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DEVELOPING SOCIAL MEDIA PROMOTIONAL STRATEGIES IN THE CASUAL DINING RESTAURANT INDUSTRY: A CASE ANALYSIS OF MONTEGRO'S ITALIAN GRILLE

Author: Whang, Yun-Oh; Koutroumanis, Dean A; Brownlee, Amy

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Abstract:

Dan and Jay Montegro along with their business partner, Joe Zito, had owned Montegro's Italian Grille for 17 years. Montegro's was an award winning casual dining Italian restaurant, located in a very busy business district. Since the beginning of the economic recession the restaurant had experienced a significant decrease in revenues. The owners had been searching for new innovative promotional strategies in order to boost sales. Groupon, the industry leader in social media marketing, had been in contact with the owners on several occasions stating that their promotional campaign is just what Montegro's needed to spark sales. The focus of the case decision is on making the strategic, promotional decision whether the small business should pursue the Groupon promotion and evaluate the economic consequences of the decision. The case is appropriate for both undergraduate and graduate level courses in Small Business Management, Entrepreneurship, Promotions, Marketing Research and Hospitality Marketing. The situation described in the case is based on actual events that occurred. All names of the parties involved (including the restaurant name) have been altered to protect their identity. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

May 28th 2012 marked a milestone for Montegro's Italian Grille. Montegro's opened its doors on Memorial Day, 1995 and was now celebrating its 17 year anniversary, quite an accomplishment for any independently-owned business. The Italian eatery was owned and operated by the Montegro brothers, Dan and Jay, and a long-time friend, Joe Zito. It had been a staple in the St. Petersburg, FL business district of Feather Cove for almost two decades, with its pasta chosen as "Best in the Bay" by Tampa Bay Magazine from 1996 to present.

However, on this beautiful sunny day in May 2012, Dan looked at the empty tables in his restaurant during the lunch hours, and remembered when it used to be the busiest time of the day with each table turning over more than once. The impact of the "Great Recession" was clearly present at Montegro's even though he could see the light at end of the tunnel. Dan thought about the meeting he had recently with a marketing representative from a leader in social media marketing, Groupon. Montegro and his co-owners had been pondering the question of how to inject some energy to their business.

Background

Montegro's was located in a highly regarded business district where many large corporations were located including the international headquarters of Raymond James Financial and Home Shopping Network. Montegro's served the local business community during lunch hours offering quality food at affordable prices with a classy atmosphere. In addition to the local business professionals, the core target market also included business travelers staying in the area. There were 22 hotels within a 4mile stretch of the restaurant's location, and hotel guests often visited Montegro's for dinner and a glass of wine after a hard day's work away from home. Another core target segment for dinner was the retirees in the Feather Cove neighborhood. It was an affluent subdivision with primarily retired couples who enjoyed the comfortable and personalized service at Montegro's. Montegro's had a split floor plan with a bar area on one side. The other side provided a quiet and relaxing atmosphere where retirees and couples could have a private dinner.

Montegro's Concept

Montegro's was in the casual dining segment of the restaurant industry. The establishment offered a wide selection of menu items ranging from Italian classics such as lasagna and chicken parmagiana to more upscale offerings such as gorgonzola crusted filet mignon with Portobello mushroom. The menu was extensive offering 60 items including appetizers, salads, entrees and desserts. They offered more menu items than the average of their five closest competitors.

The Restaurant Industry - Overview

According to the National Restaurant Association (NRA), the U.S. restaurant industry encompassed approximately 945,000 restaurants and accounted for 49 percent of the country's food dollar (National Restaurant Association, 2010) in 2010. The restaurant industry was fragmented and made up of many units ranging from full service to quick service restaurants. The industry was comprised of many independently owned and operated restaurants, which remain the backbone of the industry today. National and regional chain restaurants were an additional segment which had grown in both scope and popularity in the last 20 years.

The restaurant industry can be broken down into five categories: quick service (fast food), fast casual, family dining, casual dining, and fine dining (see Exhibit 1 for the characteristics of each category). Food quality of the different segments was based on a range of factors from the quality of the raw ingredients to the skill in preparation of the food products. Family dining restaurants tended to use more standardized and generic-type food products, which have lower raw costs. This resulted in the restaurants being able to offer their customers lower-priced menu items. Casual dining restaurants purchased a higher quality and branded raw food products and fine dining restaurants used the finest, brand name and quality products available in their food preparations.

The casual dining restaurant segment included establishments primarily engaged in providing food services to patrons who ordered and were served while seated (i.e. waiter/waitress service) and paid after eating. These establishments provided this level service to patrons in combination with selling alcoholic beverages, providing carry out services, or presenting live nontheatrical entertainment (NAICS code 722110).

Montegro's was a typical casual dining restaurant. Its main competitors within an 8-mile radius included Applebee's, Beef 'O' Brady's, Carraba's Italian Grille, and Outback Steakhouse. Carraba's was the only other Italian cuisine restaurants in the immediate area. Applebee's and Outback Steakhouse would be considered direct competitors with atmospheres similar to Montegro's.

Montegro's Owners

The Montegro brothers had a long history in the restaurant business; one could say they were "bom" into the business. Their family owned and operated multiple restaurants in the New Haven, CT area and their flagship restaurant was located in the heart of Yale University in New Haven. It was your typical college hangout serving homemade Italian favorites from chicken parmesan to Italian subs to pizza. Dan and Jay started working at the restaurant as soon as they were able to reach the counter. As they became teenagers, they were more and more involved with the daily operations and management of the business. When the brothers finished college they both went to work for a national restaurant chain where they fine-tuned their management skills and continued to learn about the restaurant business at a professional level versus the "mom and pop" management style they grew up with. The brothers met Joe Zito while they were working at the national chain and found they all shared the same vision; to one day own and operate their own casual dining, full service Italian restaurant.

The "Great Recession" Hits Montegro's

The "Great Recession" had a profound negative effect on the restaurant industry, causing a record number of closures. According to NPD (global research firm), over 4,000 (based on US figures only) restaurants closed for business in a one year period, April 2008 to March 2009 (Lockyer, 2009). As the restaurant industry continued to struggle through the turmoil, the complexities of restaurant operations were magnified in scope and context. Analysts from Standard and Poor's classified 2009 as "the most challenging operating environment the modem restaurant has ever faced" (Basham, 2010).

As the recession began impacting the country in 2008, the core target markets of Montegro's also suffered. Local business professionals who used to pack Montegro's during lunch time started to either switch to cheaper alternatives or skip lunch altogether. The definition of "power lunch" also changed from one hour to 30 minutes, which made the per person tab shrink (Dizik, 2012). Montegro's was not able to escape the impact of declining numbers of business travelers who used to be the main target market for dinner business. Banquets and catering, which both benefited the restaurant in the strong economy, took a hit as well. Although the sales had stabilized in 2011, the volume was down by 17% ($317,000) in 2010 compared to the pre-recession period (2007) (see Exhibit 2 for Montegro's financial performance from 2005 to 2011). As a result, idle tables were common during the lunch time when the dining area used to be packed and on a wait. The dinner business, including both food and wine sales, had also dramatically declined. Instead of trying to weather the economic downturn, the three partners of Montegro's saw the changing business environment as an opportunity to make strategic changes. Before the recession, Montegro's was always short on tables during lunch hours and had enough food and wine sales during dinner time, so there was little need for a strategic change.

However, with the paradigm shift in the "power lunch" and in business travel, the owners thought it would be a great opportunity to redefine Montegro's business and target markets. These changes could help the restaurant enjoy sustainable growth in the future without relying solely on the local business professionals for lunch and business travelers for dinner.

As a part of the effort to rethink the overall strategy of Montegro's, the owners had a meeting with a Groupon representative to discuss the opportunity to draw more customers to Montegro's by running a Groupon promotion online. Knowing that social media was becoming a hot marketing tool in the restaurant industry, Dan, Jay, and Joe, the owners of Montegro's Italian Grille, were still not sure after the meeting if a Groupon promotion campaign would be a beneficial strategy in the long run. It was predictable that a Groupon promotion would bring in more customers. However, would it just boost the sales in the short term, but hurt the long term sales? Would it change the intimate atmosphere of Montegro's, which had been strength in bringing back regular, repeat customers? The owners were not quite sure, but with the decrease in sales and the business barely breaking even, they thought it was worth considering. Dan, Jay, and Joe decided to go back to the drawing board to understand how social media such as Groupon can be a part of their long term promotion strategy.

The Market and Consumer Decision Making Process

According to a 2008 Nielsen Global Online Customer Survey, 33% of consumers around the world selected a restaurant primarily based on the type of cuisine it offered. Another important factor determining restaurant selection was price and value (21% of respondents). The remaining criteria items were convenient location close to home, work or school (10%), having good hygiene standards (8%), and offering healthy food choices received (6%) (Banks, 2008).

When the above criteria were met, intangibles then became an important part of the decision making process. This was where the ambiance and décor become critical factors in choosing the final destination (Auty, 1992).

Each generation of the U.S. population also had distinct needs and wants when it came to restaurants. Understanding the expectations of the generations would help restaurateurs make more effective strategic decisions.

Baby Boomers

Baby Boomers were bom between 1945 and 1964. Baby Boomers made up about 25% of the U.S. population. They had the highest levels of disposable income and the early group of the boomer generation was heading into retirement. Boomers spent more per person at restaurants than other age groups. They demanded good customer service. They liked being recognized and wanted to be taken care of by experienced servers. Boomers preferred comfort foods that had been updated to reflect a healthy lifestyle. Boomers liked value for the dollars they spent which drove them towards the casual dining segment (Rowe, 2008).

Gen Xers

Gen Xers were bom between 1965 and 1980. Seventy-one percent of Gen Xers had children under the age of 18 (Erickson, 2009). Gen Xers enjoyed spending time with their children, tended to bring them on vacations as well as out to dining establishments. Quality of life was of high importance to this demographic. Most were well educated (college/graduate school), and more technologically capable than previous generations. They were hard-working, pragmatic, and had a strong aversion to formality. Restaurants that offered a casual dress code, a kid-friendly atmosphere, and friendly service met the needs of this generation (Rowe, 2008).

Millennials

Also known as Gen Y were bom in 1980 or later and numbered 75 million in the U.S. They were the most digital of the generations. They preferred bright, fun, energetic environments where they did not need to dress up. They ate out twice as often as boomers, often on impulse, but had less money to spend. Eating out was an essential part of their lifestyle. Restaurants offered the Millennials a wide variety of appetizers, tapas-type meals and combo platters of wide-ranging ethnic flavors. Restaurants that had extended hours and were flexible and accommodating drew this demographic group (Rowe, 2008).

Based on the survey of Montegro's customers, the restaurant had a wide range of customers. About 64% of the customers were married, and 45% of them were aged 50 or older with 52% making $80,000 or more annually. The overall profile of the customers fit the baby boomer segment described above, but Montegro's also attracted younger customers with less income as shown in Exhibits 3 and 4.

Groupon Proposal

Groupon was an online coupon site where consumers can purchase a product or service at a discounted price. It started in Chicago in 2008 and quickly expanded worldwide serving 500 markets in 44 countries by 2011. In 2010, its monthly revenues in the US grew from $11 million to $89 million, and the worldwide revenue of Groupon was estimated to be over $3 billion in 2011 (Shonfeld, 2011). It had truly become a retail phenomenon with many businesses rushing to get on the bandwagon.

The owners of Montegro's had been paying attention to the new Groupon phenomenon. All three of them were technology-sawy and had purchased a few deals through Groupon as consumers themselves. However, they never used Groupon as a promotion tool for their restaurant mainly because the business consistently enjoyed growth and success without having to run any special promotions. However, times had changed. As stated earlier, the recession caused a significant drop in customer visits, and Montegro's owners recognized the potential positive impact of social media such as Groupon.

It was rather a shock when Dan did some research on using Groupon as a promotional tool. It had a hefty cost. The way Groupon deals were structured, the business that runs the promotion was bound to take a huge hit on its profit. For example, a restaurant would offer $30 worth of food and beverages to the Groupon customer for $15 in total cost. Out of that $15 collected, the restaurant would typically split it 50/50 with Groupon. In other words, the restaurant would collect $7.50 and Groupon would keep $7.50. The money collected by the restaurant would typically cover the cost of the food and beverage at a break even.

Another concern Dan had was the characteristics of the Groupon users. Based on his experience, consumers who follow deals always follow deals. Dan labeled them 'coupon hoppers' who chose a restaurant based on which had the best deal at the moment. Considering the core target markets of Montegro's-business professionals in the surrounding business district for lunch, business travelers from the nearby hotels and retirees from the Feather Cove neighborhood for dinner-Montegro's had always put more emphasis on the quality of food and repeat business rather than the price.

With the profitability issue and price sensitivity of the Groupon users, Dan almost decided not to run a Groupon promotion. However, in April 2012, he met the owner of the Arigato Japanese Steakhouse in the Tampa Bay area at a local business networking event. She told Dan about her experience with Groupon, which was more than extraordinary. She ended up selling more than one thousand coupons; about 70% of purchasers redeemed the coupons at the restaurant. She found that many of them had never heard of Arigato Japanese Steakhouse before, and the Groupon users spent more than average once they were at the restaurant. She also shared some interesting statistical information she received from Groupon. For every ten Groupon customers five returned to the merchant again; four would have never considered the merchant if it wasn't for the Groupon; two joined a repeat rewards program if the business offered one. Groupon merchants additionally add that out of 10 customers, 9 actually spent more than the face value of the coupon; eight merchants said that the Groupon reactivated lapsed customers; and seven stated that Groupon enhanced the reputation of the business (Groupon, Independent Study, 2012). Based on her experience and this information, she strongly recommended running a Groupon promotion to Dan, and he had to go back to Jay and Joe and resurrect the question of a Groupon campaign.

Social Media Survey

To study the potential benefit of a Groupon promotion, Dan, Jay, and Joe decided to run a quick survey to get a better picture of the role Groupon would play in Montegro's marketing. The customers who visited Montegro's Italian Grille over a three-month period were presented with a short questionnaire that asked them about their use of social media.

The survey found that only 21.6% of the current customers used social media in interacting/foliowing/communicating with restaurants, while 39.3% planned to do so in the future. When asked to rank the importance of various social media,

Facebook ranked the highest with an average rank of 1.83, while Groupon and Twitter were distant second tier media outlets with average ranks of 3.29 and 3.73, respectively. Foursquare and MySpace followed with ranks of 4.30 and 4.38, respectively.

In terms of the characteristics of the customers who showed interest in using social media in restaurant choice, leisure customers (40.3%) were more interested in social media than business customers (30.5%), and as expected part-time and full-time residents showed much stronger interest (44.1% and 64.3%, respectively) than business travelers and vacationers (18.2% and 28.6%, respectively).

When cross-tabulated with age and income, interest in social media in restaurant choice showed puzzling patterns. Exhibit 5 shows the percentage of customers interested in social media in each age bracket, and as expected, younger customers were more interested in using social media when choosing a restaurant. However, it was a surprise that almost one half of the customers aged between 58 and 65 were also interested in social media for restaurant choice. Income showed a similar pattern with two peaks in the interest level: $20,000 - $40,000 and over $ 100,000 (Exhibit 6). In other words, social media were not exclusively used by young, lower income customers but older, affluent customers were also getting on the bandwagon.

In addition, survey respondents who were interested in using social media for restaurant choice said they would be also interested in happy hours and family friendly atmosphere as an important attribute of the restaurant.

Groupon or Not...

Even after the survey results were analyzed, Dan, Jay, and Joe were still unsure if Groupon made sense for Montegro's. A Groupon promotion would put a dent in the profitability and they were not sure if the core target market would be happy with the promotion. They were sitting at an empty table at Montegro's looking at each other waiting for someone to make an executive decision.

Case Questions

1. Should Montegro's run a Groupon promotion? What are the pros and cons?

2. If yes, what would be the best strategic approach to maximize the impact?

3. If yes, what should Montegro's do to manage the cons?

4. If not, what alternative is there for Montegro's to achieve the benefits of Groupon?

INSTRUCTOR NOTES

DEVELOPING SOCIAL MEDIA PROMOTIONAL STRATEGIES IN THE CASUAL DINING RESTAURANT INDUSTRY: A CASE ANALYSIS OF MONTEGRO'S ITALIAN GRILLE

This case examines the challenges that small business owners face in generating new business in a poor economy, especially in a business that is in the maturity stage of the business life cycle. The challenges facing Dan and Jay Montegro and their business partner, Joe Zito, revolve around how to increase revenues in the 17 year old business that has been negatively impacted by the "Great Recession". The students are asked to evaluate the restaurant's current position and recommend if the business should launch a social media campaign with Groupon, something that the business owners have never done before.

Methodology

The case is based on one of the author's personal experience of owning and operating a casual dining restaurant. The case facts are based on the co-author's experiences during the past four years of trying to survive and grow sales during the downturn in the economy. The co-author / small business owner sought the assistance of a university Marketing Research class in order to develop a reliable instrument that measured a variety of variables to gauge the current strategic posture of the business. The results, tables and exhibits in this case are the actual results found in the study conducted by the student groups. The restaurant financials depict the actual drop in sales percentage during the downturn in the economy.

Teaching Approach

The case's focus on promotional strategies for a small business makes it appropriate for Small Business Management, Entrepreneurship, Promotions, Marketing Research and Hospitality Marketing courses at the undergraduate and graduate level. For a Small Business Management or Entrepreneurship class, this case would do well with chapters focusing on promotional strategy and revenue growth at the small business level. This case would also work well in Promotions and Hospitality Marketing classes when evaluating social media opportunities as well as developing marketing research surveys.

CASE OVERVIEW

The case begins with co-owner Dan Montergro standing in the dining room of his 17 year old business and wondering what he and his partners need to do to get customers back into the empty dining room seats. The small business, which had earned many accolades over the years and would be on a wait Monday through Friday for lunch, had seen sales decreasing since 2009. The "Great Recession" had a profound adverse impact on this business and the owners were trying to rebuild the lost revenues. The case then presents the history of Montergro's Italian Grille and a profile of the ownership group.

The case gives background information on the casual dining industry and the impact the recession and economic situation has had on the industry as a whole. This information is provided so students can better understand the broader environment that Montegro's is dealing with. Students are then given detailed information regarding social media, specifically Groupon. Additionally, data reflecting a variety of demographic information regarding current customers of Montegro's is provided to the students for analysis. The case ends with students being asked to make recommendations regarding the most appropriate approach to improving Montegro's revenues.

LEARNING OBJECTIVES

* Understand the challenges of small businesses in a tough economic environment.

* Analyze the pros and cons of a business taking advantage of social media based on the strategic objectives and fit.

* Create social media promotional strategies to achieve increased revenue for a mature, small business.

* Conduct a cost benefit analysis between the dollars received from the Groupon deal and the food/cost of goods sold for the restaurant.

DISCUSSION QUESTIONS

Question 1: Should Montegro's run a Groupon promotion? What are the pros and cons?

Montegro's has never participated in a social media promotional campaign. The data, analysis and statistics from the independent analysis provided by Groupon should push the students towards recommending the promotional strategy to Montegro's but the students should be able to identify the cons of running a Groupon promotion.

Pros:

* Introduce new customers to the restaurant.

* Build on the current brand.

* Reactivate lost or lapsed customers.

* Spark new energy into the concept.

* Add new customers to existing database (with some type of repeat rewards programs).

* "Leisure" customers were more likely than business customers (40.3% vs. 30.5%) to use social media such as Groupon and this was the customer segment Montegro's was trying to grow in this economic environment.

Cons:

* Customers only come in one time for Groupon deal.

* Current customers become more sensitive to the price and promotion deals.

* The restaurant appears to be busy, but no additional revenue is actually generated.

* $7.50 share of the Groupon sale does not cover the cost of product, so promotion costs the restaurant money.

* Current food cost as a percent of sales is almost 28% (2011) up from pre-recession levels of 24.7% (2007). A Groupon deal for $30 of food for $15 would provide $7.50 of revenue to Montegro's. This amount would not even cover the food costs of $8.40 ($30 x 28%).

* Staff might get overwhelmed with new influx of business and provides poor service, creating negative experiences.

* The owners are more traditional in their approach to running the restaurant, which makes it risky to adopt a brand new promotion tool such as Groupon.

The discussion of the question of whether Montegro's should run a Groupon promotion or not should start with identification of the restaurant's long-term strategic objectives. Considering the pros and cons listed above, Montegro's needs to answer two questions: 1) are the pros strategically important enough to jump on Groupon, and 2) can the cons can be managed to avoid long-term damage to its business. To give the Groupon promotion a green light, the answers to these questions have to be both 'yes'. It is recommended for the instructor to play a devil's advocate and draw a debate among students on where the owners should pay more attention - the pros or the cons.

Question 2: If yes, what would be the best strategic approach to maximize the impact?

The discussion on this question should start by identifying the long-term strategic objective Montegro's wants to accomplish. There are two possible objectives Montegro's can go after: 1) expand the loyal customer base, or 2) increase revenue with one-and-done customers. If the former is adopted, Montegro's needs to make sure that every first time Groupon customer is converted to a Repeat Customer Program. This would aid in curbing the "one and done" Groupon user. If the Groupon customer is a value hunter the repeat rewards program will continually give them a reason to return to the restaurant. This strategy will also get the Groupon customer into the restaurants data base.

If the latter objective is adopted, Montegro's needs to train the staff in effective upselling. This way the Groupon customer will spend above the $30 promotion and the restaurant will benefit from the added revenue.

Question 3: If yes, what should Montegro's do to manage the cons?

Again, to counter the first con Montegro's needs to convert as many of the Groupon customers into their repeat customer program. They can additionally try to negotiate a better split with Groupon in order to get more than the standard 50/50 split of Groupon sales. They may have a good chance of achieving this since they are an established small business.

Also it is critical that the owners and staff take any new promotion such as Groupon in a methodical way. As mentioned in the case, the owners never used a social media promotion before, and also their management style is old school where they like to get to know the customers and compete on food quality rather than the price. The staff is trained to ensure a comfortable dining atmosphere, but a Groupon promotion might change customer expectations rather drastically. Therefore, the owners should take baby steps to make sure they understand what they are getting into, and they will need to staff accordingly in order to make sure they can accommodate the influx of new business. The last thing that they can afford to have happen is to bring in people that have never dined at Montergo's and have them have a negative experience.

Question 4: If not, what alternative is there for Montegro's to achieve the benefits of Groupon?

This is the question where the puzzling results from the customer survey should play an important role. Even though the traditional core target market of Montegro's (i.e., high income, older couples) are also interested in social media, the younger generation is more knowledgeable and comfortable with using social media in their restaurant choice. So, if Montegro's decides not to run a Groupon promotion, a viable alternative is implementing an aggressive promotion campaign through conventional media including television, radio, and local newspapers. Montegro's has not had to promote this way previously because of the success it enjoyed over the years, but it could be a strategic change required for better long-term success. It has its shortfalls in focusing on the local market, but they are the ones who can become repeat customers.

Another option Montegro's should consider if it wants to get involved in social media is to utilize Facebook rather than Groupon. It would not bring in the large number of immediate customers as Groupon has the potential to do, but it costs a lot less (no 50% cut to Groupon) and also Montegro's can be in complete control of the promotion, message, and targeting. Specials and coupons can be run on Facebook and it also offers a lot more intimate setting where customers feel like they are in direct communication with Montegro's rather than a middleman such as Groupon. The market research showing Facebook as the most important social media outlet encourages this approach.

Subject: Studies; Social networks; Online advertising; Restaurants; Small business; Entrepreneurship education; Management decisions; Teaching aids & devices; Statistical analysis

Location: United States--US

Company / organization: Name: Groupon Inc; NAICS: 541870

Classification: 9190: United States; 9130: Experiment/theoretical treatment; 7200: Advertising; 5250: Telecommunications systems & Internet communications; 8306: Schools and educational services; 9520: Small business; 2310: Planning

Publication title: Journal of Business and Entrepreneurship

Volume: 25

Issue: 1

Pages: 141-158

Number of pages: 18

Publication year: 2013

Publication date: Fall 2013

Year: 2013

Publisher: Association for Small Business and Entrepreneurship

Place of publication: Durant

Country of publication: United States

Publication subject: Business And Economics--Small Business

ISSN: 10426337

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References Tables Graphs

ProQuest document ID: 1491444130

Document URL: http://search.proquest.com/docview/1491444130?accountid=38610

Copyright: Copyright Association for Small Business and Entrepreneurship Fall 2013

Last updated: 2014-01-27

Database: ABI/INFORM Complete

Document 2 of 100

SUSTAINABILITY AND INTEGRATED REPORTING: A CASE EXPLORING ISSUES, BENEFITS AND CHALLENGES

Author: James, Marianne L

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Abstract:

During the past few decades, formal sustainability reporting has increased significantly in the U.S. and globally. Many public and some private companies have embraced this trend. While many companies currently report on their sustainability efforts and thus their impact on the natural and social environment, reporting is largely voluntary. In addition, most companies issue separate sustainability reports instead of including the information in their financial reports. Recently, a new trend toward combining the information about a company 's sustainability efforts with its financial/economic results has emerged. This is referred to as integrated reporting or the integrated triple bottom line. This trend is supported by the International Integrated Reporting Council's efforts to develop a globally accepted integrated reporting framework. Companies and their stakeholders may derive significant benefits and encounter significant challenges from sustainability and integrated reporting. However, since sustainability reporting is largely voluntary, executives involved in the reporting process may also encounter ethical dilemmas that must be addressed. This case explores the issues, benefits, and challenges that companies and their executives, who are planning to formally report their organization 's sustainability efforts, will tend to encounter. The case can be used to develop students' awareness of the trend toward sustainability and integrated reporting and can enhance their understanding of the related issues, challenges, expected long-run benefits, and ethical considerations. The case can be utilized in an advanced level accounting or business course; it also can be used in a graduate course focusing primarily on the strategic issues. The suggested questions are independent providing instructors with considerable flexibility to assign selected or all the questions. The case has communication, research, technical accounting, and ethical aspects and can enhance students ' analytical, research, and communication skills as well as enhance their awareness of reporting related ethical issues and challenges. [PUBLICATION ABSTRACT]

Full text:

MERGENTHAL CORPORATION*

Mergenthal Corporation is a midsize privately-held company that manufactures and distributes food products. Its product lines are well established and the company's total revenue has grown steadily during its 24-year history. The company is moderately profitable and has accumulated a significant amount of cash reserves. Since the company is privately-held, its management is not subject to short-term stock market pressures to achieve short-term earnings goals and is able to focus on strategies that help the company succeed and build value in the long-run. Mergenthal's board of directors fully supports this long-run focus.

Mergenthal prepares its financial statements in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) and issues an annual report that is publicly available on the company's website. Currently, 82% of the company's products are sold in North America, the majority in the U.S. The company also sells some of its products through independent distributors in Northern Europe. Last year, the company's board of directors voted to spend a significant amount of Mergenthal's accumulated cash to help the company increase its market share in Europe. To facilitate this goal, the company plans to acquire a majority interest in its current European distributor.

The Company's Products

Mergenthal Corporation produces and sells energy drinks and energy bars. Its drinks contain only natural ingredients, such as fruit extracts, natural flavors, and natural sweeteners. Its energy bars are available in 14 different flavors. Each energy bar has no more than five ingredients and primarily consists of dried fruits, nuts, and natural flavors. One of its product lines is sweetened exclusively with Agave syrup, which because its low glycémie index, may even be suitable for individuals who must control their blood sugar levels.

Originally, most of its drinks were sold in recyclable glass bottles. A few years ago, however, the company started filling some its perishable and non-perishable drinks in Tetra Paks, which are significantly lighter and do not need refrigeration until opened. Currently, the majority of its Tetra Pak packaged drinks are sold in Europe where Tetra Paks are very common and frequently fully recycled. Because of its lower weight, the Tetra Pak drinks are significantly less expensive to ship. With its planned expansion in Europe, Mergenthal Corporation is planning to increase the percentage of its drinks packaged in Tetra Paks and plans to apply for the Forest Stewardship Council (FSC) certification. Once obtained, the company is planning to display the highly prestigious logo on its packaging. The company's energy bars already are packaged in fully recyclable wrappers.

Sustainability at Mergenthal Corporation

Ten years ago, the company made a commitment to implement a series of programs that support sustainability of natural resources, enhance employee wellbeing, help preserve the environment, and benefit the community. In support of these goals, the company has successfully implemented a number of initiatives that support sustainable development, including a companywide recycling program, replacing existing equipment and machinery with more energy efficient units, optimizing manufacturing processes that minimize waste, reusing materials whenever possible, and minimizing packaging while preserving the quality and safety of its products.

The company also adopted programs and procedures that support the wellbeing of its employees. For example, the company installed state-of-art fíne particle filtration systems throughout its manufacturing facility, overall enhanced its factory safeguards, and added a fitness facility that is available to all employees and their family members. Two years ago, the company also started providing its own products free of charge in its lunch areas.

A few years ago, the company incorporated its sustainability goals in its mission statement and revised its code of conduct to reflect these goals. In fact, the company integrated the World Commission on Environment and Development (the Brundtland Commission) definition of sustainability, which defines sustainability as a "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (United Nations, 1987) into its mission statement. Many of the company's employees participated in the revision of the mission statement and the code of conduct. Management and all employees must adhere to this code of conduct. Employees are encouraged to discuss ethical issues and challenges with designated team leaders.

The company is committed to providing the highest quality products and carefully selects ingredients that meet its high standards. In addition, the company requires that all its major vendors adhere to a vendor code of conduct that stresses responsible behavior especially in terms of social responsibility, employee welfare, responsible sourcing, and the preservation of natural resources. Mergenthal requires that its vendors sign and adhere to the vendor code of conduct.

Furthermore, the company generously contributes to selected community projects. For example, during the prior year, the company encouraged its 1,347 employees to donate money for a new park and playground near the company's headquarters and supplemented its employees' $147,300 contribution by donating an additional $352,700. The city manager gratefully accepted the check in the amount of $500,000.

The Board of Directors recently voted to replace its existing office facilities with a new "green" building that will comply with the criteria set forth by the U.S. Green Building Council to earn the prestigious LEED certification. In addition, the company has made significant strides in improving its existing manufacturing facilities so that they will also meet the LEED criteria for existing buildings. Construction on the new building will commence in approximately six months and the building is expected to be ready for use in 18 months.

Communicating Sustainability to Stakeholders

The company's management is aware that many consumers and other stakeholders expect companies to behave responsibly not only with respect to their products and interactions with its customers and other stakeholders, but also with respect to the company's effect on the natural and social environment in which it operates. Management is aware that responsible behavior tends to create goodwill and customer loyalty. Consistent with trends in the consumer and especially food product industry, Mergenthal Corporation communicates its responsible actions to its customers and other stakeholders via advertisements, news announcements, on its company website, and even on its corporate vehicles. For example, the company prominently displays information about its efforts to reduce wasteful packaging and its reduction in water use on promotional materials, magazine advertisements, and on product packaging.

Mergenthal Corporation also periodically makes public relations announcements that emphasize its responsible actions and promote its sustainability programs. The company's public relations staff has also developed a strong relationship with regional news reporters that periodically report on the company's sustainability and other responsible actions. For example, the weekend edition of the large regional newspaper recently reported that the company regularly donates products to organizations supporting the needy, such as St. Vincent De Paul, and that its employees annually utilize two paid work days to support their favorite charity. The company also publishes a monthly "Green News Letter" on its website. For example, the company recently announced that it will build a new green office facility and hopes to earn LEED certification by the U.S. Green Building Council for the new building.

Formal Sustainability Reporting

While the company vigorously publicizes its sustainability efforts, it does not currently issue a formal sustainability report and only briefly refers to its sustainability-related programs and activities in its annual report. The company's Chief Financial Officer (CFO), Kerstin Mannheim, is aware of the global trend toward formal reporting of sustainability-related activities and believes that Mergenthal Company should consider formal reporting in the near future. Kerstin believes that the company would benefit from formal reporting, especially in light of its plans to expand its distribution in Europe where sustainability reporting is expected or required.

Kerstin recently read a report based on a survey by KPMG, one of the "Big 4" global accounting firms that found that currently 83% of the U.S. based large multinational companies issue formal sustainability/corporate responsibility reports (KPMG, 2011). Kerstin is aware that generally, both public and private companies in the U.S. are not required to issue sustainability reports even though some European countries require formal reporting by public entities. Kerstin knows that most companies that are reporting on sustainability are utilizing the guidelines issued by the Global Reporting Initiative (GRI), which currently is working on the fourth generation of its guidelines (GRI, 2012). Kerstin recently noticed that some of its competitors prepare sustainability reports and believes that Mergenthal should also consider formal reporting of its sustainable actions.

Kerstin, who regularly participates in academic and professional conferences and meetings, also is aware of the movement toward integrated "triple bottom line" reporting. She is very interested in recent strides by the International Integrated Reporting Council (IIRC) to develop a formal framework for integrating reporting and recently has reviewed the integrated reports of several companies. She understands the potential advantages of integrated reporting and believes that it would be the preferred method for reporting Mergenthal's sustainability efforts to the company's stakeholders. She is planning to gain the support of the Chief Executive Officer (CEO) and to propose the adoption of an integrated reporting approach to the Board of Directors.

Kerstin meets with the CEO, John Manner, to discuss various financial reporting issues and brings up the topic of sustainability and integrated reporting. She learns that John is aware that many companies, including several of its primary competitors, currently issue sustainability reports. John agrees that in the long-run, the company may benefit from issuing a sustainability report and agrees to support Kerstin's board of directors' proposal to begin formal reporting of the company's sustainability efforts next year. John asks Kerstin to compile information that will be useful in convincing the board of directors that the company should start issuing a separate or integrated sustainability report.

John asks Kerstin to provide a brief outline of the categories and types of issues the company would include in its sustainability report. Kerstin decides to focus on their current sustainability efforts. At the conclusion of their meeting, John indicates that they should include only positive information about their sustainability efforts in their report since currently, sustainability reporting is not required.

Kerstin prepares a table that shows suggested categories, subcategories, and scope of the information that should be included in Mergenthal's integrated report; this is shown in table 1 below. Kerstin also gathers information that will help convince the board of directors of the benefits of integrated reporting and to address objections and questions that may arise.

Kerstin shows the list to John who immediately notices that negative sustainability-related events would be included in this report. John again emphasizes that only positive achievements should be included and justifies his stance by reminding Kerstin that reporting is voluntary in the U.S. and that companies have a high degree of flexibility in terms of reporting sustainable development.

Subject: Studies; Sustainability reporting; Ethics; GAAP

Location: United States--US

Classification: 9130: Experiment/theoretical treatment; 4120: Accounting policies & procedures; 9190: United States; 2410: Social responsibility

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 7

Pages: 89-95

Number of pages: 7

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: Case Study, Feature, Business Case

Document feature: Tables References

ProQuest document ID: 1465507749

Document URL: http://search.proquest.com/docview/1465507749?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-12-16

Database: ABI/INFORM Complete

Document 3 of 100

Network Expansion Strategy: A Case Study of a Malaysian Motor Claims Management Company in India

Author: Munuswamy, Shanmugam; Agil, Syed Omar Syed; Mohamad, Zulkifflee Bin

ProQuest document link

Abstract:

Collaborative ventures have dramatically increased among organizations as one of the market expansion strategies. A number of drivers appear to be behind the business partnership predominantly the instant market access, distribution synergies, business set up cost and an effective control over a huge payroll. However, several challenges are evident from such business relationship such as reliability, decision making constraints, and cultural diversity. This case study is related to the challenges of a software subsidiary of a listed company in East Malaysia that ventured into the Indian market to provide an integrated software end-to-end solution to the motor claims industry. This case study, while highlighting the potential business opportunity in the motor claims industry in India, it uncovers the microscopic issues in having collaborative partnership among surveyors, repair shops, and insurers. It is expected to provide an exciting platform to academics and potential business opportunity explorers to understand the marketing dynamics along the channel partners in the motor claims industry and to evaluate potential business models for successful collaborative partnership. [PUBLICATION ABSTRACT]

Full text:

1.1. Introduction

In June 2010, Kelvin Thomas, the CEO of the IT-Solutions Bhd (ISB), an IT subsidiary of East Malaysia Holdings Bhd (EMHB)received an ultimatum from its parent company in East Malaysia that if he could not strike a deal at least with one insurance company before September 2010, the company might think of closing the new venture in India. The decision was taken at the Board meeting in the HQ of the parent company in East Malaysia as the Indian subsidiary: West Asia Solutions Private Ltd (WASOL) had already missed the timeline to get business. Panicked by such drastic decision, Kelvin summoned the Business Development team that comprised of the regional mangers of Delhi, Mumbai, Kolkata, and Chennai to deliberate with the team leader Shan on the network panel expansion strategy across India. The expansion strategy was to consider two dimensions; one was related to bringing adequate surveyors (adjusters), and repairers (workshops) into the network to demonstrate the potential client insurer that the company had adequate pan India coverage; and the other was pertaining to the software training method that the company should adopt to train the network partners within the time frame. This was treated as most urgent as one of the largest public insurance companies was kept pending the approval of the pilot proposal for want of a suitable network expansion strategy that WASOL would embark up on to showcase the pan India coverage of its motor claim cases.

The challenge before the team was to evaluate available expansion strategies and the software training methods that the company would adopt to demonstrate the insurer for pan India coverage of motor claims service.

The first challenge was to evaluate all possible network expansion strategies that were available for the company and the related time and cost involved.

The second issue was to identify available software training methods and identify the most cost effective method

The third concern was related to the implications of having freelance runners and the potential threat of union formation in the Indian context.

1.2 The Background

In early 2009, Thiaga, the newly recruited Systems Manager in ISB, Kuala Lumpur, West Malaysia, visited its software subsidiary in Mumbai that was maintaining the self- developed state-of-the-art insurance software branded as 'Customer-connect' for one of the largest private insurance companies in India. The software was intended to bring in all front-end and back office operations from manual to electronic mode using internet. The Malaysian team stationed in Mumbai was also responsible to explore the opportunities to market the software with other insurance companies. The purpose of Thiaga' s visit was related to evaluate the efficiency of both the maintenance and marketing team.

During a lunch on meeting with Dheeran, the founder of a survey firm in Greater Mumbai, Thiaga was informed of the huge potential in the motor claims management of the Insurance industry. At that point in time, Dheeran was also using his own software to be used by his own set of surveyors. As Thiaga had exposure to motor claims software in his earlier appointment in Malaysia, he quickly collected claims data from published information of insurance companies that were available on the internet. Further, he went on to meet the officials of the Tariff Advisory Committee (TAC), the then regulatory body in order to confirm the motor claims information. The official quoted saying 'We do not have perfect information on claims data as companies do not provide the factual data with us; we are in the process of compiling a comprehensive data set'. Interestingly, while meeting with a claims manager of another private company, Thiaga confirmed that the published claims data of the company were only a small lower numbers.

Back to Kuala Lumpur (KL), Thiaga reported his Mumbai visit to Nazir, the then CEO of ISBS. Responding positively to Thiaga' s view, Nazir immediately set up a team consisted of Kelvin , the then Vice President, Sara, the newly joined finance person, and Danen, the systems designer and Shan, an Indian academic with accounting and finance background as a consultant. Shan knew Sara as a colleague in the faculty of business administration of a university before Sara joined ISB. The team mind boggled for weeks before drafting a business plan highlighting the required investment for a forecasted ROI. Excited with the figures, Nazir flew to East Malaysia to present the potential business opportunities before the Board members. On his return, the team in KL celebrated the Board's approval for the proposed new venture.

1.3 THE INDIAN INSURANCE INDUSTRY

1.3.1 The Insurance Regulation

Prior to the establishment of Insurance Regulatory Development Authority (IRDA) in 1999 and subsequent privatization of the insurance sector in 2000, there were only one life insurance company- Life Insurance Corporation of India ( LIC) and four general insurance companies - United India Insurance, Oriental Insurance, New India Insurance, and National Insurance. All these companies were owned and operated by the government. In 1999, the IRDA Act was passed with the objective to protect the interests of insurance policy holders and to regulate, promote and ensure orderly growth of the insurance industry. As a result, the insurance market was opened up to private companies including the foreign players. Though FDI into the insurance business was allowed up to 26%, there is a constant pressure from the industry to permit up to 49% which is still under the consideration of the government. Added to this mile stone, the industry is faced with bloody competition as the industry had been shifted to de-tariff regime in 2008.Amidst stiff competition, the insurance business has been witnessing a robust growth of 15% - 20% per annum.

1.3.2 The Motor Insurance Business

In India, 4 public companies and 16 private companies were operating in the general insurance segment. Most of the private companies were joint venture companies with a foreign company and 4 of them were new companies. The HQs of these companies were clustered in a few metro cities such as Mumbai, Delhi, Chennai, and Kolkata and having branches across the country. However, there was inadequate coverage of rural India. Motor insurance in India was a compulsory requirement for all new vehicles used whether for commercial or personal use.

1.3.3 Incurred Claims Ratio

Motor segment was a bleeding portfolio for insurance companies in India. Despite that fact, none of the insurers would like to ignore the business as it contributed the single largest pie of the premium income. As on 2008, while the average motor premium of public companies has increased by 5%, the private insurers showed a steady growth of 95% over the previous year. Despite the premium growth, the motor claims ratio of the public companies had increased from 92.25 per cent in 2006-07 to 104.76 per cent in 2007-08. A similar trend was also noticed among the private sector companies taking the overall incurred claim ratio to 92.31 per cent in 2007-08 from 68.2 per cent in 2006-07 (Appendix2).

1.3.4 Motor Surveyors (Adjusters)

Upon acquiring the necessary qualification and experience, independent professionals were issued license to act as motor surveyor. Registered brokerage firms and corporate bodies were also issued licenses if one or more surveyors were in the management team. Based on their qualification and experience, they were categorized into three grades; Category A, Category B, and Category C. Each category of surveyors was authorized to select any two of the non-life insurance segments (Fire, Marine Cargo, Marine Hull, Engineering, Motor, and Miscellaneous). IRDA had allowed the insurance companies to have in-house surveyors to survey claims less than Rs.20,000. Surveyors whether independent professional or in-house were appointed for survey to assess the insurance company's liability arising out loss or damage to the insured vehicle in view of the policy contract which include the perils covered, exclusions, and other terms and conditions. As regards the survey fee, it was prescribed by the IRDA. However, the selection of surveyor was left to discretion of the insurance companies. In India, there were about 70,000 surveyors in the non-life segment spread across the country. While most of the surveyors were acting independently, survey firms working for specific insurance companies (Mack Allied Services, Delhi, Libera Survey Firm, Chennai, and etc.) were also seen in the metropolitan cities. These surveyors undertook different types of survey in motor insurance including pre-inspection survey, loss / damage survey, and consequential loss survey. Some Indian survey firms were also working for foreign insurance companies. Most of the surveyors were located in metros and cities.

1.3.5 Repairers (Workshops)

The workshops (also known as garages or repairers), in India were broadly operating under three major categories, viz., Manufacturer / Distributor Own Workshops, Organized Multi-brand Workshops, and Roadside Workshops. The organization and management of these workshops vary from small scale road side shop to public limited company model. A brief description of each category stated below would be of relevant for better understanding.

1.3.5.1 Manufacturer/Distributor Workshops

The main category of workshop was the manufacturer /distributor own workshops which provided high class repair services to its own makes and models. The vehicles serviced include, vehicles on warranty terms, post warranty period for regular services, and accident vehicles. All of these workshops used Original Equipment Manufacturer (OEM) parts that were supplied from the OEM or from the Original Equipment Suppliers (OESs). They had sophisticated software either stand alone or integrated with the manufacturer (Maruti, for example provided a common server that were accessible by all its distributors through secured system) that had OEM part names and part price, The system was used by these workshops both for regular service vehicles or the accident ones through trained computer literates. However, these types of workshops were mostly located in the metro cities.

1.3.5.2 Organized Multi-brand Workshops (MBWs)

Unlike developed countries, organized multi-brand service outlets were not popular in India. These types of workshops were capable of repairing motor vehicles of all makes and models by offering genuine spare parts, diagnostics and repair including denting & painting, mechanical repair, teflon coating, and dry cleaning. The type and variety of services provided by the MBWs was superior to that offered by road side workshops thus resulting in higher customer satisfaction.

1.3.5.3 Unorganized Multi-brand Workshops

Plethora of unorganized players, mostly roadside workshops was seen in the nook and corner of the cities and small towns throughout out the country. Though they were not equipped with adequate infrastructure, they offered break-down services, regular repair services, and in some cases they also undertook painting and body shop services. They serviced all makes and models using mostly generic parts with untrained mechanics. In spite of its nature and quality of services, many preferred to go these shops for its accessibility and the close contact with the repairer.

1.4. CHALLENGES OF INSURERS

The current claim process was too cumbersome. Delayed claim approval, non-availability of standard part price and labour rates, lack of transparency in the parts damaged, and fraudulent claims were some the challenges that the insurance companies encountering in the market. As a result, the claims cost was escalating and most insurers were contemplating methods to control cost.

1.5. WEST ASIA SOLUTIONS PRIVATE LTD

1.5.1 Company Background

Inspired by the Board's approval for an initial funding to set up a new subsidiary in India, Syed swiftly acted to find an Indian partner in India. After a careful review of the background of the two different business groups, West Asia Private Ltd (WAP), an affiliate of BETA Group of companies was finalized as the JV partner. The terms of the JV provided that the shareholding would be in the ratio of 70:30 for ISB and WAP respectively. In July 2009, WASOL Private Ltd was officially launched in a grand show of strength amidst leading industrialists in the presence of media people. News items were also splashed in the leading Malaysian newspapers.

1.5.2 The Management Team

Shareel of WAP was the official Managing Director of the newly started JV Company. However, he opted to stay out of the administrations citing reasons of inadequate knowledge in the nature of business. WESOL was directly managed by the CEO of ISB. In January, 2010, Kelvin Thomas took over the position of CEO of ISB from Nazir who resigned from the company for personal reasons. The other team members were Sara, Anba, Shan, and Thiaga looking after finance, accounting & HR, business development, and software development respectively. While Sara and Thiaga were from Malaysia, Anba and Shan were residents of Chennai - the HQ of WESOL. There were 3 other regional managers under Shan who was promoted as the General Manager - Business Development immediately after the company was launched. These regional managers were located in Delhi, Mumbai, and Kolkata.

1.6. PRE-PILOT PREPARATION

1.6.1 Initial Market Survey

A market survey was conducted in Chennai along with the regional offices in Mumbai, Delhi, and Kolkata to obtain the opinion of surveyors, repairers by demonstrating the proposed web based claim process using power point presentations. Such presentations were made to the channel partners individually as well as in groups. Slide presentations were also made to both public and private insurers in front of the claims management teams. While there was an overwhelming response for the proposed electronic claim management system, some of them have raised certain technical concerns which were noted for enhancement of the software.

1.6.2 Software Development & Hosting

The team in Malaysia developed a state-of-the-art software to suite the Indian market. Branded as 'MotorConnect', it was developed in .NET platform that would integrate the functionalities of the channel partners electronically. The newly developed system was to assist all parties from initial accident through survey, cost estimation, claim approval, final settlement to vehicle delivery with the objective of minimizing cost and time whilst maximizing customer satisfaction. In addition, it would also be helpful in monitoring service standards, delivery of management reports, and would provide scope for audit trail to resolve any disputes. Panel workshops would be able to speed up repair work with original spare part replacements and receive faster payment from the insurer through the automated system. Motor surveyors would able to improve their efficiency and faster processing time by using the web-based system to send images and photos of the damaged vehicles and for submitting of reports on-line. Similarly, the insured stands to gain with the speedy administration of claims, faster delivery of repaired vehicle with original spare parts replacements. The system was designed in such a way that it was future proof and scalable. Reliance Data Centre, a cutting edge technology provider in India, was hired to host the system under 'Managed Hosting' by which, the hosting company would take care of all IT requirements of hosting for WASOL.

