 2012

Year: 2012

Publisher: HEC Montréal

Place of publication: Montréal

Country of publication: Canada

Publication subject: Business And Economics--Management

ISSN: 1911-2599

Source type: Reports

Language of publication: English, French

Document type: Feature, Business Case

Document feature: References Charts

ProQuest document ID: 1040835731

Document URL: http://search.proquest.com/docview/1040835731?accountid=38610

Copyright: Copyright HEC Montréal Sep 2012

Last updated: 2013-09-26

Database: ABI/INFORM Complete

Document 53 of 100

We Gave Them a Tool, but Hardly Anyone's Using It! Untangling the Knowledge Management Dilemma at TPA

Author: Dulipovici, Alina, Professor; Cameron, Ann-Frances, Professor

ProQuest document link

Abstract:

Given its role to assist state agencies to better plan, manage, purchase and use technology in general, Technology Project Authority (TPA) was mandated by the State Governor in 2001 to promote this vision of a collaborative IT environment across agencies, help state agencies identify relevant opportunities for collaboration based on their needs and the applicable legislation, and support the execution of such projects. To boost its credibility when promoting a collaborative IT environment to the other state agencies, TPA decided to first use its own departments to demonstrate that collaboration between government entities was possible through improved knowledge management. TPA's own divisions functioned in silos and the sharing of information and knowledge was minimal. Seven years later, TPA could still not provide positive evidence of IT-based collaboration and sharing. The latest knowledge management system, SharePointProject, was barely used. [PUB ABSTRACT]

Full text:

The meeting with the executive management team was over. Rita Carson took a deep breath as she entered her office. As the leading director of the IT Department at Technology Project Authority3 (TPA), a state-level government agency in the United States, she oversees the adoption of the new knowledge management system based on MicrosoftProject Server combined with SharePoint Server (hereafter SharePointProject). From the moment two days ago when she first saw the report on the SharePointProject usage statistics, Rita knew this meeting would not be easy. The management team's criticism still echoed in her head:

The State Governor asked TPA to promote collaboration and knowledge sharing across governmental agencies [...] What kind of example have we set for the other agencies if our own divisions do not really use the system we implemented a year ago for knowledge sharing? [...] What message are we sending to the other agencies about collaboration and knowledge sharing if we're not even able to do it ourselves?

In fact, in 2000, the State Governor had established IT-based cross-agency collaboration as a statewide goal for bringing agencies together to share information and resources. The traditional "siloed" data of each agency represented a significant barrier to providing more efficient services to citizens and employees. Deploying an integrated IT infrastructure among all 120 state agencies would allow cross-agency collaborations that would save money and increase the quality of services offered. Authorized government personnel would have real-time access to data regardless of its origin (which becomes irrelevant as long as the data is reliable and secure). For example, the management of child welfare cases would substantially benefit from the sharing of information among the Department of Human Resources, the courts, the Department of Juvenile Justice, the schools and the Medicaid program in the Department of Community Health. Also, criminal justice activities would benefit from the sharing of information among state law enforcement agencies, the courts, the Department of Corrections, and the Board of Pardons and Paroles. Given its role to assist state agencies to better plan, manage, purchase and use technology in general, TPA was mandated by the State Governor in 2001 to promote this vision of a collaborative IT environment across agencies, help state agencies identify relevant opportunities for collaboration based on their needs and the applicable legislation, and support the execution of such projects. To boost its credibility when promoting a collaborative IT environment to the other state agencies, TPA decided to first use its own departments to demonstrate that collaboration between government entities was possible through improved knowledge management. TPA's own divisions functioned in silos and the sharing of information and knowledge was minimal. Seven years later, TPA could still not provide positive evidence of IT-based collaboration and sharing. The latest knowledge management system, SharePointProject, was barely used.

Rita sat down at her desk and looked at the report again, thinking to herself:

How is it possible that only 12% of project managers and their teams used the SharePointProject system in the last three months? They were all ecstatic about this system at the beginning of the implementation project!

She didn't understand what had happened or what had changed since its implementation. The report also indicated that close to 98% of TPA employees understood the importance of, and wanted to actively participate in, knowledge sharing. "If people are willing to share but don't use SharePointProject, then what's the problem?" she wondered.

TPA's executive management team was obviously disappointed with these results. At this point, they felt confused and asked Rita to guide them in the next steps. How should Rita approach this problem to ultimately find a solution that better supports TPA's business processes and needs in terms of knowledge management?

Technology Project Authority (TPA)

Technology Project Authority (TPA) is a state-level government agency in the United States established in 2000 by the State Governor to create a more efficient and responsive government through the innovative use of technology. Employing close to 530 people, TPA's responsibilities are:

* To oversee governmental IT projects costing more than $1 million;

* To establish policies and standards for technology and IT security used by the state agencies;

* To coordinate governmental IT purchases consistent with established policies and standards;

* To facilitate statewide strategic planning with regards to the state's information systems and telecommunication networks.

Appendix 1 shows an excerpt of TPA's organizational structure: a 12-member board of directors, an executive director and three divisions (Finance, Project Planning and Operations). TPA's internal IT Department is under the direct supervision of the Finance Division. The IT Department is responsible for all of the IT projects within TPA (i.e., internal IT projects) such as the implementation of SharePointProject. The Project Planning Division is responsible for initiating and planning IT projects with other state agencies (i.e., external IT projects). Once these external projects get to the execution phase, they are transferred to the Operations Division. Note that while project management and operations divisions are often considered opposite entities, managing projects is the core business at TPA, and thus it represents their operations. Within the Operations Division, the Projects Management group is responsible for the project management aspects of a project and the Solutions Development group is responsible for the technological development and deployment. For example, integrating child welfare information and case management activities among the Department of Human Resources, the courts, the Department of Juvenile Justice, the schools and the Medicaid program in the Department of Community Health represents an external IT project. Initially, it is the responsibility of a project manager from the Project Planning Division and then, once it is ready for execution, it is transferred to a project manager from the Projects Management group, within the Operations Division.

TPA regularly reviews its IT strategic plan and fine-tunes it in accordance with technological progress and the statewide goals established by the State Governor. Since the first IT strategic plan was released in 2001, the use of IT to facilitate agency collaboration has been identified as a long-term goal. The specific objectives of this strategic goal have evolved over the years from general guidelines (for example, share information across agencies) to more concrete action steps (for example, integrate the shared front end from a specific agency into the existing state portal). Moreover, in the latest IT strategic plan (released in 2007), the use of IT to facilitate agency collaboration is no longer an isolated goal but an important step in making TPA's IT architecture and IT infrastructure more efficient and effective (see Appendix 2).

Although the general goal of "agency collaboration" could be achieved through a variety of strategies, TPA's executives chose from the beginning to improve the organization's knowledge management activities. Improving knowledge management within and across TPA's divisions would allow TPA not only to lead by example in terms of how cross-boundary collaboration could take place among the other state agencies, but also to improve its work practices and to sustain its expertise in IT project management and technology development. As TPA had a strong culture focused on the cost, scheduling, scope and quality of delivered projects, and as the IT projects (external and internal) undertaken at TPA had many similarities, the use of appropriate tools to share information and knowledge about projects would allow the project teams to avoid reinventing the wheel.

Knowledge Management at TPA

Working toward the general goal of improving collaboration within and across TPA's divisions had been extremely challenging. TPA's executive managers had to continuously adjust the organization's knowledge management approach (see Figure 1).

Phase 1: The seeds of a formal knowledge management approach

In 2001, after the decision to lead by example and improve its knowledge management activities, TPA established a list of collaboration opportunities (see Appendix 3) to reduce inefficiencies within and across its divisions, such as unnecessary spending for multiple IT platforms and information systems and inefficient use of IT components. To capitalize on these opportunities, a set of tools (some new tools and some that had been put in place to serve a purpose other than knowledge management) was used to facilitate the subsequent knowledge management activities: email, instant messaging, discussion forums, templates for the standard project deliverables, shared drives for transferring files, etc. The initiative had mixed results: some acknowledged the potential savings, but others noted the loss of ownership of the data to be shared. In the end, very few employees from the three divisions changed their work practices to include knowledge management activities.

Three years later, in 2004, the situation had not changed much: very few people used IT to create, store and share information and knowledge about their projects either within their division or across the three divisions. The executive management team decided to formalize the knowledge management initiative. Bob Archer - a well-known executive project manager from the Project Planning Division - was given the new title of Knowledge Manager. His responsibilities as the knowledge manager were to promote and assist the three divisions in their efforts to collaborate. The executive management team also chose the shared drive, among the various technologies used to store and disseminate information and knowledge within and across projects (see Appendix 4), as the main electronic repository.

The project teams were unhappy about the choice of the shared drives as the main electronic repository, as there were many problems. In particular, the shared drives could not deal with version control and redundancy. For example, project managers felt that looking for documents on these shared drives was like looking for a needle in a haystack. It was a real challenge: Where do you look for documents on the shared drive? In which folder? How do you know if it is the most recent version? Is there anything else about this issue that has been discovered since? Additionally, there was 900GB of data on almost everything and everybody and there was no index or standard organizing structure. As a result, the shared drives were used in conjunction with the other tools. Some even preferred not to use them at all and only share the issues and solutions from their projects during team meetings and one-on-one meetings. Bob Archer quickly understood that it was time for a new phase of TPA's approach to knowledge management. He made a recommendation to the executive management team to acquire a more effective electronic repository that would integrate knowledge from various sources, replacing the shared drives and other tools.

Phase 2: SharePoint

In 2005, the executive management team mandated Rita Carson (the leading director of the IT Department at TPA) to implement MicrosoftSharePoint Services (hereafter SharePoint) in the IT Department, the Project Planning Division and the Operations Division. SharePoint is a browser-based collaboration and document-management platform whose objective is to support knowledge management activities. An important characteristic of SharePoint is that it is highly customizable. At TPA, SharePoint was configured to provide key functionalities that the shared drives did not have, such as: document versions, check-in and check-out of documents, alerts when changes were made, task monitoring, forums and instant messaging. Given all these benefits, the executive management team expected SharePoint to become the main tool for knowledge management activities and to replace all the other tools.

Following a phased strategy, SharePoint was first introduced in the IT Department. Because of this group's IT background and skills, it was thought there would be fewer problems. Then, the plan was to implement SharePoint in the Project Planning Division, followed by the Operations Division. As the various project teams got access to SharePoint, they were required to use the SharePoint site created for their project to store and share all project-related information and knowledge: project deliverables, contact information, meeting minutes, lessons-learned databases, diagrams (e.g., organizational charts, project charts, graphical representations of the system, etc.), memos, white papers, roadmaps and any other project-related information.

In order for these SharePoint sites to have a coherent "look and feel," the IT Department set up a default structure, which was designed to be intuitive, simple and broad enough to apply to both the internal and external projects at TPA. However, several project teams complained about this structure, which was too general and was interpreted differently by the various users. Instead of a coherent "look and feel," the differences between the SharePoint sites were significant.

Another significant problem was access to the SharePoint sites. Project teams from the Project Planning Division interacted significantly with project teams from the Operations Division. For security reasons, however, the IT Department configured SharePoint in such a way that access to a particular project's site was restricted only to members of that project, and gaining access to the SharePoint sites of other projects was a tedious and time-consuming process. A workaround solution was quickly found: documents were put on both the SharePoint site and the shared drives. This solution complied with the formal requirement of having all the documentation on SharePoint and - through the shared drives - the documents were also accessible to all TPA employees. Over time, many different versions of a document existed and the documents on SharePoint were not always the most current version. The executive team was still using these documents to audit the project deliverables (project plan, status reports, etc.); basically they were only checking the existence of the deliverables on the SharePoint site and not their content or whether the content was up to date. Hence, the SharePoint site was used primarily as a high-level audit tool, rather than as a sharing tool.

This "double-entry" practice generated a lot of frustration and confusion. When looking for documents, the expression "It's on the site" soon became a catch-all phrase for documents on the SharePoint site, documents on the shared drives, or documents that had not even been posted (since most people not on the project team could not access the project's SharePoint site to verify a document's existence). SharePoint was therefore perceived as a "covert" knowledge repository because not everyone could access or verify the knowledge. Despite the potential benefits of using SharePoint, the project teams eventually went back to their pre-SharePoint habits. The shared drive and email became the most commonly used tools for storing and sharing knowledge, in conjunction with all the other tools that SharePoint was expected to replace (see Appendix 4).

Furthermore, some project teams chose not to use SharePoint. For example, some considered that their projects were too close to completion to make the transition from the shared drive to SharePoint worthwhile. In the case of the Solutions Development group, the leading director decided that the group used the shared drive efficiently and effectively, and he thus considered the effort to switch to SharePoint worthless.

All these problems made Bob Archer realize that SharePoint was still not the right knowledge management system for TPA's needs. The lack of clear standards reinforcing the use and adoption of SharePoint contributed to the general perception that SharePoint was just one of the many tools to support knowledge management endeavours. He recommended that the executive team reassess their needs before deciding on a specific technology.

Phase 3: SharePointProject

Following Bob Archer's recommendations, TPA's executive management created a committee to find a knowledge management system that would be more appropriate for TPA's needs. Rita Carson was part of this committee, along with Bob Archer (Knowledge Manager), Andrew Collins (Director of the Project Planning Division), and Harry Linton (Director of the Operations Division). Together they represented every group involved in project management at TPA as well as the future users.

Rita remembered clearly how the committee identified a list of "must-have" functionalities and assessed several tools. Their final choice was MicrosoftProject Server combined with SharePoint Server: SharePointProject. SharePointProject is a multi-user networking system, significantly different from SharePoint. SharePointProject provides a lot of details about the projects (similarly to MicrosoftProject) and also it automatically integrates data and information from other sources, such as lessons learned from previous projects (using knowledge repositories similar to those found in SharePoint). SharePointProject was not perfect for TPA's needs but some of its functionalities seemed very useful. The executive management team was happy with the committee's decision and quickly sent two or three memos to remind everyone of the benefits of sharing knowledge and to explain the organizational benefits of using SharePointProject.

Once the project got underway, the implementation team from the IT Department examined TPA's business processes as well as the work practices embedded in SharePointProject. The goal was to determine the best parameters for the configuration of SharePointProject. When a gap was identified, the team documented the necessary changes to the existing business processes. All the relevant processes were thus revised and documented. The configuration followed closely what the business analysts documented, except for a few minor situations when ad hoc decisions had to be made quickly to avoid long delays.