1.6.3 Power Point Presentations, Live Demo & Pilot Testing

Prior to the completion of the state-of-the-art software, the business development team in India demonstrated the claim process flow, the functionalities of each portal, and the strategic advantages to insurance companies, a group of invited surveyors, repairers, and motor vehicle owners using power point presentations. Immediately after the development of the software, a second round of live demonstration was made to the same groups. An overwhelming response was seen among the participants while showcasing the seamless system. The suggestions from the channel partners were noted for further perfection of the software. The feedback of all stakeholders right from continuous integration, test driven development, model storming, and traditional system testing had been carried out before it was rolled out as a full-blown new technology in the motor claims management in the Indian market.

A much awaited pilot run was undertaken with a private insurance company in Chennai for a fortnight and the results showed an astounding performance of the claim process. Though the initial response from the pilot participant was positive, it was under the consideration of the board. Meanwhile, one of the largest public insurance companies in India had indicated its willingness go for a pilot run in Kolkata. However, it was pending for the final approval of the Chairman who was busy on attending meetings in various cities across the country. While 'Durga Puja' (a popular festival in Kolkata) season was around the corner, Arijit made all arrangement for pilot run.

1.7. The Impediment

Unexpectedly, after returning from 'Durga Puja' holidays, the Chairman of the public insurance company indicated through Arijit that he would sign the proposal only after WASOL's empanelment of surveyors and repairers to handle claims pan India. In early September 2010, a threat came from the parent company in East Malaysia that it would consider closing the new Indian venture if it could not get business before December 2010. The justification for such threat was that WASOL could not get business even after 16 months of operations despite their commitment to get business within 6 months of its operations. Panicked by such threat from the parent company, Kelvin flew to Chennai and summoned the business development team to exert pressure on them. .

'We are in danger now. Our parent company has given a clear warning that we should close a business deal at least with one company before December 2010. We are left with only four months. The pilot-run private insurer is still under consideration. At this stage, the only hope is the insurance company in Kolkata. But, when I spoke to the Chairman, he assured me that he will sign the deal only when we are able to handle claims pan India. Also remember, in the last 16 months, we have spent lot of money. I can ask for more funding only if we close a deal. Therefore, you need to explore all possible strategies so that we can expand our network within the next 3 months. I will give you a week time for the report'. Kelvin warned. He also listed the following guidelines to be observed by the team in drafting potential strategies (appendix 1)

The Team Deliberations

Puzzled with Kelvin's warning, the team took an intensive discussion over the collaborative network expansion strategy. 'You may recall what happened in Kolkata. I understand there are group politics among the surveyors. While we presented the system to a group of 30 surveyors, they all have agreed to collaborate with us. Subsequently, all of them withdrew their commitment by sending mails. When I asked the group leader, he has stated two reasons; they do not want to work with anybody other than the insurance company; and they do not want their survey fee fixed by a third party as they are regulated by the government' Arijit opened the discussion. 'We are not having adequate infrastructure to appoint an IT literate in our small business. Secondly, you said that the part prices will be transparent. If so, how are you going to deal with cases when we use generic parts especially when we do not have access to OEM parts'? Shan recalled the statement of road side repairers in Chennai. To his part, Ravi, the regional manager from Mumbai has shared questions raised by an insurer in Mumbai. 'How will you handle claims that arise from remote places? What arrangement do you have a data base to reflect the OEM price of all makes and models in the first place and how will you update the price of parts once it is revised by the manufacturer?' Ravi narrated. He also informed the team that one of his known friends who have close contact with the top officials of a few insurance companies would get us business through under-table deal. However, Shan rejected the idea as the Malaysian company was against any such move.

The next round of discussion took place on the expansion strategy. Kelvin has given a guideline for the network expansion program that include the terms and conditions (Appendix 1) by which each of the regional managers has to come out with a scheduled time table for the said target. Discussions were focused on costs and strategy relating to setting up its own office, rental, surveyor representative office, and home office model among others.

Questions

1. You are the Business Development Manager of the WASOL. Explore the available strategies to expand the network across India within the time frame.

2. Prepare a detailed Gantt Chart that should include time required for travelling, recruiting city managers, empanelment of surveyors and repairers, and software training, (Note: SLA from surveyors and repairers should reach Chennai Office before the end of November 2010 and software training could be completed during December2010)

3. Prepare an annual budget for each expansion strategy and suggest the best scheme by justifying you're considering.

4. Suggest a mechanism whereby the WASOL could be protected from potential threat from union formation among the surveyors and repairers.

Subject: Collaboration; Joint ventures; Business models; Insurance industry; Case studies

Location: India, Malaysia

Classification: 9179: Asia & the Pacific; 9130: Experiment/theoretical treatment; 2310: Planning; 8200: Insurance Industry

Publication title: Journal of American Academy of Business, Cambridge

Volume: 19

Issue: 1

Pages: 289-294

Number of pages: 6

Publication year: 2013

Publication date: Sep 2013

Year: 2013

Publisher: Journal of American Academy of Business

Place of publication: Hollywood

Country of publication: United States

Publication subject: Business And Economics

ISSN: 15401200

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Tables Maps References

ProQuest document ID: 1357565469

Document URL: http://search.proquest.com/docview/1357565469?accountid=38610

Copyright: Copyright Journal of American Academy of Business Sep 2013

Last updated: 2013-09-25

Database: ABI/INFORM Complete

Document 4 of 100

Police Drones: A Legal Studies Case Study

Author: Neil, Benjamin A.; Neil II, Benjamin A.

ProQuest document link

Abstract:

This case offers the students the opportunity to apply their knowledge of the Fourth Amendment of the United States Constitution, as it applies to the concept of unreasonable search and seizure. With this particular case problem being based on the recent action involving the defendant, Rodney Brossart and the State of North Dakota, wherein an unmanned military grade drone was used by the local police department, for the first time in the United States, to affect an arrest. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Case studies; Constitutional law; Search & seizure; Military aircraft; Law enforcement

Location: United States--US

Classification: 9190: United States; 4300: Law; 9130: Experimental/theoretical

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 5

Pages: n/a

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: 1433048998

Document URL: http://search.proquest.com/docview/1433048998?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-27

Database: ABI/INFORM Complete

Document 5 of 100

Transfer Pricing In A Global Economy

Author: Ulmer, Jin; Ethridge, Jack; Marsh, Treba

ProQuest document link

Abstract:

In September 2006, the Internal Revenue Service and GlaxoSmithKline entered into an agreement to settle transfer pricing disputes covering the years 1989 to 2005. The $5.2 billion agreement, whereby Glaxo paid $3.4 billion in back taxes plus dropped a claim for a $1.8 billion tax refund, was the largest settlement in IRS history. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Case studies; Transfer pricing; Settlements & damages; Related party transactions; Pharmaceutical industry

Company: GlaxoSmithKline PLC

Classification: 9130: Experimental/theoretical; 8641: Pharmaceuticals industry; 4330: Litigation

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 5

Pages: n/a

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: 1433048919

Document URL: http://search.proquest.com/docview/1433048919?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-27

Database: ABI/INFORM Complete

Document 6 of 100

Offshoring At Acesco Medical Devices

Author: McIntosh, John C.

ProQuest document link

Abstract:

The medical device industry is highly profitable and projected to experience double digit growth well into the future. The five top performing American medical device companies offshore some core and non-core value chain activities to realize lower production costs, higher innovation, and faster time to market. This case examines the offshoring decision of Acesco Medical Devices - a medium-size company that produces neurology, orthopedics, and cardiovascular products. It considers the tradeoffs between corporate social responsibility, as it pertains to workforce reductions in the United Sates, and the substantial strategic benefits of offshoring to India. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Case studies; Outsourcing; Medical device industry; Strategic management; Social responsibility

Location: United States--US

Company / organization: Name: Acesco Medical Devices, Inc.; NAICS: 334512

Classification: 9190: United States; 8320: Health care industry; 9130: Experimental/theoretical; 2310: Planning

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 5

Pages: n/a

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: 1433049170

Document URL: http://search.proquest.com/docview/1433049170?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-27

Database: ABI/INFORM Complete

Document 7 of 100

A Managerial Accounting Case Utilizing Optimization And Simulation

Author: Miller, Louise

ProQuest document link

Abstract:

This paper describes a unique management accounting case appropriate for use in introductory or upper level managerial accounting courses. Monte Carlo Simulation and Microsoft's Excel's Solver add-in are used to assist in managerial accounting decisions relating to factors influencing the profitability of a small manufacturing operation. Simulation and optimization spreadsheets illustrate the analysis of financial risk and uncertainties in factors affecting future profits that can provide useful information for decision-makers. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Case studies; Management accounting; Manufacturing; Profitability; Monte Carlo simulation; Decision making

Location: United States--US

Classification: 9190: United States; 9130: Experimental/theoretical; 8600: Manufacturing industries not elsewhere classified; 2310: Planning

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 5

Pages: n/a

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: 1433049074

Document URL: http://search.proquest.com/docview/1433049074?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-27

Database: ABI/INFORM Complete

Document 8 of 100

MBC Ventures, Inc.: An Employee Stock Ownership Plan With A Union Partner

Author: Hoffman, Richard C.; Brown, M. O.; Shipper, Jr.,Frank

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Abstract:

MBC Ventures, Inc. is a 161 year-old company that is going through both product and organizational transitions. It has left one of its traditional product lines, paint brushes, behind and has developed a new one, solar panels. The organization has gone from being part of a large diversified conglomerate to a small employee-owned company with two distinct product lines. The second product line, solar panels, has been added only recently. The organization has gone from being a product unit within a hierarchically-oriented, large diversified conglomerate to an independent, team-oriented, egalitarian organization. The conglomerate was a publicly traded organization; whereas, MBC Ventures is employee owned. The transition to employee ownership would not have been possible without the cooperation and financial assistance of the United Steelworkers union. These transitions that have occurred since 1990 have not been without problems including two major recessions. Currently, the company is doing quite well. This case discusses how the firm has implemented employee ownership and participatory management, and its decision to diversify into a new growth product line. Some financial results are provided. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Case studies; Employee stock ownership plans--ESOP; Labor unions; Employee ownership; Corporate governance

Location: United States--US

Company / organization: Name: Maryland Brush Co; NAICS: 423720; Name: United Steelworkers of America; NAICS: 813930

Classification: 9110: Company specific; 6400: Employee benefits & compensation; 6300: Labor relations; 2330: Acquisitions & mergers; 9190: United States

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 5

Pages: n/a

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: 1433048881

Document URL: http://search.proquest.com/docview/1433048881?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-30

Database: ABI/INFORM Complete

Document 9 of 100

Investment Recovery: Understanding The Book Value Vs. Fair Market Value Of An Asset

Author: Slater, Robert; Shea, Vincent

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Abstract:

This case is based on a real life conversation between CPA Dave Richards and business owner John Stevenson. John has run across a situation with his business in which he has a discrepancy between what he feels an asset is worth and with what a company has the asset valued on the books. The manager of the company does not want to sell an unused asset because he does not want the loss on the equipment to impact his division's performance this period. Students get to listen along as Dave and John discuss the issues. This case introduces students to the accounting for capital assets, sales of used equipment and the tax consequences of selling equipment. Students are introduced to John Stevenson and Dave Richards as they discuss an issue John Stevenson has come across in his investment recovery business. Students are exposed to capital asset accounting and valuation from both a Generally Accepted Accounting Principles view and from a general businessman's view. The case also covers an issue of goal conflict and goal congruence with respect to the company who currently owns the asset. This case is targeted for students in an MBA course who are not accounting majors. The case may be used as an in class discussion mechanism or assigned as a take home project. The case can be discussed fully within a one hour class if students have pre-prepared for the case. Students should expect to spend about 1 hours of preparation time outside of class. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Case studies; Capital investments; Disposition of assets; Book value; Depreciation; GAAP

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

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 5

Pages: n/a

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: 1433049015

Document URL: http://search.proquest.com/docview/1433049015?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-27

Database: ABI/INFORM Complete

Document 10 of 100

First things first: Examining personal motivation before learning how to motivate others

Author: Paglis, Laura L

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Abstract:

Work motivation is one of the most popular topics in organizational behavior and principles of management courses. Virtually all the attention, however, is directed towards how to motivate others, rather than examining issues with students' own personal motivation. The purpose of the course assignment described here is to help students gain self-insight into their own challenges with motivation through self-assessment and the development of a personalized improvement plan. Students apply concepts of engagement and energy management to complete the exercise. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

Learning motivation theories and techniques for maximizing employee effort is a core concept in most organizational behavior and principles of management courses. Through a variety of methods - lecture, case analysis, experiential assignments - instructors focus students' attention on how managers can maximize employee productivity through the application of theoretically sound motivational strategies. Given the considerable amount of space allocated to this topic in management textbooks and the corresponding time spent in class, students understandably get the message that managers routinely encounter employees whose performance displays deficits in intensity, direction, and persistence of effort. However, many students would likely discover their own motivation deficiencies if asked to engage in some directed self-analysis; such a reflective exercise could have substantial benefits for them now and in the future. The premise of this article, then, is that management instructors may be "putting the cart before the horse" by devoting so much time to discussing how to motivate others before asking students to first analyze their own productivity drains. Thus, the exercise described here was developed to help students gain insight about their motivation challenges and how to overcome them. Those who fully engage with it should see improvements in their personal productivity, while perhaps also enhancing their ability to successfully motivate others later in their professional careers.

MOTIVATION AND ENGAGEMENT

The typical treatment of the motivation topic in most management textbooks involves presenting various theories that have been developed over the years to explain what motivates workers, along with their empirical validity. To take one example, the widely-adopted Robbins and Judge (2013) text sequentially covers 'early' theories of motivation, such as Maslow's (1954) needs hierarchy and Herzberg's (1959) two-factor theory, followed by the more empirically sound 'contemporary' group of theories, including goal-setting (Locke, 1968), equity (Adams, 1965), and expectancy (Vroom, 1964). This approach has merit in its clear, logical progression. Studying a series of individual theories, however, does not lend itself especially well to the objective of comprehensively examining students' own motivational challenges.

Instead, in this exercise students will be introduced to the concept of engagement to help them analyze their current motivation level. This "multidimensional motivational concept" (Rich, Lepine, & Crawford, 2010, p. 619) has been thoroughly researched in the workplace context in the form of job engagement. Kahn (1990, 1992) described engagement as the harnessing of one's full self in the work role; that is, investing one's physical, cognitive, and emotional energies at work. In this view, engagement is a comprehensive manifestation of one's connectedness with work through simultaneously exerting physical effort, maintaining focus and vigilance, and emotionally investing with others (Rich, Lepine, & Crawford, 2010). Engagement has most frequently appeared in the burnout literature, where it was originally conceptualized as the antithesis of the exhaustion, cynicism, and inefficacy displayed by workers suffering from burnout (Maslach, 2003; Maslach & Leiter, 1997; Maslach, Schaufeli, & Leiter, 2001). More recent research suggests, however, that rather than being burnout's opposite on a single continuum, engagement is a separate, negatively correlated construct (Schaufeli & Bakker, 2004). Schaufeli and colleagues empirically validated a multidimensional measure of engagement consisting of the following four components (Schaufeli & Bakker, 2004; Schaufeli, Martínez, Marques Pinto, Salanova, & Bakker, 2002; Schaufeli, Salanova, González-Romá, & Bakker, 2002):

1. Vigor: high energy, resilience, willingness to invest effort

2. Dedication: feelings of significance, enthusiasm, challenge

3. Absorption: fully concentrated, engrossed, persistent state of 'flow' (Csikszentmihalyi, 1990)

4. Efficacy: feelings of accomplishment, contribution, confidence

The proposition that students will be more motivated and successful if they are high on these four components of engagement has face validity and is indirectly supported by research conducted in employment settings. These studies have reported positive outcomes associated with job engagement, including higher levels of employee task performance, organizational citizenship behavior, and working safely (Nahrgang, Morgeson, & Hofmann, 2011; Rich, Lepine, & Crawford, 2010) and lower turnover intentions (Schaufeli & Bakker, 2004). With regard to college students' engagement, most of the existing research has focused on its negative correlate, burnout, and its influence on academic performance. Two studies found negative, though weak, correlations between burnout and college students' performance (McCarthy, Pretty, & Catano, 1990; Nowack & Hanson, 1983), while another found no correlation between burnout and GPA (Balogun, Helgemoe, Pellegrini, & Hoeberlein, 1996). Issues with the translation of burnout measures from the workplace to the academic environment likely contributed to these inconsistent findings (Schaufeli, Martínez, et al., 2002). A significant advancement, therefore, has been the development and validation of a measure of engagement specifically adapted for use with college students, the Utrecht Work Engagement Scale - Student (Schaufeli, Martínez, et al., 2002; Schaufeli, Salanova, et al., 2002). Research using this scale has supported engagement's positive relationship with college students' academic performance across three samples, particularly with regard to the efficacy and vigor dimensions (Schaufeli, Martínez, et al., 2002). Having briefly introduced the engagement concept and the accompanying research evidence on its link to important outcomes, the classroom exercise will be described next.

TARGET AUDIENCE AND OVERVIEW OF THE EXERCISE

This exercise was created and tested by an instructor who primarily teaches principles of management, organizational behavior, and leadership courses in a traditional undergraduate context. Thus, the concepts discussed herein specifically reference students' engagement with their academic studies rather than engagement in a professional work setting. With minor modifications to change the referenced role to the workplace, however, the exercise can be used effectively with working graduate or nontraditional undergraduate student populations.

The exercise incorporates segments of in-class time, approximately thirty to forty minutes each, distributed across the term. These are devoted to presenting, discussing, reflecting upon, and writing about energy management concepts and how they relate to students' engagement, motivation, and productivity. This is followed by a capstone homework assignment due at the term's conclusion. If necessary, some of the in-class time allocated to reflection and writing can be converted to homework to accommodate time limitations.

Briefly, in part one of the exercise students assess themselves using a short survey instrument on the four dimensions of engagement noted above, vis-à-vis their academic work. After students gain self-insight into what their engagement profiles currently look like, in part two the instructor presents information on the personal energy sources that drive engagement (Fritz, Lam, & Spreitzer, 2011; Loehr & Schwartz, 2003). Students are encouraged to relate this material to their own lives through reflective writing prompts. In part three, students develop a set of "positive rituals" (Loehr & Schwartz, 2003), which takes the form of a personal improvement plan to strengthen and more effectively manage the energy sources driving their engagement. The ultimate objective is for students to experience enhancements in their vigor, dedication, absorption, and/or efficacy, thus optimizing their personal motivation and productivity. The specific steps of the exercise are described in detail below.

CONDUCTING THE EXERCISE

Part one: Assessing current level of engagement

In part one, students rate themselves on the assessment instrument shown in Table 1 (Appendix), which has been adapted from previously published scales for measuring engagement and burnout (Maslach & Jackson, 1981; Schaufeli, Leiter, Maslach, & Jackson, 1996; Schaufeli, Martínez, et al., 2002; Schaufeli, Salanova, et al., 2002). These items assess the four dimensions of engagement as they apply in the college setting: vigor (e.g., "I feel like I am bursting with energy when I am studying"); dedication (e.g., "I find my studies to be full of meaning and purpose"); absorption ("Time flies when I am studying"); and efficacy (e.g., "I can effectively solve the problems that arise in my studies"). Students sum item scores to obtain a profile of their level of engagement across the four dimensions.

While the primary objective here is to individually raise a student's awareness of his or her current level of engagement, a brief period of small group discussion can be useful to strengthen understanding of the four dimensions and connections between them. Sample discussion starters include:

1. What do the patterns across the four dimensions look like for students in your group?

2. Are there common profiles, i.e., one or more dimensions that are typically lower than the others?

3. How do the four engagement dimensions inter-relate? For example, how do deficits in vigor, which is primarily a feeling of low physical energy, affect feelings of dedication, absorption, and efficacy?

Part two: Understanding how engagement is affected by energy management

After the self-assessment, attention in part two turns toward providing the conceptual information students will need to develop an individually tailored plan for enhancing engagement, motivation, and productivity, i.e., the capstone homework assignment. To do this, a summary of Loehr and Schwartz's (2003) work with energy management training, which they conducted with athletes and corporate executives, is introduced through a series of four mini- lectures corresponding to the authors' four "energy sources." In conjunction with the mini- lectures, it is recommended that instructors assign the relevant chapters of Loehr and Schwartz's book ("The Power of Full Engagement: Managing Energy, not Time, is the Key to High Performance and Personal Renewal") as outside-of-class reading to accelerate comprehension and reduce the amount of lecture time. [An alternative, shorter reading assignment is Schwartz (2007).] In addition to explaining concepts, the Loehr and Schwartz book contains case studies of clients who the authors have helped through energy management training. Reading these cases helps students transition from learning key principles to their real world usefulness.

Distributing the mini-lectures across the term, rather than presenting and discussing all the conceptual information in a single session, allows students to really focus on each energy source and how its management or mismanagement can affect them personally. Each mini- lecture is followed by a prompt for student reflection and writing. This feature encourages students to begin thinking about the specific areas where they have depleted energy reserves that may be negatively impacting their engagement, motivation, and productivity. The products of these brief reflective writing periods are the initial work that will culminate in the creation of students' personal improvement plans. A description of the four mini-lectures follows. Instructors will want to reference the Loehr and Schwartz text for additional background material.

Mini-lecture #1. Maximizing engagement requires effectively managing four sources of energy, the first being physical energy.

Optimal personal productivity is possible only when individuals effectively manage their physical, emotional, mental, and spiritual energy reserves. Causes of performance problems related to energy management include insufficient capacity to start with, continually "spending" energy without allowance for recovery, and/or an imbalance across energy sources, for example, being physically in top shape but underdeveloped in emotional or mental energy capacity. Thus, to optimize engagement, motivation, and productivity, all four energy sources need to be maximally developed and periodically recharged on an ongoing basis (Loehr & Schwartz, 2003).

Physical energy capacity is strengthened through consistently following recommendations for a healthy lifestyle in the areas of eating, sleeping, and exercising (Loehr & Schwartz, 2003). Relating back to the self-assessment completed in part one, physical energy is most closely related to the vigor with which a student approaches his or her studies. Connections may also be evident between physical energy capacity and the dedication (e.g., enthusiasm), absorption (e.g., sustained concentration), and perhaps even efficacy (e.g., confidence) dimensions of engagement. Of the four energy sources, people tend to be most familiar with this one and how it is affected by day-to-day lifestyle choices. Most people know what should be done to optimize physical condition, yet sometimes fall short in one or more of the behaviors conducive to a healthy lifestyle.

Reflective writing prompt: Where do you, personally, see problems in the areas of eating, sleeping, and/or exercising that may be draining your energy and negatively affecting your engagement with your academic work?

Mini-lecture #2. Maximizing engagement requires effectively managing emotional energy.

Emotional energy capacity is built through regularly experiencing positive feelings, such as joy, pleasure, challenge, and fulfillment (Loehr & Schwartz, 2003). In contrast, negative feelings - for instance, anxiety, impatience, frustration, and despair - indicate depleted emotional energy reserves. A deficit in positive emotional energy is most relevant to the efficacy dimension of engagement; that is, when negative, anxious, and frustrated feelings dominate a person's outlook, his or her confidence in the ability to meet and overcome challenges tends to decline. Secondarily, a person may also perceive a link between emotional state and the dedication dimension; for example, a student is unlikely to feel enthusiastic and inspired by his or her studies if his or her overall emotional state is negative.

Developing strong relationships with others, socially, at work, or at school, and regularly devoting time to maintaining and deepening those connections are primary means of "filling one's tank" with positive emotions that can boost emotional resilience. Additionally, scheduling extracurricular activities that are personally enjoyable, are active rather than passive (e.g., teaching someone a favorite hobby as opposed to watching TV), and perhaps involve a moderate degree of challenge is another way to build emotional energy reserves. Support for the concept of an energy exchange between one's extracurricular and academic lives comes from workplace research. Studies indicate pleasurable evening and weekend activities can effectively "recharge" employees' energy reserves, which are then available for "spending" later on the job (Fritz & Sonnentag, 2005; Sonnentag, 2003; Sonnentag, Binnewies, & Mojza, 2008).

In sum, unlike physical energy for which the prescription for strengthening reserves is fairly consistent across people, building emotional energy capacity will be a highly individualized endeavor. In developing a personalized plan for strengthening engagement and improving motivation and productivity, an individual will want to think about the particular relationships and activities to invest in that have the greatest potential for increasing the joy, challenge, and fulfillment experienced in one's day-to-day life.

Reflective writing prompt: In what areas of your life do you regularly experience negative feelings, e.g., frustration, impatience, incompetence, etc., that drain your emotional energy reserves? In contrast, what experiences or activities do you (or would you) find emotionally recharging? These may be activities you currently engage in, used to but don't anymore, or would like to but haven't tried yet.

Mini-lecture #3. Maximizing engagement requires effectively managing mental energy.

Mental energy capacity refers to one's ability to sustain focus and concentration on the task being worked on (Loehr & Schwartz, 2003). It is most closely linked with the absorption dimension of the engagement scale from the self-assessment. Many people are plagued by distracted thinking and short attention spans. One cause may be an imbalance between mental energy spending and recovery. Adults have been socialized to believe that "putting one's nose to the grindstone," that is, long periods of uninterrupted, intense work, is the behavioral hallmark of highly productive individuals. Over time, however, this behavior pattern draws down mental energy reserves without sufficient recovery. Another contributing factor to deficits in mental energy is the increasing prevalence of multi-tasking. An example familiar to students is the practice of studying while also keeping an eye on the TV and periodically checking social media. While this routine may seem stimulating and enjoyable, a substantial body of evidence indicates that multi-tasking undermines productivity, creativity, and decision making (Dean & Webb, 2011; Hemp, 2009; Schwartz, 2007; Shellenbarger, 2003), one reason being that switching between tasks uses up mental energy resources. A preferred approach for balancing mental energy use and renewal is to establish a regular pattern of focusing on a single task or project for no more than 90 to 120 minutes, followed by a recovery break (Loehr & Schwartz, 2003; Schwartz, 2007). While giving "mental muscles" some time to recover, these breaks can simultaneously strengthen physical and emotional energy reserves depending on the kinds of activities one engages in. In addition to intentionally scheduling intermittent breaks, busy individuals might consider ways to reduce interruptions (e.g., limiting e-mail and text message checks to specific times), manage their time more purposefully (e.g., preparing a daily to-do list with priority tasks noted), and inform others that they will not be reachable immediately at all times of the day (Schwartz, 2007).

Reflective writing prompt: Do you have problems with concentration and focus? What behaviors do you currently engage in that may be sabotaging your ability to effectively manage your mental energy reserves?

Mini-lecture #4. Maximizing engagement requires effectively managing spiritual energy.

In their training work with corporate executives, Loehr and Schwartz (2003) devote considerable attention to helping them define their core values, which are linked to a fourth source of energy - spiritual. Rather than being used in a religious sense, 'spiritual' describes the kind of energy derived from involvement in activities that individuals care deeply about because they serve a significant, meaningful and enduring purpose. Spiritual energy aligns most closely with the dedication dimension of engagement. After executives in energy management training identify their most deeply held values, they are asked to examine how their current lifestyles are incongruent with those values. A common example of disconnection occurs between a professed commitment to family and the actual hours they spend with them. This becomes the basis for creating a new behavioral routine that involves actually "scheduling" family time to renew spiritual energy.

There are a variety of ways one can identify core values. For instance, one might give some thought to questions such as,

* "What do I care deeply about?"

* "What purpose(s) beyond my own needs and desires do I want to devote time to?"

* "At the end of my life, how would I want people to describe me?"

* "What do I want to be remembered for?"

A creative exercise for clarifying core values, suggested by Kouzes and Posner (2007), is to write a tribute to oneself. This involves placing oneself in the position of honoree at a 'Person of the Year' banquet and imagining the descriptions and phrases one would most like to hear. Put another way, if an individual could write his or her own 'Person of the Year' nomination speech, what would he or she like to be able to truthfully say?

The next step is to expose incongruities between one's core values and his or her day-to- day behavior. To what extent are a person's waking hours currently spent on activities and purposes he or she personally deems significant, meaningful, and of lasting value? Not at all? Some? Is there room for improvement? Spreitzer and Grant (2012) have proposed for student use a formal way of examining current allocation of time. They suggest an "energy audit" in which students track for two days their energy level hour-by-hour, including what they were doing at the time, with the aid of e-mail or cellphone alarm reminders. The audit produces a tangible record to review for insight into how waking hours are currently being invested, and in turn, the relative proportion of time allocated to energy-renewing versus energy-sapping activities. Making modest changes aimed at specifically directing a few more hours a week to activities that align with one's values is a powerful way to boost spiritual energy.

Reflective writing prompt: Have you taken the time to identify your core values? If not, spend a few minutes thinking and writing about what you would like to be remembered for, or what words you would like to hear others use to describe you. If you have already gone through the process of defining your core values, assess the fit between how you spend your days and your values. Are you allocating enough time to activities that are consistent with your values? Can you identify some areas of incongruence that you can potentially change?

Part three: Developing a plan for improving engagement, motivation, and productivity

'Positive rituals' are behavioral routines created for the explicit purpose of strengthening energy capacity and effectively managing it on an ongoing basis (Loehr & Schwartz, 2003). At first, these need to be precisely defined, scheduled activities that require conscious discipline to implement. Over time, however, rituals become mostly automatic habits that help people balance energy spending with energy renewal consistently over time. Below are some guidelines for creating effective rituals that should be shared with students before they begin the final step of writing their individualized improvement plans (Loehr & Schwartz, 2003):

* Rituals should be positive behaviors an individual will start doing, rather than negative behaviors he or she will stop doing.

* Rituals should be as specific as possible, including the scheduling of their timing. Depending on the ritual, this could be a particular hour in one's planner or the event / experience that will prompt one to engage in the positive behavior.

* Rituals should be designed in incremental stages. They should begin with realistic steps that require a slight stretch from present behavior, rather than wholesale changes to current lifestyle that are unlikely to be sustained. Making only one or two significant behavioral changes at a time increases the chances for success.

* Individuals should commit to a minimum 30-day trial period to allow for the transition from deliberate action to automatic habit. At the end of the trial period, progress should be reviewed and adjustments made to the ritual as necessary. If a ritual has been successfully adopted so that it is now a habit, the next ritual in the sequential plan for improvement can be initiated.

Students are now prepared to work from the ideas they have sketched out in the reflective writing prompts to develop a comprehensive, personalized plan to improve engagement and productivity. See Table 2 (Appendix) for a template that can be provided to students for this purpose. This format encourages them to make explicit connections between the engagement dimensions from the self-assessment in part one and the lecture material on energy sources and building energy capacity in part two.

Instructors may be surprised by the number of positive rituals students are able to come up with, as well as the creativity and diversity of their ideas. Sometimes, though, students get "stuck" and need some examples to stimulate their thinking. Below are some brief positive rituals that have been suggested for working professionals seeking to strengthen or better manage their energy.

* Physical energy: Eat five or six small, nutritious meals daily rather than two or three big ones; consistently get seven or eight hours of sleep at night; specifically include physical workout times in workday schedule (Loehr & Schwartz, 2003; Pozen, 2011).

* Emotional energy: Show gratitude to someone else; do something that will make another person happy; offer to help another person; learn something new (Fritz, Lam, & Spreitzer, 2011).

* Mental energy: Identify next day's most challenging task and schedule it first; set cellphone to voicemail during meetings; check e-mail two times per day (Schwartz, 2007); leave at least one hour unscheduled each day (Pozen, 2011); take a recovery break every 90 to 120 minutes during the workday (Loehr & Schwartz, 2003).

WRAPPING UP THE EXERCISE

There are a couple of options for wrapping up this exercise. The instructor may specify a minimum number of positive rituals (i.e., completed Table 2 templates) and evaluate students' submitted work for completeness, effort level, and depth of thinking, ending the assignment here. Alternatively, if students are members of pre-existing small groups in which they have developed some level of familiarity and trust, they could be asked to share their completed plans within their groups. They can be encouraged to set up accountability check-ins with one or more members of their small groups for the implementation phase of their plans. Regarding this last point, although the timetable of the academic calendar may not permit it, ideally the exercise will not terminate at the plan development stage, but instead include monitoring progress, adjusting rituals as needed, and implementing additional ones following successful results. How this is accomplished - informally through periodic in-class discussions, through small groups as mentioned above, or more formally through subsequent graded written assignments - can be tailored to instructor preference, course design, and the maturity and motivation level of students.

CONCLUSION

Studying theories and strategies for motivating others for maximum productivity certainly has value for students interested in pursuing management careers. A significant omission in current management education, however, is the subject of personal motivation and productivity. In the spirit of "know thyself first," the exercise described in this article directs students' attention toward analyzing their current motivation and productivity drains vis-à-vis their academic work. The concept of engagement, a multidimensional manifestation of motivation, along with research on effectively managing sources of energy, is presented as the foundation for students' self-analysis. The primary benefit of the exercise is the development of an individually tailored plan for enhancing students' personal engagement, motivation, and productivity in their academic roles. A hoped-for secondary result is that students will carry this learning over into their post-college lives to effectively manage their own working behavior, as well as enhance their understanding of their employees' or co-workers' issues with engagement, motivation, and productivity.

Subject: Motivation; Studies; University students

Location: United States--US

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

Publication title: Journal of Business Cases and Applications

Volume: 9

Pages: 0_1,1-12

Number of pages: 13

Publication year: 2013

Publication date: Sep 2013

Year: 2013

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: 1448244628

Document URL: http://search.proquest.com/docview/1448244628?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Sep 2013

Last updated: 2013-11-14

Database: ABI/INFORM Complete

Document 11 of 100

The banker and the campus uproar: Ethical dilemmas for finance professionals

Author: Díaz, Violeta; Rosile, Grace Ann; Roth, Greg

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Abstract:

This case introduces students to the types of conflicts of interest and ethical dilemmas sometimes faced by finance professionals. The case presents an ethical dilemma in which business students accuse a bank's recruiter with predatory lending. The recruiter is a loan advisor from the local branch of a major bank. After witnessing an on-campus presentation by the recruiter, a group of business students charge her with predatory lending. This charge is based on suggestive but inconclusive evidence. These students demand that the faculty advisor to the university's finance student organization bar the bank's representatives from future speaking or recruiting visits. The case challenges students to consider what is legal vs. ethical behavior for financial services professionals. The case also forces students to contemplate ethical decision making in a complex organizational setting with multiple stakeholders and incomplete information. Finally, the case can be used to: (1) motivate a discussion about the causes of the 2008 banking crisis; and (2) raise student awareness about the potential conflicts of interest faced by finance professionals employed in other (non-banking) financial services industries. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

Background

This case presents students with a real-world example of conflicts of interest and ethical dilemmas in the financial services sector. The case is noteworthy in that it focuses on real banking activities, yet the drama unfolds among business students and their finance professor at a university. This latter feature helps make the case engaging and accessible to business students. The case questions are developed to prompt critical thinking by students on the topics of financial, ethical and organizational behavior. The teaching notes include suggested answers to case questions. The notes also include a discussion of ethical guidelines for financial professionals. The dilemma presented in the case gives students opportunities to consider different stakeholders' points of view. Students are challenged to choose the appropriate course of action for major stakeholders and defend their choices.

Learning Objectives and Suggested Use of the Case

The learning objectives of the case are for students to:

1. Identify ethical dilemmas faced by finance professionals and demonstrate an understanding of ethical considerations as a financial service provider.

2. Consider the difference between legal and ethical behavior for finance professionals.

3. Identify the differing motives of stakeholders in an organization and the difficult ethical choices they must sometimes make.

4. Select the best course of action for key decision makers and defend these choices in such a way that demonstrates consideration of ethical factors.

This case is intended for use in finance courses or courses covering business ethics. Students do not need previous exposure to an ethics course, but an introduction to ethics and organizational behavior might be useful.

CASE NARRATIVE

Cristina Rodriguez stepped out from behind the podium with a huge smile, as she drank in the burst of applause from the 30 plus members of her alma mater's Finance Club. She had just finished telling these students how she had gone from being a struggling student like them, to her present position as a loan advisor with Money Center Bank (MCB), a large US bank.

In two short years since her graduation from college, she had tripled her income. She was earning even more than her husband Julio! She could now pay for so many things she had denied her two toddlers while she struggled through school. Not that long ago, Cristina had been on the other side of the podium, another member of the audience at these monthly Finance Club meetings at Borderlands University (BU). (BU is a mid-sized school in a U.S. town, close to the Mexican border.) Now she was the guest speaker.

Inviting finance industry professionals to speak to the campus Finance Club was supposed to bring the "real world" to the campus, and Cristina's talk had been far from boring. She seemed elated with the high energy in the room as she concluded her presentation. Very few of the other invited speakers could boast of a rise as quick and spectacular as hers. Her message was to tell them how they could do the same thing she had done, and experience the same kind of success. MCB was looking for new loan advisors. Instead of rushing out the door of this Finance Club meeting, many of the students were clustered around her, asking more questions. One young woman even asked her where she bought her suit!

"Cristina, won't we have to leave this region of the country to get a high-paying job like yours?" one student asked. Cristina responded. "No, that's the beauty of this! My husband and I both have tons of relatives who live near here, so I really did not want to move for a job. Money Center Bank wants more grads like me-bilingual applicants who will be able to serve all the Spanish-speaking customers in our area. In fact, most of my customers are Spanish-speaking. So if you keep your grades up, and are willing to work hard, you can be standing up here where I am now in just a few years. MCB will be on campus to interview just before graduation in the spring, so be sure to sign up to get on the spring recruiter's schedule!"

The echoing din of chattering students died down as the last boisterous cluster squeezed out the door, leaving Dr. Chris Moore feeling quite pleased with himself. Dr. Moore was the faculty advisor to the Finance Club and Cristina had been one of his better students. He felt the reflected glow of her success and he approached her with an outstretched hand.

"Well, Cristina, thank you again for volunteering to speak to the Finance Club. I haven't seen this group so excited all year!" said Dr. Moore.

"It was my pleasure, Dr. Moore!" said Cristina. "I know what they're going through. It's not easy being the first in your family to go to college, and with kids and a husband, you wonder sometimes if it's worth it. I just want them to know that with Money Center Bank, their story can have a happy ending, like mine."

Dr. Moore replied. "I know what you mean, Cristina. I was the second in my family to go to college, and then on for my PhD, and that's one of the reasons I love teaching here. It feels great to be able to help along first-generation students."

Cristina continued. "Getting my degree at BU was the best thing I ever did! Sometimes I can hardly believe how things have changed in two short years! Now I really enjoy the chance to give something back to BU, Dr. Moore! Let's do it again next year!"

And so the Finance Club had continued to invite Cristina for repeat performances several times over the next few years. But now, in the fall semester of 2007, somehow, things had changed. Dr. Moore was feeling uncomfortable, and he was not sure why, but he thought it was something more serious than Cristina's 20-minutes-late arrival on this visit.

Breezing into the lecture hall wearing blue jeans and with chewing gum in her mouth, Cristina arrived with two junior bank employees in tow. With no apology for her tardiness, she jumped right into her talk.

"Wow, you guys, I've just flown back from Vegas! MCB wined-and-dined me, all-expenses-paid, because I was a top producer of loans this year! And my colleagues Jake and Sharon here will tell you what a great company this is to work for! This is their first year, and they already earned a huge bonus!"

A hand shot up in the audience. "You said you are 'a top producer' of loans. I thought people just came to the bank when they needed a loan. How do you 'produce' a loan?"

"Well," Cristina shot back, "I'm technically called a 'Personal Loan Advisor,' but the name of the game is really sales. When I make a home equity loan, it's like making a sale where I earn a commission, and sales is really just helping people to get what they want. Most of my clients don't know much about finance and they look to me for advice. So, I tell people that taking out a home loan can help them save money, and at the same time, buy what they want and need right now. Between the lower interest rate on home loans versus credit cards, and the tax advantages of the deductible interest on home loans, I help people save money while getting that new car or paying off their credit cards. It's really silly to pay high rates for credit card debt when our home equity loans charge less interest!"

Another hand in the air: "But in the long run, what happens if a family borrows too much with a home equity loan and can't repay? Won't they be in danger of losing their house?"

"Well yes, but my job is not to tell them how to manage their lives. These are adults. They can choose what they need and want. I just help them to get the money to do what they want, and usually I'm saving them money on the interest rates. I can only get them those low interest rates because their house is their collateral. That's what makes the loan less risky for the bank."

A loud whisper was heard from the audience: "Less risky for the bank, but not for the family that might lose their home."

Just then Cristina's cell phone rang, and holding up her index finger, she turned her back to the audience and spoke into the tiny device "Hola chica!" Whispers and laughter continued for a few minutes between Cristina and her caller. As the audience began to get restless, one of the junior bank employees, Jake, got some nervous chuckles when he jumped up and said "She's probably closing a deal on a loan right now!"

Clipping the phone back onto her jeans, Cristina turned to face the class, saying "Let me tell you about selling financial products. You don't sell money, you sell dreams. Before Thanksgiving and Christmas, I call a bunch of the bank's women customers and say 'Wouldn't you like a new dining room set, or new carpeting, when the family visits for the holidays?' Other times I call bank customers and say, 'Have you had a big car repair bill in the past year?' (and almost everybody has), 'Wouldn't you be better off in a new car? What if I could lower your monthly payments and put you in a new car?' Maybe they would like to build a backyard pool for the summer. I show them the possibilities. Then we both get what we want! That's how I became a top producer for MCB."

A soft-spoken young woman wearing faded jeans with a BU sweatshirt raised her hand hesitantly. At Cristina's nod, she began "I don't think I could call people up like that. Isn't that just like telephone sales? Aren't people rude and hang up on you? One reason I majored in Finance was so I wouldn't have to do jobs like telephone sales."

With a slightly patronizing smile, Cristina said "It's not like that at all! First, we only contact people who are already customers of MCB and you have to tell them you are with the bank. That usually worries people, they think they are overdrawn or have done something wrong, because the bank never calls otherwise, right? So then you reassure them, and they are so relieved! Then you explain to them that you're a professional financial advisor, that you're calling to help them out, to give them access to money."

With that, Cristina stepped back behind the podium and said "Well it's really been a blast, kids! I expect to see the best among you earning the big bucks at MCB soon!"

After a polite smattering of applause, students quietly filed out of the room. Dr. Moore recalled Cristina's first visit-what a difference! Had the students, the banking industry, or Cristina, changed in the past few years? Or had they all changed? Dr. Moore felt old.

It had been less than a week since the Finance Club meeting. The three students filing into Dr. Moore's office that Tuesday looked stressed and worried. One student introduced himself: "Dr. Moore, I'm Alejandro Candelaria. You might remember me from the Finance Club meetings. I'll be taking your corporate finance course next semester and I'm really looking forward to it."

After exchanging a few jokes about Moore's class, Alejandro got to the reason for their visit. "Last term, Maria, Sandy and I worked together on a research paper for our Business Ethics class. Our topic was "Predatory Lending Practices." From what we learned, we think Cristina Rodriguez and Money Center Bank are becoming "predatory" in the consumer home-equity loan business."

At this point Sandy interrupted "Dr. Moore, we also know some things about Money Center Bank that you might not. One of my old roommates, Josh, who graduated last year went to work for MCB, just like Cristina. He called it a meat-grinder, just chewing up people with the pressure to constantly bring in more loans. There was no consideration at all for the families who might be harmed by taking on more debt than they should. It was all about sales quotas, and you either make your quotas or you are out. He couldn't take it, and he quit. He said he didn't want to push people into taking on massive debt, especially if they were financially unsophisticated. And if customers complained about how high their new monthly loan payments would be, Josh was supposed to tell them that interest rates would most likely come down soon, so he could get their loan refinanced later with lower monthly payments. He knew that interest rates could go up as well as down."

Maria chimed in "Yeah, I remember Josh saying he thought banks were supposed to be so conservative, how could they be pushing these home equity loans like that? But he found out later that MCB didn't usually keep these loans, they just quickly sold them to somebody else. He said even if it was legal, he thought it was just not right. And the Spanish-speaking angle? He thought the bank was taking advantage of Hispanic customers. We even found a consumer watchdog blog that claimed some big banks are charging higher interest rates to Hispanics and African-Americans, can you believe it? So Josh said that was why they wanted Spanish-speaking recruits-so they could take advantage of their own ethnic group! How disgusting!"

Alejandro resumed: "Here's the bottom line: first, we think Cristina and Money Center Bank encouraged financially unsophisticated customers to take on unhealthy levels of debt; and second, we suspect the bank charged higher interest rates to Hispanic and possibly other ethnic minority borrowers. We think these behaviors make them guilty of unethical predatory lending." Alejandro had spoken as if reading from a paper. He must have memorized these words so he could be very precise in delivering these charges.

Alejandro concluded "We all agree that because of this unethical behavior, Money Center Bank should not be allowed to make presentations or recruit at future Finance Club meetings. You should put a stop to this."

Dr. Moore was stunned. "These are very serious allegations. Yes, I agree, the lending practices described by Cristina did seem aggressive, maybe too aggressive, but she claimed that she was usually reducing her customers' total interest payments. Since we don't have the data on these home equity loan customers, we don't have enough information to make a certain judgment that these loans were not in the best interest of the borrowers."

"How can you take Cristina's side, Dr. Moore? Aren't you always preaching to us about ethics and disclosure?"

"Now hold on, Sandy. I'm not taking any side here, not yet anyway. These are some very disturbing claims, but not, I'm afraid, totally backed up by facts-at least not yet. I will say I'm very impressed by your professionalism! You've done your homework, and you've presented a good argument. And I certainly don't want, and I don't think the university administration wants, to support any practices that might lead to people in our own town losing their homes. But we need more data to prove your point. And even if we discover harder evidence of predatory lending, the question of what to do about it is not so simple."

With clenched fists, Sandy looked like a frustrated boxer fighting for his ideas. "But Dr. Moore, you're the advisor to the Finance Club. You can decide whether Cristina comes back or not."

"If only it were that easy!" Moore said sympathetically. "You're not seeing the bigger picture, Sandy. As a professor in a business college, I'm supposed to help our students get good jobs. I do that by maintaining good relationships with financial industry employers. Money Center Bank is one of the best employers of BU grads, especially our finance majors. Some BU business students, perhaps even some of the Finance Club members, may want to interview with MCB. How would these students feel if I banned Cristina and MCB from presenting at future Finance Club meetings? I can just picture a delegation of students protesting such a ban! I'm sure the business college dean would love that! And what about other financial institutions? Would we have to screen each bank or insurance company or brokerage firm to determine if they meet some level of ethics-a level which is determined by us, and is apart from what is legal? And if we actually did implement some strict ethical screening of potential employers, how many of them would be willing to jump through all our hoops just for the privilege of coming to our campus to recruit?" Aren't we trying to attract them to come hire our students?"

In the dejected silence following Moore's little lecture, Alejandro spoke. "So you're saying we should do nothing, just ignore the whole thing."

"No, Alejandro, I'm not saying 'do nothing.' We probably should do something. But until we have more information, I'm not sure what that something ought to be."

Discussion Questions

1. Why would a bank consider making a mortgage loan or home equity loan to a homeowner who could not make the scheduled loan payments-wouldn't this end up hurting the bank?

2. After considering Cristina' s likely motives, incentives and behavior, do you believe she had conflicts of interest that were so serious she would knowingly recommend loans that were harmful to her clients' interests? Explain your answer.

3. Cristina likely understands the risks and benefits of home equity loans much better than most of her clients. Do you think that finance professionals such as Cristina have an ethical obligation to only recommend financial products that they believe will benefit their clients? Explain your answer.

4. Whatever are Cristina' s motives, do you think she is guilty of breaking predatory lending laws? Explain your answer.

5. Suppose you were in Cristina's situation, with a family to support and a high pressure loan advisor job. Considering all available options, and the likely consequences of those options, would you recommend home equity loans that were harmful to your clients, if it increased your current annual income? Explain your answer.

6. Suppose you were in Dr. Moore's situation, with all of his incentives and options. Would you consent to the students' demand and prohibit Money Center Bank representatives from recruiting at future Finance Club meetings? Explain your answer.

7. Conflicts of interest (between a professional and a client) and ethical challenges exist in all types of professions, including medical, legal, business, and academic. Can you identify any conflicts of interest that exist for other finance professions?

8. Studies on group dynamics and organizational culture have demonstrated that an individual is more likely to engage in unethical behavior when that individual is in a group rather than alone. Further, a member of a group is more likely to engage in unethical behavior when their group supports the unethical behavior (S. Robbins and T. Judge, Organizational Behavior, 14th ed. Upper Saddle River, NJ: Prentice Hall 2011). Is there any evidence in the case which suggests that the group and/or organization may have influenced Cristina's behavior to be less ethical than it might have been if she had not been a member of her work group or organization?

TEACHING NOTES

Suggested Answers to Discussion Questions

1. Why would a bank consider making a mortgage loan or home equity loan to a homeowner who could not make the scheduled loan payments-wouldn't this end up hurting the bank?

Making these types of bad loans often did not hurt a bank, at least in the short run. In the years leading up to the financial crisis of 2008, banks increasingly sold off the vast majority of their new mortgage loans or home equity loans soon after they were originated. These loans were typically bought by investment bankers or government sponsored enterprises that combined the loans into large portfolios. Securities were then created that gave the security owner a claim on the cash flows produced by the giant loan portfolio. (This process has been used for all kinds of loans and is known as "securitization.") Finally, the securities were sold to individual investors all over the world.

As long as the homeowners continued to make their loan payments, investors in these securities continued to receive their expected income. If homeowners failed to make their loan payments, investors lost money. However, the banks that originally made the loans to the homeowners did not lose money because these banks did not keep the loans. Banks essentially were collecting a fee for each mortgage or home equity loan they made, whether or not the loan was eventually repaid, and were transferring the credit risk of the loan to the investor.

Many observers believe that, because banks no longer directly suffered the consequences of making bad loans, they focused too much on generating high loan volume and not enough on analyzing the creditworthiness of borrowers. During the years 2004 to 2011 homeowners experienced increasing difficulty in paying back their loans and many lost their homes. The annual number of foreclosures in the U.S. climbed from 640,000 in 2004 to over 3.9 million in 2011.1 Eventually, the high default rate among homeowners caused substantial losses for investors and financial institutions who bought securities backed by mortgages and home equity loans. Investors were discouraged from further buying these securities and the process of securitizing home loans ground to a halt.

2. After considering Cristina's likely motives, incentives and behavior, do you believe she had conflicts of interest that were so serious she would knowingly recommend loans that were harmful to her clients' interests? Explain your answer.

Ample evidence suggests that Cristina's compensation structure created serious conflicts of interest. She stated that her income was commission-based and that her income went up with each additional home equity loan she made. Cristina never mentioned any negative consequences that she would face if one of her clients failed to repay a loan. Cristina never mentioned evaluating a potential client's credit worthiness, so we might assume that her top priority was not the client's ability to repay the loan. She states that her job title includes the word "'Advisor'" but that "'the name of the game is really sales.'"

Further evidence suggests that, over time, Cristina's ethical and professional standards deteriorated. On her most recent visit to BU, she showed up 20 minutes late for the Finance Club meeting, she was wearing jeans instead of a suit, she was chewing gum, and she (unapologetically) took a phone call during her presentation to students. None of these actions suggests that Cristina feels a deep respect or concern for her audience. We might wonder whether she has respect or concern for her clients.

Despite all of this disturbing evidence, we still cannot be certain that Cristina acted unethically in her dealings clients. As Dr. Moore indicated, we do not have detailed information regarding the home equity loans Cristina has made. We don't know what lending standards she applied. Those standards may have been appropriate. We don't know how many of Cristina's loans have gone bad, relative to some suitable benchmark.

What could motivate Cristina to act in her clients' best interests? Even if we are convinced that Cristina is completely self-interested, she may be concerned about maintaining a good reputation. A good reputation is an important asset in many businesses settings. If word gets around town that Cristina has consistently pushed harmful loans on her clients, she may find it harder to win new clients or repeat business. We also know that Cristina and her husband have many family members in town, so she may be concerned about what those family members might hear.

3. Cristina likely understands the risks and benefits of home equity loans much better than most of her clients. Do you think that finance professionals such as Cristina have an ethical obligation to only recommend financial products that they believe will benefit their clients? Explain your answer.

Most people would answer "yes" to this question simply because they think it is wrong for a person to benefit from misleading or harming others. Beyond that, consider what a "no" answer would mean for the financial services sector and the world. From a macro perspective, the financial services sector serves a critical role in supporting a modern economy. Financial services have developed to manage risks and to channel funds from those with excess capital to those with a need for capital. When financial services firms and markets work well, individuals benefit in a variety of ways. These benefits include increased employment opportunities, increased wealth, decreased risk, and smoother consumption patterns through time. However, when financial services firms and markets work poorly, these benefits are reduced or they disappear entirely. If finance professionals are allowed to mislead clients into financial ruin on a widespread basis, then the public will become cynical and distrustful of financial services. The public will shun financial services, the economy will suffer, and society as a whole will be worse off.

Recognizing the importance of ethical behavior in the financial services sector, regulators and professional organizations have promoted a code of ethics for finance professionals to follow. For example, in October 2005, the Federal Deposit Insurance Corporation (FDIC) sent a letter to affiliated financial institutions reminding them about the importance of developing a corporate code of ethics. The FDIC specifically addressed the involvement of an internal auditor in monitoring a corporate code of conduct and ethics policy: "Internal controls against self-serving practices and conflicts of interest should be monitored with an effective audit program to identify operational weaknesses and to ensure corrective action and compliance with laws, regulations and internal policies." (FDIC, 2005) With this letter, banking regulators also requested the creation and enforcement of a corporate code of ethics. However, there is not yet a standardized professional code of conduct for loan officers (or loan advisors) like Cristina.

For personal financial advisors who choose to earn the Certified Financial Planner (CFP) designation, there is a formal code of ethics which they agree to follow. The CFP written code of ethics includes the following passage "Integrity demands honesty and candor which must not be subordinated to personal gain an advantage. Certificants are placed in positions of trust by client, and the ultimate source of that trust is the certificant's personal integrity."2

For financial analysts who choose to earn the Chartered Financial Analyst (CFA) designation, there is a formal code of ethics which they agree to follow. Among other things, the CFA code of ethics requires that members must: "Place the integrity of the profession and the interests of clients above their own interests.

3

4. Whatever are Cristina's motives, do you think she is guilty of breaking predatory lending laws? Explain your answer.

This is a difficult question to answer for a few reasons: (1) as noted in the discussion of question 2, we do not have sufficient details regarding Cristina's loans to even determine whether they were in her clients' best interest; and (2) conduct that harms a client's interests, or that meets some definition of predatory lending, does not necessarily violate the law. The following examples of predatory lending were taken from the Office of the Comptroller of the Currency (OCC) website:

* Collateral or equity "stripping": The practice of making loans that rely on the liquidation value of the borrower's home or other collateral rather than on the borrower's ability to pay.

* Inadequate disclosure: The practice of failing to fully disclose the true costs and risks of loan transactions.

* Risky loan terms and structures: The practice of making loans with terms or structures that make it more difficult for borrowers to reduce their indebtedness.

* Padding or packing: The practice of charging customers unearned, concealed or unwarranted fees.

* Flipping: The practice of encouraging customers to frequently refinance mortgage loans solely for the purpose of earning fees.

* Single-premium credit insurance: The requirement to obtain life, disability, or unemployment insurance for which the consumer does not receive a net tangible financial benefit.

Various federal laws, such as the Truth in Lending Act and the Federal Trade Commission Act, have provisions designed to deter predatory lending practices. States have also passed their own laws to deter these types of lending practices. However, unethical behavior is not the same thing as illegal behavior. Ultimately the question of whether any of Cristina's loans violated an anti-predatory lending law would be up to a specific court with jurisdictional authority to decide. Cristina's conduct may have been unethical by most standards. Her conduct may have met some definitions of predatory lending. However, neither of these conditions is sufficient to conclude that her conduct would have been found to be illegal in a court of law.

5. Suppose you were in Cristina's situation, with a family to support and a high pressure loan advisor job. Considering all available options, and the likely consequences of those options, would you recommend home equity loans that were harmful to your clients, if it increased your current annual income? Explain your answer.

Most people would answer "no" to this question, because answering "yes" would be admitting to a willingness to deceive. However, it is probably an easier question to answer because it is just hypothetical. If you were really in Cristina's shoes, the pressure to make more money, to provide for your family, might become intense. Still, you would have options. Assuming you could keep your current job and behave ethically, you could accept lower current income while treating your clients well. This should allow you to develop a good reputation with clients over time, so that in the long term your income might rise (from word-of-mouth referrals and repeat business). If you could not keep you current job and behave ethically, you could simply find another job. Of course, making either of these choices might reduce your income, require more effort on your part, or both. The final option is to keep the same job and behave unethically. Many people would find this psychologically difficult, at least in the long run. Imagine going to work every day with the knowledge that you are misleading and harming people for your own personal gain. Many of us would not find happiness in this strategy because we want to be proud of our careers and ourselves.

6. Suppose you were in Dr. Moore's situation, with all of his incentives and options. Would you consent to the students' demand and prohibit Money Center Bank representatives from recruiting at future Finance Club meetings? Explain your answer.

Dr. Moore's incentives in this situation can be summarized as follows. His primary job is to train students to successfully enter the finance profession. He is also responsible for maintaining good relations with off-campus employers, so that students might have greater access to career opportunities. These responsibilities suggest Dr. Moore should be very student focused. Finance students and the business college dean (who oversees Dr. Moore) no doubt agree that helping finance students get jobs should be a high priority. However, it probably should not be his only priority. In a broader sense, Dr. Moore works for the taxpayers who support Borderlands University and they support that school to benefit a large community, not just a relatively small number of finance majors. Those taxpayers likely would not approve of finance professors who knowingly helped place finance students in jobs where they mislead the public and triggered widespread financial ruin.

Dr. Moore's options are as follows. First, he could try to ban MCB from recruiting at upcoming Finance Club meetings. This would obviously please the small group of Finance Club students who are requesting this action. Dr. Moore himself is suspicious of Cristina's business practices and is uncomfortable with her recent presentation. However, taking this action might be upsetting to the business college dean and could anger students wanting to interview with MCB. They probably would demand to know why Dr. Moore took this highly unusual step and his evidence that Cristina is guilty of predatory lending is somewhat flimsy. Even if he had hard evidence that Cristina knowingly abused her clients, would this justify banning the entire bank? Could we assume that all employees and departments within MCB were equally guilty? What about other banks? Should we assume they are all guilty too?

Dr. Moore's second option is to just refuse the students' demand to ban MCB recruiters. This probably would infuriate the Finance Club students making the request. They seem to have limited power, but they might complain to high level university officials and they might start spreading the word publicly that Dr. Moore supports predatory lenders. Where might that lead? Would they go to the student newspaper? More importantly, they have brought up an important issue. Dr. Moore is genuinely concerned that Cristina may be behaving unethically (perhaps illegally) and may be harming homeowners in the local community.

There is a third option that might work best. Dr. Moore could decline the students' request, but offer them an opportunity to make their case against MCB. Rather than just completely ignoring the students' demand to ban the bank's recruiters, he could invite the students to present their evidence of predatory lending at an upcoming Finance Club meeting. At that meeting (and in his classroom lectures), Dr. Moore could discuss his own concerns with MCB or any other financial institution. Moreover, he could discuss other conflicts of interest in finance. Free speech and academic freedom are honored at most universities in the U.S. Dr. Moore could allow recruiters on campus to speak freely to the Finance club and Dr. Moore could speak freely himself. He could encourage critical thinking on conflicts of interest and ethics. Students would then hear from recruiters, professors, and fellow students. With the benefit of a thorough discussion of the issues, students could then make their own informed decisions regarding where to work and how to treat their future clients.

7. Conflicts of interest (between a professional and a client) and ethical challenges exist in all types of professions, including medical, legal, business, and academic. Can you identify any conflicts of interest that exist for other finance professions?

Professionals usually have an informational advantage over a client. Sometimes, for personal gain, a professional misleads a client. Some surgeons have recommended surgery for a patient that doesn't need it because it increased the surgeon's income. Some lawyers have charged for more hours than they actually worked. Some business people have misrepresented the benefits or the risks associated with their products. Some academics have falsified data used in research. No occupation is immune to conflicts of interest.

Within the financial services sector, the particular conflicts will vary from industry to industry and from firm to firm. Several of the more well-known conflicts are as follows. Stockbrokers, insurance salespeople, and financial planners sometimes get paid a higher commission or they get paid higher fees for selling products that do not benefit their clients. Unfortunately, some of these professionals put their own interests above their clients' interests when recommending products.

Some security analysts have recommended that their brokerage firm clients buy a particular stock even though the analysts believed the stock was already priced far too highly. Security analysts sometimes did this because they were pressured by investment bankers within their own securities firm. Investment bankers make money by bringing in top managers of firms that will issue new stock or new bonds with the help of the investment banker. If the same securities firm offers both brokerage services and investment banking (underwriting) services, this can create a conflict of interest. If a security analyst tells his/her brokerage clients to sell XYZ company's stock, this will make it harder for an investment banker (in the same securities firm) to attract XYZ company's underwriting business. Consequently, some security analysts have publicly told their clients to buy a stock while privately telling colleagues the stock should be sold.

Finally, investors often rely on bond ratings firms to report on whether a particular company's bond is risky or safe. Companies that issue bonds with riskier ratings end up paying higher interest rates to borrow money. However, bond ratings firms get paid by the companies that are issuing the bonds. If a particular bond ratings firm gives XYZ company a risky bond rating, then XYZ might take its business to another bond ratings firm that gives safer bond ratings. This system gives the bond ratings firm an incentive to mislead investors by telling them that bonds are safe, even if they really are risky. Consequently, some bond rating agencies have falsely reported that a risky bond was a safe bond.

8. Studies on group dynamics and organizational culture have demonstrated that an individual is more likely to engage in unethical behavior when that individual is in a group rather than alone. Further, a member of a group is more likely to engage in unethical behavior when their group supports the unethical behavior (Robbins and Judge, 2011). Is there any evidence in the case which suggests that the group and/or organization may have influenced Cristina's behavior to be less ethical than it might have been if she had not been a member of her work group or organization?

Yes, it does appear that Cristina's behavior has been influenced by her work group and by the organization, for at least two reasons.

First, Cristina's behavior changed over time, both in her behaviors towards the students during her talks, and possibly towards her loan customers. In her early visits as a new employee of the bank, Cristina was a model of professionalism and courtesy. A few years later, Cristina's rude behavior in being late to arrive, and in taking a cell phone call in front of her audience, suggests lack of professionalism and respect for others. We wonder if these changes are due to the influence of Cristina's work group and the overall culture of the larger organization.

Second, Cristina may have shifted the responsibility for assessing the morality of her job behaviors from herself to her company. It appears that Cristina accepts without question what her job requires of her. As long as her superiors in the organization are rewarding her with raises, bonuses, and promotions, she assumes her behaviors are appropriate. She says that the bank would not permit anything that was unethical. So Cristina has avoided her responsibility to consider the morality of her behaviors, by rationalizing that her company would not permit and even reward behavior that was unethical. The ethical sensitivity of Cristina's superiors at the bank comes into question in this case.

Subject: Studies; Professional ethics; Financial services; Predatory lending

Location: United States--US

Classification: 9130: Experiment/theoretical treatment; 9190: United States; 2410: Social responsibility; 8100: Financial services industry

Publication title: Journal of Business Cases and Applications

Volume: 9

Pages: 1-13

Number of pages: 13

Publication year: 2013

Publication date: Sep 2013

Year: 2013

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: 1448244849

Document URL: http://search.proquest.com/docview/1448244849?accountid=38610

Copyright: Copyright Academic and Business Research Institute (AABRI) Sep 2013

Last updated: 2013-11-14

Database: ABI/INFORM Complete

Document 12 of 100

Barnett at DFW provides lessons on shale gas projects at US airports

Author: Weijermars, Ruud

ProQuest document link

Abstract:

US airfield owners are lured by attractive signing bonuses to lease their shale acreage. But shale operators cannot always fulfill their promises to drill, and the Dallas-Fort Worth Barnett shale field development project shows some winners and losers. The author has analyzed the technical challenges and financial fundamentals. The DFWA shale project provides an excellent case study with very instructive technical and financial lessons to be learned for shale field development projects at other major airports and elsewhere. Several US airports possess appealing shale acreage. There are additional safety regulations to observe (FAA, EPA, fire prevention standards), but the projects can usually move ahead once the commercial agreement is in place and signed. The bidders need to negotiate with only a single party, normally the airport authority, mainly to settle on an agreeable signing bonus and the royalty percentage on future hydrocarbon sales.

Full text: Not available.

Subject: Oil exploration; Oil shale; Airports; Leases; Oil & gas royalties; Case studies

Location: United States--US

Company / organization: Name: Dallas-Fort Worth International Airport; NAICS: 488119

Classification: 8350: Transportation & travel industry; 8510: Petroleum industry; 9190: United States

Publication title: Oil & Gas Journal

Volume: 111

Issue: 8

Pages: 46-48,50,52,54

Number of pages: 6

Publication year: 2013

Publication date: Aug 5, 2013

Year: 2013

Section: TECHNOLOGY

Publisher: PennWell Corporation

Place of publication: Tulsa

Country of publication: United States

Publication subject: Chemistry, Earth Sciences--Geology, Chemistry--Organic Chemistry, Petroleum And Gas

ISSN: 00301388

CODEN: OIGJAV

Source type: Magazines

Language of publication: English

Document type: Business Case, Feature

Document feature: Photographs Illustrations Graphs References

ProQuest document ID: 1426024554

Document URL: http://search.proquest.com/docview/1426024554?accountid=38610

Copyright: Copyright PennWell Corporation Aug 5, 2013

Last updated: 2013-09-06

Database: ABI/INFORM Complete

Document 13 of 100

N.J. health system saves $1.2 million

Author: Kotzen, Michael S

ProQuest document link

Abstract:

Using real-time location system (RTLS) technology to track equipment and patient flow, hospitals can put an end to equipment searching, low utilization and unnecessary clinical asset proliferation. The results are reduced costs and better patient care. Virtua's experience serves as an example. A health system in New Jersey comprised of four hospitals, 885 beds and several additional facilities including two urgent-care centers, Virtua successfully cut equipment wait times and saved an estimated $1.2 million after deploying GE's RTLS, AgileTrac. Prior to deploying AgileTrac, members of Virtua's biomed team would physically search for each piece of equipment that was due for preventive maintenance. Now, the biomed department can instantaneously pinpoint the locations of each piece of equipment traveling Virtua's facilities.

Full text:

In all hospitals and health systems, the priority is always to ensure that effective medical care reaches the right patient at the right time. However, what many hospital leaders underestimate is how critical access to equipment can be in achieving this goal.

According to data gathered by GE Healthcare, the volume of clinical devices at a patients bedside has grown from an average of eight devices in 1995 to 13 devices in 2010. Yet the average hospital utilization of mobile medical devices is about 42 percent, meaning that more than half of a hospital's fleet sits unused at any given time, the 2010 study found. Clinicians continue to hunt for devices, with nurses spending an average of 21 minutes per shift locating equipment. This chain of events leads some hospitals to rent or buy still more equipment.

Using real-time location system (RTLS) technology to track equipment and patient flow, hospitals can put an end to equipment searching, low utilization and unnecessary clinical asset proliferation. The results are reduced costs and better patient care.

Virtua's experience serves as an example.

A health system in New Jersey comprised of four hospitals, 885 beds and several additional facilities including two urgentcare centers, Virtua successfully cut equipment wait times and saved an estimated $1.2 million after deploying GE's RTLS, AgileTrac.

The process started in 2010, when Virtua was preparing to open a new replacement hospital in Voorhees, N.J. At the time, in order to locate one of Virtua's 10,000 mobile medical devices, staffers often had to hunt through hallways and make multiple phone calls. But that changed after Virtua embarked on an initiative with GE to better monitor and assign beds, as well as the IV pumps, telemetry units and other mobile medical equipment nurses and doctors rely on to care for patients.

Virtua tagged each piece of equipment with an RFID (radio frequency identification) tag that enabled managers to track assets throughout the hospital on the computer, making it easier and quicker to find needed equipment. The RFID tags also helped management understand how and when staffers were most prone to use certain mobile technologies, which guided process improvements to boost asset turnaround for peak and normal demand scenarios. Prior to implementing this tracking system, Virtua's average wait time between asking for a piece of "ASAP" equipment and receiving it was 202 minutes. The average wait time is now 12 minutes - an improvement of 94 percent. For "routine" equipment, which is not urgently needed, response time improved by 92 percent, or from an average of 184 minutes to 14 minutes. In the case of frequendy used, high-demand equipment, such as IV pumps, AgileTrac alerts the equipment depot when inventories are low so that supply can be replenished before requests pour in.

Tracking technology didn't only make administrative supervisors and nurses happy - the RTLS technology also aided biomedical departments in doing their jobs more effectively. Prior to deploying AgileTrac, members of Virtua's biomed team would physically search for each piece of equipment that was due for preventive maintenance. Now, the biomed department can instantaneously pinpoint the locations of each piece of equipment traveling Virtua's facilities. A recent example demonstrates how the technology made Virtua's biomed technicians more effective. A nurse director asked the equipment depot department for a specific, multi-channel infusion pump used during an instance of patient care months before. Without AgileTrac in place, there would have been no way for the biomedical department to track down the exact unit without an asset serial number, RTLS tag number and date. Instead, biomeds at Virtua were able to find the exact pump used on that exact patient.

When clinicians know the location of the medical equipment upon which they rely, it saves both time and money. According to Moody's Investor Services, the federal government will cut hospital reimbursements by more than $150 billion over the next decade as patient volumes grow; hospitals should seize this wide-open opportunity to strategically drive savings and patient care. HMT

Subject: Tracking control systems; Case studies; Hospital systems; Cost reduction

Location: United States--US

Company / organization: Name: Virtua Health; NAICS: 622110

Classification: 5240: Software & systems; 9190: United States; 9110: Company specific; 8320: Health care industry

Publication title: Health Management Technology

Volume: 34

Issue: 8

Pages: 18

Number of pages: 1

Publication year: 2013

Publication date: Aug 2013

Year: 2013

Section: RFID/RTLS/Asset Management

Publisher: NP Communications, LLC

Place of publication: Atlanta

Country of publication: United States

Publication subject: Health Facilities And Administration, Medical Sciences--Computer Applications

ISSN: 10744770

CODEN: COHED2

Source type: Trade Journals

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1429232681

Document URL: http://search.proquest.com/docview/1429232681?accountid=38610

Copyright: Copyright NP Communications, LLC Aug 2013

Last updated: 2014-03-29

Database: ABI/INFORM Complete

Document 14 of 100

TECHNOLOGY DRIVES CELL SUCCESS

Author: Lorincz, Jim

ProQuest document link

Abstract:

Manufacturing solutions that are based on today's advanced machining centers and cells are readily available for the most troublesome jobs. In the aerospace industry, these jobs may involve awkward and complex parts in medium to large sizes made from difficult-to-machine materials like titanium or Inconel as well as complete assemblies. For Hansen Engineering Co, a supplier to Tier One aerospace customers, the challenge was to provide the same quality, precision, and on-time delivery for these challenging parts, which today account for 20% of the shop's output, as it did for is competitively priced airframe and let engine parts. The solution, according to Jody Lay, Hansen CEO, was adopting advanced machining technology that not only increased production efficiency for all the shop's jobs and a variety of materials, but also allowed for untended operation. The technology selected was a fully automated Palletech Manufacturing System from Mazak Corp consisting of two CNC machining centers, a rail-guided pallet transfer vehicle, part load/unload station and multiple pallet-stocking stations.

Full text:

Manufacturing solutions that are based on today's advanced machining centers and cells are readily available for the most troublesome jobs. In the aerospace industry, these jobs may involve awkward and complex parts in medium to large sizes made from difficult-to-machine materials like titanium or Inconel as well as complete assemblies.

For Hansen Engineering Co. (Harbor City, CA), a supplier to Tier One aerospace customers, the challenge was to provide the same quality, precision, and on-time delivery for these challenging parts, which today account for 20% of the shop's output, as it did for its competitively priced airframe and jet engine parts.

The solution, according to Jody Lay, Hansen CEO, was adopting advanced machining technology that not only increased production efficiency for all the shop's jobs and a variety of materials, but also allowed for untended operation. The technology selected was a fully automated Palletech Manufacturing System from Mazak Corp. (Florence, KY) consisting of two CNC machining centers, a rail-guided pallet transfer vehicle, part load/unload station and multiple pallet-stocking stations.

Initially, Hansen Engineering started with a five-axis Mazak Integrex e-1060V/8 II multitasking machining center, a load/unload station, the pallet transfer vehicle and 12 pallet-stocker stations. The modular, pre-engineered Palletech System allowed Hansen to add a second machine, a Mazak Horizontal Center Nexus (HCN) 8800-11 machining center with high-torque spindle. There is space for the future addition of an Integrex e-1060V machine and the 16-pallet stocker capacity has room to expand to 36 if needed when the third machine is installed.

Currently, the Palletech cell runs, for the most part, nonstop during Hansen's two 10 to 12-hour daily shifts, six days a week. "The key to the system's untended operations is the reliability, precision and performance of the Mazak machine tools," said Lay. "The repeatability of the machines is phenomenal. Once we know our programming and tooling are good, we don't worry about the Mazaks. They give us good parts every time," said Lay. "Plus they feature large tool storage capacities-120 tools on both the e-1060V/8 II and on our HCN 8800-11, for extended run times."

Hansen has so much experience in machining titanium that it touts itself as a "titanium expert" that has perfected its machining of the material in particular during lights-out operations. According to Lay, processing titanium efficiently requires a combination of machining techniques and advanced machine tools like the Mazaks. The two techniques used most often by Hansen are high-speed machining and what Lay referred to as "sneaking up on a part." The part is rough machined, checked and straightened, then machined some more, checked and again straightened. Roughing is done on the HCN 8800-11 and finishing is done in single setups on the Integrex e-1060V/8 II using five-axis cutting and the machine's 5000-rpm, 50-hp (37-kW) high-torque milling spindle. Surface finishes achieved range from Ra 125 to 63 and tolerances can be as tight as ±0.0004" (0.010 mm).

Cells Are Only as Good as the Machines in Them

"What's happening today is that the aerospace OEMs want to build airplanes like cars, and to do that production has to be consistent and predictable," said Scott Walker, president, Mitsui Seiki (USA) Inc. (Franklin Lakes, NJ). "The days of taking an aerospace engine part from the machine to buffing and measuring to final assembly are coming to an end. In the future, you're going to have 15 machines lined up and a robot will feed parts in and out. The process will be basically handsoff for machining, inspection, buffing, and the part will go into the box ready for assembly," said Walker.

"The same is true for hardened nickel-based IBRs [integrally bladed rotors]. Typically, IBRs are EDM'd, ground, or CBN ground, going back and forth. They want to automate all of that and know that they will get a certain number of IBRs a day. Based on that they will need to build X number of engines a day and put them together like car engines," said Walker. For example, Mitsui Seiki has just converted a production line to a fully automated FMS cell which provides complete machining and inspection for 63 new part numbers, magnesium or aluminum castings for gearboxes for the new 737x.

"Mitsui Seiki's technology developments are aimed at providing solutions for engine, structural, and gearbox machining," said Walker. "Our new machining center, the HU63EX series, is aimed at second and Third-Tier job shops. There is a lot of development aimed at blisk machining, especially for the new jet engine programs that are being developed to be 20% more fuel efficient. These new fuel efficiency engines will be used to re-engine the global fleet of 737s and Airbus 320s."

To meet this new generation of engine technology, new machine tool technologies are being developed to manufacture blisks with a much better surface finish and improved production rates. "Surface finish and high production rates have not historically gone together," said Walker. "We're focusing on technologies like direct drive-motor based machines that make the machines very agile so they can drive a very thin tool around the blade profiles of IBRs and blisks and keep it bent the same as it goes through big changes in acceleration and deceleration. The goal is to eliminate markings and poor surface finish so that parts come off the machine ready for assembly without benching," said Walker.

At EMO Hannover, Mitsui Seiki will present its most recent developments for the European market, including the Vertex 550-5XB Blade Center, for the production of turbine blades; the large capacity HU100-5XLand HU100-5XLL five-axis trunnion horizontal machining centers for hard metal aerospace, power generation, refrigeration, mold and die, and off-road equipment applications; and the VGE60A universal vertical thread grinder.

Machine Evolution Continues for Heavy-Duty Cutting

Machine tool technology continues to evolve in ways that serve a broad range of industries in untended operations. For applications that require large, complex parts like those found in the energy, automotive and general commercial markets, the new Feeler SDM- G/GA series double-column machining centers from Methods Machine Tools Inc. (Sudbury, MA) offer the ability to machine five sides of the workpiece in one setup, a capability which is especially critical when working with very large parts.

The SDM-GGA machine line takes its machining capability one step further by offering automatic head-changing capabilities, which allow longer untended operation because heads do not need to be changed manually. A vertical/horizontal automatic toolchanger provides fast tool changes, and the SDM-GGA Series' automatic attachment changer makes head changing fast and easy without requiring operator assistance.

"The Feeler SDM series offers a rigid structure to minimize vibration during cutting and ensure stability and accuracy in greater cutting depth and efficiency," said Dale Hedberg, Feeler product manager. "Three oversized boxways are designed for heavy loading without deformation and, combined with a great span between slide ways, provide stable operation. An all box-way design provides dampening characteristics that are well-suited for extremely demanding applications that include heavy cutting," said Hedberg.

The 6000-rpm spindle of the SDM series includes a 22/26-kW motor and a two-speed gearbox. The low range speed produces the 699 N*m torque required for making heavy cuts in parts such as castings, forgings and plate work. For further rigidity and stability, the ram design features a patent-pending four-sided enclosure to offer greater force distribution on the Z-axis boxway.

VMCs Designed for Heavy-Duty and Die-Mold Machining

Hwacheon Machinery America Inc. (Vernon Hills, IL) offers machines well-suited for demanding oil and gas, aerospace and die mold machining applications. Hwacheon's machine technology features well-proven designs based on the parent company's experience as a supplier of cylinder heads, blocks, crankshafts, gears and spindles for the Korean automotive industry. Machining centers are designed for heavy-duty machining and pocket milling with Hwacheon's Optima cutting feed optimization, and HTLD tool load detection software.

Hwacheon's Vesta 1050B vertical machining center features four wide hand-scraped box guideways in the /axis and wide box ways in the Xand Zaxes for machine rigidity. A two-speed gear-driven spindle with integrated drive provides high-speed cutting and delivers high torque. All Hwacheon spindles are oilcooled, including the gearbox to minimize thermal displacement and promote long spindle life. The geared headstock machining center is capable of heavy roughing cuts as well as fine finish machining. The Vesta universal machine is available with 40 or 50-taper, 6000 or 8000-rpm spindles that produce micron accuracy in heavy-duty cutting.

Hwacheon's tool load detection (HTLD) software provides real time measurement of tool load constantly monitoring tool damage and deterioration for prevention of complete tool failure causing workpiece damage for consistent and safe machining. The HTLD system measures tool load frequently, as often as every eight msecs.

Optima cutting feed optimization software uses an adaptive control method to regulate the feed rate in real time to sustain a consistent cutting load while machining. As a result, cutting tools are less prone to damage and machining time is reduced. The system controls the feed velocity to maintain consistent cutting load. Features include a graphic display of tool load and feed rate, convenient operation using G-code programming, and a number of data sets for specific tool and process control.

For die-mold applications Hwacheon's Sirius three-axis vertical machining centers feature 20,000-rpm high-speed spindles for the UM and UL+ models and 12,000-rpm spindle for the UX model. The machines are equipped with integral motor spindles with jacket cooling and oil-jet cooled bearings and rigid roller linear guide ways for stable performance over long cycles. The cooled jets of oil are injected directly onto the spindle bearing for effective cooling and a suction pump is employed to remove the heat oil quickly. The motor and spindle assembly are jacket-cooled to limit displacement caused by heat.

Advanced CNC Milling CNC Control

When Tom Barr, owner of TK Mold and Engineering (Romeo, Ml) needed to increase capacity, he purchased a Hurco VMX24HSÍ machining center for its higher spindle speeds and stronger controller. Barr, who had experience with a VMX24 mill, says that higher spindle speeds and advanced controller on the new machine have produced the better finishes and tighter tolerances he sought.

When Hurco Companies Inc. (Indianapolis, IN) launched its VMX 24HSÍ and VMX42 HSi machining centers, equipped with UltiMotion technology, it had every confidence that they would improve productivity up to 40% in cutting parts. The reason is found in Hurco's advanced proprietary CNC control technology that features a new way of controlling motion. Position loop that normally would be on third-party cards have been moved into the core CNC, producing dramatic improvements in performance. Simply put, when in the middle of a tapping cycle, for example, UltiMotion lets the user dynamically adjust the cycle while it's in operation.

The Hurco control gives the user both conversational programming and standard NC that supports ISO/EIA standards, which means the user can take any Fanuc program or G code program and run it on fully Fanuc compatible Hurco machines. This versatility is especially important to shops that run a high mix of parts, because it allows the user to approach each job in the most efficient way that increases productivity, whether they are using NC, conversational, or both control strategies.

3D Printing and Milling Produce Metal Parts

The latest addition to manufacturing metal parts combines 3D printing with milling. The SonicLayer 4000 from Fabrisonic LLC (Columbus, OH) combines a three-axis milling head with ultrasonic additive manufacturing (UAM) capability in a mid-size fully automated 3D printing machine that can create deep slots, hollow, latticed or honeycombed internal structures in metal components and other complex geometries that can't be made using conventional subtractive machining processes.

The SonicLayer 4000 is a mid-sized machine with 2500 lb (1134-kg) load capacity, positioned in between the SonicLayer R200 for universities and R&D and the SonicLayer 7200 which has a load capacity of 5000 lb (2268 · kg). The SonicLayer 4000 features a three-axis CNC mill with dimensions of 40 χ 40 χ 24" (1016 χ 1016 χ 610 mm) and a 25-hp (18 kW) 8000-rpm spindle for machining near-net-shape parts that are produced by the UAM 3D printing process to produce final parts.

3D printing with the SonicLayer machines (see video at http://www.fabrisonic.com/video.html) is produced using a patented 9-kW UAM welding head that additively manufactures solid metal parts by welding 1" (25.4-mm) strips of metal ranging from 0.002 to 0.020" (0.05-0.51-mm) thick together at 200 ipm (5 m/min). Alloys including highstrength aluminum, stainless steel, and titanium can be combined to form sandwiches of metals for rapid prototyping, metal matrix composite workpieces and other applications. Fabrisonic's custom G-code CAM software automates the CAD-to-part process. When CAD geometry is imported into the SonicCAM, the software generates the toolpath for both welding and machining.

Universal Post Processor for CAM Output in Mori-APT

DMG / Mori Seiki (Hoffman Estates, IL) is releasing a Mori-APT tool path-based postprocess to allow machine tools to be put into service as soon as the machine lands on the shop floor. Traditionally, customers are required to purchase machine tools and CAM/postprocessing software from different vendors, possibly leading to discrepancies in quality, thoroughness and timely delivery. Part of a powerful suite of applications called Manufacturing Suite, this universal postprocessor will be available for all Mori Seiki machines and will work with any CAM software that outputs toolpaths in Mori-APT standardized format.

Customers can continue to use multiple CAM software solutions in conjunction with Manufacturing Suite Post Processor to generate NC code, avoiding the need to obtain postprocessors for individual CAM software and with the added benefit of a single support contact.

The Mori-APT toolpath format is an extension of APT CLDATA standard (based on ANSI NCITS 37-1999 and ISO 4343:2000). The Manufacturing Suite Post Processor can import the standardized toolpath from any CAM software and generate NC code using the proven DMG / Mori Seiki post templates. For the process to work, customers need to acquire the Mori-APT CLDATA interface-enabled version of the CAM software from their respective CAM vendors and acquire the Manufacturing Suite Post Processor software from DMG / Mori Seiki. Interfaces to output Mori-APT CLDATA are available or in development. ME

Subject: Product quality; Productivity; Case studies; Aerospace industry; Machine tools; Airplane engines

Location: United States--US

Company / organization: Name: Mazak Corp; NAICS: 333517; Name: Hansen Engineering Co; NAICS: 333517

Classification: 9190: United States; 8670: Machinery industry; 8680: Transportation equipment industry; 9110: Company specific; 5320: Quality control

Publication title: Manufacturing Engineering

Volume: 151

Issue: 2

Pages: 51-52,54,56-58,60-62

Number of pages: 9

Publication year: 2013

Publication date: Aug 2013

Year: 2013

Section: Machining Centers & Cells

Publisher: Society of Manufacturing Engineers (publishers)

Place of publication: Dearborn

Country of publication: United States

Publication subject: Technology: Comprehensive Works, Machinery, Engineering

ISSN: 03610853

CODEN: MAENDQ

Source type: Trade Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Photographs

ProQuest document ID: 1429384975

Document URL: http://search.proquest.com/docview/1429384975?accountid=38610

Copyright: Copyright Society of Manufacturing Engineers (publishers) Aug 2013

Last updated: 2013-09-06

Database: ABI/INFORM Complete

Document 15 of 100

CMM Reduces Manual Inspection, Increases Efficiency

Author: Probst, Emily K

ProQuest document link

Abstract:

One thing we take great pride in here is quality," says Steve Sutton, portable tooling department supervisor. To maintain this high quality while inspecting an increasing number of complex parts, the company decided to incorporate a CMM into its production process. After evaluating all of the manufactured components and looking at their features and angles, Sunnen decided that the larger-sized Contura G2 7/10/6 from Carl Zeiss would provide the flexibility and automation the department required.

Full text:

Performing more than 18,000 manual inspections each year ensured high quality at Sunnen Products Co. However, the quality of these parts came at the expense of productivity. To improve efficiency, Sunnen invested in a coordinate measuring machine (CMM) from Carl Zeiss Industrial Metrology (Minneapolis, Minnesota) that helped reduce the number of manual inspections to 8,000 annually.

Sunnen, located in Saint Louis, Missouri, manufactures and distributes honing machines, tools and abrasives for bore sizing and engine rebuilding. Its portable tooling department focuses on 2- to 48-inch-diameter bores, including hone heads, stone holders and onsite equipment. To inspect these bores, the company had been using such common manual tools as height gages, micrometers, calipers and optical comparators.

"One thing we take great pride in here is quality," says Steve Sutton, portable tooling department supervisor. To maintain this high quality while inspecting an increasing number of complex parts, the company decided to incorporate a CMM into its production process. After evaluating all of the manufactured components and looking at their features and angles, Sunnen decided that the larger-sized Contura G2 7/10/6 from Carl Zeiss would provide the flexibility and automation the department required. The machine's RDS articulating probe would be able to reach into many angles of complex parts, and the ViScan optical probe would be well-suited for 2D geometries. In addition, the company could download existing CAD models to speed measurement program creation.

The Contura also fulfilled another department requirement: ease of use. This was necessary because only two machinists with little metrology experience would be responsible for implementing the new system. Furthermore, they would provide support for 25 other machinists who were also untrained on the CMM. "After taking the basic Calypso training course at Carl Zeiss, and with a little practice, I was creating several complex part programs a day.

Carl Zeiss Industrial Metrology, call 800-3279735 or visit metrology.zeiss.com.

Sunnen Products Co., call 800-325-3670 or visit sunnen.com.

This included 10 to 20 programs a day of parts without CAD models," says machinist Ed Fowler.

After about 10 minutes of training on the Calypso programs, the machinists were able to quickly inspect parts with the AutoRun features, the company says. The inspection process begins in a temperaturecontrolled lab where the machinist uses a touchscreen drill-down menu to select the part number and operation. Visual work instructions that appear on the screen indicate which fixture to use and its orientation on the CMM. The machinist then places the part on the fixture and starts the inspection process. Parts that once took an hour to inspect now take 10 minutes, Mr. Fowler says. This averages 50 more minutes of machining time for 25 machinists. Each day, Sunnen measures about 50 parts on the Contura G2.

After the raw stock is cut to length and sent to a CNC lathe, mill or wire EDM, atypical part for Sunnen's portable tooling department undergoes three inspections: initial, at least one in-process, and final. If accurate, the part continues on to a finishing operation prior to assembly and shipment. Target tolerances are typically ±0.003 inch and frequently ±0.005 inch. Now that documentation is automated and electronic, the number of inspections has been reduced.

The Contura CMM has also helped Sunnen make the most of its other improvement efforts. For instance, the company transitioned to using multitasking machines, which produce a finished product in one operation, in order to further increase its production efficiency. However, manual inspection times were much longer when all the features were machined into a part in one operation, Mr. Sutton says. Having the CMM to manage these inspections reduces setup time even more and frees time for machinists to take on other tasks. "What once took an hour to check now takes a few minutes," Mr. Sutton says. Part setup time has reduced from 25 hours with 10 operations to about 2 hours with one operation.

By improving its metrology process, Sunnen also improved its manufacturing process, Mr. Sutton says. For example, the Calypso software helps identify process discrepancies by making it easy to find more part detail and determine root causes for any variance between departments. "With Calypso reports, you can select exactly what you want to know about a particular feature, which makes it very concise and easy to read," Mr. Fowler says.

According to Sunnen, the Contura G2 has opened the door to identifying opportunities to develop processes and tools that make better bores with higher quality and tighter tolerances. "The amount of time we're saving in the long run far outweighs the upfront development of our new quality process," Mr. Sutton concludes. "Other departments are seeing the improvements, and the financial growth opportunities from the CM Ms are now visible. The best part is that it was all implemented by two of our machinists." ·

Subject: Machine tool industry; Component parts; Inspections; Efficiency; Lean manufacturing; Case studies

Location: United States--US

Company / organization: Name: Sunnen Products Co; NAICS: 333517, 333999; Name: Carl Zeiss Inc; NAICS: 334516

Classification: 9110: Company specific; 9190: United States; 8670: Machinery industry

Publication title: Modern Machine Shop

Volume: 86

Issue: 3

Pages: 134,136,139-140,142

Number of pages: 5

Publication year: 2013

Publication date: Aug 2013

Year: 2013

Section: BETTER PRODUCTION: Shops Using Technology

Publisher: Gardner Business Media Inc.

Place of publication: Cincinnati

Country of publication: United States

Publication subject: Machinery

ISSN: 00268003

CODEN: MMASAY

Source type: Trade Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Photographs

ProQuest document ID: 1428340781

Document URL: http://search.proquest.com/docview/1428340781?accountid=38610

Copyright: Copyright Gardner Publications, Inc. Aug 2013

Last updated: 2013-10-25

Database: ABI/INFORM Complete

Document 16 of 100

Action Plan for Sales Success

Author: Ellis, Ryann K

ProQuest document link

Abstract:

Turkiye Is Bankasi is one of Turkey's first true national banks. It operates more than 1,000 branches domestically, giving it the largest branch network among private banks in the country. Its international network comprises branches and financial subsidiaries in Europe and the Middle East, as well as representative offices in Shanghai and Cairo. Under pressure to meet sales targets and improve relationships with clients, the ASTD Excellence in Practice Award winner launched a new customer portfolio management system. The financial institutions talent management division needed to add a program to its Sales Academy that would roll out the new system across the organization. In 2010, the talent management division decided to add the Retail Banking Sales Development Program to its Sales Academy courses. Trainers made certain to consider the behaviors of the trainees when participating in individual scenarios to help them work on the persuasion skills they found most challenging. At the end of the simulation, the group discussed better methods of communication.

Full text:

Türkiye 1§ Bankasi is one of Turkey's first true national banks. It operates more than 1,000 branches domestically, giving it the largest branch network among private banks in the country. Its international network comprises branches and financial subsidiaries in Europe and the Middle East, as well as representative offices in Shanghai and Cairo

Under pressure to meet sales targets and improve relationships with clients, the ASTD Excellence in Practice Award winner launched a new customer portfolio management system. The financial institution's talent management division needed to add a program to its Sales Academy that would roll out the new system across the organization.

The opportunity

A new portfolio management system was designed to help "assist branch representatives in offering customers the right product at the right time," explains Zerrin Kocuk, assistant manager of the talent management division at î§ Bankasi. To get the program up and running, the organization determined that training to promote use of the new system was required, as well as technical knowledge of general portfolio management.

In addition, the retail banking division conducts many telephone campaigns throughout the year. Sales analysis found that the branch teams were struggling with persuading tough customers. The company needed to develop strategies that would help its sales teams improve telephone skills and exhibit more assertive behaviors.

The solution

In 2010, the talent management division decided to add the Retail Banking Sales Development Program to its Sales Academy courses. The solution was twofold. One portion focused on teaching branch sales teams how to analyze individual customer portfolios and create customer-specific product offers. The second portion concentrated on providing branch sales teams with tools and techniques for behaving more confidently during telephone sales efforts.

During the first phase of the program, invitations that outlined the curriculum were sent to participants, and branch managers received an email that informed them of the program's objective and the support that was expected from them.

Prerequisites for classroom training comprised the second phase. First, participants were expected to complete an online Excel spreadsheet to ensure that everyone was prepared to use the new portfolio management system. Then, participants were asked to complete an analysis of their own portfolios.

Next, the program moved into the classroom training phase, which focused on three specific areas: effective portfolio management, telephone skills, and persuasion skills in sales.

Effective portfolio management After an in-depth examination of their portfolios, participants worked with the trainer to identify improvements for each customer and create action plans for themselves.

According to Kocuk, "As the class ended, each participant had developed a well-managed portfolio and an action plan to reach inactive customers. Using actual customer portfolios assisted with the transfer of training into the salespersons' daily work life as soon as possible."

To address a lack of knowledge regarding product features, competitions and games became a key piece of the curriculum. Also, trainers made sure to refer to the product catalog during every exercise in the classroom training. To ensure that employees would be able to properly communicate product features to customers, product-focused case studies were added. In addition, exercises taught participants how to present portfolio products more effectively.

Telephone skills. This portion of the course also used real-life examples. Trainees listened to positive and negative phone conversations to learn successful behaviors. They also watched videos of interviews with customers to gain a thorough understanding of what customers expected from them. "Videos helped to highlight what customers liked-and what upset them," says Kocuk.

Persuasion skills. Design for this part of the program included various scenarios in a role-play simulation. A professional actor attended each class and impersonated specific customer profiles.

Trainers made certain to consider the behaviors of the trainees when participating in individual scenario to help them work on the persuasion skills they found most challenging. At the end of the simulation, the group discussed better methods of communication.

Follow-up between trainees and managers was the final phase of the program. All field managers visited program participants and encouraged them to put into practice what they had learned.

Next, sales employees gave a presentation to their regional assistant managers three months after training. During the presentations, employees outlined their accomplishments regarding their action plans and discussed continuing challenges. Afterward, a new action plan was established for the next three months.

The deputy CEO and management from both the region and the talent management division have occasionally attended the follow-up presentations. "Having senior-level managers attend these presentations indicated the importance given to the program, and it highly motivated our participants to continue with the program," says Kocuk.

The process

Various assessment tools were rolled out to key stakeholders during the training needs-analysis stage. To gather needs and expectations of the salesforce and uncover specific skills gaps, an online survey was sent to a target group of about 1,000 employees from various organizational levels and roles. Meanwhile, mystery shopping research obtained data from the customer's point of view. In addition, interviews and focus groups were conducted with various managers to pinpoint common problems and needs in the field.

Analysis revealed two main drivers for the design and deployment of the program. The first driver related solely to the technical aspects of the new portfolio management program and a lack of knowledge about specific product features, whereas the second driver focused on changing employee attitudes and behaviors with customers.