The implementation of SharePointProject followed a phased strategy, targeting first the IT Department, then the Project Planning Division, and, finally, the Operations Division. Once SharePointProject was available in a division, all the project managers and project teams needed to attend six training sessions on how to use the tool. After that, they were responsible for managing their projects in SharePointProject. The executive management team expected SharePointProject to gradually replace the other tools used for knowledge management tasks, including the shared drives and SharePoint.

Although all three divisions recognized the potential benefits of SharePointProject for their daily project management tasks, the adoption process did not go smoothly. Using SharePointProject implied a significant change, from using a mix of tools to using a single, integrated tool to manage projects and share project-related knowledge. SharePointProject could provide an integrated view of a project, but it required collaboration from practically every TPA employee. For this reason, people were excited about SharePointProject, but also skeptical about whether or not everyone else would really use it.

The implementation, and consequently the adoption, of SharePointProject suffered several delays. There were some technical problems due to aging servers that needed to be replaced. Furthermore, many project managers were too busy with their daily responsibilities and could not attend the training sessions. Additional training sessions had to be offered for those individuals. Nevertheless, by the end of 2007, Rita was happy to report that the new platform had been implemented throughout the three divisions. This didn't mean, however, that everybody was using it. Switching from SharePoint and the shared drives to SharePointProject implied migrating or converting all of the existing project data. As the divisions felt swamped and understaffed, their leaders did not see the adoption of SharePointProject as a short-term priority. As a result, the few people who did use the system began calling it "a fancy note-keeping program."

Where Are We Now, and What Should We Do?

Rita was puzzled by the usage statistics for SharePointProject and wanted to better understand the situation. She organized a meeting with the same committee that chose SharePointProject: Bob Archer (Knowledge Manager), Andrew Collins (Director of the Project Planning Division), and Harry Linton (Director of the Operations Division). Before the meeting, each director talked to his group and gathered some general opinions about SharePointProject.

At the meeting, Rita delved directly into the main issue:

Rita: What's going on with SharePointProject? In 2006, we were so certain that SharePointProject was the technology that we needed. I know there were a few technical bumps along the way, but they shouldn't have been deal-breakers. The four of us carefully chose the most appropriate system for our divisions. Why aren't people using it? The executive management team is obviously displeased. Now it's time to get to the bottom of this. I am the one responsible for the adoption of this system and therefore I need to understand what's going on in the three divisions. Don't we still need to share our expertise?

Andrew: Oh, we still need to know what others are doing because we may be able to help each other. They may have something that we need and vice-versa. But right now, despite having SharePointProject in place, there's no sharing. Basically, the environment is "This is your project. This is mine. I'm working on mine and I really don't care what's going on with yours." If there is a specific need, yeah we may accommodate and inquire, and use SharePointProject, but otherwise we don't share knowledge.

Harry: I agree with Andrew. I had spent four weeks trying to solve a problem with one of my projects before I found out that a project team from the Project Planning Division already had a solution. Four weeks of wasted time! It's unacceptable! But everybody just wants to see their own project implemented on budget and on schedule and working properly. So, documenting and sharing knowledge is a nice thing to do, but it's just dessert and not part of the meal.

Andrew: I don't think the low usage of SharePointProject is due to a misfit with our needs. I think it's a matter of expectations. Everybody in my division has had some experience with SharePoint and MicrosoftProject in their previous jobs or with their previous employers. Everybody got really excited about the possibilities of SharePointProject at the beginning. Everybody imagined it differently and I think they find it hard to adjust to the new processes.

Rita: I have several new hires in my division who come from the private sector. They told me that the way we communicate between teams is a bit different. They find it hard to get access to knowledge because there is too much redundancy and not enough resources. So, their expectations are completely different from the processes that we put in place.

Harry: I think there is another problem. Several senior project managers have never used a lot of documents in the past. Conversations and meetings... I mean we have meetings every other week and it is a collaborative effort. It is a matter of talking and communicating, making sure that we've done the right thing and stayed on track. SharePointProject is a whole different story.

Bob: Everything is in people's heads and that's one of the problems. Only a small part of our knowledge gets into documents or is incorporated in organizational processes. Documenting projects and sharing project documents via SharePointProject is not part of our formal responsibilities. Every time someone leaves TPA, we realize how dependent we were on that person. The knowledge is gone, but the project has to move forward.

Harry: I'm not sure though that we can generalize this problem. In the Operations Division, I have the two extremes. In the Solutions Development group, everything gets put into documents. It's a young group of developers, business analysts and technical architects, and they have a different culture: document and reuse. In the Projects Management group, my project managers are mostly external contractors with 15 to 20 years of experience. As projects are being planned and executed, they don't check on SharePointProject to see what others have done. They will go to their buddies - you know, the other project managers - and ask them to share whatever they have documented.

Rita: Clearly SharePointProject is not being used as it is supposed to be used. For example, few people created their lessons-learned documents in SharePointProject. The technology cannot provide the overall view if the project teams do not provide the required ingredients. I know from my own projects that I discover things all the time that are not documented. That knowledge is still in people's heads.

Bob: I see that problem every day. Our people have the desire to share, but sharing knowledge is not an automatic behaviour. First of all, it's more like "what's in it for me?" This is one aspect of sharing that our organization does not address. Currently, I don't have any return on value for having made my contributions other than just the feeling that I contributed. Sharing knowledge is not even formally acknowledged as one of my daily tasks. I have to find the time to do it. Second, what is valuable in my eyes? How do I know that is what I need to share? I consider myself a senior project manager, but sometimes I still hesitate about what to share and how much. I don't want to expose myself for everyone to read what I did and have them think 'What an idiot!'

Andrew: I believe in the benefits of documenting and sharing our expertise about projects. I try to use SharePointProject as much as possible. I try to reuse existing knowledge, but it's not always easy. People's documents have themselves in mind; they don't have me in mind. The documents are either too general or too specific, and I have no idea how I can reuse that information for my case. We can't document for the organization at large, but we need to learn how to document so that the organization can absorb that knowledge and reuse it.

Rita: According to the internal report I have on the use of SharePointProject, many people feel that this is not the right platform to share knowledge and make a difference. They complain that there are still too many knowledge sharing tools. I am honestly disappointed that SharePointProject has not yet replaced the other tools.

Andrew: I feel the same way. When we chose SharePointProject, we talked about how we would enter the data once and then automatically have the various reports and deliverables in the required format. We would have a high-level view of the project for the executive team and a different view with more details about the methodology for the business owners. I know several project managers who still create these reports themselves instead of using SharePointProject.

At the end of the meeting, Rita went back to her office and wrote down the main points. She looked at her notes and reflected on a possible approach to better support TPA's business processes and needs in terms of knowledge management. Suddenly, a smile illuminated her face. The meeting with Bob, Andrew and Harry had really helped her better understand the usage statistics. She now felt ready to prepare her detailed recommendation for the executive management team.

Subject: Organizational behavior; Efficiency; Knowledge management; Information sharing; Case studies

Classification: 5220: Information technology management; 2320: Organizational structure; 9130: Experimental/theoretical; 2500: Organizational behavior

Publication title: International Journal of Case Studies in Management (Online)

Volume: 10

Issue: 3

Pages: 1-16

Number of pages: 16

Publication year: 2012

Publication date: Sep 2012

Year: 2012

Publisher: HEC Montréal

Place of publication: Montréal

Country of publication: Canada

Publication subject: Business And Economics--Management

ISSN: 1911-2599

Source type: Reports

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1040835736

Document URL: http://search.proquest.com/docview/1040835736?accountid=38610

Copyright: Copyright HEC Montréal Sep 2012

Last updated: 2013-09-26

Database: ABI/INFORM Complete

Document 54 of 100

Sustainable Case Study: University Of Pittsburgh Medical Center

Author: Clinton, Steve; Marco, Gayle; Manna, Dean R.; Weir, Amanda

ProQuest document link

Abstract:

University of Pittsburgh Medical Center (UPMC) mission is to provide outstanding patient care and to shape tomorrow's health system through clinical innovation, biomedical, and health services research, and education. By operating their health system by this mission, UPMC is the leading health provider in Pittsburgh. Their vision is to create a new economic future for western Pennsylvania. They want to build a new perspective of the way people think about health care by creating new avenues in the health care field.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Health care industry; Corporate profiles; Hospitals; Corporate objectives; Case studies

Location: Pittsburgh Pennsylvania

Company / organization: Name: University of Pittsburgh Medical Center; NAICS: 621111, 622110; Name: Childrens Hospital-Pittsburgh PA; NAICS: 622310

Classification: 9130: Experimental/theoretical; 2310: Planning; 9110: Company specific; 8320: Health care industry

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 5

Pages: 441

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418711010

Document URL: http://search.proquest.com/docview/1418711010?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 55 of 100

Tax Case: Single Member LLC Brings In A Second Owner

Author: Durant, Monique O.

ProQuest document link

Abstract:

This paper presents a tax case simulating a real-world experience whereby a single member limited liability company that is currently classified as a disregarded entity, takes on a second owner. By default the entity will be classified as a partnership; however, if an affirmative election is made, the LLC could be taxed as a corporation or as an S corporation. Students are presented with two options for partnership formation along with hypothetical data and business objectives of the partners. They are then asked to consider the tax rules of two options, along with the resulting tax and economic impact of each option, in order to make a recommendation about the more favorable business alternative. Students are also asked to consider alternate forms of entity in addition to that of a partnership and the potential impact on the owners. In order to do this, students rely on fundamental knowledge learned in the typical business entities tax course and use their research and analytical skills to synthesize the most favorable outcome. Students are asked to deliver a tax memorandum which addresses a series of issues or questions, plus a client letter discussing the tax considerations as well as non-tax factors, in addition to Excel worksheets which outline the tax impact under each of the two options provided. As a result of this assignment, students discover the value of prudent and skillful tax planning, that additional, non-tax factors may need to be considered, and the positive impact they can have on the financial affairs of their clients.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Limited liability companies; Partnerships; Business ownership; Corporate tax planning; Case studies

Classification: 9130: Experimental/theoretical; 4210: Institutional taxation

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 5

Pages: 447

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418710911

Document URL: http://search.proquest.com/docview/1418710911?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 56 of 100

Power Play: A U.S. Senator Pushes

Author: Nelson, James A.

ProQuest document link

Abstract:

This case shows an American health-insurance executive being asked by a U.S. senator to "back pay" a canceled health-insurance policy so that the senator's brother's hospital bills would be paid. The reader discovers how elected officials can use their power to influence and abuse regulated industries. The reader also considers the dilemmas and consequences of pressure from elected officials to perform illegal acts. This case is appropriate for courses in Business Ethics, Insurance, and Government.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Public officials; Regulated industries; Health insurance; Insurance fraud; Case studies; Professional ethics; Political behavior

Location: United States--US

Classification: 9190: United States; 2410: Social responsibility; 4310: Regulation; 8210: Life & health insurance; 1210: Politics & political behavior; 9130: Experimental/theoretical

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 5

Pages: 459

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1418710865

Document URL: http://search.proquest.com/docview/1418710865?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 57 of 100

Conflicting Goals In A Higher Education Environment

Author: Colbert, Jan

ProQuest document link

Abstract:

Marie O'Shutt is the MBA Director, a mid-level management position, at an institution of higher education (a university). She inherited Amy, an underachieving administrative assistant (AA) when she was asked to take the MBA position. Marie has concerns related to ethics and integrity surrounding some of Amy's actions, including recording hours worked that cannot be substantiated. Marie's goal is to employ a productive AA in order to operate an efficient and effective MBA program. Amy strongly desires to retain in the position of MBA AA and to maintain the status quo of reporting hours worked at hours when the university was not open and which cannot be substantiated. Upper level management at the university; i.e., the Dean of Business and the Director of Human Resources, has a goal of wanting to avoid having Amy sue. Members of management in this institution of higher education appear to have conflicting goals and are not seeking goal congruence, and the issues involve integrity, ethics, and legal matters.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Higher education; Colleges & universities; Human resources; Objectives; Business ethics; Case studies

Location: United States--US

Classification: 9190: United States; 9130: Experimental/theoretical; 2410: Social responsibility; 6100: Human resource planning; 8306: Schools and educational services

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 5

Pages: 453

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1418710937

Document URL: http://search.proquest.com/docview/1418710937?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 58 of 100

International Expansion: A Case Study Of Mongolia's Dairy Market

Author: Daly, Shelly A.; Ganbold, Tsogt

ProQuest document link

Abstract:

A businessman teaches himself the fundamentals of business and marketing in order to expand beyond the region of his Mongolian home. He must work through the meaning of supply and demand and customer-orientation which are foreign concepts to him. Letting go of the fundamental principles taught to him by a socialist system and competing in the 21st century may bring success, but first he must identify the challenges and begin to understand which ones are significant to overcome for success.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Entrepreneurs; Marketing; Emerging markets; Case studies

Location: Mongolia

Classification: 9179: Asia & the Pacific; 9130: Experimental/theoretical; 7000: Marketing; 9520: Small business

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 5

Pages: 473

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1418710860

Document URL: http://search.proquest.com/docview/1418710860?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 59 of 100

Midwest Health Services: Purchasing Patient Snacks

Author: Moffit, Timothy; Gigowski, Michelle

ProQuest document link

Abstract:

Melanie Griffin is a recent college graduate who has been asked by her supervisor to evaluate the consumption of snacks and pop at the ambulatory surgery center for which she works. Immediately, Melanie is confronted with the cultural complexities of a small health services operation. The reader discovers these complexities through a lively meeting dialogue, and the reader is then asked to help Melanie prepare for a follow-up meeting by identifying, analyzing, and preparing possible procurement solutions. The richness of this case is attributed to the practical quantitative consumption and pricing analysis coupled with the complexities of implementation because of the array of personalities. This case is appropriate for early undergraduate courses in management, marketing, and managerial accounting.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Leadership; Corporate purchasing; Customer satisfaction; Health services; Small business; Case studies

Location: United States--US

Classification: 9190: United States; 9130: Experimental/theoretical; 9520: Small business; 8320: Health care industry; 2400: Public relations; 5120: Purchasing; 2200: Managerial skills

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 5

Pages: 477

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Tables

ProQuest document ID: 1418710888

Document URL: http://search.proquest.com/docview/1418710888?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 60 of 100

G. LeBlanc Corporation, Relocating A Facility

Author: Furdek, Jonathan M.