Once these key program elements were determined, the talent management division worked closely with the retail banking sales division to design the initial program. Randomly chosen branch managers and customer relationship managers were included in the design phase. It was determined that external solution providers were needed to help to sculpt the content design, thus a rigorous supplier-selection process was conducted.

A pilot of the program was rolled out to a target group of sales reps and managers. Feedback from the pilot guided modifications to the final version of the Retail Banking Sales Development Program. With changes in place, the program was implemented for all the retail banking sales teams throughout the entire organization.

Sales managers of the 24 local sales regions also participated in the program's classroom-based courses and attended coaching sessions to help them with the courses' follow-up procedures. Finally, face-to-face follow-up meetings occurred in the sales regions throughout the country.

Lessons learned and results

Sales figures indicate that the program has met its primary objectives, and sales reps have attained positive business outcomes. Evaluations of the retail banking sales division reveal increases in overall sales, basic product usage rate (average number of retail banking products used by customers), assets under management, funds under management, and profits earned by customers. Evaluations also denote a decrease in customer complaints.

Since the program's launch in 2010, profit earned from mass affluent and affluent customer segments increased by 28 percent. Likewise, assets under management increased 4.5 times and funds under management increased more than 2.5 times.

More importantly, the division has learned the importance of having action plans in place to monitor and evaluate future sales, and representatives and managers now have tools to help them transfer what they learned during the program into their daily work, explains Kocuk. The follow-up processes between trainees and managers have proved to be particularly effective for the business. "The organization definitely anticipates a long-term impact from the program," says Kocuk.

Subject: Commercial banks; Case studies; Portfolio management; Talent management; Sales

Location: Turkey

Company / organization: Name: Turkiye Is Bankasi AS; NAICS: 522110

Classification: 7300: Sales & selling; 3400: Investment analysis & personal finance; 6200: Training & development; 9110: Company specific; 8110: Commercial banking services; 9178: Middle East

Publication title: T + D

Volume: 67

Issue: 8

Pages: 20-22

Number of pages: 3

Publication year: 2013

Publication date: Aug 2013

Year: 2013

Section: case in point: SALES ENABLEMENT

Publisher: American Society for Training and Development

Place of publication: Alexandria

Country of publication: United States

Publication subject: Business And Economics--Management, Education, Business And Economics--Labor And Industrial Relations

ISSN: 10559760

Source type: Trade Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Illustrations

ProQuest document ID: 1428148574

Document URL: http://search.proquest.com/docview/1428148574?accountid=38610

Copyright: Copyright American Society for Training and Development Aug 2013

Last updated: 2013-09-06

Database: ABI/INFORM Complete

Document 17 of 100

Beyond Internal Training

Author: Magnuson, Beckie

ProQuest document link

Abstract:

Today, organizations across the globe are looking for new ways to engage customers and add value to their product or service using existing resources. However, not all of them think to look toward their trainers for guidance. But that thinking is exactly what Ashford University's channel markets team did when it wanted to add services for its corporate partners. In general, the team works with organizations and associations to develop and retain their employees and members by offering degree grants and creating competency plans that match Ashford's 65 online degree programs. The professional development team was soon approached by Ashford's Military Relations Department, which had recently met with community partner Freedom Station (now part of the Warrior Foundation), a local community home dedicated to helping wounded warriors transition back into civilian life. The all-day event also included a career fair where military members could learn more about current employment opportunities and meet with recruiters from local companies, including Ashford University.

Full text:

Trainers can broaden team scope and value by outreaching with community partners.

Today, organizations across the globe are looking for new ways to engage customers and add value to their product or service using existing resources. However, not all of them think to look toward their trainers for guidance.

But that thinking is exactly what Ashford University's channel markets team did when it wanted to add services for its corporate partners. In general, the team works with organizations and associations to develop and retain their employees and members by offering degree grants and creating competency plans that match Ashford's 65 online degree programs

"We were looking for additional value to support our alliance partners," says Margie Tlapa, Ashford's associate vice president of corporate relations. "Our degrees are their long-term solution to succession planning and retention, but we wanted to complement the programs with professional development presentations they could use today."

Look within to help externally

To accomplish this, the channel markets team engaged with its internal learning and development department, which had already created the Future Leaders Program to develop the institution's best and brightest employees. Initial conversations led them to Tamara Carrillo and Melissa Goodwin, whose backgrounds are in leadership development and executive coaching, and who understand the goals of the CEOs and chief learning officers with whom the channel markets team works.

"The transition to the partner side was such a wonderful fit for us," says Carrillo, now director of partnership professional development. "The knowledge we gained from our years of experience as external consultants, combined with our internal experiences, positioned us perfectly to serve our corporate partners. Our experiences have allowed us to have a seat at the table with learning leaders from many different organizations who have valued our input and insight to meet their organization's learning and development needs."

They got to work, surveying more than 2,000 HR and learning and development leaders to ask what topics interested them. "We wanted to know what challenges they were facing;

what their shortfalls were in learning and organizational development," says Goodwin. "From those responses, we developed a robust catalog of workshops to cover the top learning and development needs in the industry."

Community partnership

As the channel markets team began to present successful workshops to corporations, other departments took notice. The professional development team was soon approached by Ash-ford's Military Relations Department, which had recently met with community partner Freedom Station (now part of the Warrior Foundation), a local community home dedicated to helping wounded warriors transition back into civilian life.

The professional development team knew that this was no ordinary audience, so it met and collaborated with several departments-including career and alumni services, student access and wellness, human resources, and community relations-to tailor the message accordingly.

They also met with Ashford's military admissions team, a group dedicated to understanding the unique needs of military students, many of whom are former service members themselves. From there, the team adapted the presentation language, stories, and message to best suit the audience.

Attendees of the event, aptly named Operation Career Transition, were provided with tools, resources, and workshops to help service members market themselves to employers. Ashford kicked off the occasion with a presentation created by the professional development team titled "Marketing You!"

Dozens of military members then spent the rest of the day at Ashford University exploring career services to help them transition to civilian life. Participants also had the option of attending various workshops on résumé writing, interviewing, and social networking.

The all-day event also included a career fair where military members could learn more about current employment opportunities and meet with recruiters from local companies, including Ashford University.

"This was a fantastic opportunity for our soldiers," says Sandy Lehmkuhler, president of Warrior Foundation-Freedom Station. "Ashford University provided a stellar team of people and organizations to help guide the service members through their first experience interviewing outside of the military. It has already made such a difference in the morale of our wounded warriors."

"Having a room full of people standing on the brink of a new phase in their life is an honor for us," says Carrillo. "We received positive feedback, and the best part was watching our guests make new connections, learn new skills, and some even landed new careers."

Have you thought about what may interest your organization's community partners or clients? Many times, simple relationship building can maximize your company's efforts, which can be a valuable and visible way for trainers to step outside the box and broaden team development.

Subject: Case studies; Nonprofit organizations; Professional development; Community relations

Location: United States--US

Company / organization: Name: Ashford University; NAICS: 611310; Name: Warrior Foundation-Freedom Station; NAICS: 813910

Classification: 9110: Company specific; 9190: United States; 9540: Non-profit institutions; 6200: Training & development

Publication title: T + D

Volume: 67

Issue: 8

Pages: 68-69

Number of pages: 2

Publication year: 2013

Publication date: Aug 2013

Year: 2013

Section: solutions

Publisher: American Society for Training and Development

Place of publication: Alexandria

Country of publication: United States

Publication subject: Business And Economics--Management, Education, Business And Economics--Labor And Industrial Relations

ISSN: 10559760

Source type: Trade Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Photographs

ProQuest document ID: 1428148819

Document URL: http://search.proquest.com/docview/1428148819?accountid=38610

Copyright: Copyright American Society for Training and Development Aug 2013

Last updated: 2013-09-06

Database: ABI/INFORM Complete

Document 18 of 100

The International Expansion Strategies for Giordano: A Case Study from Chinese Clothing Industry

Author: Jianguo, Wang

ProQuest document link

Abstract:

Giordano opened its first retail store in Hong Kong in 1981 and started to expand to Taiwan with the entry mode of joint venture. In 1985, it expanded to Singapore. China, Hong Kong, Singapore, and Taiwan are the four key markets of its international expansion. To ensure its successfully competing in international markets, Giordano have been always providing high qualified products and excellent service to its customers. The price to value concept had been testified to be successful. Advertising and promotion are another effective way to keep a strong customer relationship. For the global entry sequence, Giordano made its initial overseas move in Asia. Because of Asian crisis from 1997 to 1999, it started to widen its markets and expanded in Germany, Japan, and Kuwait etc. As a whole, the Uppsala model does indeed explain the internationalization of Giordano. Franchising is the strategy reserved by Giordano when failed in entering Germany and Japan, which will still be a better strategy than joint venture. For the positioning aspect, Giordano started to reposition its core brand by to be more stylish. As a whole, Giordano has placed 'internationalization' on the brand and is in the process of turning into a global brand. [PUBLICATION ABSTRACT]

Full text:

1 Introduction

According to Doole [1], to be a successful company competing in global markets should hold several vital components in their strategies, which include a learning organization being managed and having an effective relationship strategy. The first trait identified by Doole was that key characteristics of such firms include learning with pleasure, severing all its international markets heart and soul, and dominating and keeping watch on all their international markets.

1.1 The Learning Culture of Giordano

To adapt the different environment, culture of learning plays a key role from the foundation of Giordano's to its global expansion, which is also proven by its trial-and-error culture. For example, Giordano empower its employees and would accept their mistakes. Firstly, Giordano needed to learn and adapt when decided to expand into global markets. For example, whether its successful experiences in its existing markets are fit for the new international markets? Actually, as the big differences from country to country, Giordano has to adapt to new environment and reconsiders its successful formula. Secondly, Giordano is willing to learn from the best practice organization and started to benchmark as follows: it carried out computerization with benchmark to the limited, a simplified menu with benchmark to McDonald's, thrifty with benchmark to Wal-Mart, and price to value with benchmark to Marks & Spencer. Thirdly, Giordano is willing to practice its trial-and-error culture in new products development and market entry modes. For example, the preservative introduction of new product lines like Giordano Ladies' reflects Giordano's effort to develop new products. At the same time, Giordano is willing to learn also reflects in the market entry modes. This can be seen from the situation in Japan. In 2009, Giordano quitted from Japanese market, as it suffered from financial issue. While in 2011, this firm announced to re-enter Japan. Compare with these two decisions, it is easy to found that Giordano select different cooperate styles. The former is joint venture with local retailer; the latter one is giving franchising to WEGO Limited. According to the Chairman and Chief Executive Chief of Giordano, the second cooperate partner is better fit and will make great achievement in Giordano's worldwide sales.

Giordano has a high commitment to its international markets. First, to realize its mission, it insists on supplying value for money products and excellent customer service to all its international markets, which will make its customers both feel good and look great. Excellent service will make customers be satisfied and loyal to Giordano. Just as the founder Lai refers to that the company is not just a garment company and retailer > the essential of the firm is the excellent service to make customers buying again and again. In its business philosophy, customer service is an important aspect to enhance Giordano' core competitiveness. Second, Giordano had an excellent sales force to ensure high level of energy and commitment to all its international markets. For example, Giordano paid high wages to its employees. As a result, there are less job-hopping in Giordano, all the employees are satisfied with their salaries, as a result, staffs have full passionate to work. The positive mood of the employees will positively influence the consumer mood. As a result, high satisfied employees will led to high customer satisfaction.

The control and effective monitoring of all its international markets mainly reflects in its aspects of computerized inventory control. With computerization, Giordano can effectively manage its inventory and estimate its market demand. The point-of-sale cash register can transmit the barcode information of the sold product synchronously to the company's main computer. The compiled information at the store level will be sent to the distribution center diurnally. At the same time, the transmitted information turned to be the store's order for the next day. The products were produced and delivered at night, which ensures new products be in the store before it opened in the morning. On the other hand, with the synchronous information from the market Giordano can respond to the markets quickly and accurately forecast the demand. The products of Giordano' are just what the consumers want. As a result, Giordano' products are sold swimmingly. What is more, in order to better control and response to the different international markets, Giordano kept a flat organizational structure, which ensured fluent communication and fast decision making in the process of international expansion.

1.2 Effective Relationship Strategies

Doole [1] indicated that another trait of competing successfully in the international markets was their capacity to adopt an efficient and resultful relationship strategy. This strategy includes building up, maintaining and developing robust customer relationships, committing to supplying high quality goods and services, and a dedication to customer service.

First, Giordano have built up a strong customer relationship by owning a dedicated, trained, ever-smiling sales force. Jeon & Choi [2] argued satisfied employees led to satisfied customers. So Giordano took a lot of measures to enhance its employees' satisfaction. For example, Giordano paid high level salary to its employees, as a result, its employees seldom jump ship and it always possesses an excellent sales force. Giordano' satisfied customers will not only build a good word of mouth but also will repurchase the products and services again and again. Second, advertising and promotion are another effective ways to keep a strong customer relationship. On the one hand, Giordano has a considerable advertising and promotion budget for a better customer communication. On the other hand, its advertisings and promotions were quite effective and appealing. For example, both "Round the Clock Madness Shopping" and "Simply Khakis" promotion in Singapore had achieved great successes.

Second, continually push-off new products to meet the new demand of the markets is the source power of its successful products strategy. With computerization technology, Giordano can quickly develop new products and response to the market. Giordano Ladies' has proven the success of its new product development strategy. Further more, Giordano has a tightly controlled menu and merchandises no more than 100 items. That is why Giordano respond quickly to the market. Besides, a tightly controlled menu ensures Giordano supplying products in high quality to all its international markets. While its rivals have 200 to 300 items so that they can respond to the market more slowly. Besides, the price to value concept had been testified to be successful. Mid-priced products make people feel good and good looking design of the products make people look great, which is the very mission of Giordano. Besides, Giordano insists on positioning on price to value. For example, it developed the new product named blue star exchange to meet the demands budget-conscious consumers in Hong Kong and Taiwan.

Finally, Giordano also shows its indulges in effective relationship management by providing excellent customer service. Lai described Giordano not only a clothing retailer but also a service retailer. In 1989, Giordano began its customer service campaign and started a series of creative, customer-focused promotions. Finally, to ensure supply distinguished customer service, employees' performance evaluations were carried out among the stores.

2 The Uppsala International Expansion Model

The Uppsala Model is a theory explaining how the firms tend to intensify their commitment towards international markets as their experiences grow, which was developed by Johanson and Vahlne [3], The model indicates that multinational companies often firstly choose to enter the countries culture similar and region close to themselves and then enter the unfamiliar markets. For the global entry sequence, Giordano made its initial overseas move in Asia like Taiwan and Singapore etc. When it succeeded and then transferred to enter the developed countries. The Uppsala Model also indicates that these firms usually begin to enter international markets by casual exports, came along by more regular exports, in case the prophase operations succeeded, then more intensified operation strategies such as franchising and joint venture are used.

2.1 The Uppsala Model: Relevant Aspects to Giordano

As a whole, the Uppsala model does really explain Giordano's international expansion process. Since being set up in 1981, Giordano has started to expand to the international markets in line with the Uppsala model. At the beginning, Giordano started to expand to countries closer to Hong Kong like Taiwan, China, and Singapore, and since 1997, it started to broaden its markets and expanded in Germany, Japan, Australia, Indonesia, Kuwait and countries in the other continents. In 1981, Giordano opened its first retail store in Hong Kong and started to expand to Taiwan with joint venture. In 1985, it expanded to Singapore and opened its first retail outlet there. Giordano also successfully expanded in Mainland China, whose retail outlets number was over 1300 by 2012. China, Hong Kong, Singapore, and Taiwan are the four key markets of its international expansion. International expansion in markets culture similar and region close to themselves and then enter the unfamiliar markets. This helps Giordano decrease obstacles like language gap and clearer knowing the local consumer behavior [4].

The Uppsala model also indicates that international expansions are carried out step by step. In this regard, Giordano's international expansion process fit for the Uppsala model. To avoid high risk and failure, the company made its initial overseas move in the markets of developing countries. When Giordano succeeded and then transferred to enter the developed countries. In 1981, Giordano firstly distributed its products in Taiwan with an entry mode of joint venture. Giordano accordingly can know better about the market and consumers there, which laid the foundation of its further expansion in the international markets. In 1985, it expanded to Singapore and opened its first retail outlet there, which would be operated directly.

2.2 The Uppsala Model: Irrelevant Aspects to Giordano

When the expanding directions turning from Asia to Europe, from developing countries to developed countries, Giordano was not very fit for the Uppsala model, which indicated the international expansion should develop in similar culture regions. The reason that why Giordano want to expand beyond Asia on the one hand was its desire for development ' on the other hand was to decrease its dependence on the market of Asia. Because of Asian crisis from 1997 to 1999, Giordano started to widen its markets and expanded in Germany, Japan, Australia, Indonesia, Kuwait and other countries. Although Giordano was easy to adapt to consumer preferences when opening up stores in markets similar to Hong Kong, when it started to expand to the developed countries markets like Germany and Japan, it encountered some problems. When the entry mode of joint venture failed, Giordano changed its market entry modes to franchising in Japan cooperate with a local firm. In terms of escalating market commitment according to the Uppsala model, Giordano fits but not perfectly with the model. The Uppsala Model indicates that these firms usually begin to enter international markets by casual exports, came along by more regular exports, in case the prophase operations succeeded, then more intensified operation strategies such as franchising and joint venture are used. Giordano is only partly consistent with this part of the Uppsala model. It distributes its products to the international markets by joint venture or franchising. Giordano enters new markets by opening retail stores (Singapore in 1985) or franchising (Japan) or joint venture (Germany). Giordano fits but not perfectly with the Uppsala model's theories of escalating market commitment, but does follow an expansion pattern similar to it. Besides, as to the entry mode of Giordano, it firstly entered international markets by joint venture instead of franchising. Compared to franchising, joint venture is a more advanced international markets entry mode. So Giordano's international expansion is not fit for the Uppsala model in this regard. However, as a whole, when evaluating Giordano's expansion steps, from 1981 till present, it really fits with the international expansion theory of the Uppsala Model.

3 Market Entry Mode

3.1 Giordano: Entry via Joint Venture

The entry mode of joint ventures is a practical way for many firms to enter and expand their international markets. That can explain why Giordano firstly entered Germany and Japan in 2001 with the entry mode of joint venture. The new joint venture agrees to share resources with its local partners in the target market. The partnerships with local firms are a crucial component in ensuring Giordano's product competitiveness and organizational excellence. The cooperation also provides much needed legitimacy for the Giordano's expansion in developed markets. Entry in the international markets via joint venture will have its own strengths and weaknesses, which are decided by the nature of that market.

A major advantage of joint ventures is the development and return potential. Furthermore, joint ventures allow much more domination over the operations of the new firm than franchising. To get more control of the international markets may be the reason why Giordano firstly entered Germany and Japan in 2001 with a joint venture. It is an important advantage because it would enable Giordano to maintain its policies and culture. Therefore it protects it from losing its unique identity within that market. What is more, the synergy is another important cause to set up a joint venture. The Giordano expansion in Germany offers an excellent example. Through joint venture, the Group made use of the East European apparel manufacturing base. Although the expansion failed in 2002, Giordano had built up good relationships with some local retailers and suppliers, which will be helpful for its European expansion in future. For Giordano, cooperative joint venture maybe the right way to cooperate with their local partners. For example, Giordano take charge of production technology, while its local partner takes charge of distribution channels. Although we can't know the exact way Giordano cooperated with ETA Star group, Giordano did succeeded expanding in Dubai via a joint venture. By 2000 the number of outlets had grown to 40 and by 2011 240.

Lack of full control is the biggest weakness of joint ventures for many firms. The Group made its debut in Germany through a joint venture in March 2001. Due to inappropriate distribution channel, so Giordano failed to continue its running in Germany in September 2002. Lack of trust and mutual clashes turn numerous international joint ventures into failure. In many cases, the seeds for trouble exist from the very beginning of the joint venture. When trouble undermines the joint venture, the partners can try to resolve the conflict through mechanisms built in the agreement. If a mutually acceptable resolution is not achievable, the joint venture is scaled back or dissolved. For instance, a joint venture between Giordano and Nöda in Japan broke up after eight years' cooperation.

3.2 Giordano: Entry via Franchising

On the other hand, franchising is the strategy reserved by Giordano for use when failed in entering Germany and Japan. Franchising indicates franchiser provides a standard package of products, systems and management services, and the franchisee provides market knowledge, capital and personal involvement in management. Especially for firms from the developed countries, franchising is the fastest market developing entry mode strategy. Similar to joint venture, the entry mode of franchising has its own strengths and weaknesses.

The strengths of franchising are capitalizing on a successful business formula by expanding to international markets with a minimum of investment. Environmental risks for the franchiser are very restricted. Furthermore, since profits of the local partners mainly lie on their endeavors, Giordano's local partners are often highly inspired. At last, Giordano is able to make use of the local market knowledge. The local partners are often more familiar with local culture and laws than the Giordano. For example, by franchising, Giordano avoids itself from information and consumer behavior surveying. Franchisees are often allowed to make changes according to the local political, economical, and culture environment. That is why Giordano franchisees in Japan and Germany possessing the elasticity to change the pattern they give serve to their local customers.

However, franchising also has some risks. The franchisor's earning is often less than joint venture. Seeking fit franchisees is often another stumbling block in many markets. The lack of control over the franchisees' operations is a major problem. On the other hand, many franchising systems are intangible, which cultural can also result in problems. The Group opened its first shop in Japan in 2001 with a mode of joint venture, but the company failed to make significant inroads and in 2009 the joint venture was dissolved and Giordano exited the Japanese Market. In 2011, however, Giordano International Limited announced that it was re-entering Japan by partnering with local retailer WEGO Limited in a franchising arrangement. The first store opened in Fukuyama with a new face and operation style to serve the particularly complicated Japanese fashion market.

3.3 In Summary

There are some experiences behind successful joint ventures expand to international markets, which include: (1) Pick the right partner. Most joint venture marriages prosper by choosing a suitable partner. Partners with whom the firm has built up an existing relationship (e.g., distributors, customers, suppliers) also facilitate a strong relationship. (2) Bridge cultural gaps. A lot of agony and frustration can be avoided when the foreign investor makes an attempt to bridge cultural differences. Giordano's successfully expansion in Asia while failed in Europe may be the reason of culture gaps. (3) Incremental approach works best. Rather than being overambitious, an incremental approach to setting up the international joint venture appears to be much more effective. The partnership starts on a small scale. Gradually, the scope of the joint venture is broadened by adding other responsibilities and activities to the joint venture's charter. For example, Giordano made its Middle East debut in 1993 with a store in the Buijuman shopping in Dubai. The entry into this market was via a joint venture with the ETA Star group of Dubai. By 2000 the number of outlets had grown to 40 and by 2011 240.

On the one hand, franchising allows flexibility and adapting speed to an international market; on the other hand, franchising is an entry mode make Giordano reduce its investment on fixed assets to set up with joint venture. We can say it is a better strategy than joint venture for Giordano. Since franchising can minimize investment on fixed assets, and so it would result in a less loss should the business fail in Germany and Japan. So Giordano should enter Germany and Japan with franchising.

4 Marketing Strategies

4.1 Adaptation versus Standardization

Why the firm should be globalized? Several benefits are derived from standardization of the marketing mix. The most important benefit derived from globalization is an agreed international brand image. Global brand can generate brand umbrella, which speed up new product introductions and increase the effectiveness and efficiency of advertising. As there are common value-for-money needs, the price to value concept had been testified to be successful. Mid-priced products make people feel good and good looking design of the products make people look great, which is exactly its mission. Giordano insist on positioning on price to value and push new product, such as "Blue star Exchange" to meet budget-conscious consumers in Hong Kong and Taiwan in 1999. Uniform global brand images for Giordano are more and more important as advanced information technology all over the world. Without doubt, market differences seldom allow entire standardization. This may explain that why Giordano gradually repositioned its core brand to be a younger and stylish symbol.

4.2 Overview of Giordano' 4Ps

The marketing theory of 4Ps includes four factors: product, price, place, and promotion. They are the tools to meet the customers' demands. For Giordano, its products includes: Giordano Lady' and Blue star Exchange etc. The price to value concept had been testified to be successful. Mid-priced products make people feel good and good looking design of the products make people look great, which is the very mission of Giordano. For its promotions, both "Round the Clock Madness Shopping" and "Simply Khakis" in Singapore had achieved great successes. For its place strategy, at the beginning, Giordano started to expand to countries closer to Hong Kong like Taiwan, China, and Singapore, and since 1997, it started to broaden its markets and expanded in Germany, Japan, Australia, Indonesia, Kuwait and countries in the other continents. All of the products are sold with name of Giordano in the international market. 4Ps lay the foundation of Giordano's turning to be a global brand.

4.3 Brand Repositioning

Giordano only sold men's casual apparel before 1987. It started to sell unisex casual clothes after it was aware that a lot of female customers came to its shops. The price to value concept had been testified to be successful. Its shift in strategy was successful, leading to a substantial increase in turnover. However, as time goes by, Giordano' positioning became inconsistent with its brand image. So it started to reposition its core brand by to be more stylish and sensible. For example, Giordano Ladies' aimed to fascinate young, stylish women and earn more profits from them.

5 Conclusion

Giordano is on the road to be a global Brand. Global brands are brands that are recognized throughout much of the world. From the beginning, Giordano has started its successful expansion in the international markets. In Asia, it founded its first retail store in Hong Kong and started to expand to Taiwan with a joint venture in 1981. In 1985, it expanded to Singapore and founded its first retail outlet there. In mainland China, its retail outlets were over 1300 by 2012. China, Hong Kong, Singapore, and Taiwan are the four key markets of its international expansion. And from 1997 onwards, it started to widen its markets and expanded in Germany, Japan, Australia, Indonesia, Kuwait and countries beyond Asia. Although its entry into Germany and Japan with mode of joint venture in 2001 failed, the debut is beneficial for Giordano's future expansion in those markets as well. Because of Asian crisis from 1997 to 1999, On the one hand, Giordano started to widen its markets and expanded in Japan, Germany, Australia, Indonesia, and Kuwait etc. On the other hand, Giordano try to strengthen its positioning and brand image. For the positioning aspect, Giordano started to reposition its core brand by to be more stylish. It overhauled its shops to improve shop ambience and image. This proved its purpose to improve its brand image and positioning to match up its international expansion strategy and changing consumer demands. According to the Giordano's international expansion process, we can say Giordano has placed 'internationalization' on the brand and is in the process of turning into a global brand.

ACKNOWLEDGEMENTS: This article is funded by social science foundation of Anhui province (AHSK09-10D57); The employees from Giordano have done a lot of work for the completion of this article.

Subject: Case studies; Retail stores; Clothing industry; Expansion; Market strategy

Location: China

Company / organization: Name: Giordano International Ltd; NAICS: 448140

Classification: 7000: Marketing; 8620: Textile & apparel industries; 9179: Asia & the Pacific; 8390: Retailing industry; 9110: Company specific

Publication title: Advances in Management and Applied Economics

Volume: 3

Issue: 4

Pages: 139-147

Number of pages: 9

Publication year: 2013

Publication date: 2013

Year: 2013

Publisher: International Scientific Press

Place of publication: Athens

Country of publication: Greece

Publication subject: Business And Economics--Management, Business And Economics

ISSN: 17927544

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1399543125

Document URL: http://search.proquest.com/docview/1399543125?accountid=38610

Copyright: Copyright International Scientific Press 2013

Last updated: 2013-11-20

Database: ABI/INFORM Complete

Document 19 of 100

Analysing the Employment Status of Graduate Students: The Case of Kent International College in Vietnam

Author: Diem, Pham Thi; Ha, Nguyen Minh

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Abstract:

Analysing the employment status of graduate students: The case of Kent International College in Vietnam is an empirical study to provide an overview of employment status of graduate students, especially graduate students of Kent International College and determinants of the employment status of graduate students. With a sample of 186 graduate students interviewed directly by questionnaire and using the method of testing differences, Exploratory Factor Analysis (EFA) and regression, the study shows that i) for finding out suitable jobs, there are no differences among education majors and among education results; but there are differences between male and female graduates, and among the years that students graduate, ii) three factors influence positively to the employment status of graduate students, they are education process, entrepreneurship, and practical experience. In addition, against popular belief specialized skills, soft skills, and social context are not significant to the employment status of graduate students. [PUBLICATION ABSTRACT]

Full text:

1 Introduction

There were a lot of graduates students unemployed in Vietnam, while the labor shortage on market is now in a serious way, both quantity and quality. This situation has made students, parents, enterprises, and especially schools so anxious, thoughtful, rethinking their directions is a top concern not only of one or two schools but also of almost Universities-Colleges in Vietnam.

The effectiveness of the training process is evaluated through four elements: inputs, activities, outputs and efficiency. Efficiency is expressed through the level of participation in society, level of meets in work, income. Thus, through the study of the employment status of graduates, the college may evaluate the effectiveness of current training processes. On that basis, a possible solution will be found out to further improve the quality of services, training programs. This may helps with satisfying "student consumers", in meeting the needs of employers, improving the competitive advantage for school as well as minimizing the gray matter waste for the whole society.

The paper of analysis of the employment status of graduates: A case study of the Kent International College in Vietnam (KIC)" is an empirical study provides an overview of employment status of students graduated from different majors. Based on the findings, the policy recommendations will be suggested to improve the quality of training and services to meet needs and aspirations of students, parents as well as the employers.

2 Literature Review

2.1 Definitions

What is a good job? According to Paul and Beth (2011), it is a job paid enough to feed the family, and provided the safe, legal working conditions. According to the working experts and the final-year students of KIC, it is a job to make sure the following elements: the work consistent with preferences, abilities and studied majors; the work allows the development and opportunities for promotion in line with their individual capacity; the work pays an adequate income. Concisely, it is a job that fit ability, interests, and majors; ensures the development of the the individual, having the promotional opportunities, pays a fair wage as well as providing a legal, safe working environment.

2.2 Career Development Theory

The theory of Trait & Factor of Parson (1909) suggests that the career choice is should be based on such factors: an accurate knowledge of yourself, thorough knowledge of job specification and the ability to make a proper match between two. He asserts that the closer the match of personality to job, the greater the job satisfaction and level of career success. Ginzberg, Ginsburg, Axelrad and Herma Theory (1951) suggested that the career choice was influenced by four factors, there are practical factors, the influence of the educational, emotional factors and personal values. Holland's career typology (1959) said that individuals are attracted to a particular occupation that meets their personal needs and provides them satisfaction. The closer the match of personality to job, the higher the satisfy possibility. Social Cognitive Career Theory of Lent, Brown & Hackett (1996) said that career choice is affected by beliefs that the individual develops and refines through four main sources: a) the personal performance accomplishments, b) vicarious learning, c) social persuasion, d) physiological states and reactions.

In general, theories of career choice indicate that the current job is the result of a selection, accumulation, analysis, synthesis and decision progress formed from the childhood to the present. This process is influenced and impacted by external and internal factors. Therefore, the current employment situation of graduates is not only affected by the educational process in colleges or universities, but also it is affected by a previous process. At the beginning, if students have not yet chosen a suitable career options, consistent to their interests and personality, they are unlikely to be satisfied with the current job. This indirectly reduces the possibility of having a suitable job.

2.3 Career Development Model

Samson et al. (1992) suggested that a career choice decision occurs in a cycle with five distinct phases, also known as cycle CASVE, comprising of these stages: (1) Communication, this stage is to identify the gap between where they are now and where they would like to be in the future through analyzing internal and external cues; (2) Analysis, the focus of this stage is for the individual to learn more about themselves, their decision-making, and the world-of-work. This is done through analyzing personal experience and information obtained from assessments; (3) Synthesis, this stage assists the individual in expanding the list of possible career options through synthesizing all of the information derived in the prior two stages, and then using this information while considering the list of options; (4) Valuing, this stage focuses on evaluating the costs and benefits of each alternative and (5) Execution, the purpose of this stage is to formulate a plan for implementing a tentative choice. This process is eventually ended at communication stage to identify the external factors, internal factors. By reviewing external demands and internal states during this stage, the individual will learn if their tentative choice is the right one for them.

Prescreening, In-depth exploration, Choice Model (PIC) of Gati et al (2011) aimed at increasing the quality of career decision-making processes and its outcomes. They divided the PIC model into three stages: (1) Prescreening the potential alternatives: is to locate a small set of "promising" alternatives that deserve further, in-depth exploration, (2) In- Depth exploration of the promising alternatives: is to locate alternatives that are not only promising but indeed suitable for the individual and (3) Choosing the most suitable alternative.

2.4 The Reason of Job Choice

Choosing a job consistent with the learning ability, practical experience and trained major: The students grouped by major such as human resource management, marketing, accounting, finance have very different perceptions from marketing majors (Anderson et al, 1991). Marketing students had a positive response on the question of whether they pursue a career in marketing or not. The non-business students had a neutral feedback. On the other hand, accounting and finance students responded with low means because they had declared their choices. Similarly, most of the students studying the hotel and restaurant management major at AUT University wishes to work in the hospitality industry after graduation, and volunteer to work in the food and beverage department in the beginning (Kim, 2008). The students were also aware that the education is the only means to achieve the goal of finding a job suitable to chosen majors (Chacko, 1991). Another study conducted with freshmen of a Singapore accountancy University discovered that experience and interpersonal skill are most important personalities to achieve a good job (Fatt, 1993)

Choosing a job consistent to the capacity, personality and hobbies: Individual tends to choose occupations suitable to his capacity, personality and interests (Holland, 1985). Previous studies have demonstrated that students studied accounting as they recognized the working environment and professional lifestyle of accountant are consistent with their abilities, interests and their interest (Holland, 1985; Chacko, 1991).

Choosing the high-income jobs: the study of Parmley et al (1987) demonstrated that student select student jobs mainly based on the potential high earnings in the future. This also coincides with the study of (Chacko, 1991; Ferry, 2006), that money is one of the reasons attracting students to pursue career. In the survey of Vinay & Shami (2000), 50% of survey participants said that high wages, the reward are the main reasons in choosing a job. In addition, it also revealed that in thoughts of the young potential CEOs the cash compensation is the biggest and may be the sole factor used to measure the value of a job.

Choosing the jobs having the promotion opportunities: Previous studies have demonstrated that the promotion opportunities influence to the graduate decision of selecting job (Devlin & Peterson, 1994; Parmley et al, 1987; Assari, 1995; Assari & Karia, 2002). The U.S. and New Zealand students value the promotion opportunities over other factors such as working conditions, challenges, job types and training. This coincides with the result of Asaari (1995) study, a case of final year business students of the University Sains, Malaysia.

Choosing the jobs having the professional growth: Many previous studies have shown that professional growth is an important factor, influencing to the decision of occupation choice (Chow & Ngo, 2011; Assari, 1995; Devlin & Peterson, 1994). In a study with sample of more than 1,200 college students in China by Chow & Ngo (2011), has revealed that there are differences in career interests and career choosing decisions between men and women and there are many factors affecting to the decision of job choose between them. Both male and female students have similar views on valuing highly the professional growth and the promotion opportunities when they decide to choose a job.

Choosing the job having a good working environment and safety: Previous studies have asserted that besides the external factors of money and promotion opportunities, a good working environment is also a very important factor affecting to the graduate decision on job choice (Asaari, 1995; Devlin and Peterson, 1994; Andrew & Eldos, 2010). Gooding (1988) discovered that values are changing, an individual prefers to be safer rather than high pay. They also desire to get a job having the opportunity to develop in future, the ability to learn through their work experience and the opportunity to enrich their knowledge and skills.

Location of the employer: Many previous studies discovered that the students appreciated the employer location when deciding to choose a job (Parmley et al, 1987; Assari et al, 2001; Assari, 1995; Devlin & Peterson, 1994). This is supported by the result of a survey of Andrew & Eldos (2010), conducted on 200 Indian management graduates.

Choosing the job according to the parents' choose, the group's standards, friends or lover: A child's choice of education and career is influenced by parents, this is evident beyond to the boundaries of gender and ethnicity. Although it is also influenced by schools, friends, and student council, the parental expectations and perceptions about what is good career for their children play an important role in forming career options for their children (Ferry, 2006). A research (Creamer & Laughlin, 2005) indicated that this parental influence is very strong, and overwhelms the influence of teachers, faculty and career counselors, who well know vocational fields but are not known as well nor as trusted as the child's parents.

As an operational process, the employment selection of an individual is affected by many differently external and internal factors. The internal factors or subjective factors, also called internal motivation such as the excitement, expectation, learning abilities, aptitudes, inclinations and lifestyle act importantly on the decision making process of choosing a job. As well as the above literature argues that an individual should consider other influential factors such as income, power, work environment, career development, promotion opportunities, job prestige. The external factors, called external motivation such as employers need, public opinion, family advice and socio-economic conditions indirectly impact to the decision of job choose. In addition, the earlier formed choice also played a major role in deciding what job after graduation for the students.

2.5 Suggested Research Model and Hypothesis

This study model is mainly based on previous researches, literature review and qualitative research of experts" comments to determine the composition of its variables. It consists of six hypotheses from HI to H6. In which, the group from HI to H6 are the independently quantitative variables directly impact the dependent variable "the ability to have a suitable job". Independent variables are follows:

Educational process is a process in which an individual take mainly effect from teachers or school to form of the scientific world and the important personalities of the citizens, workers. It is the process with two sides, one side is the impact of education to the educated individual, another is the responses of the educated ones on the self- improvement of their own personalities.

Professional skill is the necessary knowledge and skills to perform a specific job, in other words, it is an individual"s professional qualification.

Entrepreneurship is characterized by innovation, dare to take risks. It is a series of positive attitudes regarding to the initiation and implementation.

Practical Experience is knowledge attained from exposing the reality, experiencing the real situations, it is the knowledge of past cases which individual has experienced by himself.

Soft Skills is a sociological term or skills related to the use of language, the ability of integrating into society, attitudes and behavior, applied for interpersonal communication. Social context is evaluated as a combination of factors including income, education, occupation, wealth and residence.

3 Methodology

Qualitative research is used the method of interviewing experts to explore, adjust and supplement the observed variables. The interviewed experts were KIC graduates, teachers and management team.

Quantitative research is conducted to evaluate measurement scales, test theoretical models. The statistical method is used to analyze the descriptive statistics of the sample groups such as gender, majors, employment rate, ... Methods of testing the equality of average value of sample used to test the average ability of getting a suitable job of the differently sample groups such as differently majors, learning capabilities and the year of graduation. Using the multiple linear regression is to determine factors influencing on employment status.

Measurement Scales: Ability to get a suitable job, measured by 12 items, built on the professional success scale developed by Greenhaus, Parasuraman and Wormlye (1990) and expert comments. The scales of the dependent variables are mainly based on the scale of Ali & Fereshteh (2010) and expert comments. They are measured by 32 observed variables and divided into six factors: education process (eight observed variables); professional skills (three observed variables), entrepreneurship (seven observed variables); experience (three observed variables), soft skills (four observed variables); social context (five observed variables). Those were measured by five-point likert scale.

Study sample: The survey was sent to 498 graduates of 2009, 2010 and 2011 via email. There are the response of 250 (50% rate) per 498 delivered questionnaires. From 246 valid responses, there are 132 (53.7%) responses from men and 114 (46.3%) responses from women. There are 186 (75.6%) responses from employed graduates, and 60 (24.4%) from unemployed graduates. There are 170 (69.1%) of business management graduates, 30 (12.2%) of marketing graduates, 46 (18.7%) of information technology graduates. There are 34 (13.8%) of graduates completed in 2009, 89 (36.2%) of graduates completed in 2010, and 123 (50%) of graduates completed in 2011.

4 Empirical Results

4.1 Descriptive Statistics

In Table 1, the results show that the employment rate is 75.6%, if considered separately, those of business management graduates is 72.9%, of marketing graduates is 90%, of information technology graduates is 76.1%. By year of graduation, employment rate of graduates is 82.4% in 2009, 82% in 2010, 69.1% in 2011.

The results in Table 2 show an average value of 32 observed variables ranging from 2.52 to 4.33 mark. The variable of "Has been trained in the same work before doing the current work" has the lowest point and the variable of "Having a progressive spirit" attainted a highest point. The observed variables which their mean are less than 3 points primarily allocated into two factors of practical experience and social context. They are "Has done similar work before, Being referred to company by acquaintance, Have a relationship with current company, Having financial support from the family", the external factor that could affect the ability of get suitable job. This confirms that the ability of getting a suitable job of KIC graduates mainly depend on their own capacities, do not depend on helps from relatives or friends. The variables with its mean of 4 point or higher mainly allocated into factors of soft skills and entrepreneurship, including variables of "Information technology skill support to current work, Having an independent working skill, Having a progressive spirit, Always striving to do works well, Having a high responsible spirit, Having ambition and wills, Having a learning spirit ".

4.2 Cronbach's Alpha and EFA Analysis

After eliminating the unsuitable variables resulted from the scale test and factor analysis, the model has 28 variables used to measure and divided into six factors with their totally extracted variance of 72.762%. They include education process, entrepreneurship, soft skills, practical experience, social context and professional skill.

Results in Table 3 shows that the only factor of entrepreneurship attainted a high mean of over 4 marks, the others have low mean, specially, two factors of practical experience and social contexts have mean of lower 3 marks.

4.3 Test the Difference between the Characteristics.

Result of Independent Samples Test with significance level of 0.036 (>0.05), indicated that the ability to get a suitable job of male is higher than of female graduates

Result of ANOVA test with the significance level of 0.355 (>0.05), indicated that there is not a difference on ability of getting to a suitable job between graduates studied the differently majors

Another ANOVA test of the ability of getting a suitable job of the graduates in 2009, 2010, 2011 showed that there is a difference with the reliability at 99%. Performing t-test with Bonferroni to compare each pair in turn, the result confirmed that there is a significant difference on ability of getting a suitable job of graduates in 2009 and 2011.

Result of other ANOVA test showed that there is not the difference on the ability of finding out a suitable job of groups with different education results. This shows that although education results are always the first concern of the parents, the colleges and the students, for this study, it does not play an important role on finding out a suitable job.

4.4 Regression Results

Based on the literature review and the correlation analysis, all the independent variables are used on the regression model by SPSS software. The results indicated that this regression model can be used to test the theoretical models and explained to 48% of the change of the dependent variable (see Table 4).

Result of ANOVA test shows that F value of the model with sig = 0.000 <0.01, mean that Ho hypothesis rejected with very high reliability (99%) and may conclude that the education process, entrepreneurship and practical experience related to the ability of finding out a suitable job and explained the change of the dependent variable. The tolerance in Table 6 is quite high, greater than 0.5, while VIF are also lower 2. Thus it can be concluded that there is no autocorrelation between the independent variables in this regression equation.

The results on table 5 shows that there are only three independent variables: education process (sig. = .000 <0.05), entrepreneurship (sig. = 0.001 <0.05), practical experience (sig. = 0.000 <0.01) are statistically significant in this model with significance level sig. <0.05 (95% confidence). On other words, these variables relate to the dependent variable of the ability of finding out a suitable job. The regression coefficients exactly reflect the expected hypothesis, a positive sign (+) showing a positive correlation between the dependent variable and the independent variables.

To explain variables in the regression results are follows:

Education process: This variable has the significance level of 0.000 (> 0.05), meaning that education process significant in this model in 95% reliable. Its regression coefficient (? = 0.290) exactly reflects the expected hypothesis, a positive sign (+) showing a positive correlation with the ability of finding out a suitable job. If education process increases, the ability of finding a suitable job of graduates also increases. The relationship and affecting level of the educational process of the model are consistent with studies of Ali and Fereshteh (2010). But in the model of Ali and Fereshteh (2010), it plays the most important role in comparison with the other six remaining variables.

Entrepreneurship: This variables is with the significance level of 0.000 (> 0.05). It also means that entrepreneurship significant in this model with 95% reliable. Its regression coefficient (B = 0.380) is the same the expected hypothesis (+). This means that if entrepreneurship increase, the ability of finding a suitable job of graduates also increases. This result coincides with studies of Ali and Fereshteh (2010), but the affecting level of entrepreneurship on the study of Ali and Fereshteh (2010) was only ranted on third level after educational process and professional skills.

Practical experience: This variable has the significance level of 0.000 (> 0.05). Its regression coefficient (B = 0.183) exactly reflects the expected hypothesis, a positive sign (+) showing a positive correlation with the ability of founding out a suitable job. If practical experience increases, the ability of finding a suitable job of graduates also increases. The relationship and affecting level of the educational process of the model are consistent with studies of Ali and Fereshteh (2010). In the model of Ali and Fereshteh (2010), its affecting level is also lower than entrepreneurship and education process and ranked at the fourth position.

The results showed that there are only three variables affecting the ability of finding out a suitable job of KIC graduates from six expected variables initially built on the model. This results fairy accurately reflects the actual situation in the KIC, because KIC has not yet solved the internship for its students presently, its training programs under the Australian standards are being applied and finding out which way to adapted to the actual situation in Vietnam, KIC's student entrepreneurship is fairy good but not really perfect.

In addition, the result also indicated that professional skills (sig. = 0.118> 0.05), soft skills (sig. = 0550> 0.05) and social context (sig. = 0.163> 0.05) are not significant on this research. Finding out the reasons why it did not effect in this study through the ideas of the KIC's teachers, management team and a few graduates, it can be identified that the professional skills are the necessary basic skills, which a graduates needs to apply for jobs and increase the ability to get a job, but these skills do not help them to find out a suitable job. In other words, the English skills and information technology skills play a role as the foundation knowledge for the professional development process of a student, it does not truly help students getting a suitable job. But if KIC students lack of these skills, their employment opportunities will be reduced, and will indirectly affected to the outcome of KIC's training. For the social context, it is the external factors or objective factors, so its effect on each object is so different, it may impact or does not, depending on the specific situation.

5 Conclusion and Recommendation

5.1 Conclusion

Analysing the employment status of graduate students: The case of Kent International College in Vietnam is an empirical study to provide an overview of employment status of graduate students, especially graduate students of Kent International College and determinants of the employment status of graduate students. The study has used a sample of 186 graduate students interviewed directly by questionnaire and has applied the method of testing differences, Exploratory Factor Analysis (EFA) and regression, the study indicates that for finding out suitable jobs, there are no differences among education majors. This asserts that the training effectiveness among the faculties is homologous and the possibility of getting a suitable job is not affected by the different professions needs of labour market. Similarly there are no differences among education results. This finding shows that although education results is always the first concern of parents, the school and the students, for this study, it does not play an important role for the ability of finding out a suitable job. But the ability of getting a suitable job between male and female graduates is not similar. This difference may cause from the female's timidity and shyness. Similarly there are differences among the years which student graduate. This result reflects quite accurately and consistently with the real situation, the longer student graduate, the more experience, thus the higher possibility of getting a suitable job.

This research also discovered that ability of finding out a suitable job of KIC graduates depending on three main factors, they are education process, entrepreneurship and practical experience, in which entrepreneurship plays the most important role.

5.2 Recommendation

Training Entrepreneurship for students: entrepreneurship should be taught to students at the beginning, throughout the learning process by these following steps 1) Helping students to recognize the entrepreneurial spirit; 2) building entrepreneurial skills for students, and 3) facilitate students to practice. For example, regularly hold seminars on entrepreneurship, introducing the real situations on doing business of well-known businessman... This activities will help students to recognize how an entrepreneurship and benefit for society and student when having it. Besides that, entrepreneurial skills need be trained through teaching methods and teachers. Using the teaching methods encourage students studying actively, solving real-life situations, doing teamwork and solving the problem independently.

Developing the practical training program: besides the soft skills have already built on current training program, the specialized subjects should be built closer the reality. The criteria of choosing lecturers should primarily focus on practical experience.

Practical experience: it is one of three factors affecting to the ability of finding out a suitable job. So KIC should establish the employment department as soon as possible.