ProQuest document link

Abstract:

This is a business case study describing a classical success story that brought a business from a store front music store to become the largest producer of brass and woodwind instruments in America. Additionally, the unique work environment and operating strategy of this firm was not only visionary, but enabled the company to prosper in a difficult labor market. Finally, the demise of the company when new management attempted to be a traditional company clearly indicates the important role of the entrepreneur. Although the focus of the case is on the decision to re-locate a facility, this is an excellent case for courses in entrepreneurship, strategy, and operations.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Entrepreneurs; Location of industry; Site planning; Operations management; Musical instruments; Case studies

Location: United States--US

Classification: 9190: United States; 9130: Experimental/theoretical; 2310: Planning; 5100: Facilities management; 9520: Small business; 8600: Manufacturing industries not elsewhere classified

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 5

Pages: 489

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418711120

Document URL: http://search.proquest.com/docview/1418711120?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 61 of 100

Auditing Cases That Made A Difference: Funds Of Funds

Author: Struach, Bruce A.; Foster, Sheila D.

ProQuest document link

Abstract:

A few fraud cases stand out for the impact they have had on the auditing profession. These cases continue to affect how today's auditing professionals perform the critical job of expressing opinions on financial statements. Names and dates of certain cases appear in nearly all auditing textbooks, but rarely are the stories behind these cases presented. Fund of Funds is an international case so convoluted that it is difficult to tell the players without a score card. It spanned the globe from the Arctic wastelands to European palaces, across the Atlantic to Costa Rican hideaways and then traversed the United States to Hollywood movie lots. It included contact with a couple of US Presidents and a foreign leader thrown in for good measure. Like other "Audit Cases That Made a Difference," Fund of Funds clearly shows students that fraud is not limited to today's corporations and that there is, indeed, little that is new under the sun.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Auditing; Fraud; Liability; Case studies; Professional liability

Classification: 9130: Experimental/theoretical; 9180: International; 4300: Law; 4130: Auditing

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 5

Pages: 493

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418710963

Document URL: http://search.proquest.com/docview/1418710963?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 62 of 100

Earnings Management Through Consolidation: Hutchison Telecommunication International Limited

Author: Man, Chi-Keung

ProQuest document link

Abstract:

This paper uses a case study approach to analyze how three corporations; namely, Hutchison Whampoa Limited (HWL), Hutchison Telecommunication International Limited (HTIL), and Hutchison Telecommunication Hong Kong Holdings, managed earnings through consolidation. The author finds that HWL, by listing, reducing, and increasing its shareholding in HTIL, improved its levels of profitability during the study period of 2004-2010. Furthermore, HTIL spun off its Hong Kong and Macau businesses to improve its profitability directly and that of HWL indirectly. Finally, HWL privatized HTIL in 2010. The author demonstrates that although HTIL was listed on the Hong Kong Stock Exchange, HTIL and HWL improved their share performances by managing earnings through consolidation techniques.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Telecommunications industry; Earnings management; Consolidation; Profitability; Stock prices; Case studies

Location: Hong Kong

Company / organization: Name: Hutchison Whampoa Ltd; NAICS: 488310, 517210; Name: Hutchison Telecommunications Ltd; NAICS: 517110, 517210

Classification: 9179: Asia & the Pacific; 9130: Experimental/theoretical; 3400: Investment analysis & personal finance; 8330: Broadcasting & telecommunications industry

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 5

Pages: 509

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1418711334

Document URL: http://search.proquest.com/docview/1418711334?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 63 of 100

Gaussian Copula Vs. Loans Loss Assessment: A Simplified And Easy-To-Use Model

Author: Naimy, Viviane Y.

ProQuest document link

Abstract:

The copula theory is a fundamental instrument used in modeling multivariate distributions. It defines the joint distribution via the marginal distributions together with the dependence between variables. Copulas can also model dynamic structures. This paper offers a brief description of the copulas' statistical procedures implemented on real market data. A direct application of the Gaussian copula to the assessment of a portfolio of loans belonging to one of the banks operating in Lebanon is illustrated in order to make the implementation of the copula simple and straightforward.[PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Statistical methods; Probability distribution; Multivariate analysis; Case studies; Normal distribution

Location: Lebanon

Classification: 9178: Middle East; 9130: Experimental/theoretical

Publication title: Journal of Business Case Studies (Online)

Volume: 8

Issue: 5

Pages: 533

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Clute Institute for Academic Research

Place of publication: Littleton

Country of publication: United States

Publication subject: Business And Economics--Management

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Tables References

ProQuest document ID: 1418711154

Document URL: http://search.proquest.com/docview/1418711154?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2012

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 64 of 100

CHRIS THOMPSONS CAREER DILEMMA! WHAT SHOULD I DO?

Author: Wilson, Shirley; Luthar, Harsh K

ProQuest document link

Abstract:

This case discusses the moral dilemma experienced by Chris Thompson. Thompson, an African American University student and top athlete, accepted a summer internship at American Brands International, the nation's largest tobacco company. Although Chris Thompson held long-standing negative attitudes toward smoking and the use of tobacco products, he was flattered by the fact that American Brands, a company known for recruiting the best and brightest, aggressively recruited him for the internship with the potential for a bright future career in the organization. Chris accepted the internship based on pay, benefits, freedom on the job, and future advancement opportunities. However, as the internship progressed, he began to have doubts about whether or not American Brands was the right company for him. The case raises a variety of behavioral issues including the fit between personal and organizational values, the role of attitudes in job satisfaction, turnover and decision-making in organizations. This case, which has been used successfully in several Organizational Behavior classes, suggests that congruence between the individual and the organization is essential for both career development as well as organizational effectiveness. [PUBLICATION ABSTRACT]

Full text:

CHRIS THOMPSON'S CAREER DILEMMA! WHAT SHOULD I DO?

This case can apply to many other situations that students will face. The concepts of value congruence/incongruence will likely come up several times during the course of their careers. Some examples may include hiring or performance appraisal decisions. What should someone do when they are pressured to hire a lesser qualified individual over a more qualified person? Suppose someone is pressured to hire someone as an employee or invite them to join a board of directors when the values of that individual conflict with those of the organization? Suppose the values of that individual conflict so strongly that you only want that person because of what they can offer, but would prefer not to interact with that individual, should a person be brought on board because they have influence? If a subordinate holds values inconsistent with yours, does this affect your appraisal of the subordinate's work? If you are asked to do something inconsistent with your personal values by a supervisor, do you do it or refuse and possibly risk your job? The instructor should have students brainstorm situations and conduct a discussion around value conflicts.

Student responses will vary concerning the takeaways of this case. Many will again mention the importance of value congruence between the individual and the organization. Others will discuss the importance of ethics in decision making. Again, the instructor should encourage students to think about what other ideas they can take away from this case.

EPILOGUE

Chris decided to continue his internship with American Brands. He did not try to alter his values to align with those of the organization. He continued to speak against smoking to young people when he gave his talks. He tried to accept the fact that people would challenge him and ask him to explain his choice of company. Since the internship was a short-term experience and he felt that he could give the company his best efforts while he was there. He continued to feel conflicted about his situation.