Tips for KIC students: Students need dynamic, creative, and involved into many group activities, seminars... this will help students improve the interpersonal skills and the ability of solving problems. No matter what jobs student do, provide that it can help students learn the working skills. Students should not rely on family or passively wait for the support of the college on looking for a job, this will reduce the ability of getting a suitable job in the future. Besides student should hardly study and initiatively acquire knowledge transmitting by the college. So the effectiveness of the training process must be built by both the students and the college.

Subject: Graduate students; Colleges & universities; Case studies; Employment; Education

Location: Vietnam

Company / organization: Name: Kent International College; NAICS: 611310

Classification: 1110: Economic conditions & forecasts; 9110: Company specific; 8306: Schools and educational services; 9179: Asia & the Pacific

Publication title: Advances in Management and Applied Economics

Volume: 3

Issue: 4

Pages: 235-248

Number of pages: 14

Publication year: 2013

Publication date: 2013

Year: 2013

Publisher: International Scientific Press

Place of publication: Athens

Country of publication: Greece

Publication subject: Business And Economics--Management, Business And Economics

ISSN: 17927544

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1399543094

Document URL: http://search.proquest.com/docview/1399543094?accountid=38610

Copyright: Copyright International Scientific Press 2013

Last updated: 2013-11-20

Database: ABI/INFORM Complete

Document 20 of 100

RITE AID CORPORATION

Author: Gosman, Martin L; Ammons, Janice L

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Abstract:

Oftentimes students describe a company that experienced a net loss as having "lost money" for the period. Using elements from Rite Aid's recent financial statements, this case allows instructors to guide students to reflect on the stories being conveyed about Rite Aid's financial health and performance. After many years during which drugstores were consistently profitable and growing, pharmacy retailing is facing challenges. The past few years for Rite Aid were characterized by consistently negative stockholders' equity with different swings in earnings and cash. In introducing financial statements, the beginning chapters of textbooks often present fictitious businesses that have just begun operations. Using excerpts from statements of a real company that has been in business for many years allows instructors to prompt interesting questions that can refine students' thinking about the importance of the different signals conveyed through key elements of financial statements. The use of this case would fit well into introductory financial accounting and financial management courses. The case has a difficulty level of two and is designed to be taught in 20 to 30 minutes of class time and should require about a half hour of outside preparation by students.

Full text:

INTRODUCTION

Headquartered in Pennsylvania, Rite Aid is the third largest drugstore chain in the U.S. and ranked #113 in the Fortune 500 (Fortune, 2013). Its 4,623 stores in thirty-one states generated revenues in excess of $25 billion during fiscal 2012 (Rite Aid, 2013, 3 and 25). The firm estimates that it serves an average of 2 million customers each day and filled approximately 297 million prescriptions during fiscal 2012 (Rite Aid, 2013, 8). Rite Aid's stock has been publicly traded since 1968 under the ticker RAD. Rite Aid's major competitors, CVS Caremark and Walgreen, are considerably larger as shown in Table 1 (CVS, 2013, 6; Walgreen, 2012, 3).

INDUSTRY CHALLENGES

Pharmacy sales account for approximately 65% of revenues in the drugstore sector (CVS, 2013, 7; Rite Aid, 2013, 7; Walgreen, 2012, 5). Most prescriptions are filled for customers who are covered by health plan contracts in which a third-party payor agrees to pay for all or a portion of a customer's eligible prescriptions. A third-party payor is an entity such as an insurance company, government agency, or managed care provider. These payors or their pharmacy benefit management companies (PBM), which administer the drug benefit portion of most health care plans, put pressure on pharmacy reimbursements and consequently drugstores' gross profits and gross margins (Talsma, 2013). If a drugstore doesn't sign the take-it-or-leave-it contract offered by an insurance company or its PBM, then that pharmacy's customers will take their business elsewhere. Walgreen, the largest national drugstore chain, failed to negotiate a contract renewal with Express Scripts (the largest PBM) that affected much of fiscal 2012 until the dispute was resolved in September of that year.

One analyst (Reeves, 2011) summed up the industry's challenges as follows:

The drug store game is a difficult racket, characterized by high competition and razor-thin margins. Drug benefit plans and Medicare providers are embracing online sales and mail orders to cut costs, so traditional drug stores have to slash prices to keep up.

Historically, drugstores competed mostly on location/convenience (Standard & Poor's, 2013). So it is not surprising that the development of drugstore chains was largely regional. Now the most accessible way of filling a prescription may be through mail-order or direct fulfillment. Health plan sponsors may opt to restrict consumer choice to mail service providers or other lower-cost prescription-filling alternatives (Standard & Poor's, 2013). Pharmacy benefits management company Express Scripts may also seek to expand its own mail-order business (Chain Drug Review, 2012; Martin & Kamp, 2012).

Increasingly, pharmacies compete on price. Wal-Mart offers $4 generic programs (Fein 2010) and Wegmans, a major regional grocery store chain with pharmacies, offers a generic version of the cholesterol medicine Lipitor for free (Fein, 2013; Sell, 2013).

On a more positive note, analysts predicted that increased availability of generic drugs resulting from the expiration of patents on several blockbuster brand-name drugs could yield higher gross profits during fiscal 2012 even though those patent expirations would likely result in lower sales revenue at drugstores. While looming patent expirations pose threats to profitability for the pharmaceutical industry, the expirations can benefit drugstores and consumers.

ACQUISITIONS AND GROWING PAINS

Perhaps in response to industry challenges, the three largest drug store chains have made a concerted effort to grow. Each firm has grown organically and through acquisitions, such as the 258-unit Duane Reade chain (Walgreen, 2010, 3), 529 Long's stores (CVS, 2009, 4) and the 1,850-unit Brooks and Eckerd chains (Rite Aid, 2008, 4-5). Prior to the Duane Reade acquisition, Walgreen did not have a history of making large acquisitions. But Rite Aid's growth was particularly fueled by its acquisitions. Rite Aid's August 2007 acquisition of the Brooks and Eckerd chains nearly doubled its size. Cost control is critical when a company is undergoing considerable expansion. Challenges in managing this integration contributed to Rite Aid's reporting of net losses before income taxes of $274 million for fiscal 2007 and $2.6 billion for 2008, its first net losses since fiscal 2002 (Rite Aid, 2009, 65). In addition, during fiscal 2007 the firm's existing long-term debt of $1.6 billion grew to $2.8 billion and its interest expense was 63% higher than that of the prior year (Rite Aid, 2008, 59-60).

CONCERNS FOR RITE AID'S SURVIVAL, YET RECENT OPTIMISM

As billions of dollars of long-term debt and sizable annual losses became the norm for Rite Aid, some analysts raised questions concerning its survival. In 2010, Rite Aid was included, in a Forbes listing of ten troubled retailers (Hawkins, 2010). One year later, another analyst cited Rite Aid among "three big-name stocks that may be bankrupt soon" in part because "Rite Aid doesn't have the scale to offer lowball prices like Wal-Mart or the reach to turn over sheer volume like Walgreen's" (Reeves, 2011).

And in early 2012, a third analyst expressed his view that the firm is "doomed to fail and investors should avoid the stock at all costs" (Goldman, 2012). Despite these dire warnings, on April 12, 2013 the brokerage firm Raymond James upgraded Rite Aid's stock to outperform the market. And perhaps partly as a consequence, Rite Aid's stock price closed near $3.50 per share in late August 2013, up 250% from its $1.01 level just two years earlier (NASDAQ, 2013).

QUESTIONS FOR DISCUSSION

1. Table 2 reveals that Rite Aid's net losses before income taxes averaged $470 million in fiscal years 2010 and 2011, before turning slightly positive in fiscal 2012. How did Rite Aid manage to pay for salaries, merchandise, rent, and utilities in years in which some would say that the firm "lost money"?

2. Stockholders' equity ranged from negative $2.2 billion to negative $2.5 billion in fiscal years 2010-2012. On the other hand, working capital ranged from positive $1.8 billion to positive $2.0 billion. How did Rite Aid's stockholders' equity become so negative? Do other key elements presented for Rite Aid in Table 2 temper your concern over Rite Aid's negative stockholders' equity?

3. As noted in Table 2, fiscal 2011 saw the most favorable overall change in the balance of cash and cash equivalents, while fiscal 2012 was the least favorable. Examine the cashflow data and explain why it is NOT accurate to characterize Rite Aid's cash-flow situation as most favorable in fiscal 2011 and least favorable in fiscal 2012.

4. As noted in the case, drug-store industry analysts predicted lower sales revenue but higher gross profits for fiscal 2012 as more generic versions of brand-name drugs become available for sale. Use the data presented in Table 2 to first calculate sales revenue for each fiscal year and then calculate the gross-profit (gross-margin) percentages. Is the direction of changes in sales revenue and gross-profit percentages for fiscal 2012 vis-àvis fiscal 2011 consistent with analysts' predictions? Explain.

5. Raymond James' "outperform" recommendation and the sharp increase in Rite Aid's stock price could suggest that the firm "turned the comer" on its financial difficulties. Are the trends in Rite Aid's financial data observed in Table 2 consistent with this viewpoint? Explain.

Subject: Drug stores; Chain stores; Industrywide conditions; Business growth; Financial performance; Shareholders equity; Statistical data; Teaching aids & devices; Corporate profiles

Location: United States--US

Company / organization: Name: Rite Aid Corp; NAICS: 446110

Classification: 8390: Retailing industry; 3400: Investment analysis & personal finance; 9140: Statistical data; 9190: United States; 9110: Company specific

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

Volume: 20

Issue: 2

Pages: 3-7

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 References

ProQuest document ID: 1509211409

Document URL: http://search.proquest.com/docview/1509211409?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-07

Database: ABI/INFORM Complete

Document 21 of 100

SWEET PEAS STITCHERY: AN INTRODUCTORY CASE IN ACCOUNTING FOR MERCHANDISING

Author: Gruben, Kathleen H; Fletcher, Leslie B

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Abstract:

Imagine quitting your secure job to open a new business on a mere $10,000 in a time of uncertainty. You don't have any experience in the industry nor does your partner. You are running on blind faith that your initial capital investment will be enough for the business to survive and generate enough revenue to draw a paycheck within the first six months. This case provides an overview of the operations of such a business that opened in 2011 at a time when unemployment rates were some of the highest in more than a decade. Several things are considered in this case, including the risks of an inexperienced entrepreneur starting a new business during a time of high unemployment and difficult economic times. The odds of success are against the owner because of her limited funds, unemployment rates, and high failure rate, what the Small Business Administration calls death rate, of new businesses. With no experience in and little knowledge of accounting, it is easy for the owner to fail to recognize when her "accountant" and "CFO" submit financial statements that are incorrect and do not make sense, which happens in this case. It requires students to recognize the errors in the company's financial statement, analyze the statement, provide insight to the owner, and give recommendations.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns accounting. Secondary issues examined include marketing, entrepreneurship, retail management, and merchandising. The case is appropriate for freshman, sophomores, or juniors in a core course of financial accounting or marketing, entrepreneurship, retail management, and fashion merchandising. More specifically, it should be used after completing the retail financial accounting chapter of the textbook. This case will take approximately three class hours. It will not require students to do any outside preparation provided they have successfully completed the retail financial accounting portion of the core accounting class. However, the case can be started in a one-hour class so that students can get assistance in the set up if necessary. Students can then complete it as a homework assignment followed by class discussion the following class period. If the professor or instructor wants to devote less time than anticipated, the solution has 16 questions. He can select a smaller number of the most appropriate questions for his class.

CASE SYNOPSIS

Imagine quitting your secure job to open a new business on a mere $10,000 in a time of uncertainty. You don't have any experience in the industry nor does your partner. You are running on blind faith that your initial capital investment will be enough for the business to survive and generate enough revenue to draw a paycheck within the first six months. This case provides an overview of the operations of such a business that opened in 2011 at a time when unemployment rates were some of the highest in more than a decade. Several things are considered in this case, including the risks of an inexperienced entrepreneur starting a new business during a time of high unemployment and difficult economic times. The odds of success are against the owner because of her limited funds, unemployment rates, and high failure rate, what the Small Business Administration calls death rate, of new businesses. With no experience in and little knowledge of accounting, it's easy for the owner to fail to recognize when her "accountant" and "CFO" submit financial statements that are incorrect and do not make sense, which happens in this case. It requires students to recognize the errors in the company's financial statement, analyze the statement, provide insight to the owner, and give recommendations.

Subject: Entrepreneurs; Startups; Financial statements; Merchandising; Business failures

Location: United States--US

Classification: 9520: Small business; 4120: Accounting policies & procedures; 9190: United States; 9000: Short article

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

Volume: 20

Issue: 2

Pages: 9

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: 1509211394

Document URL: http://search.proquest.com/docview/1509211394?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-07

Database: ABI/INFORM Complete

Document 22 of 100

ORGANIZING AND FINANCING A NEW BUSINESS VENTURE

Author: Kunz, David A; Dow, Benjamin L

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Abstract:

Eric Colin has learned that his employer, a regional chemical manufacturer and distributor, had been sold and he will soon be unemployed. Colin, a young business professional, had been the Director of Sales for the distribution division of Superior Chemical. As a result of his chemical distribution business experience, he is considering beginning a chemical distribution business. He has a solid understanding of the chemical industry and the distribution process but his knowledge of accounting and finance is limited. He has completed a preliminary investigation into a number of business startup issues but is not sure how to put everything together. The learning objectives of the case include: 1. an introduction to the purpose and content of a business plan, 2. a review of the different business organization forms and the importance of organization selection to the new business, and 3. an examination of the alternative sources of startup capital and the type of capital provided by each. The case also introduces students to the chemical distribution process, the Small Business Development Center (SBDC) Program administered by the U.S. Small Business Administration and the RMA Annual Statement Studies.

Full text:

THE SITUATION

Eric Colin, the Director of Sales at Superior Chemicals, a regional chemical manufacturer and distributor, has been told that the company has been sold to a large multi-national chemical manufacturer. While he was aware of a possible sale, the actual sale came as a surprise to Colin and most employees. The company had entered sale negotiations a number of times during the previous years, but for a variety of reasons the sale was never completed. As a result of the sale, Colin was told his position would be eliminated and that his services would no longer be required. Most members of Superior's senior management received the same message. This didn't necessarily reflect unfavorably on Superior's management team but without staff adjustments, combining the two firms would result in substantial management duplication. While the actual sale of Superior was unexpected, Colin had considered his career options.

Colin is thirty-two years old and has been employed by Superior Chemical, since graduation from University of Missouri with a degree in chemical engineering. With Superior he moved through a number of management positions, each with an increased management responsibility, but only in his current position as Director of Sales for the distribution operation in Kansas City did he have Profit & Loss (P&L) responsibility. In an effort to develop the business skills necessary to handle a senior management position and to increase his accounting and finance knowledge, he continued his formal business education. He recently earned an MBA from University of Missouri - Kansas City after attending evening classes for three years.

Colin's career has reached a decision point. Should he seek a management position with another firm or pursue his aspirations of someday owning and operating a chemical distribution business? He favors the latter and has elected to pursue the startup option.

Colin previously investigated beginning a chemical distribution business in the Kansas City area and understands the availability of startup capital is the critical factor in the process. At this point, the required startup capital is only a very rough estimate but he believes a minimum equity investment of $500,000, and maybe as much as a $1,000,000 will be required.

The proceeds from the sale of his Superior holdings (stock and stock options), severance pay and family savings could be used to start the new business. Although he is not sure of his exact tax liability, he expects to net about $280,000 from the buyout of his stock options and the sale of his Superior stock. In addition, he will receive a severance package amounting to $90,000, of which $60,000 could be used to start the new business. He and his wife could contribute $120,000 from savings, and a second mortgage on their home could add another $40,000, but his wife is hesitant to consider a second mortgage. In fact, his wife has reservations about the whole idea of starting a business.

Colin and his wife have sufficient other funds to cover living expenses for nine months and if they sold their luxury SUV and leased a more economical vehicle they could cover another three to four months of living expenses.

Despite the reservations expressed by his wife, Colin estimates personal assets would, at a maximum, provide only the minimum required equity investment of $500,000.

_$

Sale of Superior stock and buyout of stock options 280,000

Severance package 60,000

Savings 120,000

Second mortgage on home 40,000

Family contribution 500,000

Colin's father may be another source of startup equity capital. His father is retired and living in Florida but recently sold a chain of fast food restaurants for a profit of more than $12,000,000. He has expressed a willingness and interest in investing in new business ventures. Colin thinks his father may be willing to invest as much as $500,000 in his new business.

Preparing projected financial statements for the first three years will allow a more accurate estimate, but at this time Colin feels sufficient startup capital could be raised using his personal assets and a substantial investment ($500,000) from his father.

COLIN'S EXPERIENCE

Colin has a solid understanding of the chemical distribution process. While with Superior, Colin developed customer contacts in the Kansas City metropolitan area, as well as with major customers in Missouri, Kansas and other Midwest states. He has also developed valuable contacts with key chemical manufacturers. While at Superior, he had Profit & Loss responsibility but he is uncomfortable analyzing and interpreting financial results. He has very limited balance sheet responsibility.

Colin had completed a preliminary site location investigation and examined other startup issues but is not sure how to put everything together. Colin has discussed his situation with a friend who is a commercial lending officer with a large local bank. He suggested Colin visit the Small Business Development Center (SBDC) at the University of Missouri - Kansas City. His friend thinks the Small Business Development Center could provide the assistance Colin needs to determine if his new business is feasible.

SMALL BUSINESS DEVELOPMENT CENTERS

The U.S. Small Business Administration administers the Small Business Development Center Program to provide 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.

THE MEETING

Colin arranged a meeting with Joe Blake, the Director of the Small Business Development Center at the University of Missouri - Kansas City, to determine what assistance, if any, the SBDC could provide in beginning his new venture. Before becoming the Director of the SBDC, Blake owned and operated a number of small businesses as well as worked as a commercial loan officer for a commercial bank. Blake explained the services available and asked Colin to describe his proposed new business.

Blake described the chemical industry and the role of a distributor. He would begin operations in Kansas City from a leased warehouse/office building located in an industrial park. The facility would be leased for five years at an annual cost of $90,000 and includes two, fiveyear 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 he thinks the modifications would cost approximately $400,000. With the modifications and six employees, Williams estimates the facility would support an annual sales volume between four and six million dollars. First-year sales dollars are estimated to approach five million, with his existing customer contacts providing the majority of the sales. Initial inventory would require an investment of $600,000. Colin expects to offer credit terms of net 30, the industry average. Colin 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.

In addition to questions regarding financing requirements for the new venture, Blake asked Colin what form of business organization he intended to select. Colin indicated he hadn't really given it much thought and didn't know much about any organization form other than the corporation.

Given the industry experience of Colin, Blake thinks the proposed new business venture has merit, but told Colin he needs to convert his ideas and thoughts to a business plan. A formal business plan would provide Colin with a guide to starting the business. Colin has been involved in preparing three year plans and annual budgets but has had no experience in preparing a business plan. Colin admitted he doesn't even really know what a business plan includes. Blake suggested that one of the SBDCs counselors could provide help in preparing the plan. Blake said the plan would also help quantify the assets and financing needed to start the business. Colin agreed to work with a counselor to develop a plan before a final decision to begin the business is made.

THE TASK

Assume the role of a SBDC counselor and help Colin begin planning his new business. Prepare answers to the following questions.

1) What is the purpose of a business plan?

2) What are the components of a business plan?

3) What business organization forms are available for selection? What are the advantages and disadvantages of each form? What organization form would be best for Colin's new venture? Why?

4) What sources of capital, other than personal funds and his father's investment, might Colin consider? Examine the type of capital provided by commercial banks, venture capital firms and business angels. What are the characteristics of each?

5) Colin has considered some startup costs. What other costs might/should be included in determining financing requirements? What operating costs should be included and how should they be estimated?

6) Describe the function of Small Business Development Centers.

Subject: Startups; Chemical industry; Distribution; Business plans; Organizational structure; Entrepreneurial finance; Government agencies; Teaching aids & devices; Statistical data

Location: United States--US

Company / organization: Name: Small Business Administration; NAICS: 921130

Classification: 8640: Chemical industry; 2310: Planning; 9550: Public sector; 9190: United States; 9520: Small business; 9140: Statistical data

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

Volume: 20

Issue: 2

Pages: 11-15

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: References Tables

ProQuest document ID: 1509211406

Document URL: http://search.proquest.com/docview/1509211406?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-07

Database: ABI/INFORM Complete

Document 23 of 100

EKU CENTER FOR THE ARTS: WHO'S THE BOSS?

Author: Loy, Stephen L; Tabibzadeh, Kambiz

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Abstract:

The Eastern Kentucky University Center for the Arts opened in September 2011. The $32 million Center was a long-time dream for EKU and surrounding communities that would enhance the image of EKU as it transitions from a regional focus to a national and international focus. Arts Center is 2,100-seat facility with a Broadway-quality theater, a grand lobby suitable for multiple events, and a configurable "black box theater," with a capacity of 250 for small events. It is largest in performing arts center in central Kentucky. An experienced and locally well-known arts administrator, was hired to be the Center's Executive Operations Director. The first season was a smashing success with twenty-one performances and revenues that exceeded expectations. Despite these successes, there were internal accusations that the Center was being seriously mismanaged. These problems came to a head when the university President attempted to fire the executive director for fiscal misconduct and falsification of university records and documents. The executive director denied the accusations claiming she misunderstood or was unaware of university policies. To avoid being fired, she submitted a letter of resignation to the Center's Community Operations Board which had recruited and hired her. Surprisingly, the Board rejected her resignation, and rejected the university president's claim of authority to fire the executive director without the Board's approval.

Full text:

CASE SYNOPSIS

The Eastern Kentucky University Center for the Arts opened in September 2011. The $32 million Center was a long-time dream for EKU and surrounding communities that would enhance the image of EKU as it transitions from a regional focus to a national and international focus.

Arts Center is 2,100-seat facility with a Broadway-quality theater, a grand lobby suitable for multiple events, and a configurable "black box theater," with a capacity of 250 for small events. It is largest in performing arts center in central Kentucky. An experienced and locally well-known arts administrator, was hired to be the Center's Executive Operations Director.

The first season was a smashing success with twenty-one performances and revenues that exceeded expectations. Despite these successes, there were internal accusations that the Center was being seriously mismanaged. These problems came to a head when the university President attempted to fire the executive director for:

"...fiscal misconduct and falsification of university records and documents. Violation of human-resources policies (e.g., improprieties such as submitting inappropriate meals and items on expense reports, and directing students to falsify time cards, creating a "discourteous and unfriendly work environment, inappropriate behavior toward students, improper handling of customers' credit card information, and the misleading of university officials ..." (Copley, 2013, April).

The executive director denied the accusations claiming she misunderstood or was unaware of university policies. To avoid being fired, she submitted a letter of resignation to the Center's Community Operations Board which had recruited and hired her. Surprisingly, the Board rejected her resignation, and rejected the university president's claim of authority to fire the executive director without the Board's approval. Thus, set the stage for a battle between the university and the Board over who is the boss of the executive director.

BACKGROUND

EKU, the fourth largest university in the state, is located in Madison County which is the fastest growing county in Kentucky. In 2003, EKU adopted a strategy to reposition itself from a regional focus to a national and international focus. A first-class performing arts center was viewed as way to enhance the status of the Eastern Kentucky University (EKU) and its surrounding community.

The nearest performing arts centers are Singletary Center located in Lexington, 25 miles away, and Danville, 40 miles away. The Norton Center at Centre College in Danville is an internationally acclaimed performing arts center that routinely hosts outstanding guest artists, touring productions, symphony orchestras, and hosted Vice Presidential Candidates debates in 2000 and 2012.

POOLING RESOURCES

From the beginning, the university sought out local government officials to participate in developing plans for a Center for the Performing Arts on the EKU main campus. By 2009, construction costs had dropped substantially due to the "Great Recession." Local leaders and the EKU president turned their attention toward the construction of the Center for the Arts. The financial situation of the state was poor with no likelihood for improvement for the next few years. In order to build the Center while construction costs were down, the university needed a funding strategy that did not depend solely on the state government. The strategy that evolved pooled financial support from two city governments, one county government, and the university. An oversight board for Center was formed with representatives of EKU, the cities of Richmond and Berea, and Madison County. The board assumed responsibility for the overseeing the design, construction and operations of the Center for the Arts.

EKU's share had to be appropriated in the state budget. Fortunately, EKU had two powerful allies in the state legislature, Harry Moberly and Ed Worley. Moberly was the EKU Vice President for Finance & Administration and Chairman of the House Appropriations Committee in the state legislature and Worley was the minority leader in the state senate. Moberly and Worley, ushered the bill through the legislature. During the drafting of the bill, Moberly inserted a provision stating that oversight control of the Center would be jointly shared by a board of representatives from Madison County, City of Richmond, City of Berea, and EKU, and that the board would be responsible for hiring the Center's Executive Director.

The bill passed both chambers of the legislature and signed into law by the governor. A 13-member Community Operations Board was created with representatives from EKU, the City of Richmond, the City of Berea and Madison County to oversee construction of the Center and to hire an executive director. Composition of the Board is comprised as follows (EKU, 2011):

Two members appointed by Mayor City of Richmond

Two member by Mayor City of Berea

Four members appointed by Madison County Judge-Executive

Five members appointed by EKU President

One ex officio member representing EKU

Following a national search, Katherine Eckstrand was hired and assumed the duties of Executive Director on January 1, 2010 while the Center was under construction. Eckstrand had eleven years of experience as executive director of the Clark State Community College Performing Arts Center in Springfield, Ohio and four years of experience as director of community development for the Ohio Arts Council (Mandell, 2009).

Surprisingly, in October 2011 Eckstrand resigned. Officially, she was moving back to Ohio to attend to family health issues, but it was known that she felt frustrated about having to deal with two bosses-the university and the board. For payroll purposes, the executive director is classified as a non-contract employee, even though the director is hired by and reports to the Community Operations Board, which is independent of the university. As a university employee, the university administration was demanding that she clear her decisions and actions through them, and to follow university policies related to expenses, budgets, and personnel management.

With Eskstrand's resignation, the Board had to act quickly to hire a new executive director to make decisions about the Center's interior designs and furnishings, and to book acts for the first season that was scheduled to begin in September 2012. After a month long search, the Board hired Deborah Hoskins as Executive Director without a contract, effective February 1, 2012.

For eighteen years, Hoskins had been the assistant managing director for the Norton Center for the Arts at Centre College in Danville, KY, which is one of Kentucky's premier performing arts venues. The Norton Center had recently hired a new executive director, a job for which Hoskins had applied and hoped to get, but do not get (Copley, 2010).

In an interview, she said being passed over for the top post was not her reason for leaving the Norton Center for the new Center at EKU. "Things feel like they are going in a different direction, and it felt like it was time to move on...If you are going to make a career change, you need to do it when you are still young and smart enough to make the right moves." (Copley, 2010)

Centre vice president for college relations said, "(Hoskins) service to Centre has been marked by exceptional energy and initiative. Her efforts have made possible many of the extraordinary events for which the college and its arts center have become well known." (Copley, 2010)

TROUBLE IN PARADISE

The grand opening, on September 24, 2011, was a smashing success. However, there was one hitch: A long line for tickets at the will-call window delayed the performance by nearly an hour. The executive director explained that the center's ticketing system was not set up yet, and organizers did not anticipate how much time it would take to manually distribute tickets and process credit/debit card payments.

The first season, Hoskins brought in an extraordinary line up of acts. More than 50,500 tickets were sold which generated more than $2 million in revenue. The first year operating loss of $65,000, was less than half the planned first year loss of $150,000.

While the Arts Center was a financial success, there were serious complaints about personnel and operational mismanagement coming to the attention of the university administration. An investigation into the internal complaints was conducted by authorization of the university president and resulted in a 740-page report.

CRISIS

The report listed the following problems.

The Center overpaid and underpaid artists appearing at the center, resulting in "an aggregate overpayment of $46,622. " The center did not accurately pay production companies for 12 out of 26 events. After the irregularities were discovered, artists who were underpaid were immediately issued payments for the balance due.

Weakness in the center's system of internal controls over cash handling such that should errors or irregularities occur, it may not be possible to fix responsibility for the loss on one individual. Cashiers were not required to balance their activity at the ends of their shifts, and sales reports were not routinely compared with deposits. Recorded ticket revenue for the season was nearly $1.8 million, but the ticketing sales system indicated nearly $1.9 million in sales, a discrepancy of $104,731.

Invoices were falsified to calculate and to support settlement payments made to production companies to decrease the amount the center owed them.

The report said 6,899 complimentary tickets, valued at $389,039, were distributed. Of those, there was no way to account for the recipients of 3,125 of those tickets.

A "Save Your Seat" fundraising program placed 74 engraved plaques on the center's seats, but records indicated only 29 patrons who made the designated $500 donation.

Irregularities existed in the use of Hoskins' EKU pro-card, including 98 transactions totaling $14,564 by unauthorized individuals and disallowed purchases of meals.

Hoskins said she was not aware others should not use her ProCard when it was issued. "The bureaucracy was overwhelming because I had never worked in state bureaucracy before," Hoskins said. "But, as I was told of these policies and procedures, they were implemented."

"As I told the board (when I was hired), I'm no financial manager - that's not my strong suit." She was hired with the understanding that a financial manager would be hired for the Center, but after two unsuccessful searches, the center continued to operate with no financial manager (Copley, March 2013).

Based on the report findings, the university president sent a letter to inform the director that her employment was being terminated and ordering her to vacate her office. To avoid being fired by the university, she submitted a letter of resignation to the Center's Community Operations Board, which surprisingly, rejected her resignation. Thus, the stage was set for a battle between the university and the Community Operations Board over who controls the EKU Center for the Arts.

WHO'S IN CHARGE?

The board claimed the university president did not have authority to fire the director, as that rested with the board.

"... a majority of the center board disagreed with the university's action, saying the board had authority over personnel decisions at the center. Board member Harry Moberly cited state law regarding the center which states the board "shall make all decisions regarding personnel. " At the June 14 meeting, the board voted 8-3 for a resolution to retain Hoskins. The resolution said the university did not have "authority to take unilateral personnel action"against employees at the center. " (Copley, 2012)

After a few contentious days, the Board accepted Hoskins resignation and appointed an interim director on June 19. Six months later, the president and the board were grappling over the wording of a formal agreement between the university and the board. Job announcements for the executive director were posted in newspapers and relevant trade newsletters. The search committee received more than twenty-five applications from across the country by February 1, 2013. However, the search was put on hold until the board and the university resolved the issue of who will have authority over the new director (Copley, June 2013).

QUESTIONS

How did the university and the Community Operations Board create the problems described in the case?

What problems arise when the line of authority is ambiguous or conflicting?

Do you think Hoskins is a victim? Explain your answer.

What changes should be made before hiring a new executive director?

Subject: Colleges & universities; Performing arts centers; Mismanagement; Boards of directors; Firings; Executives; Organizational structure; University presidents; Case studies; Teaching aids & devices

Location: United States--US

Company / organization: Name: Eastern Kentucky University; NAICS: 611310

Classification: 8306: Schools and educational services; 2110: Boards of directors; 2320: Organizational structure; 6100: Human resource planning; 9190: United States; 9110: Company specific

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

Volume: 20

Issue: 2

Pages: 19-23

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

ProQuest document ID: 1509211408

Document URL: http://search.proquest.com/docview/1509211408?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-07

Database: ABI/INFORM Complete

Document 24 of 100

SPEEDY DSL CORPORATION

Author: Marcal, Leah; Tontz, Richard

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Abstract:

Students are faced with a factual setting that presents practical business issues. The Client, Speedy DSL, has a profit margin that is below the industry average and is considering a price increase to raise its profitability. Speedy faces strong competition from Timely Cable in the local broadband market. Currently, the two firms (Speedy and Timely) charge the same price for basic Internet connectivity that is similar in speed and reliability. Speedy has an estimated monopoly demand schedule and its own cost data from which students must calculate the profit-maximizing price. Additionally, Speedy has an estimate of the cross-elasticity of demand between DSL price and Cable subscriptions. Understanding that Timely's gain of customers would be Speedy's loss; students evaluate the impact of a price increase on Speedy's profit in a duopoly setting. Students must also estimate the cost of Speedy's business activities and show the breakdown of those costs against sales revenue.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns the pricing decision of a service firm, and the use of the appropriate economic model to analyze that decision. A comparison of priceelasticity and cross-elasticity of demand highlights the market structure in which the firm operates and thereby an understanding of how a price change will impact the firm's total profit. Secondary issues involve calculating the cost of the firm's business activities and allocating those costs by sales revenue.

The case has a difficulty level of three and is intended for use in junior-level courses. It can be covered in three hours, including a class presentation by a student team. The case requires a minimum of nine hours of outside preparation by students.

This case is designed for use in an upper-division, inter-disciplinary business course. The purpose of the course is to enable students to apply the knowledge they have gained in their lower-division business core courses that include microeconomics, financial accounting, and managerial accounting. Specifically, the case incorporates the understanding of profitmaximizing pricing under monopoly and duopoly models of competition, how price and crosselasticity of demand are interpreted, and how cost data can be organized for management decisions.

CASE SYNOPSIS

Students are faced with a factual setting that presents practical business issues. The Client, Speedy DSL, has a profit margin that is below the industry average and is considering a price increase to raise its profitability. Speedy faces strong competition from Timely Cable in the local broadband market. Currently, the two firms (Speedy and Timely) charge the same price for basic Internet connectivity that is similar in speed and reliability. Speedy has an estimated monopoly demand schedule and its own cost data from which students must calculate the profitmaximizing price. Additionally, Speedy has an estimate of the cross-elasticity of demand between DSL price and Cable subscriptions. Understanding that Timely's gain of customers would be Speedy's loss; students evaluate the impact of a price increase on Speedy's profit in a duopoly setting. Students must also estimate the cost of Speedy's business activities and show the breakdown of those costs against sales revenue.

Subject: Profit margins; Price increases; Duopoly; Broadband; Demand; Digital subscriber line; Teaching aids & devices; Costs; Revenue

Location: United States--US

Classification: 8330: Broadcasting & telecommunications industry; 9190: United States

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

Volume: 20

Issue: 2

Pages: 25

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: 1509211371

Document URL: http://search.proquest.com/docview/1509211371?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-07

Database: ABI/INFORM Complete

Document 25 of 100

WASTE MANAGEMENT INC.

Author: Nevin, Jennifer; Rao, Arundhati; Martin, Charles L, Jr

ProQuest document link

Abstract:

After a humble childhood in South Dakota, Dean Buntrock worked his way up the corporate ladder to become an industry leader and founder and CEO of Waste Management Inc. Whenever an opportunity presented itself, Buntrock made the most of it; it seemed like he had the "Midas Touch" in the garbage business! He was also known for his charitable contributions and even has a building named after him at his alma mater. Unfortunately this real life story has a sad ending. Although he began Waste Management as an honest businessman making it big in America, Buntrock turned into a dishonest businessman when his company began using accounting methods to recover from bad decision-making during times of intense regulation in the industry. The auditors, Arthur Anderson, knew about the accounting irregularities the entire time. In 1998, 30 years later after going public, Waste Management Inc. acknowledged that it had misstated its pre-tax earnings by approximately $1.7 billion over a 5-year period and had to restate earnings; at the time, this was the largest restatement in corporate history. This case study examines how the Sarbanes-Oxley Act may have protected the stockholders.

Full text:

CASE DESCRIPTION

This case describes a financial statement fraud perpetuated by top management of Waste Management Inc., with the knowledge of their external auditors. It describes the business opportunities and circumstances leading to the growth, the fraud and eventual downfall of the top management and its implication for the shareholders. This case study is based on library research involving Accounting Series Litigation Release No. 17435 and Administrative Proceeding File No. 3-10513 [1]. It is designed for an Undergraduate Auditing course with a difficulty rating of 3, Graduate Auditing course with a difficulty rating of 3 or a Graduate MBA course with a difficulty rating of 4. Classroom presentation and discussion time of one hour.Outside preparation time of 4 hours. The case may be presented individually or in a small group.

CASE SYNOPSIS

After a humble childhood in South Dakota, Dean Buntrock worked his way up the corporate ladder to become an industry leader and founder and CEO of Waste Management Inc. Whenever an opportunity presented itself, Buntrock made the most of it; it seemed like he had the "Midas Touch" in the garage business! He was also known for his charitable contributions and even has a building named after him at his alma mater. Unfortunately this real life story has a sad ending. Although he began Waste Management as an honest businessman making it big in America, Buntrock turned into a dishonest businessman when his company began using accounting methods to recover from bad decision-making during times of intense regulation in the industry. The auditors, Arthur Anderson, knew about the accounting irregularities the entire time. In 1998, 30 years later after going public, Waste Management Inc. acknowledged that it had misstated its pre-tax earnings by approximately $1.7 billion over a 5-year period and had to restate earnings; at the time, this was the largest restatement in corporate history [2]. This case study examines how the Sarbanes-Oxley Act may have protected the stockholders.

Subject: Waste management industry; Financial statements; Accounting procedures; Accounting irregularities; Financial restatements; Public Company Accounting Reform & Investor Protection Act 2002-US; Stockholders; Teaching aids & devices

Location: United States--US

Company / organization: Name: Waste Management Inc; NAICS: 562111

Classification: 8340: Electric, water & gas utilities; 9190: United States; 4120: Accounting policies & procedures; 4320: Legislation; 3400: Investment analysis & personal finance

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

Volume: 20

Issue: 2

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: Conference Proceedings, Business Case

ProQuest document ID: 1509211386

Document URL: http://search.proquest.com/docview/1509211386?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-07

Database: ABI/INFORM Complete

Document 26 of 100

UNION BANK OF NIGERIA

Author: Okoli, Basil; Smith, D K

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Abstract:

This case invites students to play the role of Basil Okoli, a Nigerian who worked for many years at Union Bank of Nigeria. At one time, Union Bank of Nigeria was the market leader in the banking industry in Nigeria; over the years, however, Union Bank has fallen from #1 to "emerging big bank." Currently, Okoli serves as a lecturer for the Faculty of Business Administration at Baze University, a new private University located in Abuja, Nigeria; yesterday, however, Okoli received an offer to take up a consultancy appointment with Union Bank, so as to assist the bank in developing a strategy to regain (in retail banking) the market leadership position it once held in Nigeria in many areas including retail banking. The case is appropriate for senior level undergraduates as well as students in MBA and/or 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.

Full text:

CASE OVERVIEW

This case invites students to play the role of Mr. Basil Okoli, a Nigerian who worked for many years at Union Bank of Nigeria. At one time, Union Bank of Nigeria was the market leader in the banking industry in Nigeria; over the years, however, Union Bank has fallen from #1 to "emerging big bank." Currently, Mr. Okoli serves as a lecturer for the Faculty of Business Administration at Baze University, a new private University located in Abuja, Nigeria; yesterday, however, Mr. Okoli received an offer to take up a consultancy appointment with Union Bank, so as to assist the bank in developing a strategy to regain (in retail banking) the market leadership position it once held in Nigeria in many areas including retail banking. The case is appropriate for senior level undergraduates as well as students in MBA and/or 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. Data and information provided in the case include:

For Nigeria, the Nigerian environment, and the Nigerian economy: Historical background plus selected statistics.

For the banking sector in Nigeria: Historical background plus selected statistics.

For Union Bank of Nigeria: Historical background plus selected statistics.

Subject: Banking industry; Consultants; Strategic planning; Market shares; Teaching aids & devices

Location: Nigeria

Company / organization: Name: Union Bank of Nigeria PLC; NAICS: 522110

Classification: 8100: Financial services industry; 8310: Consultants; 2310: Planning; 7000: Marketing; 9177: Africa; 9000: Short article

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

Volume: 20

Issue: 2

Pages: 31

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: 1509211419

Document URL: http://search.proquest.com/docview/1509211419?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-07

Database: ABI/INFORM Complete

Document 27 of 100

EDUTAINMENT STUDIOS NIGERIA, LTD

Author: Smith, D K

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Abstract:

This case invites students to play the role of Professor Jonas Davidson, Dean of the Faculty of Business Administration & Social Sciences (FBASS) at Baze University and longtime Visiting Professor of Marketing at Lagos Business School (LBS) in Lagos, Nigeria. At the end of an LBS seminar he taught recently, Mr. Olusegun Adegboye, one of the executives attending the seminar and the Director of Marketing for Edutainment Studios Nigeria, Ltd., asked Professor Davidson's advice on how to increase the probability of successfully soliciting the business of "bottom of the pyramid" customers from the large corporate bodies which Edutainment Studios has targeted; companies interested in "bottom of the pyramid" business opportunities include banks, Fast Moving Consumer Goods (FMCG)companies, pharmaceutical companies, and so on. The case is appropriate for senior level undergraduates as well as students in MBA and/or 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

Full text:

CASE OVERVIEW

This case invites students to play the role of Prof. Jonas Davidson, Dean of the Faculty of Business Administration & Social Sciences (FBASS) at Baze University and longtime Visiting Professor of Marketing at Lagos Business School (LBS) in Lagos, Nigeria. At the end of an LBS seminar he taught recently, Mr. Olusegun Adegboye, one of the executives attending the seminar and the Director of Marketing for Edutainment Studios Nigeria, Ltd., asked Prof. Davidson's advice on how to increase the probability of successfully soliciting the business of "bottom of the pyramid" customers from the large corporate bodies which Edutainment Studios has targeted; companies interested in "bottom of the pyramid" business opportunities include banks, Fast Moving Consumer Goods (FMCG)companies, pharmaceutical companies, and so on. The case is appropriate for senior level undergraduates as well as students in MBA and/or 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. The data and information in the case include:

For Nigeria: Information on the Nigerian environment plus selected statistics.

For Edutainment Studios Nigeria, Ltd.: Background information on the company, marketing strategy being used by the company, and problems and opportunities the company has encountered so far.

For customers in the "bottom of the pyramid" socioeconomic group: Information on their attitudes and behaviors regarding banks and banking (that is, one industry which has an interest in pursuing business opportunities with members of this socioeconomic class.

Subject: Market strategy; Consumer behavior; Consumer attitudes; Target markets; DVD; Teaching aids & devices

Location: Nigeria

Company / organization: Name: Edutainment Studios Nigeria Ltd; NAICS: 511210

Classification: 9177: Africa; 7100: Market research; 8306: Schools and educational services

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

Volume: 20

Issue: 2

Pages: 33

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: 1509211400

Document URL: http://search.proquest.com/docview/1509211400?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-08

Database: ABI/INFORM Complete

Document 28 of 100

OPERATIONS CULTURE IN AN INTERNATIONAL ENVIRONMENT

Author: Gastrock, Jon Austin

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Abstract:

The author examines the confirmations and regulatory reporting portion of JP Morgan Chase & Co. and make suggestions as to how to improve operations with suggestions for how this can be used for instructional purposes.

Full text:

ABSTRACT

In the current case I examine the confirmations and regulatory reporting portion of JP Morgan Chase & Co. and make suggestions as to how to improve operations with suggestions for how this can be used for instructional purposes.

Subject: Investment banking; Bank compliance; Disclosure; Teaching aids & devices

Company: JPMorgan Chase & Co

Classification: 8130: Investment services; 4310: Regulation; 9000: Short article

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

Volume: 20

Issue: 2

Pages: 35-38

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: 1509211391

Document URL: http://search.proquest.com/docview/1509211391?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-07

Database: ABI/INFORM Complete

Document 29 of 100

NEW PRODUCT INNOVATION AT CFM, INC.

Author: Bell, Jan; Wain, Tony; Ansari, Shahid

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Abstract:

Chet's Fan Manufacturing Inc. (CFM), established in 1992 to manufacture and distribute quality ventilation equipment, was known for superior products, dependable service, competitive pricing, and custom fans. Since its inception until 2010, CFM's sales were to original equipment manufacturers for industrial and commercial fans. Seeking revenue growth, CFM recently entered the residential ventilation market with standard fans and blowers for bathroom exhaust, kitchen range hoods and laundry ventilation that it sold to major wholesalers for distribution in Canada and the US. The quality of CFM's products caused Home Depot to approach the company with a business proposal. They offered CFM a two year contract for 40,000 basement ceiling fans, sold under Home Depot's brand, and exclusively in their stores. With adequate capacity on existing lines, CFM's managers must decide if they can accept the terms of Home Depot's contract.

Full text:

Chet's Fan Manufacturing Inc. (CFM), established in 1992 to manufacture and distribute quality ventilation equipment, was known for superior products, dependable service, competitive pricing, and custom fans. Since its inception until 2010, CFM's sales were to original equipment manufacturers for industrial and commercial fans. Seeking revenue growth, CFM recently entered the residential ventilation market with standard fans and blowers for bathroom exhaust, kitchen range hoods and laundry ventilation that it sold to major wholesalers for distribution in Canada and the US. The quality of CFM's products caused Home Depot to approach the company with a business proposal. They offered CFM a two year contract for 40,000 basement ceiling fans, sold under Home Depot's brand, and exclusively in their stores.

With adequate capacity on existing lines, CFM's managers must decide if they can accept the terms of Home Depot's contract. Home Depot's customer specifications must be met at a retail selling price of $150, and Home Depot requires a 30% gross margin on the sale. CFM must also earn its required profit margin on the product, which would be impossible without considering cost during design.

This three case sequence about a fictitious company and transaction provides students an introduction to Target Costing and requires them to apply its principles from product concept through the preliminary design phase. Students develop the product's target cost, perform a first look cost estimation, and use activity based costing and a value index to suggest ways that the target can be met. The case also requires students to budget the cash flow consequences of the contract. Through these requirements, students experience entrepreneurial activities of shaping an opportunity within an established organization seeking revenue growth. This case is appropriate for a core managerial accounting class at either the undergraduate or graduate level.

Subject: Ceiling fans; Product quality; Retail stores; Contracts; Production costs; Cash flow; Management decisions; Teaching aids & devices; Innovations

Classification: 8650: Electrical & electronics industries; 7500: Product planning & development; 8390: Retailing industry; 5310: Production planning & control

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

Volume: 20

Issue: 2

Pages: 39

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: 1509211362

Document URL: http://search.proquest.com/docview/1509211362?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2014-04-07

Database: ABI/INFORM Complete

Document 30 of 100

Marvellous medicine

Author: Threapleton, Marnie

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Abstract:

Boots UK aims to be the world's best pharmacy-led health and beauty retailer. In pursuit of this goal, the business has laid down five strategic goals to underpin everything it does. By aligning e-learning activities with those goals, the e-learning team ensured buy-in for its programme. The range of product knowledge, skills and process-based e-learning the business produces is a key mechanism for engaging and empowering teams to make Boots number one for customer care. Buy-in at every level not lust management is imperative. To ensure they remained responsive to the needs at learners and the business, the e-learning team aimed to make the department stronger, simpler and more efficient. They devised a rapid methodology to produce short, sharp modules with a consistent navigation structure which learners loved. Nearly a third of all Boots UK stall completed a No7 e-training in the month of launch, which helped contribute towards a significant increase in sales in stores.

Full text:

Boots UK launched its e-learning programme in February 2007 with a small in-house team of six members covering LMS and infrastructure, design and development and the HR technology and e-learning manager. Despite its size the HR technology and e-learning team have had a significant impact on the business and its more than 100,000 learners. The scale of their programme speaks volumes: between 2007 and June 2012 they have had over 7.1 million module accesses and they produce around 60 new bespoke modules internally every year, plus updates to existing packages. The impact on productivity, sales and efficiency speak louder still.

The challenges

Boots UK aims to be the world's best pharmacy-led health and beauty retailer. In pursuit of this goal, the business has laid down five strategic goals to underpin everything it does. By aligning e-learning activities with those goals, the e-learning team ensured buy-in for its programme. The business's five strategic goals are to become No1 for customer care, to develop the most loyal customer base, to be the healthcare partner of choice, to develop the most empowered and engaged team, and to create a stronger, simpler and more efficient organisation.

L&D challenges

For the e-learning team the most important fact was that, unlike many businesses, Boots staff do not have their own PCs. To do e-learning at work, they must come off the busy shop floor and go into a small back office where there is a shared PC.

Then as the pace of retail business increased, so the e-learning team's usual development time of eight weeks to design, script and build a training module couldn't keep up with the demand for support for new product developments. The rapid increase in demand for e-learning made it essential to streamline the developmental process.

Keeping up to date was also a challenge. Since the team started to produce learning content in 2007, tools, learning techniques, content relevance and design had evolved and training modules needed to reflect that to ensure engagement.

And while store employees loved e-learning, feedback showed the generic nature of the content meant that staff found it difficult to determine what to focus on each month. It was time to change to a more tailored approach. A mechanism was needed to support performance development with a change in emphasis from formal on-the-job training to self-management and learning from others.

E-learning aligned to strategic goals

The buy-in of senior management and the alignment of all e-learning activity with corporate strategic goals forms the heart of Boots UK's e-learning strategy. The range of product knowledge, skills and process-based e-learning the business produces is a key mechanism for engaging and empowering teams to make Boots number one for customer care. Buy-in at every level, not just management, is imperative.

Content revolutionised

Boots vastly improved the visual quality and pedagogical value of its in-house e-learning content. A greater variety of visual styles, striking imagery, unregimented structure, interactions and activities were all incorporated into the learning materials. Moving away from a dated and repetitive look and feel, Boots introduced colour, interest and variety to the modules. This kept store colleagues interested, excited and talking about each unique module.

The team looked to make the learning experience more relevant to how staff learn or find information in their daily lives, using influences from social networking, blogs, popular entertainment and websites. For example, a dating website metaphor was used for a module that helped learners match their customers with the perfect suncare product based on their summer profile.

Development streamlined

To ensure they remained responsive to the needs of learners and the business, the e-learning team aimed to make the department stronger, simpler and more efficient. They devised a rapid methodology to produce short, sharp modules with a consistent navigation structure which learners loved. A consistent template and guided scripting document, populated by subject matter experts (SMEs), reduced build time to just one day. The simple but impactful five-minute e-learning modules produced supported the most important new product launches, equipping colleagues with the information they needed.

Existing processes were reviewed with 'lean' principles in mind and a toolkit developed to ensure the e-learning was based on learning requirements that added value to the business. This amplified the learning and enabled faster project completion.

Tailored experience

This year Boots has focused on moving from a generic approach to making e-learning relevant to each user's role, which saves colleague time and consequently money. Profiles are tailored to location and business area - store colleague, support office, and so on. In addition, an Accelerators section (the Boots term for the initiatives that support the company's strategic goals) is part of everyone's learning plan. Assigned modules support these goals to the Accelerators so that learners can easily find these key modules and any key products/initiatives for the month.

New solutions

An ? Can at Boots' website was launched in April 2012 to transform the way

colleagues in the support office access learning, development and recruitment. The

changes included:

* creating a different and inspiring look and feel that promotes exploration and increases colleague Ownership' of their personal development;

* following the '70:20:10' framework, with a shift from formal to on-the-job learning, self-management and learning from others;

* enabling employees to access resources based on their work level and area of interest to make the experience personal and relevant;

* enabling students on graduate year and work inspiration programmes to access

the website before joining to create energy and enthusiasm for how Boots develops its people.

Charity support

In 2012 Boots UK launched its Macmillan information pharmacist e-learning.

Boots pharmacists volunteer to be trained as a local source of advice and support to people suffering with cancer. This e-learning is a major part of their training and without it the scheme would not be possible using a face-to-face approach. This supports a strongly aligned empowered and engaged team.

After just a couple of months of the programme being live, Boots UK had 186 trained Macmillan information pharmacists.

The gains

Boots UK's L&D helpdesk supports 95,000 users. The team's initiatives have halved the number of helpdesk callers asking for support to 1 %. This call reduction comes as a result of systems being more reliable and easy to use and better-quality content, all of which contributes towards a stronger, simpler and more efficient organisation.

Nearly a third of all Boots UK staff completed a No7 e-training in the month of launch, which helped contribute towards a significant increase in sales in stores.

For a cough/cold product, Boots also saw a significant increase in sales after more than 30% of staff completed the associated e-learning.

The e-learning content has seen a 19% increase in the number of accesses year on year, driven by users wanting to do more content because they feel more engaged and excited by it.

The new toolkit has enabled Boots UK's designers to increase their production capability by 133% compared with last year. It supports the generation of e-learning that offers more value to the business and is more in line with its strategic goals. It has allowed the team to build training tools to meet the needs of the business more quickly. The quality has also improved, production timelines have reduced and the team has developed stronger relationships with key stakeholders as a result.

Stores with a tailored learning experience had an average increase of 4.4% in their overall customer care measure scores and a 7.7% increase in product knowledge among staff.

The learners at Boots UK are passionate about e-learning, regularly giving modules five-star ratings and glowing comments on the LMS with a continuing high demand for new content.

Subject: Case studies; Drug stores; Online instruction; Goal setting

Location: United Kingdom--UK

Company / organization: Name: Boots Co PLC; NAICS: 325412, 325620, 446110, 446130, 452111, 454111

Classification: 6200: Training & development; 5250: Telecommunications systems & Internet communications; 8390: Retailing industry; 9110: Company specific; 9175: Western Europe

Publication title: E.learning Age

Pages: 14-16

Number of pages: 3

Publication year: 2013

Publication date: Jul/Aug 2013

Year: 2013

Section: awards case study

Publisher: Bizmedia Ltd.

Place of publication: Twyford, Reading

Country of publication: United Kingdom

Publication subject: Business And Economics--Computer Applications

ISSN: 14745127

Source type: Magazines

Language of publication: English

Document type: Feature, Business Case

Document feature: Photographs

ProQuest document ID: 1428803755

Document URL: http://search.proquest.com/docview/1428803755?accountid=38610

Copyright: Copyright Bizmedia Ltd. Jul/Aug 2013

Last updated: 2013-09-06

Database: ABI/INFORM Complete

Document 31 of 100

At the Heart of Integration: Aligning Physicians and Administrators to Create New Value

Author: Molden, Michele M; Brown, Charles L; Griffith, Bryan F

ProQuest document link

Abstract:

Because of its ability to create real incremental value for patients and providers, physician-hospital integration will continue to play a major role in transforming the way healthcare is delivered. Integration is more than a transaction, and without developing the right culture, new integrated organizations will struggle to transform their current model of care. Confronted with regulatory and specialty-specific environmental forces, cardiovascular physicians have integrated with health systems at a higher rate than other specialties have. In 2007, Piedmont Healthcare launched Piedmont Heart as the first integrated cardiovascular care delivery program affiliated with a community healthcare system in greater Atlanta. Piedmont Healthcare had successfully brought together hospitals and cardiovascular physicians in an organizational structure that allowed for the right culture, resulting in true integration and patient-centered care. Today, Piedmont Heart is one of the largest physician groups in the United States focused on delivering high-quality outcomes, aligning multidisciplinary cardiovascular initiatives, and allowing for smart, strategic growth. It has taken Piedmont Heart nearly five years to create new, incremental value from its center-of-excellence organizational structure, clinical pathways development, and Patient First program. Piedmont Heart had the advantage of starting earlier than many other physician-hospital integrated structures. As US healthcare moves from an industry driven by volume to one focused on value, it is organizations like Piedmont Heart that continue to drive smart integration forward and focus on innovation, despite potential disruption, that will be successful. [PUBLICATION ABSTRACT]

Full text:

Today's US healthcare system is com- plicated by silos that segment payers, hospitals, and physicians. It is incapable of providing the type of integrated and coordinated care across a continuum that drives incremental value for patients and healthcare organizations. To truly trans- form the U S healthcare system, greater alignment must occur between hospitals and physicians through clinical integra- tion. Change of any significance is almost always disruptive to the system it affects, as the components of that system are forced to alter current pro- cesses. Physician-hospital integration is no exception, and even with strong evi- dence confirming its ben- efit, transformative inte- gration can test the resolve of all parties involved.

Piedmont Healthcare (PHC), a not-for-profit, integrated care delivery health system in Georgia, recognized the potential to increase value through physician-hospital integration, specifically in cardiovascular (CV) services. In 2007, PHC created the Piedmont Heart Institute, now known as Piedmont Heart, an integrated entity based on a foundation of total alignment between physicians and hospitals. Initially forced to overcome numerous challenges, Piedmont Heart now serves as evidence that progressive innovation may initially be disruptive but ultimately delivers greater value to a health system and the patients it serves, and it is likely neces- sary to transform current models of care. The importance of breaking down silos in healthcare is broadly accepted, and the development of Piedmont Heart addresses only one type of silo. The US healthcare system's multi-silo culture will not go qui- etly into the night, and breaking the bonds of this traditional and hierarchical design will not be an easy task.

PHC views the path to transforming healthcare as two evolutionary curves. The first curve, which we refer to as Curve A, represents the rise and even- tual decline of an industry that makes no adjustments to address changing external forces and stakeholder demands. Curve A in healthcare is based on volume and is provider-centric, silo structured, and driven by fee-for-service payment. To remain viable, healthcare organizations must move to a new curve, a new way of operating-Curve B. This is the health- care industry's new model of success, based on value and integration that is pa- tient- and population-centric and driven by global or bundled payments for the outcomes achieved.

The gap between curves is significant. Healthcare organizations must learn to optimize performance in the current environment (Curve A) while preparing to move to a new, innovative way of operating (Curve ?). A powerful vehicle for change that spans curves A and ? is physician- hospital integration. Integration is neces- sary in both curves and may be a prerequi- site to transform healthcare delivery from Curve A to Curve B.

PHYSICIAN-HOSPITAL INTEGRATION

The term integration suggests a true align- ment of vision and goals between multiple parties. Because organizational transfor- mation requires an effectively integrated structure and culture, successful integra- tion is much more than just a transac- tion between hospitals and physicians. MedAxiom (2013) describes the integra- tion process as having three steps:

1. Transaction

2. Cultural integration

3. Creating value

Significant value from integration is gained only after the vision and goals of the integrated parties are aligned and a favorable and directional culture is established.

Background

The integration of CV physicians into hos- pitals and health systems has occurred as a result of national attention focused on the increased prevalence and resulting cost burden of CV disease in the United States. To lower costs, the Centers for Medicare & Medicaid Services significantly reduced Medicare reimbursement for CV imag- ing services. This reduction triggered the migration of CV physicians from the inde- pendent group practice model to hospital- based arrangements. A recent MedAxiom (2013) survey found a 253 percent increase in the percentage of CV physicians who in- tegrated with hospitals between the spring of 2010 and the fall of 2012. At 53 percent of all respondents surveyed, more CV phy- sicians are now integrated with hospitals than are not, with an additional 14 percent reporting that they are in the process of integrating.

PHC'S PATH TO INTEGRATION

Overview

In 2005, the Atlanta metropolitan CV service market was highly fragmented and competitive. At least three major health systems, including PHC, competed for CV market share. Multiple CV physician groups provided care across Atlanta, but few had significant geographic reach and even fewer were true CV multispecialty practices. Physician leaders from three prominent Atlanta-area CV groups began discussing potential integration strate- gies between their groups and between the groups and a health system partner. These physicians recognized that the other physician practices were not the enemy and, by working together, the combined group could create a more sustainable and more highly differentiated clinical practice that could achieve regional or national regard-a goal that would be extremely difficult to achieve as independent prac- tices. Representatives of the three inde- pendent CV groups approached the then chief executive of PHC and told him they wanted to merge into a single group and were looking for the right health system partner. This visionary executive immedi- ately let them know that PHC should be their choice.

PHC had a long history of positive physician relations through physicians' in- clusion on PHC's governing boards and in other positions of influence. The organiza- tion considered its current and future rela- tionship with physicians to be paramount and was prepared to offer employment to the interested parties. The strategy was a high-risk gamble because of the finan- cial investment and the potential impact it could have on organizational culture, but it also could produce great reward for patients and the health system.

After much consideration and due diligence, in mid-2007 the PHC board of directors approved the partnership, and the new entity was formally established in October 2007. As part of the agreement, PHC acquired three CV practices, thereby employing 62 cardiologists and 650 staff, and committed ongoing capital to expand CV services at its flagship tertiary hospi- tal in Atlanta, Piedmont Atlanta Hospital (PAH). The partnership represented an opportunity to create a world-class heart program for the region by instituting clini- cal excellence and a culture that promoted innovation, research, and teaching.

Piedmont Heart

Piedmont Heart is a physician-managed and physician-governed entity. The deci- sion to adopt this physician-driven struc- ture, and its corresponding demand for physician accountability, marked the be- ginning of the innovative decision making that propelled PHC and Piedmont Heart through the transaction and cultural stages of integration defined by MedAxiom and allowed the organization to create value early in its evolution.

As an independent entity within PHC, Piedmont Heart is responsible for com- prehensive CV service line management, including strategic planning, CV physician recruitment, education, research, clinic op- erations, finance and accounting, human resources, the revenue cycle, quality performance, philanthropy, and education. PHC hospitals and Piedmont Heart share responsibility for hospital-based CV ser- vice line operations. As Piedmont Heart's CV-related role within PHC expanded, it came to optimize capital investment, prevent the unnecessary duplication of services, and avoid unproductive internal competition.

Embracing Disruptive Innovation

The integration journey from Piedmont Heart's inception to today was far from smooth. One of the first priorities for Pied- mont Heart, and fundamental to its ability to move at a rapid pace, was to create a new Piedmont Heart culture, unique from the cultures of its founding physician groups and, in many ways, from the rest of PHC. The act of creating that culture was intentional and powerful, and the new culture was characterized by speed in execution.

While the rest of PHC found the up- start Piedmont Heart to be brash, reckless, and disrespectful of the traditions and rules of the old culture, Piedmont Heart saw the established organization as overly hierarchical, bureaucratic, risk averse, and slow to make decisions. Such conflict is expected in organizations that undergo disruptive innovation of this nature. After much dialogue, board interaction, con- flict management, and some downright uncomfortable years, the partnership between the hospitals and physicians, and often between physician and physician, grew.

Piedmont Heart assumed responsibil- ity for strategic and some operational CV decision making from PHC hospitals, including care processes, service ratio- nalization, capital allocation, and physi- cian recruitment. While decision-making responsibility shifted, income statement accountability between the hospitals and Piedmont Heart did not always corre- spond, resulting in a disconnect between revenue generation and the expenses necessary to drive that revenue.

This is a critical issue to resolve in the integration process. If the expenses required to operate the physician group are kept separate from the revenues they drive in the hospitals, there is a tendency to characterize these expenses as "losses." Instead, the expense to employ the physi- cians and manage the enterprise should be viewed as an investment and, when ag- gregated with the corresponding revenue, can result in greater benefit for the whole than was possible before integration. Un- less the expenses and the revenues are calculated together, the organization may not recognize the true value of the inte- grated enterprise. This lack of recognition leads physicians to feel that their contribu- tions are not valued and others to incor- rectly view the integrated organization as a financial burden.

PHC's acceptance of Piedmont Heart's role has increased as the system itself has focused more on integration and "system- ness." Many stakeholders, who did not see it before, now view the development of Piedmont Heart as a best practice for sys- tem service line development. For PHC, forming Piedmont Heart was an opportu- nity to create a sustainable care integration model that, once further defined, would serve as a model of clinical integration for other physician specialties.

Developing a positive new culture and integrating a physician-driven entity with hospitals can easily disrupt "the way we've always done it." Care must be taken to ensure a newly created culture is not a counterculture that disrupts the old and new businesses to the extent that neither is successful. Once conflict is resolved internally, the value produced through innovative integration models will trans- form the current, unsustainable healthcare model and help shift providers to Curve B, where patients and other stakeholders experience greater value.

INNOVATIONS THAT CREATE VALUE

Three areas in which Piedmont Heart is already creating incremental value are its center-of-excellence organizational struc- ture, clinical pathways development, and Patient First program.

Adopting the Center-of-Excellence Model

Piedmont Heart's first major innovation was a patient-centric center-of-excellence (COE) design. Rather than organize by functional departments, like a traditional hospital organizational structure, Pied- mont Heart physicians organized them- selves along a continuum of patient care by disease state or condition. Piedmont Heart's six COEs, shown as vertical bars in Exhibit i, are Arrhythmia, Advanced Heart Failure, Coronary Therapeutics, General and Preventive Cardiology, Structural and Valvular Heart Disease, and Vascular. Because of the matrix relationships inher- ent in Exhibit i, Piedmont Heart has input into most areas of PHC's CV operations and administration. Every COE meets monthly to further cultural and opera- tional integration in addition to collabo- rating on clinical and research priorities and tactical clinical issues. Each is led by a COE chief, who is accountable to a chief over all COEs. When physicians join Pied- mont Heart, they select a "major" COE on which to focus based on individual inter- ests, subspecialty training, and patient population served. Under certain circum- stances, physicians may also participate in a "minor" COE. In a move toward even more comprehensive integration, physi- cian extenders have recently been asked to form similar COEs.

COEs create a focused factory within a factory that results in real subspecialty depth of expertise and care standard- ization. For example, a physician who chooses to specialize in general cardiol- ogy is no longer allowed to perform even occasional interventions; similarly, an interventionist may no longer perform the occasional electrophysiology procedure. Furthermore, Piedmont Heart requires physicians to obtain subspecialty board certification to work in a major or minor COE.

Reducing variation in the type of care provided typically increases the quality of care and results in repeatability and reli- ability. At Piedmont Heart, moving away from "cardiac multispecialists" is neces- sary because the current state of complex- ity in medicine dictates that no one person can be an expert in many areas, and a shift toward specialization is operationally pos- sible because of the organization's scope and scale.

The COE structure brought physicians of similar specialties together and asked them to work as a team to identify and implement best practices. It took them away from the comfort of their legacy physician group practice, and by focusing on the COE, they moved from a physician- preferred decision-making paradigm to physician team-driven decision making. The COE structure was originally designed to get similar-specialty physicians talking and actively engaged. Once those relation- ships were formed, Piedmont Heart had to decide

* what the groups should be talking about,

* how their efforts should be aligned with both Piedmont Heart and PHC organizational goals,

* how to support the groups, and

* how to measure performance.

Piedmont Heart's administration now provides each COE with specific goals related to quality, education, definition of models and processes of care, and strate- gic growth. These goals include creating and implementing clinical pathways and furthering cultural integration and clinical education.

Piedmont Heart COEs have created new value for patients and the organiza- tion. For example, physicians within the Electrophysiology COE had once practiced eight different ways to dress a wound after an implant procedure. Variation was present not only between legacy physi- cian groups but also within those groups. Through the COE approach of review of evidence-based literature, group discus- sion, and discernment, there is now one best practice approach.

Other organizations interested in adopting a similar structure should be realistic about the time needed to estab- lish this type of structure and the neces- sary commitment of the physicians to achieve success. It is also important to select the right COE chief and identify the right focus areas early on so that COEs do not spend time developing lower-value solutions.

Defining and Developing Clinical Pathways

Piedmont Heart defines clinical pathways as comprehensive care management tools used across the inpatient and outpatient continuum of care. More than order sets, clinical pathways are meant to improve quality, reduce variation, and ensure appropriate care is provided efficiently. Essentially, a clinical pathway is a process flow diagram created from evidence-based guidelines and organizational standards or best practices for how to treat specific disease states.

PHC previously viewed clinical path- way development as order set develop- ment, and it measured compliance to clinical pathways by compliance to order set utilization. With the hiring of a direc- tor of clinical transformation in July 2 on, Piedmont Heart began to take a broader view of what pathways were, how they were developed, and the value they could provide. Piedmont Heart's work to develop pathways started with identifying varia- tions in care processes within the COEs and then moved on to COE subcategories. Each COE treats multiple diseases, which have numerous possible approaches to treatment, and potentially as many opin- ions on how that treatment should pro- ceed as physicians in the COE. To help organize and prioritize pathway opportu- nities, Piedmont Heart developed a "trunk and branch" structure, which works as follows: The trunk relates to a general dis- ease state oriented to a COE, such as heart failure. From that trunk, branches of the disease subcategories multiply until finally terminating in a detailed pathway, such as a left ventricular assist device versus cardiac resynchronization therapy device pathway. Because each pathway takes time and resources to develop, building an en- tire tree-trunk and branches-may take two or more years.

While processes were initially identi- fied as variable on the subjective basis of perception, the approach quickly evolved to one that used objective data to identify the processes that actually suffered the most variation. Process variation is now measured by comparing physician-to-physician average resource utiliza- tion for a defined patient population. Through this analysis, Piedmont Heart identified specific care pro- cesses with significant vari- ation that would benefit from implementing a standard pathway.

Once consensus was reached on a general plan for developing Piedmont Heart pathways, the organization spent approximately four months collecting, analyzing, and interpreting data on patient care variation; recruiting Piedmont Heart leaders and COE chiefs as champions; and scripting pathway development meetings and messaging to all stakeholders. COE chiefs presented the concept of pathways to their respective COEs, the process by which to develop them, and specific pathway opportunities for that COE. Then, with multidisciplinary support from every clinical and nonclinical group that was part of the selected care continuum, the COEs began the difficult work of craft- ing detailed pathways. Each Piedmont Heart pathway development effort follows a structured and consistent approach of planning, analysis, design, development, education, implementation, and monitor- ing quality and outcomes. Pathways are iterative, and both their content and the method for developing them are continu- ally adjusted and improved.

The first pathways Piedmont Heart addressed were those with clear clinical variation and engaged COE members who were energized about and open to stan- dardizing care to drive increased value. Quickly evident through this work was the need for physician and care team member education about what pathway develop- ment is and is not-particularly that it is not order set development. Order sets are helpful to implement a pathway through technology but simply serve as a way to direct care through various stages of the pathway. As true wins have been achieved, the pathway development program has experienced increased buy-in within Piedmont Heart and within other PHC entities.

Piedmont Heart expects to have de- veloped at least seven CV pathways by July 2013. Examples of pathways already developed include same-day discharge (percutaneous coronary intervention), therapeutic hypothermia management for cardiac arrest patients, lipid management, and management of atrial fibrillation in cardiac surgery patients (Exhibit 2). Path- way work to date has focused on develop- ment; implementation is planned for the next fiscal year.

Depending on the process affected, pathways improve quality, cost, and rev- enue measures. Piedmont Heart expects to see significant cost reductions next year because of pathway implementation that reduces variation in care. Pathways are also expected to improve a variety of differ- ent quality measures that will be tracked separately. Once the pathways are implemented, compliance and success will be gauged by specific quality and efficiency measures, customized to each pathway. After PHC finishes implementing a sys- tem-wide electronic health record, pathway compliance will be centrally monitored so that variations from established pathways can be real-time teaching opportunities.

Piedmont Heart pathway development has been difficult and required significant resources. Efforts to standardize care processes can meet major roadblocks if an organization has not achieved a high level of physician engage- ment and collaboration, which are hallmarks of an integrated culture capable of creating value. We at- tribute Piedmont Heart's pathway success to the physician-hospital integra- tion model combined with strong physician collabora- tion and the management support to execute initiatives. To sustain current accomplishments and allow for expansion, the Piedmont Heart pathway development team will soon add dedi- cated financial, case management, and information services resources. Pathway development is a noteworthy milestone in Piedmont Heart's evolution because it underscores the commitment of the phy- sicians who came from different legacy physician groups to work together toward agreement on the single best way to care for a patient.

Piedmont Heart's journey to create clinical pathways continues today. The level of detail each pathway requires and the multitude of possible branches con- nected to a trunk provide ongoing oppor- tunity to add patient value. Most current pathways have been specifically developed for PAH, the largest and most complex of the hospitals within PHC. In the future, Piedmont Heart pathway champions will work with all PHC hospitals to review ap- plicable pathways, adjust them if necessary to accommodate fundamental and accept- able process variations, and support their implementation and maintenance. Pied- mont Heart's work on CV pathways is now considered best practice within PHC, and other clinical service lines are actively con- sidering how to develop similar programs.

Putting Patients First

Most CV physicians divide their time among making clinic visits, performing office- and hospital-based procedures, reviewing diagnostic study results, and rounding on inpatients. That fragmented approach preserves the individual physi- cian's "ownership" of the patient, but it often results in inefficient time usage and does not encourage physicians to "play to their strengths" and work as an integrated team.

Piedmont Heart recognized that the quality of CV services at PAH, which made up at least 40 percent of hospital volume, could be improved, in part by minimizing the chances that physicians' attention would be diluted by juggling multiple responsibilities. Additional focus was needed to improve patient outcomes, patient satisfaction, physician extender and other CV clinical team satisfaction, and the management of care throughout an acute episode. Toward this end, Piedmont Heart's leaders sought to determine whether many physicians should continue doing many different activities, often during the same day, or if a few physicians should specialize in their area of greatest skill and focus their day on a single type of patient care activity.

After careful evaluation, Piedmont Heart's leaders recognized the need to redesign the way care was provided in the hospital to put the patient first. The approach was to rationalize how physicians spend their time caring for patients through a coordinated medical care delivery team model. The resulting program, called Patient First, requires detailed coordination between Piedmont Heart and PAH, the physicians' buy-in to the idea of trusting their partners to manage Piedmont Heart patients as a team, and establishment of clear roles and responsibilities for the entire medical care team. A physician may not always care for "her" patient, but she retains the patient's overall care management. Each member of the clinical team had to understand his or her role in the care of a patient, with the CV physician serving as the "captain of the ship." Patient First sought to improve CV patient care by decreasing inpatient average length of stay, decreasing inpa- tient readmission rates, decreasing ad- mission time for CV patients from the emergency department, increasing patient satisfaction, and decreasing the rate of no-response-on-admit order status. All of these measures contribute to deliver- ing a seamless continuum of high-quality patient care.

The Patient First program-probably the most dramatic change implemented through Piedmont Heart-provides dedicated CV coverage around the clock for PAH, similar to the way a CV hos- pitalist program would operate. Patient First physicians follow a master schedule that assigns them to specific CV service responsibilities in weekly rotations. First conceived in late 2010, Patient First ran multiple pilots starting in April 2 o 11 before formally going live in January 2012. For such a drastic change in the way hospital CV care is delivered, from concep- tion to implementation, the decision and development cycle time was very short. Patient First was successful because, as an integrated organization, Piedmont Heart was designed to allow quick and nimble decision making wherein all major stake- holders are at the table with common goals-uncharacteristic of a large institu- tion that is vertically oriented.

Developing Patient First was a com- plex, patient-centric physician scheduling exercise. A sample schedule appears in Exhibit 3. Each week the schedule rotates. If they are not included in the Patient First weekly schedule, physicians are assigned to the clinic, operating or procedure rooms, diagnostic study reading schedule, or time off. This scheduling process helps Piedmont Heart utilize and balance its resources to avoid the potential conflict of multiple physicians trying to perform the same activity on the same day when physi- cal capacity does not allow it and patient volume does not demand it.

Taking into consideration a matrix of resources, necessary tasks, and projected volume, Piedmont Heart's Patient First program creates weekly physician sched- ules for Medical Cardiology, Interventional Cardiology, Electrophysiology, Cardiac Critical Care, and CV Imaging services. Each week, for the entire week, CV physi- cians are assigned to one of these services on the basis of his or her Piedmont Heart CO ? affiliation. Patient First physician scheduling is managed by a team of physi- cians and administrators who create the schedule based on physician preference and patient need. The scheduling team posts each schedule at least six months in advance and serves as the point of contact to manage scheduling request changes and adjust physician schedules when pa- tient volume increases or decreases.

By changing the fundamental ap- proach to a week's worth of work, Pied- mont Heart allows a physician to focus attention on one or two activities rather than trying to manage multiple uncoor- dinated tasks related to a patient's care. The physicians on the hospital units are available to answer questions from patients and families, support the nurs- ing staff, and schedule and coordinate tests and discharges, thereby facilitating an efficient process of care and reducing unneces- sary waiting or holding generally experienced by patients during inpatient stays.

Transformative care models often expand the role of nonphysician providers to reduce costs and increase efficiency and access. Given the need for better coordination across the continuum of care, potentially significant physician shortages in the coming years, demographic trends including the aging of the population, and potentially many more Americans gaining access to health coverage through health reform, physician extenders must be used to the full extent of their license. In Piedmont Heart's Patient First program, physician extenders play a key role in enhancing coordination be- tween multidisciplinary clinicians and sup- port personnel. They contribute to more efficient and more standardized processes, patient education, and family communica- tion. Physician extenders are critical to the success of Patient First and are scheduled to overlap with a physician to ensure con- tinuity of care for the patient and effective handoffs between physician rotations.

The Patient First program ensures patient- and family-centered care and improves ease of access. Physicians find value in the program because it improves teamwork and communication. It creates shared accountability for CV patients yet preserves the personal patient-physician relationship. PAH has been very pleased with Patient First results and the service it provides to its patients and its clinicians, in part because having a CV physician available when needed aids timely deci- sion making and education. Because of its success, Piedmont Heart will continue to optimize and expand the Patient First program. Opportunities to optimize the current operation include the following:

* Expanding the program to weekends

* Improving the handoffs between weekly care teams from one week to the next

* Reducing the variations in care processes within and between the weekly teams

* Incorporating Piedmont Heart's cardiac, vascular, and thoracic surgeons in a modified Patient First weekly schedule

Beyond PAH, the Patient First program can be expanded in a modified form to the other PHC hospitals for acute care and, eventually, to Piedmont Heart clinics across the health system to improve care along the continuum. Creating a program like Patient First requires an evolved and highly integrated physician-hospital rela- tionship. A Patient First-type structure in a traditional practice model would signifi- cantly challenge that organization, so it is important not to attempt change of this nature until the culture of the integration effort has some tensile strength. Effective communication and change management are also required to support an initiative of this magnitude.

POTENTIAL FOR FURTHER INTEGRATION

To date, integration at Piedmont Heart has focused on hospital-to-CV-physician, physician-to-physician within the same CV specialty, and physician-to-physician across CV specialties. Because of the co- morbidities of many CV patients and the need for a team approach to care driven by the extensive specialization in medi- cine today, Piedmont Heart physicians will need to better and more formally collaborate and coordinate with non-CV physicians outside Piedmont Heart. Clini- cal pathway development is a multidis- ciplinary exercise that, as it expands, not only will require physicians from other specialties to assist in creating pathways but also, through standard processes and increased communication, will better align the various specialties. Piedmont Heart will soon be partnering with other PHC specialties in joint program development, such as Erectile Dysfunction with Urology, Lung Cancer Screening with Piedmont Heart's Thoracic Surgery practice, and Women's Heart Health Clinic with Obstet- rics/Gynecology. Finally, as PHC focuses more on population health, Piedmont Heart will help to develop better vehicles to transition patients along the continuum of care and manage their health outside an acute care setting.

LESSONS LEARNED AND CONCLUSION

A willingness to explore disruptive innova- tion that may not fit within today's model of care will become a key characteristic of successful healthcare organizations in the next five years. Innovative solutions to healthcare's biggest and toughest chal- lenges are not always workable or broadly accepted in today's infrastructure, and even when successfully implemented they can be highly disruptive. At PHC, the real disruptive innovation of Piedmont Heart was putting physicians in charge of man- aging the clinical enterprise within the walls of the hospital. The direct involve- ment of physicians in all aspects of pa- tient care, along with their administrative counterparts, improves quality and drives increased value. As physicians become "owners" of the process and outcomes, they make better clinical and administra- tive decisions than nonclinical adminis- trators could possibly conceive or imple- ment. By continuing to push innovative initiatives, such as patient-centric clinical integration, forward, even when it causes disruption, value will be created that was never possible in the old model of care.

In retrospect, the innovative disruption of Piedmont Heart might have been bet- ter mitigated if we had known how much disruption would be introduced. Piedmont Heart could have practiced better conflict management, more quickly broached difficult communication, and established a better set of expected outcomes at the start so that expectations regarding authority and accountability would have been better managed. Overall, the experience of Piedmont Heart has enlightened PHC to the power and potential of alignment with physicians. It has produced a far better clinical product than was delivered prior to integration, as evidenced by better quality and service outcomes. Healthgrades has ranked Piedmont Atlanta Hospital as Best in Atlanta for overall cardiac care, cardiac surgery, and coronary intervention for two consecutive years. Piedmont Heart is proud to have more cardiologists ranked Top in the Nation by U.S. News e[ World- Report than any other hospital in Atlanta.

Physician participation in improving clinical processes and structuring care delivery has truly transformed both the tra- ditional physician practice and the hospital operation. In the near future, PHC will be taking what it has learned in CV and ap- plying it to other clinical service lines.

Time is the integration regulator. Rela- tionships cannot be built and innovations conceived and implemented overnight. They take time. It has taken Piedmont Heart nearly five years to create new, incre- mental value from its CO ? structure, clini- cal pathways, and Patient First program. While Piedmont Heart had the advantage of starting earlier than many other physi- cian-hospital integrated structures, the organizations that keep pushing integra- tion forward in a thoughtful way and con- tinue to seek innovation, despite potential disruption, will be successful.

Subject: Integration; Health care delivery; Case studies; Cardiovascular disease; Physicians

MeSH: Cardiology Service, Hospital, Georgia, Humans, Organizational Case Studies, Organizational Culture, Delivery of Health Care, Integrated (major), Hospital Administrators (major), Hospital-Physician Relations (major), Quality Improvement -- organization & administration (major)

Location: United States--US

Company / organization: Name: Piedmont Heart Institute; NAICS: 621111

Classification: 9110: Company specific; 8320: Health care industry; 9190: United States

Publication title: Frontiers of Health Services Management

Volume: 29

Issue: 4

Pages: 3-16

Number of pages: 14

Publication year: 2013

Publication date: Summer 2013

Year: 2013

Section: FEATURE

Publisher: Health Administration Press

Place of publication: Ann Arbor

Country of publication: United States

Publication subject: Public Health And Safety, Health Facilities And Administration, Business And Economics

ISSN: 07488157

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case, Journal Article

Document feature: References Graphs Tables

Accession number: 23858984

ProQuest document ID: 1382044256

Document URL: http://search.proquest.com/docview/1382044256?accountid=38610

Copyright: Copyright Health Administration Press Summer 2013

Last updated: 2014-03-10

Database: ABI/INFORM Complete

Document 32 of 100

Volume to Value

Author: Leaver, William B

ProQuest document link

Abstract:

Traditional fee-for-service medicine has put physicians on an unsustainable treadmill of volume that escalates healthcare costs regardless of the quality of care they provide. This article shares the experience of UnityPoint Health (formerly Iowa Health System) in designing and implementing patient-centered, physician-led, coordinated care as a building block for transforming the delivery system. Keys to the effort's success include aligning physicians, hospitals, and home care delivery in terms of organizational goals and having the ability to gather, analyze, and share data to manage population health. On April 16, 2013, Iowa Health System became UnityPoint Health, dedicated to transforming the delivery of care through a coordinated system that offers regional, organized systems of care in most of our markets in Iowa and Illinois. These capabilities allowed the system to enter into value-based accountable care organization contracts that cover more than 220, 000 lives. The transition ultimately will lead to population health-driven approaches in which compensation will be based on the management of specific populations or chronic diseases over a specified period. As increased value from care coordination becomes clear, the external environment will demand this better system, and patients will expect it. [PUBLICATION ABSTRACT]

Full text:

WILLIAM B. LEAVER, FACHE

MOVING FROM VOLUME TO VALUE

Traditional approaches to contain costs by reducing unit prices only encour- age providers to increase units. Chang- ing the environment from an episodic, fragmented, hospital-centric care delivery system to one that is patient centered and led by physicians shifts the focus of care provision from volume to quality out- comes. An environment characterized by coordinated care achieves better outcomes and lowers the costs of care. Coordinated care not only increases value but also provides strategic channels for reimbursement.

Early in 2008, UnityPoint Health (for- merly Iowa Health System) publicly recognized that healthcare in the United States, as it was currently being delivered, would not be sustainable. A delivery system that was fragmented, episode focused, and paid on volume could not address both an increase in Medicare beneficiaries and double- digit health cost inflation without putting programs, patients, and the federal budget in jeopardy.

At that time, the following character- ized healthcare delivery:

* Fee-for-service medicine had driven primary care physicians onto a treadmill of volume, which, by definition, does not place the individual patient at the center of care.

* Patients were being shuttled between silos of care (or sites of care) without coordination between clinicians.

* A small portion of our patients-those with chronic health conditions- consumed half of our existing resources.

As one of the nation's largest nonprofit healthcare systems, we chose not to adopt a "wait and see" approach regarding health- care reform. Rather, we actively forged solu- tions and created innovative approaches to transforming care delivery and payment reform. With the support of our board of directors, we embarked on our integra- tion initiative, knowing that this approach would entail some risk and that we might ultimately create a better delivery model without a payment system to compensate it.

As we are all too aware, our current health system is complex and difficult for most to understand, even for those who work within it. We believed that transformation to a better delivery system depended on changing the payment struc- ture. Intrinsically, fee-for-service payment, which is reimbursed regardless of the quality of outcome achieved, will continue to escalate costs. In the past, public and private payers tried to control costs by focusing on the unit price paid for the services delivered. The natural economic reaction of providers, when their unit price is steady or decreasing, is to produce more units of service to maintain their revenue. For a primary care physician, this shift triggers a treadmill effect: Each year, primary care physicians must see more patients each day to maintain revenue to support their practice.

This economic cycle must be broken to stabilize or curb the costs of healthcare. To do so, the system has to move away from volume and toward value as a basis for payment.

WHERE TO BEGIN?

Our senior leaders began the discussion by considering how to position UnityPoint Health for a future environment that would not reward volume or, at the very least, would pay a lot less for that volume. We focused first on how to ease the tread- mill effect on our primary care physicians.

We determined what specific factors were driving the high cost of care beyond a fee-for-service payment model. Certainly, waste and duplication of services were at play, but also at issue was a lack of coordi- nation of care for an individual patient be- tween clinicians and between silos of care.

A national study released in January 2012 by the Agency for Healthcare Re- search and Quality indicated that a small number of patients-those with chronic disease-account for 50 percent or more of total healthcare spending (Cohen and Yu 2012). Our silos of care-from physi- cian to hospital to home care or long-term care, all with different payment models and incentives-were preventing appropri- ate coordination of chronic disease.

So the future began to crystalize: If we could manage or coordinate care, pro- duce a better outcome and lower cost (i.e., better value), and get paid to do that, we might have the means to break free of the unsustainable economic cycle we faced.

Historically, UnityPoint Health has been a hospital-centric system, not unlike others across the country. To effectively coordinate care, we needed to begin with the patient and physician. Although the effective management of chronic disease depends on the patient complying with his treatment regimen, including diet, medi- cation, and exercise, managing chronic disease is a process complicated by mul- tiple factors. Our fundamental thesis is, if we increase the potential for interaction between the patient and the physician (or her staff)-the number of touches be- tween them-we likely increase the prob- ability of compliance and, hence, a better outcome. Lower cost is likely to follow.

In 2008, we changed our vision state- ment to a simple yet forceful phrase, "Best outcome for every patient every time," which served as a catalyst for declaring our intention to move from a hospital-centric system to a patient-centered, physician- driven system in 2009. The vision also was the building block on which we transformed our delivery system in that it conveyed the following:

* Our purpose for operating is clinically based.

* Our intention is to uniformly provide the highest level of care to our patients.

* Our patients and the work of our clinicians are more important than our finances and buildings.

We then built a road map (Exhibit i) to achieve our strategic intent, in which physician alignment was the key to our ability to create value, that is, to coordinate care. We launched our initiative with an impressive array of capabilities already in place: great hospitals, excellent physicians, a single home care company covering most of our regions, our own fiber-optic network connecting all of our employed physician clinics and hospitals, a call center staffed by nurses around the clock, and a common IT platform throughout our hospitals and clin- ics. Although our employed physician base (most of whom were primary care physi- cians) numbered about 700, those physi- cians operated in nine groups, each with its own billing system and management infrastructure. In short, we had many of the elements necessary for a different delivery model, but they were not integrated, were not focused on the same objectives, or did not operate under the same incentives.

The road map helped crystalize the path to a future delivery model and an under- standing that care coordination could not occur without physician alignment. It also built on our assumption that patients will first look to their physician for guidance, counsel, and answers. So if we desired to manage care across the continuum or be- tween silos, we had to put the patient and the physician at the center and build coor- dination capability around them. Because we realized that opportunities to demon- strate value or value-based contracting would appear at any time and not neces- sarily when we were completely ready, the road map was not assumed to be linear.

BRINGING THE CARE TOGETHER

Beginning in 2010, we pursued the cre- ation of a single physician enterprise across all of our regions, thereby bringing together our disparate employed groups. The ratio- nale was simple: First, our care coordina- tion brand would not be successful without a single physician brand. Second, we could not become physician driven if multiple voices were trying to influence our direc- tion. Finally, we would not transform our delivery model unless a singular physician influencer, along with other clinicians, was involved in that transformation.

The work involved in bringing our phy- sicians together could consume a separate article. Suffice it to say, 18 months of dis- cussion, debate, and persuasion ultimately helped us to determine a shared vision for future care delivery and to recognize that we would either succeed together or not at all. The development of our shared vision was helped by our decision to cre- ate the Physician Leadership Academy. Collaborating with the American College of Physician Executives, we developed a curriculum to help physicians learn and master leadership skills. It afforded us a great opportunity for deep discussion with our physicians about our future environ- ment and a sense of what it would take to be successful. In addition, it strengthened our collective sense that we were in this together. Our first leadership class gradu- ated in July 2011, and we are about to com- mence our third. The importance of the Academy in helping coalesce our physi- cians cannot be overstated.

We recognize this physician enterprise as a senior affiliate, equivalent to our hospital enterprises. Its CEO has a seat at the system executive table and on our par- ent board. Each region is treated equally regardless of size or revenue. Inviting this level of involvement sent a powerful, criti- cal message to our physicians.

We also have the advantage in most of our regions of operating a single, strong home care presence. Three years ago, we brought our home care services under a single operating entity with common management and a common focus. This shift helped drive home the concept of care integration so that we now can offer a regional organized system of care in most of our markets. Home care is a vital ele- ment in our care delivery model. The key is integrating all of our care coordinating capabilities, including home care, into the primary care office.

Recognizing that chronic disease patients most likely present with multiple comorbidities, we established the Advanced Medical Team (AMT) program in six of our eight regions to help physicians manage these complex cases. Led by care naviga- tors, the teams work with the referring physicians, home care services, and com- munity resources to deliver appropriate care in less acute settings than the emer- gency department (ED). The AMT pro- gram focused initially on treating patients suffering from chronic obstructive pulmo- nary disease, congestive heart failure, and the aftermath of heart attack. Now that the program is being advanced and refined, it is focusing on all chronic disease condi- tions. From scheduling regular appoint- ments with patients' primary care physi- cians to helping patients comply with their discharge instructions to arranging trans- portation for patients to keep doctor and therapy appointments, the care navigators help patients live healthier lives and avoid hospitalization or trips to the ED.

Some regions have also launched coor- dination projects to reduce nonemergency visits to EDs. The Consistent Care program at UnityPoint Health-St. Luke's Hospital in Cedar Rapids, Iowa, for example, targeted 103 frequent ED users and worked with them individually to help them obtain care from primary care physicians and even set up their initial appointments. In the first year of the program, those patients' visits to the ED declined by 68 percent (from 1'377 visits during the first nine months of 2on to 438 visits during the same period in 2012). The coordination among the St. Luke's team, primary care physicians, and community support organizations also is delivering significant savings in healthcare costs-$971,246 during the periods stud- ied. Today, 233 patients are participating in the program.

With these inroads, the care coordinat- ing capabilities began to come together to create value. We have begun to integrate this capability into our physician offices and patient-centered medical homes. One example is the integration of our call cen- ter capabilities. We maintain a call center in Sioux City, Iowa, known as My Nurse, that is becoming the first line of triage for our physician offices. When the system is completed, a patient will be able to call My Nurse at any time, including after physicians' office hours, when those calls are routed to My Nurse. The nurse who answers the call will be able to identify the caller as a patient of a particular physician and have access to the patient's electronic health record. The nurse can then tri- age the patient by phone and determine whether the patient needs to be seen im- mediately, how to manage the problem at home if appropriate, and so on. The nurse also will have access to the physician's schedule and can book an appointment or request a prescription refill.

The call center operation is expected to provide a great experience for our patients and great benefit for the physician. The doctor's on-call volume will be reduced, overall costs will be reduced, and out- comes will likely improve because we will be keeping the patient from visiting the ED and potentially being exposed to other illnesses.

INTEGRATING DATA

Driving our clinical transformation is our emphasis on the power of data. We have begun to gather claims data available through our current value-based con- tracts, and we are investing in software capability to merge the claims data with patient clinical data. With these tools, we are beginning to see a clearer picture of how and where our chronic disease pa- tients are receiving their care, and we are tracking the effects of those fragmented episodes of care on the patient's outcome. Those data help the physicians and other clinicians continually improve how we deliver care because they point to gaps in that care and where we need to bridge silos. Finally, we are beginning to learn what keeps patients healthier and enjoy- ing a better quality of life than they had experienced before.

VALUE BRINGS VOLUME

We define value as the best clinical out- come combined with the best patient experience at an affordable price. We want the patient to see the value that care coor- dination brings. In our case, care coordi- nation capabilities allow better access to and better navigation through the system, whether the patient needs directions to a specific location or a medical solution.

PREPARING OUR REGIONAL NETWORKS

As we built this coordination capability, the primary question that emerged was how to deploy it to all regions throughout our system.

In a multi-region system spread over two states, duplication and redundancy are likely to occur. With a keen under- standing of the significant resources required to create population health management and care coordination across our system, we wanted to standardize the approach as much as possible. We also appreciate that each region is different in terms of the structure of its medical com- munity. Examples of variations include the way in which primary care providers work with specialists, the ratio of indepen- dent to employed providers, and the size of specialty groups. Our approach needed to accommodate those practice differences to be successful.

As Exhibit 2 shows, we came to an understanding with our regional CEOs as to who is responsible for what activities in this transformation. Clearly, each CEO has responsibility for the continuum of care in her region, meaning she must de- cide which services are owned and which are outsourced and which community partners to collaborate with. We do not an- ticipate that UnityPoint Health will "own" all parts of the continuum of care in each region, so it will be necessary to partner or collaborate with a variety of other clini- cal providers, such as federally qualified health centers, community mental health centers, and long-term care facilities.

Physician alignment, on the other hand, is a shared responsibility through- out UnityPoint Health. To help the regions meet that responsibility and others, we developed standards for the AMTs, our call center, and other components of our care coordination capability. While our physician enterprise will determine overall clinical initiatives for the system and the transformation of our clinical practice environment (e.g., migration to medical homes), the deployment in each region will vary according to its community's cir- cumstances. For example, the number of employed physicians will vary significantly between regions.

Finally, analytics and contracting are conducted at the system level. As an ex- ample, investments in software to perform analytics are handled system-wide, rather than on an affiliate-by-affiliate basis. The analytics and contracting activities will keep evolving, so we want to ensure that we are migrating to best practices quickly and keeping pace in our capability. As we continue to roll out care coordination abil- ity, we want to be able to analyze claims data and be able to share those data with our providers as soon as they are available.

THE ACO TRANSITION

With the passage of the Affordable Care Act in March 2010 came the ability to participate in an accountable care orga- nization (ACO). We viewed the advent of the ACO-related Medicare Shared Savings Program as an opportunity, first and fore- most, to obtain claims data throughout all levels of operation at UnityPoint Health. Results from claims data are the only clear way for our clinicians to see the impact of silos on patient care, including the gaps in care and the impact other providers have on the patient's outcome. Combined with our clinical data, the claims data we gather will give us, for the first time, a clear picture of the patient's progress, or lack thereof, through the system of care and how chronic disease is managed.

The second opportunity with ACOs is the ability to assess the effectiveness of our coordination capability. We understood at the outset of our capability development that innovation would take place when we were treating real patients rather than operating under a theory or hypothesis of coordination. That understanding has led to greater recognition of what works and what does not.