Subject: Case studies; Organizational behavior; Internships; Tobacco industry; Values

Location: United States--US

Classification: 2500: Organizational behavior; 9190: United States; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 6

Pages: 1,11-12

Number of pages: 3

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1081347379

Document URL: http://search.proquest.com/docview/1081347379?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 65 of 100

A FAMILY'S TRAGEDY-LEAKED PICTURES OF A TEEN'S FATAL ACCIDENT

Author: Ghazzawi, Issam A

ProQuest document link

Abstract:

This case is about a much-publicized story of an eighteen year old girl that lost her life instantly after losing control of her father's Porsche car on a toll road in Orange County Lake Forest, (Southern California) on Oct 31, 2006. In this case, the California Highway Patrol has acknowledged that against its policies and procedure, one of its dispatchers leaked the graphic pictures of the teen's nearly decapitated body onto the Internet. In 2007, the girl's family filed a civil lawsuit against the California Highway Patrol agency and its dispatchers for the leaked images and cited violation of privacy, negligence and infliction of emotional distress. In 2008, the court dismissed the case and the family criticized the ruling and appealed it. This case serves as a great educational topic for discussing what responsibilities organizations and its professionals have towards the general public; to further engage students in the topics of professional ethics, privacy rights and privacy issues, and the process of making ethical decisions.

Full text:

Chairman of the Board of the Antelope Valley Health Center) for his advice, definitions, and explanations of the medical terminologies used in this case; and to Mr. Stephen Monteros, COO of Linear Systems for his insight on law enforcement agencies procedures (S.O.P) relating to crime scenes.

INSTRUCTOR'S MANUAL ENDNOTES

1. Centers for Disease Control and Prevention (2010). Injury Prevention and Control: Motor Vehicle Safety. Information was retrieved on September 12, 2010 from http://www.cdc.gov/MotorVehicleSafety/Teen_Drivers/teendrivers_factsheet.html.

2. Ibid, para. 2 &3.

3. Ibid.

4. Carroll, A.B. & Buchholtz, A. K. (2008). Business & Society: ethics and Stakeholder Management, 7 ed. Mason: OH. Cengage Learning.

5. Ibid.

6. See also "Organizational Justice, Ethics, and Corporate Social Responsibility" in Organizations in Greenberg, J. & Baron, R.A. (2008). Behavior in Organizations. 9th ed. Upper Saddle River, NJ: Pearson Prentice Hall.

7. See also "Organizational Justice, Ethics, and Corporate Social Responsibility" in Organizations in Greenberg, J. & Baron, R.A. (2008). Behavior in Organizations. 9th ed. Upper Saddle River, NJ: Pearson Prentice Hall. Page 66.

8. Ibid.

9. See the article titled "The Catsouras Photos, privacy, and Privilege" by Marc J. Randazza in http://randazza.wordpress.com/2009/06/05/the-catsouras-photos-privacy-and-privilege/. The article was retrieved on October 2, 2009.

10. Bennett, J. (2009). A tragedy that won't fade away: When grisly images of their daughter's death went viral on the Internet, the Catsouras family decided to fight back. Newsweek, (April 25, 2009). The story was retrieved on August 31, 2009 from http://www.newsweek.com/id/195073.

11. Ibid, Para. 2.

12. See the article titled "The Catsouras Photos, privacy, and Privilege" by Marc J. Randazza in http://randazza.wordpress.com/2009/06/05/the-catsouras-photos-privacy-and-privilege/. The article was retrieved on October 2, 2009, Para. 18.

13. See also Hardesty, G. (2007). Lasting Images: Parents who lost 18-year-old daughter in a car crash fight to get gruesome accident-scene photos off the Internet (Friday, January 12, 2007), Para. 7. The story was retrieved on September 12, 2009 fromhttp://www.ocregister.com/articles/nild<;i-catsouras-farnily-1541821images-chp.

14. See Stanwick, P. A. & Stanwick, S. D. (2009). Understanding Business Ethics. Upper Saddle River, NJ: Pearson Prentice Hall. Page 19.

15. Ibid.

16. See also Decision Making in Organizations in Greenberg, J. & Baron, R.A. (2008). Behavior in Organizations. 9th ed. Upper Saddle River, NJ: Pearson Prentice Hall.

17. Ibid.

18. See Stanwick, P. A. & Stanwick, S. D. (2009). Understanding Business Ethics. Upper Saddle River, NJ: Pearson Prentice Hall. Page 20.

19. Ibid.

See also Decision Making in Organizations in Greenberg, J. & Baron, R.A. (2008). Behavior in Organizations. 9th ed. Upper Saddle River, NJ: Pearson Prentice Hall.

20. Summarized from "Internet Insecurity," Time (July 2, 2009), 46-50. From: Carroll, A.B. & Buchholtz, A. K. (2008). Business & Society: ethics and Stakeholder Management, 7 ed. Mason: OH. Cengage Learning.

21. Bennett, J. (2009). A tragedy that won't fade away: When grisly images of their daughter's death went viral on the Internet, the Catsouras family decided to fight back. Newsweek, (April 25, 2009). The story was retrieved on August 31, 2009 from http://www.newsweek.com/id/195073.

22. Hardesty, G. (2008). CHP dispatcher says suit over crash photos is misguided: Images of body of Nicole "Nikki' Catsouras were circulated worldwide. Orange County Register, (Wednesday, January 23, 2008, Para. 54). The story was retrieved on August 9, 2009 from: http://www.ocregister.com/news/nikkicatsouras-chp- 19654 1 5-donnell-family.

23. Bennett, J. (2009). A tragedy that won't fade away: When grisly images of their daughter's death went viral on the Internet, the Catsouras family decided to fight back. Newsweek, (April 25, 2009). The story was retrieved on August 31, 2009 from http://www.newsweek.com/id/195073. Para. 12.

24. Ibid.

25. Ibid, Para. 12.

26. See also Hardesty, G. (2007). Lasting Images: Parents who lost 18-year-old daughter in a car crash fight to get gruesome accident-scene photos off the Internet (Friday, January 12, 2007). The story was retrieved on September 12, 2009 from http://www.ocregister.com/articles/nikki-catsouras-family-1541821-images-chp.

27. Hardesty, G. (2008). CHP dispatcher says suit over crash photos is misguided: Images of body of Nicole "Nikki' Catsouras were circulated worldwide. Orange County Register, (Wednesday, January 23, 2008). The story was retrieved on August 9, 2009 from: http://www.ocregister.com/news/nikki-catsouras-chp19654 1 5-donnell-family.

28. Hardesty, G. (2008). CHP dispatcher says suit over crash photos is misguided: Images of body of Nicole "Nikki' Catsouras were circulated worldwide. Orange County Register, (Wednesday, January 23, 2008, Para. 14). The story was retrieved on August 9, 2009 from: http://www.ocregister.com/news/nikkicatsouras-chp- 19654 1 5-donnell-family.

29. Hardesty, G. (2008). CHP dispatcher says suit over crash photos is misguided: Images of body of Nicole "Nikki' Catsouras were circulated worldwide. Orange County Register, (Wednesday, January 23, 2008, Para. 17). The story was retrieved on August 10, 2009 from: http://www.ocregister.com/news/nikkicatsouras-chp- 19654 1 5-donnell-family.

Subject: Case studies; Traffic police; Professional responsibilities; Right of privacy; Fatalities

Location: United States--US

Company / organization: Name: California Highway Patrol; NAICS: 922120

Classification: 9550: Public sector; 9130: Experimental/theoretical; 9190: United States

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 6

Pages: 13,24-25

Number of pages: 3

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1081347374

Document URL: http://search.proquest.com/docview/1081347374?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 66 of 100

FMCG NIGERIA, PLC

Author: Smith, D K

ProQuest document link

Abstract:

Henry Adjai is supply chain manager for FMCG Nigeria, the Nigerian subsidiary of a multinational food manufacturer and marketer. Due to changes in the local environment, the cost of trucking services in Nigeria has increased by as much as 30%. Because FMCG Nigeria already spends more than one billion naira per year on trucking services, and because the company has very aggressive growth plans for its business in Nigeria, and because the company is now in the process of receiving bids from trucking companies to provide trucking services to FMCG Nigeria for the next three years, the managing director of FMCG Nigeria has asked Adjai to develop (as a matter of great urgency) a solution to the trucking services-related problems and opportunities facing FMCG Nigeria.