With Trinity Regional Medical Cen- ter and Trimark Physician Group, in Fort Dodge, Iowa, among the original 32 pioneer ACOs, our system was an early adopter of the initiative. We also partner in the Medicare Shared Savings Program with Wellmark Blue Cross and Blue Shield, Iowa's largest private insurer, in operating an ACO in four regions. Col- lectively, these ACOs cover more than 220,000 lives.

Yet we view ACOs as a transition strat- egy to a more population health-driven system of care. The ultimate result will be an organization that is paid on an annual basis, by way of a global dollar amount, for the management of certain chronic diseases and other healthcare issues. All of the care coordinating capability we are creating now will be useful in that en- vironment. The ACO is simply a way to measure financially the value that is cre- ated through increased care coordination, care management, and the integration of clinicians around the care of the patient. It provides us a legal way to share sav- ings with our physicians, in particular our independent physicians. But because we still will be paid on a fee-for-service basis, I view ACOs as a transition strategy to something very different.

This transition period does afford us the opportunity to understand how we can better manage care and put together the pieces of the care continuum both to cre- ate better patient outcomes and to be able to measure those outcomes. It also gives us a structure by which to talk to employ- ers and to create a methodology with them that will benefit them and their employees.

Now, I predict that the challenge with employers will be that they will want to keep all the savings accrued from the coor- dinated care model. Our argument is that the capability to create those savings is achieved through the development of sig- nificant infrastructure at significant cost. We have made tremendous investments in care coordinating capability, and we need to be compensated for those investments, leading to a question of value-based con- tracting: "What are you really paying for?" Payment will be made for care manage- ment under a global, annual budget. Over time, risk will be shifted from the payer to the provider, reinforcing the need for organizations to share the savings from coordinated care.

Care coordination demands a strategic shift-not only of priorities but also of du- ties, team concepts, and channels through which to provide care. And change de- mands education. To address that need, we will soon be creating a curriculum in our colleges of nursing and health sciences to educate the inpatient nurse in providing care in other settings. And the more we educate, and the better job we do of it, the more we will break down the resistance to that change because people will see we are investing in them for the future. They will see the opportunities before them to do what they have always dreamed of doing: providing total care for the patients and patient populations we serve. No one should fear that better coordination of care will eliminate his job; instead, he should know that it will offer opportunities in our new model.

The challenge we still have is that the fee-for-service world has not kept pace with our innovation. The physician prac- tice business model has not yet changed significantly; physicians are still being paid on a fee-for-service basis for all the ancillary tests performed on equipment that they own and for other services. Nevertheless, we are committed to dramatic change, and we believe the groundwork we have laid for the transition will come in a flood more rapid than most expect. Once fee-for-service rates change, we will see dramatic changes for many individual providers, physician offices, and critical ac- cess hospitals. And once the change starts, it will advance more rapidly than most people expect.

Starting in 2on, payers dramatically reduced reimbursements to providers for procedures in nuclear medicine and cath- eterization. Those cardiologists who had previously been fiercely independent now wanted to be employed to salvage their in- come. In the future, if the government and insurance companies reduce unit rates- and we believe they will-a wholesale rush of physicians will be searching for oppor- tunities to align with hospitals and health systems.

Organizations in turn should be ready to accommodate these physicians. At Unity- Point Health, independent physicians can join our ACO, providing them a position from which to help govern and direct our care coordinating capabilities while allow- ing them to remain independent. They will still be rewarded for the value they contrib- ute to their patients while helping to direct change at the system level through opera- tions and governance.

CONCLUSION

Our system has been on a four-year journey to transform our delivery model. While we have made great progress, we still have a long way to go. Deploying the capability we have, tightening the align- ment with our physicians, and developing analytics are all in progress.

The greater learning is yet to come, and that is about ourselves, our role in a new world, and the way in which value will be recognized. Figuring out how to collaborate between traditional silos of care and reorient clinicians to a different view of their responsibility to the patient will all take time. Leaders must provide focus for others on the overall objective, prioritize where to start, and communi- cate the good work being done for our patients.

The difficulty we face as a profession is having one foot in a fee-for-service world as we are about to step into a value-based world. The payment environment will not transform in a nice, rational, straight-line fashion. As leaders, we need to navigate our organization toward a better system of care and not hang onto the old model. The external environment will demand this better system, and the early adopters will convince patients they should expect it. Or- ganizations that want to get every last bit of fee-for-service revenue are not serving their patients' best interests and will have to play catch-up well into the future.

Our physicians, nurses, and other clini- cians are inspired by the promise of doing something better for our patients and families. The transformation is under way. We can either lead or get out of the way. Our organization has chosen to lead.

Subject: Case studies; Name changes; Hospital systems; Health care delivery; Organizational change

MeSH: Accountable Care Organizations, Cooperative Behavior, Iowa, Organizational Case Studies, Organizational Innovation, Patient-Centered Care, Delivery of Health Care, Integrated -- organization & administration (major), Program Development (major)

Location: United States--US

Company / organization: Name: UnityPoint Health; NAICS: 621111, 622110; Name: Iowa Health System; NAICS: 622110

Classification: 9110: Company specific; 2310: Planning; 8320: Health care industry; 9190: United States

Publication title: Frontiers of Health Services Management

Volume: 29

Issue: 4

Pages: 17-27

Number of pages: 11

Publication year: 2013

Publication date: Summer 2013

Year: 2013

Section: FEATURE

Publisher: Health Administration Press

Place of publication: Ann Arbor

Country of publication: United States

Publication subject: Public Health And Safety, Health Facilities And Administration, Business And Economics

ISSN: 07488157

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case, Journal Article

Document feature: Maps Diagrams References

Accession number: 23858985

ProQuest document ID: 1382044250

Document URL: http://search.proquest.com/docview/1382044250?accountid=38610

Copyright: Copyright Health Administration Press Summer 2013

Last updated: 2014-03-10

Database: ABI/INFORM Complete

Document 33 of 100

revisiting gainsharing

Author: Berman, Lani

ProQuest document link

Abstract:

Gainsharing is an approach to improving processes and reducing costs that emerged in the healthcare industry in the late 19905, in which physicians' efforts to improve performance were rewarded with a share in the financial savings associated with those efforts. Legal obstacles to gainsharing materialized in 1999, however, when the US Department of Health & Human Services Office of Inspector General released a special advisory bulletin stating that the government could impose a civil monetary penalty, or fine, on a hospital that pays a physician or physicians for reducing or limiting services to Medicare or Medicaid beneficiaries under their care. St. Luke's modeled its program after the safeguards laid out in the other advisory opinions rather than applying for its own opinion. As a result of the program, St. Luke's was able to save a total of $11.2 million over the program's duration, from 2007 through 2012.

Full text:

Gainsharing is an approach to improving processes and reducing costs that emerged in the healthcare industry in the late 1990s, in which physicians' efforts to improve performance were rewarded with a share in the financial savings associated with those efforts. Legal obstacles to gainsharing materialized in 1999, however, when the U.S. Department of Health & Human Services Office of Inspector General (OIG) released a special advisory bulletin stating that the government could impose a civil monetary penalty (CMP), or fine, on a hospital that pays a physician or physicians for reducing or limiting services to Medicare or Medicaid beneficiaries under their care. In the OIG's view, such activity, prohibited under the anti-kickback statute, was an all-too-likely consequence of gainsharing arrangements. Broad adoption of gainsharing was effectively stalled by hospitals' concerns about incurring federal CMPs as a result of entering into gainsharing agreements with physicians.

The OIG subsequently issued a series of 14 gainsharing advisory opinions that provided guidance for hospitals, indicating that it would not impose sanctions so long as the arrangements meet certain criteria. The OIG requirements are stringent, but they are not insurmountable. The experiences of one hospital that modeled its gainsharing program after the OIG's guidance in the 14 advisory opinions offers clear evidence of how gainsharing can be effectively used to reduce costs, with respect to physician preference items, in particular.

Tracing a Gainsharing Program's Trajectory

St. Luke's Health System-an 864-licensed-bed health system in Boise, Idaho-implemented a five-year gainsharing program, based on the OIG's criteria, to lower costs in the three areas where it had experienced the highest spend: cardiovascular, orthopedic, and spine services. St. Luke's modeled its program after the safeguards laid out in the other advisoiy opinions rather than applying for its own opinion. As a result of the program, St. Luke's was able to save a total of $11.2 million over the program's duration, from 3007 through 2012.

Before implementing the gainsharing program, St. Luke's conducted an initial cost analysis, which disclosed that the health system was spending $39 million annually on supplies and implants for patients requiring coronary, cardiac rhythm management, open heart, total joint, and spine services. The health system's senior executives launched a gainsharing program with the goals of achieving more competitive pricing, applying clinical criteria around appropriate utilization, and engaging physicians to lead cost reduction and quality improvement efforts. They assembled a multidisciplinary gainsharing team to lead the initiative, which included hospital administrators, physicians, clinicians, supply chain managers, and the gainsharing program administrator. This team worked together to track clinical and supply data related to physician preference items and to share the data with physicians. To keep the project manageable, the team started small, focusing on the cardiovascular service line during the first two years of the initiative and addressing orthopedic and spine implants later.

To tackle cardiovascular service line costs related to physician preference items, the gainsharing team issued a request for proposal (RFP) to vendors asking them to match a specific price or agree to market-share price for these items. This one step resulted in St. Luke's saving $1 million during the initiative's first two years. In the third year, the system switched from two-year to one-year contracts for cardiovascular implants, saving another $1.25 million in the cardiovascular service line alone. The cardiology department now negotiates only one-year contracts with its high-dollar supply vendors because technology and pricing change rapidly, and they don't want to be locked into a long-term agreement.

During the initiative's third year, the gainsharing team began to address physician practice patterns and utilization. For example, physicians wanted to target a particular type of contrast used for certain patients during coronary angiography. Cardiologists drove down usage of higher-cost materials from 14 percent to 4 percent in the third year. The following year, they decreased usage by another 3 percent. By the end of the fourth year, 99 percent of cath lab patients were receiving a lower-cost contrast, while the quality of outcomes remained high and utilization continued to reflect best practices. The department also established utilization criteria for vascular closure devices, saving $80,000 in one year.

When St. Luke's extended the initiative to its orthopedic and spine practices, the annual savings grew to $7.5 million. The team focused on leveling prices for similar types of technology and on providing physicians with information to help them compare costs for similar products and different types of implants.

Tailoring the Gainsharing Program to Cardiovascular Services

The gainsharing team came to realize that even greater savings could be achieved by developing a unique approach for each clinical area participating in the gainsharing initiative.

For cardiovascular services, St. Luke's developed a market-share agreement in which vendors agreed to lower pricing in exchange for purchasing a higher percentage of product from them. In year three, the system signed contracts with three vendors rather than two for its cardiac rhythm management devices, in which St. Luke's made market-share commitments to purchase

60 percent of its devices from one vendor and 20 percent each from the other two vendors. In year five, the health system stopped working with one of the vendors and added another, negotiating market-share agreements of 70 percent with its primary vendor and 15 percent each with the remaining two vendors. Physicians were aware of their commitment levels and adhered to the agreements. St. Luke's also negotiated favorable contract clauses, such as prohibiting a vendor from increasing prices during a contract year if new technologies were introduced.

The RFP process included a review of product quality, vendor service levels, and cost-savings potential across the entire St. Luke's system. This process included an opportunity for physicians to request a new product or vendor, which allowed all physicians to tiy the product and provide feedback. Vendors were given a limited time frame to present their new technology or products to physicians. Physicians gave feedback about the service provided by the vendors' representatives. Cost savings were applied to various market share scenarios, which physicians and administration reviewed to understand the impact of their product selection decisions.

Having a gainsharing program in conjunction with an internal RFP process not only maximized savings, but also kept the health system on target for earning the best prices in the market. Health system leaders also gained critical insight into which vendors delivered not only competitive pricing, but also high-quality products.

Using the Right Joint Construct on the Right Patient

Turning its attention to joint implants, the St. Luke's gainsharing team-with physician support-decided to work with fewer joint implant vendors than previously in an effort to secure less variation in pricing. The team developed construct agreements in which the hospital purchases an implant and all associated hardware at a designated price rather than paying for each part individually, which tends to result in greater variability and can be more expensive. In selecting vendors for implants, physicians focused on 17 constructs: seven for total knees, five for total hips, and five for partial hips.

Since implementing the gainsharing program, the St. Luke's team has seen an improvement in the orthopedic surgeons' demand matching, or use of the right construct for the right patient. For example, when performing a hip replacement on a 90-year-old patient with limited mobility, surgeons typically do not use the same expensive, high-impact hip that would be used on a 40-year old patient who is an avid tennis player.

Holding the Line on Spine Implant Costs

Spine surgery was the largest implant expense spend area and the area with the highest potential for savings. From a cost reduction standpoint, it was also the most challenging of the gainsharing initiative's three areas of focus due to variations in practice patterns among physicians and the use of multiple vendors. The spinal surgery landscape also had changed in recent years, with new technologies and surgical approaches resulting in substantially expanded spine vendor catalogs. These factors, along with a highly variable case mix among patients, made standardization and construct pricing difficult.

St. Luke's addressed these factors by using gain-sharing as a collaborative vehicle for change. System leaders shared information with physicians to initiate active discussions around physician practice patterns. As part of this process, the team presented clinical and cost data to a formal group of physicians and administrators, who were responsible for the oversight and implementation of the savings initiatives. In addition, physicians became advocates and champions for implementing clinically based changes with their peers.

Physician and system leaders also discussed the impact of new technology and how to manage new technology needs collaboratively with physicians. To manage the myriad items in vendor catalogs, the goal is to move to an item-categorized capitated pricing model (meaning the system will only pay $210 for a pedicle screw, regardless of which vendor manufactures the screw, for example).

Recognizing That Gainsharing Is a Team Effort

The gainsharing program was a success largely because the health system recognized that a gain-sharing program should be collaborative, involving physicians, clinicians, department managers, and system leaders, rather than solely the responsibility of a hospital's purchasing and supply chain management departments. It was for this reason that St. Luke's leaders viewed creating a multidisciplinary gainsharing team as a critical first step for such an initiative. To ensure all participants remained engaged, the team met monthly or quarterly (depending on what stage they were at in the process) to evaluate clinical outcomes, vendors' service, and cost savings. During the meetings, the team discussed cost-savings scenarios and evaluated the pros and cons of different products.

The team immediately recognized that collecting and recording clinical quality and operational data for the gainsharing program would be one of the biggest challenges. The organization needed to make a commitment to securing accurate and timely clinical data, including patient demographics, co-morbidities, and outcomes, to ensure that these data improved or remained constant.

It was also important to compile physician data so physicians could compare their performance with that of their peers. Originally, the gainsharing team shared blinded data with physicians as a way to stimulate discussion. Initial concerns that physicians would not like these comparisons were quickly allayed. The data allowed physicians to compare costs to perform procedures in the context of clinical results. Over time, the team recognized the importance of updating the reports to make them more meaningful and to provide actionable results. St. Luke's received positive feedback about the comparative reports from the physicians, who then asked for the data to be unblinded.

To keep hospital administrators apprised of progress, the gainsharing team updated the system's heart and vascular board on a quarterly basis and gave the C-suite an annual progress report with details about dollar and percentage savings.

To help with contract negotiations, St. Luke's used a business intelligence solution to determine whether it was purchasing medical devices at a fair price. A benchmarking tool provides visibility into what hospitals across the country are paying for a similar product, allowing the hospital to negotiate more competitive contracts. For example, an organization may receive a 20 percent discount off the list price for an item. Hospital leaders might believe they are doing a good job on contract negotiations until they learn that other hospitals of similar size are purchasing the same product at a 50 percent discount and that most hospitals receive a 3o percent discount.

Transparency goes beyond sharing pricing and data with physicians and healthcare professionals. To comply with OIG requirements, St. Luke's also informed patients that their physicians were participating in a gainsharing program and that the products patients received from their physicians were purchased through this program. The health system wanted to assure patients that the medical devices and supplies being used were high-quality products.

Realizing the Full Potential of Gainsharing

Over the years, legal aspects of gainsharing have diverted attention from operational and outcomes aspects of these programs. As a result, many healthcare finance leaders may not know about the potential gainsharing programs offer for preserving physician choice, reducing costs, and improving quality.

Gainsharing does not limit physician choices. There is a misperception that in a gainsharing initiative, the supply chain management department tells physicians they have to use a less expensive product, regardless of quality. In fact, St. Luke's involved physicians early in the process to evaluate products and decision-making criteria. With this physician input, the system was able to move to construct agreements, in which the hospital purchases an implant and all associated hardware at a specific price, and capitated pricing, where it is ultimately up to the physicians to decide which products to use.

Savings do not plateau after the first year. It might seem that after initial reductions, savings would plateau after the first year, but this isn't true. St. Luke's implemented a successful gainsharing program for five years and found that savings varied each year, depending on complexity and the sensitivity of the initiative. Indeed, this result is more in line with what should be expected from a dynamic gainsharing program that introduces new steps and targets each year, as opposed to simply paying physicians for the same savings each year, which is contrary to OIG guidance.

Physician payment does not drive engagement. According to one member of the gainsharing team, one of the top reasons why physicians joined the program was to ensure the purchase of high-quality products that could save the hospital money, and in turn, save patients money. The latter is important because insurance companies and Medicare pay only for a portion of procedure costs and patients are responsible for the balance. At St. Luke's, savings were split between the hospital and the physicians: 45 percent went to the hospital, 45 percent went to the physicians, and 10 percent went to an educational fund for staff training.

Gainsharing programs should include private practice and employed physicians. Contrary to popular belief, physician employment alone does not result in high-quality, cost-effective care. Gainsharing actually works well in health systems that have private practice physicians or a mix of both employed and private physicians. The key is securing physician buy-in and a shared commitment to cost savings and quality improvement efforts.

Cost savings and high-quality care go hand in hand. Regardless of whether an organization opts for a gainsharing or shared-savings program, it needs to demonstrate that patient outcomes either improve or stay the same. Collecting clinical data not only helps ensure that clinical quality is maintained, but also supports new collaborative programs with physicians.

Gainsharing Evolves

Gainsharing has not gone away; it has simply become part of larger initiatives. Today, gain-sharing is rarely a stand-alone program. It is a core element in broad Centers for Medicare & Medicaid Services (CMS) initiatives aimed at promoting accountable care organizations (ACOs) and bundled payments. Recent government opinions about gainsharing are no longer limited to discussions of rewarding physicians for cost savings efforts, but now also address rewards for performance improvement and patient satisfaction. For example, the most recent OIG advisory opinion, issued in December 2012, approved a comanagement agreement that included a performance bonus program that would reward physicians based on their scores for patient service, quality of care, and cost savings.

At a time when hospitals are being asked to redouble their efforts to cut costs and improve quality, they should take a second look at gain-sharing because it provides a framework for them to work with physicians on both fronts. Whether it is through establishing comanagement agreements, employing physicians, or forming ACOs, gainsharing rewards collaboration toward improvement. ·

Subject: Hospitals; Case studies; Cost reduction; Financial performance; Physicians

MeSH: Idaho, Organizational Case Studies, Quality Improvement, Cost Savings (major), Efficiency, Organizational -- economics (major), Hospital-Physician Relations (major), Physician Incentive Plans -- economics (major)

Location: United States--US

Company / organization: Name: St Lukes Health System-Boise ID; NAICS: 622110

Classification: 9110: Company specific; 8320: Health care industry; 9190: United States

Publication title: Healthcare Financial Management

Volume: 67

Issue: 7

Pages: 62-7

Number of pages: 6

Publication year: 2013

Publication date: Jul 2013

Year: 2013

Section: CASE STUDY

Publisher: Healthcare Financial Management Association

Place of publication: Westchester

Country of publication: United States

Publication subject: Health Facilities And Administration

ISSN: 07350732

CODEN: HFMAD7

Source type: Trade Journals

Language of publication: English

Document type: Feature, Business Case, Journal Article

Accession number: 23875507

ProQuest document ID: 1420509267

Document URL: http://search.proquest.com/docview/1420509267?accountid=38610

Copyright: Copyright Healthcare Financial Management Association Jul 2013

Last updated: 2014-03-10

Database: ABI/INFORM Complete

Document 34 of 100

The accelerated internationalization of born global firms: a knowledge transformation process view

Author: Huang, Hsiu Ying; Hsieh, Ming Huei

ProQuest document link

Abstract:

Purpose - This study aims to employ a knowledge-based capability approach to explore how born global firms accelerate their internationalization. Design/methodology/approach - The paper adopts a qualitative in-depth case study approach. Various types and sources of data were collected to provide a rich and solid foundation for theory development and data triangulation. These comprised semi-structured interviews, field observations and archival material. Findings - The findings show that the transformation process of international knowledge may more adequately account for the difference in internationalization at conventional globals and born globals than the "indigenous" knowledge resource, i.e. founder experience. Born global firms accelerate their internationalization process through a three-stage transformation process: knowledge acquisition and dissemination, knowledge integration, and knowledge institutionalization. Two underlying knowledge mechanisms are identified: vertical and horizontal knowledge thrust. Originality/value - The knowledge transformation process constitutes the basis of "acceleration" of born globals' internationalization. The speed of a born global's internationalization is rooted in its ability to transform internationalization knowledge resident in individual employees into organizational strategies and operational procedures. The finding bridges the gap by identifying effective organizational mechanisms in management of the knowledge process. The "speed-up" mechanism identified in this research can equip born globals as well as conventional globals with the ability to respond quickly in a dynamic international environment.

Full text:

Introduction

Past research suggests that firms usually broaden their international involvement as they gradually gain experience and knowledge about foreign markets. This gradual strategy of internationalization is conceptualized in the Uppsala internationalization model ([16] Johanson and Vahlne, 1977). However, an alternative internationalization pattern undertaken by so-called born global firms (hereafter "born globals") has emerged and become widespread in recent decades. Without taking the gradual approach of internationalization typically adopted by conventional global firms, born globals engage significantly in international activity soon after their establishment. Because most born globals are relatively young and resource-scarce compared to their larger global rivals ([9] Freeman et al. , 2006; [20] Knight and Cavusgil, 2004), their accelerated internationalization has drawn substantial research attention ([39] Rialp et al. , 2005).

Substantial research progress has been made in explaining the appearance of born globals and the drivers behind the born global phenomenon (e.g. [21] Knight et al. , 2004; [35] Oviatt and McDougall, 1994). For example, among important drivers that have been identified are the environmental factor of the trend towards globalization, and organizational factors such as global orientation and founder experience. Despite the significant progress made, scholars still find the existing explanations for born globals' accelerated internationalization to be insufficient ([2] Chetty and Campbell-Hunt, 2004; [15] Jantunen et al. , 2008). Recently, some scholars have advocated a capability approach as a way to more adequately explain the born global phenomenon (e.g. [43] Weerawardena et al. , 2007). Because knowledge-based capability has been identified as influential in the internationalization process of a firm ([39] Rialp et al. , 2005), this study examines how knowledge-based capability facilitates born globals' internationalization.

This study particularly focuses on the knowledge transformation process within born globals. A firm can create value through a knowledge transformation process, which translates the knowledge into concrete strategies and actions for producing goods and services ([12] Grant, 1996a; [22] Kogut and Zander, 1992). In the context of global firms, a global firm can turn its international knowledge into global strategies and actions to serve a global market and thus facilitate its internationalization. Though the importance of knowledge-based capability in the internationalization process of a firm has been underscored by both the Uppsala model and research into born globals ([10] Gassmann and Keupp, 2007; [17] Johanson and Vahlne, 2003; [24] Liesch and Knight, 1999), few studies have explored the knowledge mechanisms behind the knowledge process ([8] Foss and Pedersen, 2004). Following this line of research, this study attempts to explore how the knowledge transformation process and its underlying mechanisms facilitate a born global's accelerated internationalization.

Given that market knowledge plays an important role in the internationalization of a firm ([27] Madsen and Servais, 1997; [16] Johanson and Vahlne, 1977) and that a firm's marketing/product strategy typifies its knowledge capability, this study focuses on examining the knowledge transformation process in the context of the global marketing strategy development process within a born global. Because most born globals adopt a global niche strategy in international markets due to resource constraint and small firm size ([19] Knight and Cavusgil, 1996), we conduct an in-depth case study of a born global porcelain firm, Franz Collection Inc. (Franz), originated from Taiwan, an emerging economy in Asia. The firm has adopted a global niche strategy to rapidly penetrate multiple markets soon after its establishment. As such, it provides a solid basis for the research subject of our study.

Field evidence reveals that the internationalization of born globals is accelerated by an efficient knowledge transformation process. It is a three-stage process comprised of knowledge acquisition and dissemination, knowledge integration, and knowledge institutionalization. The knowledge process assists born globals in accelerating their internationalization by rapidly transforming individual-level knowledge into organizational-level knowledge. More specifically, the born global transforms the tacit international market/product knowledge resident in employees into explicit firm strategy and concrete working procedures. Two accelerating mechanisms underlying the knowledge transformation process have been identified from the study. One mechanism is vertical knowledge thrust, which enhances transformation efficiency by shortening the time and effort for identifying and transferring critical internationalization knowledge across the firm. The other is horizontal knowledge thrust, which improves transformation effectiveness by furnishing the firm with the innovative and adaptive ability to respond to the dynamic global environment. These two accelerating mechanisms allow a born global to efficiently and effectively reap the benefits of its knowledge at minimal cost and drawing minimally on resources ([9] Freeman et al. , 2006), and thus enable a born global to leapfrog the long and incremental internationalization process that is the norm in conventional global firms.

Theoretical background

Born globals

Born globals, or international new ventures, are those firms that engage heavily in international activities since, or near, their founding ([20] Knight and Cavusgil, 2004; [30] Moen, 2002; [35] Oviatt and McDougall, 1994). Their immediate and significant international involvement after founding is in contrast to the conventional gradual/stage development process. The Uppsala internationalization model ([16] Johanson and Vahlne, 1977) is a representative internationalization model for conventional global firms. This conventional model offers that global firms typically take a step-by-step strategy in their international involvement, which means they have usually accumulated a lot of the necessary internationalization resources and experience before starting global activities. Born globals usually face the constraints of small scale, and scarce resources and capabilities ([9] Freeman et al. , 2006; [24] Liesch and Knight, 1999) and these constraints make their accelerated internationalization even more salient ([43] Weerawardena et al. , 2007); therefore, their unconventional pattern of internationalization process has attracted greater research interest in recent years ([39] Rialp et al. , 2005).

Past researchers in this area have focused on the drivers behind the internationalization of born globals. At least three factors have been identified as major driving forces: one is the globalization trend, which creates a global market opportunity for international firms; and the other two are global orientation and founder experience. The globalization trend, fueled by technological innovation, engenders the firm and its managers working in an increasingly complex and dynamic global environment ([27] Madsen and Servais, 1997; [25] McDougall and Oviatt, 2000), where speed and flexibility are the basic requirements for the firm. Global orientation refers to a global mindset, seeking and exploiting international market opportunities worldwide ([1] Burpitt and Rondinelli, 1998; [20] Knight and Cavusgil, 2004). Finally, the founder's experience, especially prior industry experience and networking ties, is a critical source of international knowledge which contributes to the acceleration of a born global's internationalization ([27] Madsen and Servais, 1997; [36] Oviatt and McDougall, 1997; [38] Reuber and Fischer, 1997).

However, recent research has found the previous explanation for born globals' accelerated internationalization to be insufficient. For example, empirical studies by [2] Chetty and Campbell-Hunt (2004) and [39] Rialp et al. (2005) found no distinctive difference in terms of founder experience between born globals and non-born globals. Furthermore, global orientation has also been identified as an important characteristic in conventional global firms (e.g. [47] Zou and Cavusgil, 2002). Similarly, the globalization trend benefits both born globals and non-born globals in their internationalization process. Therefore, it seems that the mechanism underlying the accelerated internationalization process remains unclear.

Knowledge and knowledge-based capabilities at born globals

Knowledge can be categorized into explicit and tacit knowledge in terms of its transferability ([13] Grant, 1996b; [22] Kogut and Zander, 1992; [34] Nonaka, 1994). Explicit knowledge is conceptualized as know-what, informational, and declarative knowledge and tends to be easier to codify and transfer among organizational members. Tacit knowledge is referred to as know-how, experiential, and procedural knowledge and is more difficult to codify and transfer. International knowledge tends to be tacit and experiential because it is usually created from one's experience in doing business abroad and may include market knowledge and business practices in different countries ([7] Eriksson et al. , 1997; [27] Madsen and Servais, 1997; [28] Michailova and Wilson, 2008).

Knowledge plays a critical role in the internationalization process of the firm ([10] Gassmann and Keupp, 2007; [17] Johanson and Vahlne, 2003; [24] Liesch and Knight, 1999). It provides internationalizing firms with the ability to enter foreign markets and carry out international operations ([23] Kogut and Zander, 1993). International knowledge at a born global firm reflects mostly the knowledge resident in the founder's earlier experience ([27] Madsen and Servais, 1997; [31] Moen and Servais, 2002; [37] Oviatt and McDougall, 2005). The prior international experience and business knowledge of the founder/owner provides born globals with an important source of advantages ([43] Weerawardena et al. , 2007). Prior experience helps born globals to carve out a niche market ([27] Madsen and Servais, 1997), responding to market demand with appropriate product, communication, distribution and pricing strategies ([43] Weerawardena et al ., 2007).

With regard to knowledge-based capability, the firm's intent is the creation and application of knowledge to the production of goods and services ([13] Grant, 1996b; [40] Spender, 1996; [23] Kogut and Zander, 1993). Though scholars have different thoughts on knowledge creation in an organization, they underscore the importance of knowledge application. For example, while [13] Grant (1996b) argues that knowledge is created at the individual level and [40] Spender (1996) argues that it is socially constructed and embedded in the organization's rules and routines, both do agree that knowledge application rather than knowledge itself creates value for a firm ([12] Grant, 1996a; [40] Spender, 1996). According to this perspective, the born global can be viewed as a firm that from inception seeks to derive significant international market results by the application of knowledge-based resources ([10] Gassmann and Keupp, 2007).

Effective knowledge application is manifested in the knowledge transformation within a firm. The objective of knowledge transformation is to help a firm realize the strategic value of its knowledge ([12] Grant, 1996a; [22] Kogut and Zander, 1992). By accumulating knowledge, then integrating and applying it into business strategies and activities, a firm can create value for customers ([5] Demsetz, 1991; [12] Grant, 1996a; [32] Nelson and Winter, 1982). For the purpose of this study, we define knowledge transformation as a process whereby a firm translates its accumulated knowledge into actionable company strategies, policies, routines, or operational procedures for production and markets. While knowledge creation and transfer within a firm is critical to firm performance ([22] Kogut and Zander, 1992), the tacit characteristic of international knowledge makes knowledge transfer even more difficult in born globals, and this further underlines the importance of knowledge capability in born globals.

A number of scholars have proposed that knowledge-based capability is particularly important to the competitive advantage of born global firms (e.g. [20] Knight and Cavusgil, 2004; [30] Moen, 2002; [35] Oviatt and McDougall, 1994). Though the capability in managing knowledge process has been addressed in different contexts for global firms, few studies have examined the underlying mechanisms facilitating within-firm knowledge process ([8] Foss and Pedersen, 2004). Therefore, this study attempts to provide additional insights into the accelerated internationalization of born global firms from a perspective of knowledge transformation capability.

Research approach

The authors adopted a qualitative case study approach because the phenomenon under investigation is complex and context-dependent ([11] Glaser and Strauss, 1967; [44] Yin, 2003). In addition, data from an in-depth case study approach can generate new theory ([6] Eisenhardt, 1989). Various types and sources of data were collected to provide a rich and solid foundation for theory development and data triangulation ([6] Eisenhardt, 1989; [44] Yin, 2003). These comprised semi-structured interviews, field observations and archival material. Data analysis follows the principle of grounded theory, iterative collection and analysis of data to generate insights into the particular phenomenon of accelerated internationalization ([11] Glaser and Strauss, 1967). The case study focuses on the knowledge transformation processes involved in the development of a global niche strategy within Franz. We selected Franz as the focal company because its establishment and quick global expansion are in line with the definition of a born global: a firm seeking to derive significant advantages from the sale of output to multiple countries right from the legal birth (e.g. [35] Oviatt and McDougall, 1994; [27] Madsen and Servais, 1997). This born global has penetrated multiple markets since its foundation and its status as a global firm is underscored by multiple worldwide awards, including the UNESCO "Seal of Excellence for Handicrafts."

Data collection

To gain permission to conduct the research, an initial interview was conducted with the president and senior PR personnel at Franz Collection Inc. Once permission was granted, an interview and data-collection protocol was developed to help explore the research question. There were two rounds of data collection. The first was conducted intensively over a period of six months, with preliminary analysis of this data taking three months. The result of the preliminary analysis guided the second round of data collection by identifying further interviewees and interview questions. The authors refined and narrowed the scope of data collection to specific processes and identified key interviewees based on the preliminary data analysis. The second round of data collection involved in-depth interviews and was conducted over two months. The authors conducted 13 in-depth interviews with individuals involved in the development process of the global niche strategy. Each interview lasted 90-150 minutes, and averaged around two hours. Interviewees were drawn from across different functional departments of Franz and comprised the president, senior managers and employees, as well as new employees from the design, R&D, marketing, planning, and sales departments. In the initial interviews, the authors asked general questions about Franz, its history, global marketing and product strategy, with particular emphasis on knowledge transformation process. Subsequent interviews focused on themes that emerged in the first round of interviews, and that were selected for more detailed study. Brief follow-up interviews via e-mail and telephone were used to gain more information and to clarify any ambiguities in earlier data collection. Finally, to track the progress and performance of the internationalization, follow-up contact, including telephone calls, e-mails and informal meetings, was conducted periodically after the two rounds of data collection.

The data collection methods and content are summarized in Table I [Figure omitted. See Article Image.]. In sum, the interview data and archival data, supported by extensive notes gathered in the field and during visits, added up to more than 400 pages of transcribed notes and documents for analysis.

Data analysis

The researchers used an iterative process to develop an understanding of the knowledge transformation process in the focal company's development of global niche strategy. A case database, comprising transcripts, field notes summary and archival material constituted the analysis base. Following the guidelines for inductive research ([11] Glaser and Strauss, 1967; [41] Strauss and Corbin, 1990), initially over 300 concepts were developed that were later recombined and reduced to fewer broader concepts. These concepts were further extracted into meaningful dimensions and grouped into three categories of global niche strategy process. Category creation and dimension assignment to the categories was based on mutual agreement between the two researchers. The data analysis process was as descriptive as possible until major themes emerged from the data ([11] Glaser and Strauss, 1967; [29] Miles and Huberman, 1994). Over a period of time and in line with the constant comparative method, some promising themes emerged - such as "vertical knowledge thrust" - and more data were collected to find evidence of replication ([6] Eisenhardt, 1989; [44] Yin, 2003). The final data structure is illustrated in Figure 1 [Figure omitted. See Article Image.], which summarizes the three orders of data analysis on which we built our model of knowledge transformation process. The emerging dimensions and themes were identified and developed by iterating between prior theories and field findings. The iterative process ended when "theoretical saturation" ([11] Glaser and Strauss, 1967) was reached, which meant more data collection could no longer improve the existing transformation process framework of knowledge developed by the researchers.

The case company

Franz Collection Inc. (Franz) was established by Francis Chen and its parent company is Seagull Deco Inc., a Taiwanese original equipment manufacturing (OEM) company. Franz was formally incorporated in San Francisco in 2002. It sells fine porcelain tableware and decorative accents. Its design and research center is in Taiwan, with production in China and distribution in major markets of the world. After its establishment, this young global firm immediately gained a presence in US and European markets, and sales rose sharply. Franz's overseas sales have accounted for more than 50 percent of total annual sales since its establishment, and were at 70 percent in 2007 (see Appendix for additional information on its "fast global presence."). Despite such globally renowned competitors as Royal Copenhagen, Wedgwood, and Meissen, by the end of 2009 Franz products were being sold through more than 6,000 outlets across the USA, Europe, Australia and China.

Case description

To explore the knowledge capabilities and mechanisms behind Franz's accelerated internationalization, this study examines knowledge transformation process in Franz's development of its global niche strategy. Figure 2 [Figure omitted. See Article Image.] depicts a three-stage process whereby Franz transforms its accumulated international market knowledge into a concrete global niche strategy and operational process. Below is a description of the three stages.

Franz's knowledge transformation process in the development of global niche strategy

Stage 1. Acquisition and dissemination of international market knowledge

Franz Collection Inc. was established in 2002 by Mr Francis Chen. With 20 years' experience in the export business, including running a successful OEM company in Taiwan where he gained a wealth of international market knowledge, Chen established Franz with the aim of making it a leading international brand. He knew that establishment of a global brand needs more than great ambition, and recognized the need to quickly train employees to a level where they are sufficiently knowledgeable and capable of engaging in international business. Given that Franz is a small and nascent firm with some functional experts (e.g. in R&D and production) but few internationally-experienced employees, Chen aimed at closing the gap between his international experience and the inexperience of his employees by taking training into his own hands.

Our boss is really an encyclopedia. I always feel that no matter what area of this industry, or even not related to this industry, he'll always be able to answer your questions ... (Product development coordinator).

Chen often takes time off from his busy schedule to personally conduct classes that ably enhance his employees' international market knowledge and skill. Furthermore, to broaden employees' international horizons, he takes them overseas whenever he can. Such trips provide opportunities for valuable training. For instance, he coaches his employees to be sensitive to consumer preference by observing the hot-selling products abroad, both on casual shopping trips and at airport duty-free shops. This kind of practical training effectively nurtures international market sensitivity among Franz's employees, and is well received by them.

At every stage of life I had mentors, and when I came to work at FRANZ, I felt that Chen had been constantly trying to pass on to me and share with me his more than 20 years experience in the gift industry (Director of Design Department).

He's so clear about everything: what kind of cup should be used in different situations; and which manufacturer is best suited for each cup. He's all very clear about it. He knows this market like the back of his hand. So he really earns the respect of all of us (Special Assistant and PR manager).

In addition to his personal coaching, Chen demands that those in the top management team also take responsibility for knowledge transfer by educating their subordinates in both functional and international knowledge fields. The typical pattern is that Chen personally leads the initial training of the top management, then the "trained" top management coaches subordinates. A senior employee told one researcher that she would have been unable to become a professional product coordinator without her "supervisor coach" since she had had little previous knowledge of product development. This "waterfall" coaching process enables Chen's personal experience and market knowledge to quickly transfer from him, via the top management team to the company's lower-level employees.

[Chen] expects all the senior management's attitude to be like his. For example, he expects the manager in China to monitor every product possible, just as he would do himself ... pretty much like his style (Director of Designing Department).

A unique way for Franz to coach its employee is via a meeting format termed "roundtable meeting." A "roundtable meeting" is characterized by no-one playing the role of head or foot, implying that the opinion of all attending the meeting is equally appreciated and respected. Such a meeting is a quick way for Franz's employees to share and learn from each others' experiences. Chen himself typically shares his international experiences and conveys his thoughts to employees in these meetings. Each "roundtable meeting" is usually held for the discussion of a specific topic, such as the progress of new product development, and the attendees are largely employees related to the topic. Sometimes an employee engaged in an area outside the scope of the topic is also required to attend. This happens when the topic is new and critical to the company, or when the future role of an employee is expected to be related to the topic.

... when the boss calls for a meeting, a whole lot of people are called to attend. Our company is willing to spend this effort, because in the process, there is a team learning effect (Marketing director).

Another salient way to speed up the coaching process of employees is the placement of an "interaction window." An "interaction window" is a formal position and most departments have one. The "interaction window" is responsible for the quality and speed of knowledge flow between functions. In the product design department, the position is a direct communication channel with Chen; thus the position gives an opportunity for employees to receive face-to-face training from Chen. Everyone in the Design Department takes turns to fill the role of "interaction window." A new designer learns a lot from his/her personal interaction with Chen and other departments. Therefore, by being placed in the position of "interaction window" a new hand can mature quickly through intensive training by senior employees, both inside and outside his/her department.

We take turns being the window for our department every two months. Basically the chance to interact with Chen occurs at this time. At the same time, you also get to interact with the other departments. If it was any different, everyone would end up just moving in their own little circle, and that is not what we would like to see happen (Director of Design Department).

In addition to the internal transfer of knowledge among firm members, Franz also emphasizes replenishment of market knowledge. It regularly sends its top management and professionals overseas to attend exhibitions and visit customers. Information collected on these trips furnishes Franz with contemporary and first-hand market knowledge. Moreover, the company requires its distributors and subsidiaries' sales worldwide to provide feedback on both market response to new products and on local trends. The new market information is soon distributed to the relevant employees, often via the "roundtable meeting" and "interaction window."

Another thing our boss puts much emphasis on is employee education. To broaden our views he took us sculptors in turn to attend gift shows abroad, either in the US or in Europe ... (Senior Designer).

We have sales representatives worldwide who give us information on local market demand, allowing us to see the market trend. For example, the information of what animal is most popular in Europe now would influence our product designs (Howard Yeh, Marketing Director).

Stage 2. Formation of global positioning and product strategy

Like other born globals, Franz adopts a global niche strategy to enter the international market. The primary task in going international is to identify a unique positioning featuring a universally appealing theme that can attract a certain global segment. Countless "roundtable meetings" have been held on this topic, and ideas and thoughts of employees throughout the firm are continually floated at these meetings; similarities and differences between markets are compared and contrasted. Any theme proposed as a candidate to be used in product positioning has been iteratively reviewed and discussed thoroughly for its adequacy and potency as a universal theme. From these integrating efforts, two universal themes, nature and humanity, were distilled to form the core of Franz's positioning strategy. The two were chosen as they are conceived as being the least subject to cultural influence.

Our company aims for the global market because we think there must be some elements common to all human beings' aesthetic senses. Eighty to ninety percent of our top ten items in different markets are amazingly the same. You see, there is something fundamental (President).

In fact, Chen's experience plays an important role in the decision process of Franz's niche market strategy. For example, he authenticates the extracted positioning themes of nature and humanity from his 20 years' observation that they are the two most adopted themes in the history of human craft. Chen also encourages employees to put forward their points of view when strategy is being formulated. When Franz was seeking the best design criteria to guide its global product strategy, the functional experts involved in product development gathered at product strategy meetings to evaluate and screen the input from employees based on these employees' personal experiences. The collective product knowledge resident in individual employees was integrated and funneled into Franz's five-element design principle which Chen finalized. The five design elements - unique, inviting, stylish, cultural and artistic - are believed to be easily embraced by global customers.

Meeting coordinator: "The US market calls for additional decorations in different materials." Chen: "You mean adding some jewels or metal? But how about the price ... " Designer A: "Can we make them limited edition products which usually garner a higher price?" Chen: "If we do, we have to consider whether we can raise the new product's price, too. Lei [another designer], you can try this in your Ocean Series design first." (Dialogue at a "roundtable meeting").

Sometimes a proposed product strategy may challenge the existing production skills. Franz takes this as an opportunity to innovate rather than a threat. When a challenging issue appears, a "roundtable meeting" of the related experts in the firm is called and possible solutions sought. Sometimes the result may lead to the abandoning of a strategy; at other times it may trigger the invention of new technology. A good example is the invention of the "underglazing" technique. This patented technology was the fruit of a collaborative effort by product experts trying to resolve the difficulty of producing an intricate product design strategy in "Art Nouveau style."

The spirit of the "roundtable meeting" spreads from the core strategy team to peripheral employees via the meeting attendees, who are usually the leader or senior employee of a department. They experience the benefits of knowledge interaction with their participation in a "roundtable meeting" and also hold "roundtable meetings" within their own unit to share experience and exchange opinions. In this way other members of the unit, though they have no chance to sit at the "roundtable", learn the skill and acknowledge the merit of knowledge exchange among different experts. Therefore, a unique working norm of cross-unit cooperation is gradually fostered via this "learning-by-doing" practice across Franz.

Stage 3. Construction of product development process

Although FRANZ's global positioning and product strategy provides a clear direction, it is insufficient to assure the implementation of the strategy. The company's top management team believes that only by transforming the positioning and product strategy into daily operational procedures for each employee's job can its global strategy be properly and quickly implemented across the firm. Therefore, Franz further constructs a series of concrete working processes and procedures to guide the behavior of the employee. A typical process to fulfill the company's global niche strategy is the new-product development process, which coordinates and directs product-related employees on how to perform their job properly. The product development process can be divided into two sub-processes: pre-market screening and pre-production assessment.

The pre-market screening process begins with a check on the product design principle. Franz demands that each new product candidate undergoes rigorous market potential screening before it can be put in the formal list of new products. Judges for the screening are market experts from different units of the firm, including Chen himself, experienced designers, sales and marketing personnel, as well as distributors and agents worldwide. New designs that do not adhere to the five principles would be dropped first, and the remaining ones are further scrutinized for their conformity with the positioning strategy, and potential demand across multiple markets. Therefore, after the pre-market screening process, the only products remaining are those considered to have high market potential and close conformity to the firm's positioning and product strategy.

... the shape of Kue-Mei's [a designer] design is too pointy ... I don't think it will sell well. Do you remember what Ken [a distribution agent] told us? Those shapes are most popular with the market - he circled the shapes of hot items for us. They are more streamlined ... we chose the Art Nouveau design style because it features a streamlined shape (President, speaking at a product screening meeting).

Before they proceed into the formal production line, those items that survive the pre-market screening undergo a further process of pre-production assessment that checks for any weakness that may result in production failure. Senior staff in R&D and production, such as experienced sculptors and painters, check the new designs, identify potential problems that may occur during the prototyping and production process, and confer with the designers on methods to overcome the problems. The checking and reviewing process before production helps Franz reduce the production failure rate, enabling it to efficiently introduce unique and high-quality new products into global markets twice a year.

When it comes to the stage of refining a porcelain clay body, the technical person will come to check. We hate to hear that "this is too bent", "this is too shallow", "this won't come out of the mold", or "this will hinder production" [...] after we've finished all the sculpting work. You should troubleshoot the problem at the beginning. Finally, before we fire the porcelain clay body, the painting personnel will come to check whether any problem could occur in the future painting stage. We try to check all the related processes before moving on to mass production (Product development coordinator).

To assist the construction and standardization of the product development process, Franz has introduced information technology. Production of a product item usually requires a series of complicated procedures that includes sculpting, molding, and painting. The company demands that for each item, employees input technical and production details for each procedure into the computer database. Through this effort Franz now generates an "item bible" for each new product. The "item bible" is a production guide that provides the "best practice" for each product. The content of the "item bible" is incorporated into Franz's knowledge repertoire and by the company's estimation, its establishment has increased the unflawed product rate by at least 10 percent.

We make a prototype for each item and set up a standard procedure for manufacturing, so that we can keep the finished product at two factories exactly the same. We standardize, for example, which part of the item needs to be painted first; we have recorded the whole manufacturing process in the computer (Head of R&D).

Each piece has its own "item bible", which records the information on designing, sculpting, manufacturing, and marketing for every piece. The detailed information prevents us from making the same mistakes and creating waste (Head of IT Department).

Numerous standard operating procedures (SOPs) have been established because Franz wants to make its global marketing activities both faster, and more coherent across the firm. For example, just in the process of new product development Franz has developed over a dozen SOPs and rules. The SOPs stored in the information system allows a new hand to learn skills quickly and accurately by following the procedures set up in accordance with "best practice." Furthermore, with some slight revision, SOPs developed in one area can be applied in other units of the firm. For example, the prototyping procedures developed for poly products was transplanted into the prototyping procedure of clay products. The SOP transplant reduced the failure rate of clay prototyping, thus improving the procedure of clay prototyping. The established procedures are codified and articulated in official corporate documents and employee handbooks, and product development team members can act accordingly, enabling Franz to churn out new products of consistent quality and at a fast pace.