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CASE OVERVIEW

This case challenges student to resolve FMCG Nigeria's trucking services-related problems in Nigeria, so as to be able not only to address immediate challenges (including truck availability in a disorganized environment as well as the cost and service quality of the needed trucking services) but also (and far more importantly, in the long run) to be able to double (over the next three years) the volume of the company's business in Nigeria. At first glance, the case looks as if it is all about trucking service contracts; in reality, however, it ends up being all about business process innovation and the importance of viewing challenges and opportunities within the context of a strategic vision for the company. The case is appropriate for senior-level undergraduates as well as students in MBA and Executive Development programs. It is designed to be taught in a one hour and a half class session, and is likely to require at least a couple hours of preparation by students.

CASE SYNOPSIS

Mr. Henry Adjai is Supply Chain Manager for FMCG Nigeria, the Nigerian subsidiary of a multinational food manufacturer and marketer. Due to changes in the local environment, the cost of trucking services in Nigeria has increased by as much as 30%. Because FMCG Nigeria already spends more than one billion naira per year on trucking services, and because the company has very aggressive growth plans for its business in Nigeria, and because the company is now in the process of receiving bids from trucking companies to provide trucking services to FMCG Nigeria for the next three years, the Managing Director (M.D.) of FMCG Nigeria has asked Mr. Adjai to develop (as a matter of great urgency) a solution to the trucking servicesrelated problems and opportunities facing FMCG Nigeria.

Additional data and information in the case include:.

1. For Nigeria: Historical overview, a sample of recent statistics from the World Bank, and (for benchmarking purposes), comparable statistics for the United States.

2. For the company (at both local and global levels): Historical overview, current performance, and numerous factors impacting that performance.

3. Characteristics of the local company's current strategy, including descriptive information on the product line, characteristics of the distribution system the company is currently using, etc.

4. Characteristics of the trucking-related challenges which the company currently faces.

Subject: Case studies; Supply chain management; Fast moving consumer goods; Transportation services; Strategic planning

Location: Nigeria

Classification: 9130: Experimental/theoretical; 8600: Manufacturing industries not elsewhere classified; 5160: Transportation management; 9177: Africa; 2310: Planning

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 6

Pages: 27

Number of pages: 1

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

ProQuest document ID: 1081347375

Document URL: http://search.proquest.com/docview/1081347375?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 67 of 100

TNK-BP: TREAD WITH CAUTION

Author: Bluhm, Christopher T; Vradelis, Mary; Li, Catherine; Threlkeld, Brett; Gomez-Arias, J Tomas

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Abstract:

BP, one of the largest publicly listed oil companies in the world, had been operating in Russia since 1997, initially through minority stakes in Russian oil companies and, since 2003, through TNK-BP, a 50-50 joint venture with AAR, a consortium of Russian investors. This joint venture allowed BP access to extensive oil reserves in Russia and was one of BP's most valuable assets, accounting for 25% of BP's production in 2007. In 2008, BP and its partners in TNK-BP encountered serious disagreements about how to run the company. A string of government actions including raids by the Russian tax police on both BP and TNK-BP's offices in Russia concluded with the cancelation of TNK-BP's British CEO's work visa by Russian immigration authorities. Although BP and its partners reached an agreement in principle to renew the board of TNK-BP and appoint a new CEO in December 2008, by February 2009 they had not been able to appoint a Chief Executive acceptable to both parties. [PUBLICATION ABSTRACT]

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INSTRUCTORS' NOTE

CASE USE AND TEACHING OBJECTIVES

This case has been written for a session on the management of international joint ventures, although it can also be used to discuss business in Russia and government's intervention in business and how it affects multinational companies. It is appropriate for a graduate course in international business, although it could also work for an undergraduate capstone course. Topics covered in the case and appropriate readings are listed below:

SHOULD BP'S ATTITUDE TOWARDS ITS RUSSIAN VENTURE CHANGE?

The instructor can take a poll of the class here, and then ask those who say yes what is the alternative. Walking away from TNK-BP would reduce BP's reserves very significantly, and there are few other alternatives to replace them in Russia. How about outside Russia then? As the case explains, most of the world's reserves are not accessible to the western majors, or in political conditions that are not significantly different from Russia. At the same time, a lower oil price makes BP's contribution to the joint venture more valuable, giving it more power in negotiations with its partners.

A NEGOTIATION EXERCISE

Instead of a traditional case analysis, the instructor can use the case as the basis for a negotiation exercise. The class can be divided into two teams, BP on one side and its Russian partners on another, or even three teams (BP, its Russian partners and the Russian government). Each team would be required to carry out additional research before the class, and dedicate the class time to negotiate a satisfactory agreement for all parties. Once the negotiation is concluded, the rest of the teaching note can be used as part of the debriefing process.

Subject: Case studies; Joint ventures; Petroleum industry; Corporate governance; Appointments & personnel changes

Location: Russia

Company / organization: Name: TNK-BP; NAICS: 211111

Classification: 9130: Experimental/theoretical; 2110: Board of directors; 8510: Petroleum industry; 9176: Eastern Europe

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 6

Pages: 39,43

Number of pages: 2

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1081345246

Document URL: http://search.proquest.com/docview/1081345246?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 68 of 100

IS THE GRASS GREENER ON THE OTHER SIDE: AN INDEPENDENT CONTRACTOR CASE STUDY

Author: Newton, Stan; Borstorff, Patricia C

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Abstract:

This case deals with an individual as he tries to make his way through the maze of today's workplace in route to becoming a self-sufficient and productive citizen. Specifically, the case involves a person choosing a worker category, employee or independent contractor, in relation to one 's own self interest. While not every job is suited to the flexibility associated with the independent contractor, neither is each individual. As our character comes to life, we will see how he appraises this option as it relates to career choices and the work-life balance in his life. Jimmy is a skilled tradesman currently working as an employee of long standing with a reputable company but has become interested in an opportunity with a competitive firm as an independent contractor. Student find themselves personally involved in the sorting through the pros and cons of either choice. And, like Jimmy, they are asked to make decisions [PUBLICATION ABSTRACT]

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INSTRUCTOR'S NOTES

RECOMMENDATIONS FOR TEACHING APPROACHES

Subject: Case studies; Decision making; Independent contractors; Self interest

Location: United States--US

Classification: 9130: Experimental/theoretical; 9190: United States; 8370: Construction & engineering industry

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 6

Pages: 45

Number of pages: 1

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

ProQuest document ID: 1081345244

Document URL: http://search.proquest.com/docview/1081345244?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 69 of 100

CAMPBELL: IS THE SOUP STILL SIMMERING?

Author: Eisner, Alan B; Baugher, Dan; Korn, Helaine J

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Abstract:

The soup business has been stagnant or slow growing for many years. Consumer preference has moved away from soup to frozen pizzas and microwave meals. Campbell has struggled in the face of this decline by first diversifying its products and then consolidating tangible assets in order to focus on soups. In July 2011 Douglas Conant is stepping down as the CEO of Campbell Soup Co. and Denise Morrison will step into his shoes. Morrison currently runs the company's struggling North American soup. She plans to change the focus of the company from salt reduction to taste adventure in the coming years. Will Morrison's change in strategic direction work for the Campbell? [PUBLICATION ABSTRACT]

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INSTRUCTORS' NOTES

CASE OBJECTIVES

1. To investigate the key external environmental issues that can affect a firm's strategy.

2. To examine how a révaluation of strategy involves assessment of internal activities and resources.

3. To discuss the decisions and actions that a firm has to undertake to sustain a competitive advantage, especially when pursuing growth.

See the table below to determine where to use this case:

Subject: Case studies; Soups; Strategic planning; Appointments & personnel changes; Chief executive officers

Location: United States--US

People: Morrison, Denise

Company / organization: Name: Campbell Soup Co; NAICS: 311422

Classification: 2120: Chief executive officers; 2310: Planning; 8610: Food processing industry; 9190: United States; 9130: Experimental/theoretical

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 6

Pages: 51

Number of pages: 1

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: Tables

ProQuest document ID: 1081347376

Document URL: http://search.proquest.com/docview/1081347376?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 70 of 100

COASTAL FLOORING

Author: Kimerling, Alex; Knuth, Katie; Watson, Tripp; Carson, Charles M

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Abstract:

Timothy Price was the majority owner and operator of a 100-year-old, regional flooring supplies company. General contractors hired Coastal Flooring, who in turn hired subcontractors, to supply and install carpeting and hardwood in retail, residential, and commercial projects. Because a large portion of Coastal Flooring's business had been hurt by a recession, the company was considering marketing themselves to the increased number of government contracts that were becoming available in 2010 and 2011. These changes could have significant effects on Coastal Flooring's operational structure and regulatory obligations. Price must decide if the shift in the company's marketing and operations is worth the risk. [PUBLICATION ABSTRACT]

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INSTRUCTORS' NOTE

LEARNING OBJECTIVES

Following discussion of this case, students should be able to identify some of the complexities that arise when a small business seeks to change its market position to increase its overall revenues. The case also informed students about the issues, internally and legally, that small businesses face as they try to expand. Specifically the objectives include:

* To examine how Federal employment law can impact small business in both day to day operations and as they grow.

* To identify key considerations that Tim Price and Coastal Flooring should examine as they move forward in their decision making.

* To gain a better understanding of the multifaceted nature of small business decision making and the pitfalls of thinking too operationally and less strategically.

AUDIENCE

The case is designed for use in undergraduate-level courses in Small Business or Entrepreneurship. The case also contains aspects that could be useful to the Human Resources Management instructor.

Many of these regulations place a significant burden on small businesses that are not wary. However, a little prevention negates significant risks. As for Coastal, who only has 12 employees currently, their liability and regulation is minor. The increase in employees appears to create a correspondingly daunting increase in regulation. However, in the 16 to 50 employee range, requirements on small businesses are minimal, and the costs to Coastal can easily be absorbed. In the short term, Coastal has no plans to exceed 50 employees, so those regulations are avoidable. Therefore, Coastal should be aware of its obligations, but should not be deterred against its growth strategy.

Subject: Case studies; Floor coverings; Marketing; Operations management; Government contracts

Location: United States--US

Company / organization: Name: Coastal Flooring; NAICS: 442210

Classification: 8600: Manufacturing industries not elsewhere classified; 7000: Marketing; 9190: United States; 9130: Experimental/theoretical; 9550: Public sector

Publication title: Journal of the International Academy for Case Studies

Volume: 18

Issue: 6

Pages: 59,65

Number of pages: 2

Publication year: 2012

Publication date: 2012

Year: 2012

Publisher: Jordan Whitney Enterprises, Inc

Place of publication: Arden

Country of publication: United States

Publication subject: Business And Economics

ISSN: 10784950

Source type: Reports

Language of publication: English

Document type: Business Case, Feature

Document feature: References

ProQuest document ID: 1081345245

Document URL: http://search.proquest.com/docview/1081345245?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 2012

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 71 of 100

THE CASE OF REWARDING "A" BUT EXPECTING "B" IN HIGHER EDUCATION: REVISITING REWARD SYSTEMS THAT FAIL IN UNIVERSITIES

Author: Snipes, Robin L; Carter, Fonda

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Abstract:

There are many examples of reward systems where the behaviors that are rewarded are not those desired by management. In public universities, officials hope that teachers will focus on quality instruction, but they are mainly rewarded on their research and publications. Moreover, teaching quality is often measured by student evaluations, which may be manipulated by making courses easier or more "fun". Students get rewarded for getting good grades, not necessarily for acquiring knowledge. In short, the reward systems of most universities have failed to achieve their intended objectives. As pointed out by Steven Kerr over 30 years ago, some of the causes of this are the fascination with "objective" criteria, overemphasis on highly visible behaviors, and an emphasis on equity rather than efficiency. [PUBLICATION ABSTRACT]

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INSTRUCTORS' NOTES

Recommended Assignment: Have students write a report to the President of this fictitious university discussing these issues with their recommendations on how to resolve them, in light of the current budget situation. Be sure they include a cover letter that summarizes the report. In the report, they should address the following questions:

(1) How do you think faculty productivity should be measured? Discuss specifically what each measure should contain. What would be an accurate measure of teaching productivity? Research productivity? Service? Can they all be quantified? If not, will the measures be reliable and valid (free from error)?

(4) Can you think of some cost-efficient ways to motivate faculty to participate in developing learning assessment plans?

Students will get creative here. Some research has shown that group rewards as well as individual rewards can motivate employees to achieve the organization's objectives. Some type of group incentive - possibly in the form of a group outing or bonus - could be used as well as individual recognition and rewards. Additional training might also be necessary to show faculty the value of using learning assessment in their courses and how this information might help them become better teachers.

(5) Some might argue that faculty motivation can be best explained by the tenants of SelfDetermination Theory in that faculty are motivated more by intrinsic than extrinsic rewards. What does this theory suggest about how we should motivate faculty to perform their best work?

Self-Determination theory argues that some employees are more motivated by intrinsic than extrinsic factors. It proposes that people want control over their actions and lives, so anything that makes their jobs feel more like an obligation than a freely chosen activity will be demotivating for them. To increase motivation, then, the most important thing to many employees is to give them the tools to do their jobs well, and then give them the autonomy to do their jobs the way they see fit. S elf-Determination theory argues that extrinsic rewards may even reduce the intrinsic interest in a job. It could be argued that business faculty are drawn to their chosen occupations because of intrinsic reasons, not because of the pay. (A caveat here, though, is that the pay and rewards systems need to be perceived as fair, or they could be a source of job dissatisfaction!). Most business faculty could make more money working in the private sector. Extrinsic rewards are those rewards given to an employee by someone else (boss, co-workers, etc.), such as pay, bonuses, and/or plaques. Intrinsic rewards are those that are given to the employee by himself/herself (such as satisfaction from a job well done or the feelings of accomplishment). One good way to increase intrinsic job satisfaction is to hire more clerical workers (and graduate assistants) so that faculty will have more time to do the things that they enjoy - it increases their sense of autonomy and freedom of choice. The clerical workers could be part-time to save on the cost of benefits and stay within budget.