Discussion

The case data reveal that the internationalization of born globals is accelerated by a transformation process of internationalization knowledge. The knowledge transformation process enables born globals to transform the implicit and dispersed individual knowledge for internationalization into explicit and solid organizational knowledge. The process is characterized by three stages that comprise knowledge acquisition and dissemination, knowledge integration and knowledge institutionalization. The three stages are manifested in and correspond to the global niche strategy development process of the focal company (see Table II [Figure omitted. See Article Image.]). Previous scholars argue that the goal of a firm's knowledge transformation process is to help the firm realize the strategic value of its knowledge ([12] Grant, 1996a; [22] Kogut and Zander, 1992). Evidence from the case data suggests that a fruitful result of the born global's knowledge transformation process is translating its international knowledge into concrete global strategies and operational procedures, and this constitutes a distinctive knowledge capability that accelerates its internationalization ([9] Freeman et al. , 2006; [18] Knight, 2000; [43] Weerawardena et al. , 2007).

P1. A knowledge transformation process accelerates the internationalization of born globals.

Accelerating mechanisms of knowledge transformation

The most salient characteristic of born globals is the acceleration of their internationalization ([43] Weerawardena et al. , 2007). This implies the speed of knowledge transformation plays a critical role in the internationalization process. This study attempts to dig deeper into the knowledge transformation process to explore the source of the speed. The case data reveal two organizational knowledge mechanisms that accelerate the transformation process: vertical knowledge thrust and horizontal knowledge thrust. Figure 3 [Figure omitted. See Article Image.] summarizes how these two knowledge mechanisms facilitate the process of knowledge transformation within a born global.

Vertical knowledge thrust

Evidence from this study suggests vertical knowledge thrust as an accelerating mechanism in the knowledge transformation process. The thrust of vertical knowledge begins with facilitation in acquisition and dissemination of knowledge. The case data reveal that two knowledge resources are crucial to a born global's growth. One is the "indigenous" knowledge resource, which refers to the knowledge possessed by the founder and functional experts. Evidence shows that acquisition of this legacy knowledge, consistent with previous research findings, largely reduces the period for Franz's acquisition of international knowledge ([27] Madsen and Servais, 1997; [36] Oviatt and McDougall, 1997; [38] Reuber and Fischer, 1997).

The other knowledge resource that needs to be acquired is "extraneous" knowledge, which differs from the "indigenous" resource in two ways. First, it is gained after the firm's establishment; and second, it is resident in different parts of the firm, being drawn from the collective effort of employees across the firm. The "indigenous" knowledge provides knowledge foundation for born globals' internationalization, while the "extraneous" knowledge replenishes the knowledge base in readiness for new challenges. The findings suggest that in addition to the founder's knowledge ([27] Madsen and Servais, 1997; [36] Oviatt and McDougall, 1997) other knowledge resources also play an important role in born globals' internationalization. Different knowledge resources complement and equip the born global with the necessary knowledge to sustain its internationalization.

However, since most internationalization knowledge tends to be tacit and stored in individuals ([12] Grant, 1996a; [22] Kogut and Zander, 1992), it is difficult to transfer such knowledge between individuals ([34] Nonaka, 1994). The case company develops a chain of coaching systems within the firm to overcome transfer difficulty. In vertical knowledge thrust, the system effectuates transfer of tacit internationalization knowledge through individual coaching, which creates close person-to-person interactions between the coach (the experienced or expert employee) and the coached (the novice or new hand). The personalized approach can tailor the coaching to each employee's needs, thus advancing the effect of knowledge transfer between senior and junior employees.

In addition to the acquisition and dissemination of knowledge, vertical knowledge thrust facilitates knowledge integration and knowledge institutionalization. The founder's significant involvement in strategic decision making helps improve the quality and speed of knowledge integration. By providing critical knowledge to direct the way decisions are made and as the final decision maker, the founder is able to assure alignment between knowledge integration and strategic goal. Moreover, the unqualified input from junior employees will often be screened out by top management and functional experts in the decision-making process, which further enhances the results of knowledge integration. In particular, the development of a well-crafted global positioning and product strategy greatly helps the born global to compete in a global market ([3] Dalgic and Leeuw, 1994; [26] McKenna, 1988).

Vertical knowledge thrust facilitates knowledge institutionalization by establishing standards for operational procedures and knowledge recording. The concrete and standardized operational procedures benefit accelerated knowledge transformation by allowing employees unable to receive individual or collective coaching to accurately perform their job without deviating from the internationalization goal. Recording knowledge in a computer may generate added-value from that knowledge ([40] Spender, 1996), for example, by helping an employee learn the skills required for his/her job, or by improving production quality. The finding suggests that knowledge can be institutionalized in a firm to accelerate firm internationalization, through the establishment of clear standard working procedures and with the aid of information technology.

Vertical knowledge thrust is favored in the knowledge transformation process of the born global because it is characterized by an economic method of communicating between experts and a large number of non-experts or experts in other fields of the firm. With vertical knowledge propulsion, the firm can quickly acquire, disseminate, integrate and institutionalize the knowledge dispersed among individuals across units to implement its organization-wide international strategies and activities in minimal time and at minimal cost. Therefore, the vertical knowledge thrust is well suited to the needs of a young and resource-scarce firm. After all, being efficient is critical to the survival of a born global in the dynamic global market.

P2. Vertical knowledge thrust accelerates knowledge acquisition and dissemination, knowledge integration, and knowledge institutionalization in born globals.

Horizontal knowledge thrust

Another accelerating mechanism is horizontal knowledge thrust. This horizontal knowledge mechanism facilitates the knowledge transformation process by enhancing the pace and intensity of knowledge interaction across different parts of the firm. It facilitates knowledge acquisition and dissemination when employees from different units exchange their local knowledge and new information through a sharing conduit such as the "roundtable meeting." Horizontal knowledge thrust can expedite knowledge dissemination within a born global through collective coaching. It enables a novice to receive training by interacting with multiple experienced employees simultaneously. Most of the collective coaching occurs in the "roundtable meeting" or via the "interaction window" position. The former enables employees from different units of the firm to be trained by each other collectively; the latter expedites the training of a new hand by enabling him/her to absorb experiences from various experts.

The finding confirms the argument that person-to-person interaction is particularly effective in the externalization of tacit knowledge ([34] Nonaka, 1994) in the born global context, and complements the theory by proposing an alternative interaction, collective interaction, to reduce the cost of the externalization. Previous research has demonstrated the importance of knowledge absorptive capability in global firms ([14] Gupta and Govindarajan, 2000) and this study suggests that establishing an internal coaching system (with both individual and collective coaching) may improve the absorptive results of interactions between older and recent employees.

The essence of knowledge-based capability is for firms to create value through the application of knowledge to goods and services ([12] Grant, 1996a; [40] Spender, 1996). Horizontal knowledge thrust facilitates knowledge application in a born global by collectively solving the problems encountered during the process of knowledge integration. Because it usually takes a long time to collect and exchange knowledge scattered across different units, collective knowledge interaction to find the solution to a problem through a "roundtable meeting" shortens the time for knowledge integration.

The key knowledge task that a firm has to face includes the efficiency of both knowledge exchange and knowledge creation ([33] Nickerson and Zenger, 2004). One merit of collective problem solving is the potential to create knowledge in a timely way. Novel invention or knowledge is brought out in problem solving through collective knowledge interaction between functional experts. The new knowledge helps the born global respond to the dynamic global environment, by solving problems, making decisions and taking action. Collectively, these form the basis for acceleration of the firm's global expansion ([10] Gassmann and Keupp, 2007; [42] Subramaniam and Venkatraman, 2001; [43] Weerawardena et al. , 2007).

Horizontal knowledge thrust propels knowledge institutionalization in born globals through preventive knowledge interaction and knowledge transplant. The case company established specific procedures (i.e. checkpoints) at critical points in important operational procedures (i.e. product development process) to allow interaction between key employees. This knowledge interaction helps prevent the failure of implementing important process. In addition to establishment of SOPs, the institutionalization of knowledge can be intensified through knowledge transplant, which enables a born global to apply the essence of specific "best practice" in different units of the firm. This knowledge transplant efficiently enlarges the benefits of knowledge results from "best practice" within a firm.

P3. Horizontal knowledge thrust accelerates knowledge acquisition and dissemination, knowledge integration, and knowledge institutionalization in born globals.

The two organizational mechanisms of vertical knowledge thrust and horizontal knowledge thrust together contribute to the speeding up of knowledge transformation in a born global. Though vertical knowledge thrust is beneficial to the efficiency of knowledge transformation, it does bear the corresponding disadvantage of being highly dependent on the knowledge furnished by the top-management elite ([34] Nonaka, 1994). To some extent the horizontal knowledge thrust balances the disadvantage of vertical knowledge thrust by bringing in a new source of knowledge and making room for innovative action. Therefore, the two accelerating mechanisms complement each other to speed up the knowledge transformation process and enable a born global to maintain flexibility without losing efficiency.

Conclusions

The purpose of this study is to explore the acceleration of born globals' internationalization based on the approach of knowledge-based capability. Since knowledge is a strategic resource essential to a firm's internationalization ([16] Johanson and Vahlne, 1977; [24] Liesch and Knight, 1999; [30] Moen, 2002; [46] Zhou, 2007), the capability to apply knowledge is crucial to a resource-scarce global firm. The study suggests that the internationalization of born globals is accelerated by a knowledge transformation process. This process may explain the difference in internationalization between conventional global firms and born globals more adequately because it constitutes the basis of "acceleration." The speed of a born global's internationalization is rooted in its ability to transform internationalization knowledge resident in individual employees into organizational strategies and operational procedures.

Though the knowledge transformation process is essential to the success of internationalization, the ability to accelerate the transformation process may be of even greater importance ([9] Freeman et al. , 2006). The main progress in the knowledge process of global firms has been on cognitive aspects and few studies examine organizational mechanisms that influence the knowledge processes ([8] Foss and Pedersen, 2004). This study bridges the gap by identifying effective organizational mechanisms in management of the knowledge process. Central to the finding is the identification of accelerating mechanisms through which knowledge can be efficiently and effectively integrated within firms to create firm capability. The "speed-up" mechanism is a distinctive capability that born globals may develop ([2] Chetty and Campbell-Hunt, 2004), and equips them with the ability to respond quickly in a dynamic global environment. Ultimately, it may be "the ability to speed up" that distinguishes the internationalization performance of born globals from their giant global rivals.

This study contributes to our understanding of the accelerated internationalization of born globals from the perspective of knowledge-based capability. The proposed transformation process of internationalization knowledge fills out the scant research on how internationalization knowledge facilitates the speed of internationalization ([37] Oviatt and McDougall, 2005). The findings also complement the explanation of the accelerated internationalization process of a born global by shifting the focus from the "indigenous" knowledge resource to the knowledge transformation process ([2] Chetty and Campbell-Hunt, 2004; [45] Zahra et al. , 2000). The result echoes the argument by [43] Weerawardena et al. (2007) that knowledge is a necessary but insufficient condition for success in international markets by highlighting the importance of knowledge transformation capability.

The case finding has managerial implications for resource-scarce nascent born globals, as well as resource-endowed international firms. Managers of global firms are seeking control methods to influence their knowledge process ([8] Foss and Pedersen, 2004), and this study provides them with practical knowledge strategy. Therefore, this study suggests that a global firm can rethink its internationalization strategy from the perspective of knowledge process, which could enable it to respond better to market changes and emerging opportunities by accelerating the translation of its accumulated knowledge into actionable strategies and activities.

Limitations and future research

This study has some limitations that could benefit from further research. First, the finding is based on a single case, and this bears the flaw that the proposed knowledge transformation process may not be generalizable for other firms serving different markets. Therefore, more empirical studies are needed to broaden the generalization of the proposed model. Though single-case findings need to be cautiously applied, the knowledge transformation process presented in this case study provides a complementary insight into born globals' accelerated internationalization process from the knowledge-based viewpoint. This process may serve as a basic framework for future research to explore more generally how knowledge process influences the internationalization of born globals.

Future research is suggested to explore the issue of global orientation culture. We observe that a culture of global orientation ([20] Knight and Cavusgil, 2004) is implicitly shaped in the knowledge transformation process, while mutual reinforcement between strategy guidance and daily operational procedures seems to engender the global orientation of the firm. Examining the formation of global orientation culture and its impact on the internationalization process may help us better understand the born global phenomenon; particularly, the connection between knowledge accelerating mechanism, organizational culture and individual behavior may shed some light on the micro-foundation of the knowledge process, an important area of research for global firms ([8] Foss and Pedersen, 2004).

There remains a need to examine the knowledge process beyond the boundary of the firm. Since born globals also interact with their business partners (e.g. distributors, agents, strategic alliance partners) in a global context ([4] Di Gregorio et al. , 2008), they may benefit from these partners' experiential knowledge in foreign markets, thus accelerating the speed of foreign knowledge accumulation ([19] Knight and Cavusgil, 1996; [18] Knight, 2000; [39] Rialp et al. , 2005). We believe further insights into the knowledge process of born globals could be garnered from examination of how a born global interacts with external sources to accelerate its internationalization process.

Subject: Multinational corporations; International trade; Retailing industry; Case studies

Classification: 9130: Experimental/theoretical; 9510: Multinational corporations

Publication title: Journal of Asia Business Studies

Volume: 7

Issue: 3

Pages: 244-261

Publication year: 2013

Publication date: 2013

Year: 2013

Publisher: Emerald Group Publishing, Limited

Place of publication: Bingley

Country of publication: United Kingdom

Publication subject: Business And Economics--International Commerce

ISSN: 15587894

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

DOI: http://dx.doi.org/10.1108/JABS-03-2013-0015

ProQuest document ID: 1425423141

Document URL: http://search.proquest.com/docview/1425423141?accountid=38610

Copyright: Copyright Emerald Group Publishing Limited 2013

Last updated: 2013-09-25

Database: ABI/INFORM Complete

Document 35 of 100

The Fanciest Dive

Author: Lewis, Jamie; Ritchie, William; Pargas, Fernando; Yankey, Mike

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Abstract:

Clear Water Dives is an expatriate-owned Dive Resort located off the coast of Central America. This case study provides students with an opportunity to assume the role of the new resort owners who are in the process of undertaking a strategic audit of the external factors that will be influential on the resort's operations in the next five years. With an emphasis on the cultural and ecological diversity of the region, the case challenges students to consider sustainable eco-tourism factors in the SWOT analysis. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Tourism; Resorts & spas; Case studies; Small business; Entrepreneurs; International business; SWOT analysis; Strategic management

Location: Central America

Company / organization: Name: Clear Water Dives; NAICS: 721110

Classification: 2310: Planning; 8380: Hotels & restaurants; 9520: Small business; 9173: Latin America; 9110: Company specific

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 4

Pages: 283

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

Document feature: References

ProQuest document ID: 1418712136

Document URL: http://search.proquest.com/docview/1418712136?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-09

Database: ABI/INFORM Complete

Document 36 of 100

Everybody Loves Joe

Author: Balfanz, Henry B.; Brunswick, Gary J.

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Abstract:

This is a case about an entrepreneur who has spent his entire life riding, fixing, and selling bicycles. While the business is a family business, there is little doubt that it revolves around the owner and his reputation as not only a smart businessman, but also as a very honest, friendly, approachable individual. The case discusses the business in detail, from the early days to the present. The owners of the business, Joe and Cheryl Russell, have seen the marketing landscape change greatly in the past thirty-five years. Making advertising decisions is not as easy as it used to be, thanks to all the new media choices. In addition to making the proper selections, the Russells also wonder if they are spending too much money on advertising and promotion. Many other bicycle dealers spend much less on promotion than the Russells do. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Entrepreneurs; Bicycles; Family owned businesses; Case studies; Market strategy

Company / organization: Name: Russells Cycling; NAICS: 451110

Classification: 2310: Planning; 7000: Marketing; 9520: Small business; 8390: Retailing industry; 9110: Company specific

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 4

Pages: 301

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

Document feature: Tables References

ProQuest document ID: 1418712084

Document URL: http://search.proquest.com/docview/1418712084?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-09

Database: ABI/INFORM Complete

Document 37 of 100

Micro Talk Systems

Author: Brunswick, Gary J.; Gnauck, Brian; Amtmann, Raymond; Graci, Samuel P.

ProQuest document link

Abstract:

This case focuses on a unique and often overlooked product market - sporting event timing systems and supplies - and involves a Japanese manufacturer of radio frequency identification (RFID)-based timing systems called Micro Talk Systems or MTS. Some of the challenges facing MTS, as they begin to penetrate the US timing market, include identifying the size and scope of the timing market, which market segment(s) should MTS focus on, what is the competitive advantage(s) MTS holds compared to other timing systems being marketed in the US, and which channel(s) of distribution would prove to be the most efficient and cost effective to use. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Market segmentation; Radio frequency identification; Case studies; Distribution channels; Competitive advantage; Strategic management

Location: Japan

Company / organization: Name: Micro Talk Systems; NAICS: 443112

Classification: 8650: Electrical & electronics industries; 2310: Planning; 9179: Asia & the Pacific; 7000: Marketing; 9110: Company specific

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 4

Pages: 311

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

Document feature: References

ProQuest document ID: 1418712164

Document URL: http://search.proquest.com/docview/1418712164?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-09

Database: ABI/INFORM Complete

Document 38 of 100

Case Study: Potential Violation Of The Employee Assistance Program (EAP)

Author: Lucas, John J.; Clute, Stephanie

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Abstract:

This Human Resource Management case focuses on a potential violation of a company's Employee Assistance Program (EAP) and the appropriate procedure to address this issue. This case is based upon an actual event that occurred at a production plant of a Fortune 500 company. The case study can be used for any undergraduate or graduate level human resource management class. It is designed to be conducted as a group assignment or general class discussion within one class hour. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Employee assistance programs; Human resource management; Case studies; Employee problems; Employee benefits

Classification: 6500: Employee problems; 6100: Human resource planning; 9110: Company specific

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 4

Pages: 333

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

Document feature: References

ProQuest document ID: 1418712106

Document URL: http://search.proquest.com/docview/1418712106?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-06

Database: ABI/INFORM Complete

Document 39 of 100

Estimation of Health Care Costs and Cost Recovery: The Case of Rafidya Hospital in Palestine

Author: Younis, Mustafa Z; Jabr, Samer F K; Plante, Catherine; Forgione, Dana A

ProQuest document link

Abstract:

The purpose of this study is to develop an estimation model for health care costs and cost recovery, and evaluate service sustainability under an uncertain environment. The Palestinian National Authority's recent focus on improving financial accountability supports the need to research health care costs in the Palestinian territories. We examine data from Rafidya Hospital from 2005-2009 and use step-down allocation to distribute overhead costs. We use an ingredient approach to estimate the costs and revenues of health services, and logarithmic estimation to prospectively estimate the demand for 2011. Our results indicate that while cost recovery is generally insufficient for long-term sustainability, some services can recover their costs in the short run. Our results provide information useful for health care policy makers in setting multiple-goal policies related to health care financing in Palestine, and provide an important initiative in the estimation of health service costs. [PUBLICATION ABSTRACT]

Full text:

(ProQuest: ... denotes formulae omitted.)

Financing of health services is a concern shared by developed and developing countries, although the features and conditions are substantially different. In developing countries, the process is often to introduce key concepts and initiate systematic approaches to establish the foundations for one or several systems suited to the needs of the local environment. Such systems must meet the satisfaction of the users regardless of their socio-economic status, the healthcare personnel, the public health authorities, and also must maintain the support of the political leaders.

The overall objectives of health financing policies, as with all health policies, are to improve health outcomes, provide financial stability, and ensure consumer satisfaction. Health financing policies can help to achieve these objectives by improving equity, efficiency, and sustainability in the three basic functions of (1) collecting revenues, (2) pooling resources, and (3) purchasing services.1 Collecting revenues deals with the sources and levels of revenues attracted to pay for the health services. The amount of revenue collected needs to be adequate to provide individuals with a basic package of essential services and provide financial security against catastrophic medical expenses from illness or injury. Revenue must be collected equitably, efficiently, and in a sustainable manner. The various revenues need to be pooled so individuals will have equitable access to health care, and any resulting cross-subsidies are justifiable. The available revenues must also be allocated to purchase services in ways that maximize improvements in health outcomes and consumer satisfaction while minimizing the related costs.

The Palestinian National Authorities' (PNAs) recent focus on improving financial accountability supports the need to research health care costs in the Palestinian territories. Health care costs, in general, are continuing to increase throughout the global community. Due to rising costs, examination of cost allocations within the hospital setting is important for future research.2 Cost recovery is also important, and is measured as the ratio of revenue to costs. Cost recovery measures the capacity to generate future revenue.

In this study, we examine total revenues, costs, and estimate the potential for cost recovery for Rafidya Hospital. Rafidya Hospital is one of the largest hospitals in Palestine. It was built in 1976 and is owned by the Ministry of Health (MOH) in Rafidya. The hospital serves about 300,000 people and is a referral hospital for all of the West Bank. When the hospital was established, there were approximately 40 beds. Over time and with an increase in the population, hospital services were expanded to include about 212 beds.3 The objective of the hospital is to provide a broad range of health care services, including surgical services, to the regional community.

Background

A study of cost recovery in a developing country was conducted in Bangladesh for primary health care facilities.4 The study was designed as a case study covering a single facility from the provider's perspective. The facility was run by Building Resources Across Community (BRAC), a large nongovernmental organization (NGO) in Bangladesh, for the period July 2004-July 2005. Because of the provider's perspective, the costs estimated for the provision of inpatient and outpatient services did not reflect the costs incurred by patients when obtaining care. The "ingredient approach" was used in analyzing the service delivery process. Cost recovery for the facility was also estimated from the provider perspective. Depreciation of capital assets was estimated in order to calculate annual capital costs, and replacement values were estimated using a 5 percent discount rate. A sensitivity analysis was also done using a 3 percent discount rate. The study demonstrated that the total operating and capital cost recovery ratio for the inpatient department (IPD) was 72 percent while it was 40 percent for outpatient department (OPD). Excluding the capital costs, the average operating cost recovery ratio for the IPD was 88 percent, while it was 47 percent for OPD.

A study by Akashi et al.,5 assessed the effects of user fee programs on hospital performance and provider attitudes in Cambodia. Before the introduction of user fees, the revenue from patients was taken directly by individual health care staff as their private income. After the introduction of user fees, however, the fees were retained by the hospital and used to improve the quality of hospital services. They collected various data elements to assess the effects of user fees from April 1997 to March 2000. For outpatient services, their study found that the total volume of patient services almost doubled within two and half years after implementation of the user fee program. For example, the average number of inpatient baby deliveries per month significantly increased after the introduction of user fees, and the hospital bed occupancy rates also increased from 50.6 percent to 69.7 percent. As patient utilization increased, hospital revenue also increased. In addition, the cost recovery ratio was maintained within the range of 49.2 percent to 79.2 percent for the same period.

Kanha6 estimated the cost, revenue, unit cost, and potential cost recovery of Takeo Hospital in Cambodia for the year 2003 from the provider's perspective. The study demonstrated that the cost recovery contributions from user fees increased from a baseline point of 30 percent (with zero price increase) to 58 percent (with 50 percent price increase).

Taking a different approach, Liu et al.,1 examined the association of managerial incentives and political costs with hospital financial distress, recovery, or closure in the US. Some hospitals recovered from financial distress, while others failed and closed. Hospital closure is an important measure of access to care, especially for indigent patients, that is considered by the Medicare Payment Advisory Commission. The factors associated with hospital closures have important implications for the distribution of cost, quality, and access to health care throughout the US. The study demonstrated that hospital closure was associated with low occupancy, return on investment, asset turnover, and lack of affiliation with a multi-hospital system. It was also significantly associated with urban location, teaching programs, high Medicare (for the elderly) and Medicaid (for the poor) patient populations, and high debt. The study presented the results of three pair-wise group comparisons for the total sample using binominal logistic regression analysis. Essential-access, private nonprofit hospitals were less likely to close, largely due to political factors. However, the study did not examine government-owned or private for-profit hospitals, as are commonly found in developing countries.8

Prices for health care services in China are set under guidelines established by the State Price Commission.9 The prices are supposed to be set high enough to protect and develop the services provided, yet low enough to assure affordability to the users. At the time of the Cultural Revolution the government tried to increase access to care by reducing the prices of visits and hospital days to levels that a poor farmer could afford. Because most Chinese hospitals charge patients for each item of service rendered and drugs given, about 85 percent of the revenues come from these charges. Liu et al.,10 analyzed the distortion effects of hospital pricing policies in China. Comparing the regulated fees of selected hospital services with their average unit costs, they found that the average cost-recovery rate of the fees is only 50 percent. The fees for 90 percent of the services are below their average unit costs, while the more recently established fees for high-tech services exceed their costs.

Health care payment reforms in China are perhaps some of the most radical.11 Starting from the early 1980s, the government budget for public hospitals was fixed, and hospitals had to rely on patient charges to fill the gap between hospital expenditures and revenue received from the government. Medical prices regulated by the government were increased and hospitals were allowed to earn a profit from certain services and from drugs. A bonus system is now widespread and used by almost all hospitals in China. The types of hospital bonuses can be summarized in three forms: flat bonus, quantity-related bonus, and revenue-related bonus.

The objectives of the Liu and Mills12 study were to assess the effects of the bonus system on hospital revenue, cost recovery, and productivity, and to explore whether bonus pay was associated with the provision of unnecessary care. Their study employed both uni-dimensional ratio analysis and data envelopment analysis (DEA). DEA is a linear programming method that measures the relative technical efficiency of production. Cost recovery was alternatively defined as service revenue divided by recurring costs and by total costs.

The Liu and Mills13 study found that transition to the bonus system over time contributed significantly to an increase in hospital service revenue and cost recovery, a doubling of patient admissions, a decrease in outpatient visits, and a tripling of operations. The average annual revenue increase in real terms was 16.3 percent per year. There was an increase in both the probability of patient admission to a hospital and in the frequency of unnecessary care when the bonus system was changed from a weak financial incentive to increase services to one with a stronger incentive.

The Cost Recovery for Health Project (CRHP) in Egypt was formed under the MOH to convert a number of government hospitals and polyclinics into largely self-financing facilities.14 The Health Financing and Sustainability (HFS) Project provided technical assistance to the CRHP in financing, economics, and administration. The HFS Project developed a cost analysis methodology and applied it in Embaba Hospital in Egypt. An analysis of patient ability and willingness to pay for health care was conducted among the people in the neighborhood of Embaba. These two metrics were jointly used to formulate a pricing policy for Embaba.

The analyses to evaluate costs at Embaba Hospital were conducted in four stages. In the first stage, costs of supporting medical activities were estimated. In the second stage, hospital overhead and final service department costs were estimated. In the third stage, costs of resources used for medical procedures and services were estimated. At final stage, the unit of analysis was the cost of procedures for inpatient, outpatient, or emergency patient cases.

In the Zaman15 study, all costs of operating the hospital were assigned and allocated to departments. The departments were identified as overhead, intermediate service, or final service departments. The overhead departments provided support to intermediate service departments, and to final service departments. Intermediate service departments provided procedures and services to patients in the final service departments. The study found that fixed salaries, fringe benefits, and other incentive payments to Embaba staff accounted for more than 40 percent of total expenditures. There was substantial variation in inpatient cost across departments. The average cost of inpatient discharges varied from 599 LE (Egyptian pounds) for intensive care units, to 31 LE for ear, nose and throat (ENT) departments, with a hospital-wide inpatient cost of 84 LE. The average cost of an outpatient care visit at Embaba Hospital was 8 LE.

Methodology

In our study, we retrospectively identified and analyzed costs for Rafidya Hospital in Palestine from 2005-2009, then prospectively estimated unit costs and cost recovery ratios for the year 2011. Similar to prior research, the costing method we used is from a provider perspective and does not include the costs incurred by patients when obtaining care. We collected information on the infrastructure and organization of the hospital, including an organizational chart, the number of services or departments under IPD and OPD, and the number of different types of health care staff in each department. We collected data on the epidemiological factors for unit cost estimation in each department, including number of OPD visits and number of IPD patient days, the number of X-Ray tests, number of laboratory tests, and average patient length of stay. We also collected information on salient macroeconomic parameters, including the domestic inflation rate, domestic interest rate, and life time of assets in order to estimate capital costs.

Allocating Overhead Costs

We distributed the costs of overhead departments to the intermediate and final service departments using the classic step-down method, based on close approximations of actual resources used by the departments. We allocated personnel costs based on the percentage of time spent for inpatient and outpatient services. We distributed other operational costs, including utilities, pharmacy costs, laboratory costs supplies, and maintenance costs among inpatient and outpatient services according to the proportion of users. In some cases, the existing accounting systems were inadequate for our analysis purposes and estimates were required. Figure 1 summarizes our allocation criteria.

Consistent with Shepard, et al.,16 we employ seven steps in calculating unit costs: (1) define the final product, (2) define the cost centers, (3) identify the full cost for each input, (4) assign inputs to cost centers, (5) allocate all costs to final cost centers, (6) compute total and unit costs for each final cost center, and (7) report results. The costs of Rafidya Hospital can be classified into two elements-capital costs and recurring (or, operating) costs. We define capital costs in the traditional manner, as the costs of resources having a useful economic life exceeding one year and not acquired primary for resale. We estimate the capital prices prospectively for 2011 based on the purchase prices in year "f. All costs are expressed in local New Israeli Shekels (NIS). Our formula is:

...

where C20U is the value of the capital costs in the year 2011. C is the market value of capital assets for the year t, and r is the discount rate.

We estimate the annual cost of capital based on Younis et al.11

...

where C is the amount of money required to purchase the assets in year n, CQ is that amount in the initial period, i is the inflation rate, η is the useful life of the assets, and ris the interest rate in the local market (Palestine).

Recurring costs are the costs of operating the hospital, including labor and materials costs. Labor costs are the amounts paid to employees in return for services rendered, material costs are the costs of resources with less than one year life, including the utility expenses such as water, electricity, and facilities maintenance. We use an ingredient approach to estimate the costs of health care services for the year 2011.

To calculate the unit cost for each patient service, we estimate the output for year 2011 using a demand estimation formula, as follows:

...

where D is demand, r is the annual growth rate, and e is the natural exponential value (2.7183).

We use a log equation for quantity demanded (?), assuming the growth rate to be constant with no change in price.

...

We used the following formula to estimate the revenue of Rafidya Hospital for 2011, assuming no change in prices as:

...

where Ρ is the price for a service in the year 2011 and Q is the quantity of the service demanded in the year 2011.

We obtained the cost recovery using the following formula:

Cost recovery = Revenue/Cost

Results

Estimate of Total Demand for 2011

We use financial and non-financial data for the years 2005-2009 to prospectively estimate quantity demanded for the year 2011. First, Figure 2 presents the 20052009 quantities demanded for services in Rafidya Hospital, classified by IPD, delivery services, surgical operations, emergency, and polyclinic services.

Then, we use the logarithmic formula, Q^sub 2011^ = eln q^sub 2011^, to estimate prospective demand for the year 2011, with a growth rate in Palestine of about 2.9 percent. Our results are presented in Figure 3, Panel A. From Figure 3, Panel A, we take the inverse of the natural logs to estimate the quantity demanded for the year 2011 by service type, as presented in Figure 3, Panel B.

Estimate of Total Revenue for 2011

According to the MOH financial system, patients admitted to the hospital pay 500 NIS for each inpatient day, and 400 NIS for delivery services, which covers all of the services provided by the hospital. The MOH does not charge any fee for the cost of surgical operations services, assuming the cost is covered by the inpatient daily fees. An outpatient patient pays only 20 NIS for each visit, which covers only doctor visits. The cost for an emergency room visit is 15 NIS. For IPD and delivery services, we estimate total revenue as follows:

TR = Ρ χ Q

where TR = total revenue, Ρ = price, and Q = quantity. Our results are presented in Figure 4.

Outpatients who visited clinics or the emergency room and paid 20 and 15 NIS, respectively, for doctor visits, may recover their payments if they subsequently pay for intermediate services, such as drugs or laboratory tests.

Cost and Unit Cost Estimation

Capital costs average 9 percent of the total costs, where recurring costs account for the remaining 91 percent. Figure 5 presents the total costs of Rafidya Hospital as 21,679,643; 21,488,154; 20,236,669; 20,949,629; and 34,517,039 NIS for the years 2005-2009 respectively. We analyze various components of total costs and find that the major component of the total costs is labor costs, with an average proportion of 54 percent, followed by drugs & supplies 17 percent, other operating costs 10 percent, capital costs 9 percent, water & electricity 5 percent, maintenance 3 percent, and fuel oil 2 percent. By dividing total operating costs by output for each service, we obtain unit costs, as presented in Figure 6.

We estimate the total costs for each service using an ingredient approach, where we multiply the unit costs by the demand for 2011. We estimate capital costs using a generally prevailing 13 percent discount rate in 2009. Our results are presented in Figure 7.

By excluding outpatients and emergency visits, we find the cost recovery ratio is 83 percent for IPD and 126 percent for delivery services, including capital costs. The average cost recovery ratio for IPD services is 87 percent for IPD and 130 percent for delivery services, excluding capital costs. Our cost recovery ratios for each service, IPD, delivery services, and surgical operations, with and without capital costs, are presented in Figure 8, Panels A and B.

Conclusion

The aim of our study is to gain insights into the cost and cost recovery potential, and thus the financial sustainability, of Rafidya Hospital in Palestine. Our study demonstrates that the delivery services can recover the costs of its services, while the other inpatient services have a shortfall due to current pricing policies. To improve the cost recovery or financial sustainability, the MOH may consider policies to either contain costs or increase the revenue structure. Our study contributes to formulating macro level policy in light of costs, revenue, and the demand for health services. Despite the limitations of our analysis, this study employs established methods in estimating costs and cost recovery ratios for hospital services. Future studies may consider extending this line of inquiry by applying our methodology to other hospitals, or to secondary health care services.

Subject: Cost estimates; Health care expenditures; Cost recovery; Case studies; Accountability; Hospitals

MeSH: Cost Allocation -- economics, Hospitals, Urban, Israel, Models, Economic, Organizational Case Studies, Retrospective Studies, Economics, Hospital -- organization & administration (major)

Location: Palestinian territory

Company / organization: Name: Rafidia Hospital-Nablus West Bank; NAICS: 622110

Classification: 2600: Management science/operations research; 8320: Health care industry; 9110: Company specific; 9178: Middle East

Publication title: Journal of Health Care Finance

Volume: 39

Issue: 4

Pages: 44-54

Number of pages: 11

Publication year: 2013

Publication date: Summer 2013

Year: 2013

Publisher: Aspen Publishers, Inc.

Place of publication: New York

Country of publication: United States

Publication subject: Public Health And Safety, Health Facilities And Administration

ISSN: 10786767

Source type: Trade Journals

Language of publication: English

Document type: Feature, Business Case, Journal Article

Document feature: Tables Equations References

Accession number: 24003761

ProQuest document ID: 1415731451

Document URL: http://search.proquest.com/docview/1415731451?accountid=38610

Copyright: Copyright Aspen Publishers, Inc. Summer 2013

Last updated: 2014-03-10

Database: ABI/INFORM Complete

Document 40 of 100

PANDORA INVESTMENTS WURUNDI, INC.

Author: Smith, D K (Skip

ProQuest document link

Abstract:

Mr. Mike Adams is Vice President and General Manager of Pandora Investments Wurundi Inc., the Wurundian subsidiary (Wurundi is a real country in Africa and Pandora is a real company; for purposes of this case study, however, both the country and the company must remain disguised) of a New York Stock Exchange (NYSE) listed U.S. multinational company called Pandora Investments Group, Inc. While it is listed on the NYSE, Pandora Investments Group has very substantial operations in the UK. Pandora Investments Wurundi, Inc. (hence, PIWI) recently completed (under a contract valued at approximately $2,000,000) a gas transportation network code for the parastatal company in Wurundi called Gaseo Wurundi Ltd. (hence, GWL). GWL 's role in Wurundi includes creating the hard and soft infrastructure needed to move natural gas around the country. While all the key stakeholders (management of GWL, management of PIWI, etc.) agree that PIWI has successfully completed the gas transportation network code project and that all the work done by PIWI and its consultants has been truly world-class, GWL has not yet paid PIWI for its work. Earlier today, a senior executive at GWL (his name is Mr. Jonas Ador ande) indicated to Adams that before he (that is, Adorande) signs off on the project (one of the required steps in GWL's payment process), Adams will need to give him (in unmarked bank notes) approximately $50,000. [PUBLICATION ABSTRACT]

Full text:

THE SITUATION

Mr. Mike Adams is Vice President and General Manager of Pandora Investments Wurundi Inc., the Wurundian subsidiary of a New York Stock Exchange (NYSE) listed U.S. multinational company called Pandora Investments Group, Inc. While it is a NYSE listed company, Pandora Investments Group has very substantial operations in the UK. Pandora Investments Wurundi, Inc. (hence, PIWI) recently completed (under a contract valued at approximately $2,000,000) a gas transportation network code for a parastatal company in Wurundi called Gaseo Wurundi Ltd. (hence, GWL). GWL's role in Wurundi includes creating the hard and soft infrastructure needed to move natural gas around the country. While all the key stakeholders (management of GWL, management of PIWI, etc.) agree that PIWI has successfully completed the gas transportation network code project and that all the work done by PIWI and its consultants has been truly world-class, GWL has not yet paid PIWI for its work.

Adams has just come out of a meeting with Mr. Jonas Adorande, a senior manager at GWL. During that meeting, Adorande indicated that:

1) Before he (that is, Adorande) signs off on the gas transportation network code project (one of the required steps in GWL's payment process), Adams will need to give him (in unmarked bank notes) approximately $50,000. Based on his years of experience operating in Wurundi, Adams believes that Adorande's bosses are expecting to receive a portion of that money. In other words, Adams believes that Adorande's bosses are "in on this game" and that Adorande is expected (by those bosses) to share with them the money he receives from Adams.

2) Within the next six months, GWL will be seeking tenders (that is, bids) on a number of additional projects. Adorande indicates that because of its excellent work on the gas transportation network code project, PIWI could be well-placed to compete for (and win) some of these additional projects, each of which is worth more than $10,000,000.

ADDITIONAL INFORMATION: THE COMPANY

Pandora Investments Wurundi, Inc.(hence, PIWI) is the Wurundian subsidiary (Wurundi is a real country in Africa and Pandora is a real company; in this case study, however, both of them must remain disguised) of a NYSE listed U.S. company called Pandora Investments Group, Inc. which has very substantial operations in the UK. Many years ago, after coming to Wurundi to build the Wurundian business of a multinational trading company, Adams resigned his position with the multinational and started his own company. His new company was very successful. After a few years, Pandora Investments Group purchased Adam's company. While the name of the company started by Adams was changed to PIWI, Adams was hired by Pandora Investments Group to continue on as Vice President and General Manager of PIWI.

Over his years of working with the multinational trading company, and continuing on after he started (and then sold) his own company, Adams encountered (and made friends with) many mid-level officers in the Wurundian military. When Wurundi became a military dictatorship; these officers (many of them now quite senior) were suddenly in positions where they: 1) Were responsible for projects which required both overseas experts and overseas technologies; and 2) Were able to help Adams win contracts for those projects. As a result, over the years that Wurundi remained a military dictatorship, Adams and his company successfully completed many large and very profitable projects in Wurundi.

The business model used by Adams and his company (and at the heart of his success) was very simple: the company looked for projects which met the following criteria: 1) The project required substantial amounts of world-class technical and/or specialized skills; and 2) The needed world-class technical and/or specialized skills were not available in Wurundi. In such situations, Adams would use his contacts to identify an overseas company which could provide the needed world-class technical and/or specialized skills. Having identified a provider company, Adams would then recruit that overseas provider company (by offering very attractive prices and terms) to come to Wurundi and perform the world-class services required.

Using the above model, Adam's company (and then PIWI) operated very successfully for many years. Over the last several years, however, the environment in Wurundi has changed. One of the biggest changes was that the military dictator was replaced by a democraticallyelected government. As this transition took place, Adams discovered that his old military friends were no longer functioning as key decision makers and were no longer in a position to push projects his way. For PIWI, finding good projects, winning those projects, and successfully wrapping up those projects (including getting paid) became much more difficult. In one particular case, PIWI invested a huge amount of time and energy and money into a project, only to have the project run afoul of key governmental decision makers. To date (that is, several years later), that project is still in limbo and PIWI has still not been paid for its work.

ADDITIONAL INFORMATION: THE GAS TRANSPORTATION NETWORK CODE PROJECT: BACKGROUND, EXPLANATION, AND IMPORTANCE

The reasons natural gas is important in Wurundi include: 1) Wurundi has lots of natural gas; and 2) Natural gas can be used to run turbines to generate electric power; and 3) Currently, the electric power situation in Wurundi is very problematic. One power-related rule of thumb used by experts is that for every 1 million people, a country should have approximately 1000 megawatts (MW) of electric power. By that standard, Wurundi should have more than 50,000MW; in reality the country is limping along with less than 2,000MW. Wurundi's president has developed a plan to massively increase the amount of electric power in Wurundi; that plan assumes that it will be possible to move natural gas all around Wurundi and especially to urban locations with huge needs for more power.

To move natural gas around in any country (including Wurundi), at least the following two things are needed:

a. pipelines and associated equipment (central processing facilities, compressors, and so on); and

b a set of rules and regulations regarding the quality and quantity of gas which the suppliers of natural gas (often, international oil companies) will put into the a. pipelines and the quality and quantity of gas which users (including natural gasfired generating plants) will be allowed to take out of the pipeline. This set of b. mies and regulations is called a "gas transportation network code." Without this set of mies and regulations (that is, without the code), it is very unlikely that any private investor will be willing to invest money in the business of using natural gas to generate power in any country (again, including Wumndi).

As indicated earlier:

1) PIWI recently completed the development of a gas transportation network code for the parastatal company in Wumndi (that is, Gaseo Wumndi Ltd., or GWL) which is responsible for creating the hard and soft infrastructure of moving gas around the country.

2) All key stakeholders (management of GWL, management of PIWI, etc.) agree that PIWI has now completed the project and that all the work done by PIWI and its consultants has been truly world-class.

3) Adorande indicates that within the next six months, GWL will be seeking tenders on a number of additional projects, each of which will be worth at least $10,000,000. Because of its good work on the network gas transportation code project, Adorande indicates that PIWI could be well-placed to bid for (and win) some of these additional projects.

ADDITIONAL INFORMATION: BACKGROUND ON THE COUNTRY AND ITS NATURAL GAS RESOURCES

Wurundi has about 5% of the landmass of the United States. The terrain is diverse, ranging from beaches and swamps to desert conditions. Large deposits of both oil and natural gas have been discovered. Even though much of the gas was discovered by accident (in many cases, the gas was discovered by companies prospecting for oil), Wurundi's proven reserves of gas are worth (at any reasonable price per standard cubic foot) billions of dollars.

As indicated above, Wurundi has very large reserves of natural gas. In addition, however, there are also huge amounts of gas in the crude oil which Wurundi produces. Before crude oil can be moved around safely, that gas (it is called "associated gas") needs to be removed from the crude. The process of removing associated gas from crude oil is well-understood; however, in many places around the world (including Wurundi), there was (in the beginning) no way to productively use the gas removed from the crude. Because there was no way to use this gas, it was simply burned, or "flared." The oil producing regions in Wurundi are full of gas flares; some of those gas flares have been operating 24/7 for many years. Over the years, the amount of associated gas wasted (and the value of that gas) has been huge. Efforts to reduce the amount of associated gas being flared are underway.

Data collected by Wurundi's Bureau of Statistics indicates that 70% of Wurundi's population is classified as "poor," It is also true, however, that Wurundi's Gross National Product (GNP) exceeds $100 billion. In report titled "Lions on the Move" and published by the McKinsey Global Institute, Roxburgh et al. (2010) claim that "the continent (that is, Africa) is among the world's most rapidly growing economic regions" and that "the rate of return on foreign direct investment in Africa is higher than in other developing countries." As for the country called (in this case study) Wurundi, each of the last five years the economy has grown by more than 5%. In other words, the economy is not only quite large but is growing much more rapidly than most developed world economies. For several countries which export food products, Wurundi is one of their top 5 export markets in the world.

A final point about Wurundi involves the level of corruption in the country and the economy. In its annual rankings of the most and least corrupt countries in the world, Transparency International in Berlin (TI) has always ranked Wurundi in the bottom quartile (that is, the most corrupt quartile) of all countries in the world. While it is viewed as less corrupt now than in the past, Wurundi is still ranked in that bottom (that is, most corrupt) quartile.

ADDITIONAL INFORMATION: GASCO WURUNDI LTD. (GWL)

Before agreeing to undertake the gas transportation network code project with GWL, Adams and his team at PIWI collected a substantial amount of information on GWL. One of the pieces of information they collected was a document setting forth the steps in the process GWL uses to pay for goods and services which GWL purchases. The steps in that process, and brief commentaries on some of those steps, are as indicated below:

1) The process of getting paid by GWL for work contracted by them begins by submitting invoices for review by an executive at the level of Mr. Jonas Adorande. The firm submitting the invoice needs to ask that manager to confirm that the invoices are in the proper format; if not, the firm needs to ask the executive to help make sure that the invoices are put in the proper format. PLEASE NOTE: without the assistance and cooperation of the GWL executive, successful completion of this step of the payment process could be difficult.

2) Once the invoices are in proper format and have all the proper attachments, the firm submits that set of invoices to the same GWL executive for their approval. An approved set of invoices needs either to be STAMPED or needs a HANDWRITTEN STATEMENT OF ACCEPTANCE. PLEASE NOTE: without the assistance and cooperation of the GWL executive, successful completion of this step of the payment process could be difficult.

3) Assuming the invoices align properly and completely with the contract, the GWL executive at Mr. Adorande's level will issue a PAYMENT CERTIFICATE; this document will have spaces for several signatures including his own. PLEASE NOTE: without the assistance and cooperation of the GWL executive, successful completion of this step of the payment process could be difficult.

4) The payment certificate will be sent for the approval of GWL's Managing Director. In reality, the Managing Director's technical office will approve the documents first; after reviewing the documents, a technical advisor will stamp the certificate "RECOMMEND FOR APPROVAL". Once the Managing Director receives a document with the notation "recommend for approval," he will write "APPROVED" on that document.

5) The clerk at the Managing Director's office will send the approved form plus the original invoice to the Director of Finance of the unit of GWL from which the invoice emanated. That individual will make a note "approved for further processing," and send this approved invoice on to the Director of Finance for all of GWL.

6) The Director of Finance for all of GWL will make a note on the invoice (please process) and then forward the invoice on to GWL's Director of Budgets & Projects. Accountants reporting to GWL's Director of Budgets & Projects will generate a document called a "Payment Voucher."

7) GWL's Director of Budgets & Projects will sign the Payment Voucher. Having done so, he will send this Payment Voucher to the department for whom the project was done. Once the individuals in that department (including executives such as Mr. Adorande) have signed, the Payment Voucher goes back to GWL's Director of Budgets & Projects. PLEASE NOTE: without the assistance and cooperation of the GWL executive, successful completion of this step of the payment process could be difficult.

8) At this point, the Payment Voucher is sent to audit. Everything is reviewed again; in addition, accounts are checked to see if funds are available. After receiving approvals from audit, the Payment Voucher is sent back to GWL's Director of Projects & Budgets.

9) GWL's Director of Projects & Budgets sends the Payment Voucher to the treasury. If the invoice is denominated in local currency, a deputy manager of banking will issue payment instructions and transfer funds from a GWL account to the company or individual which submitted the invoice. If the invoice is denominated in dollars or some other foreign currency, payment instructions signed by GML's Director of Finance and GML's Director of Treasury will be issued, so that the transfer into the account of the individual or organization who submitted the invoice can be made.

Another document about GWL discovered by Adams and his team is a study conducted by a major research organization in the U.S. which assessed the role and performance of GWL. Findings from that study included the following:

1) The role of GWL in Wurundi includes: Sector manager and regulator, buyer and seller of natural gas, and service provider to the natural gas industry in Wurundi.

2) GWL is neither competent commercially nor effective as a regulator. GWL employees have few incentives tend to act in the interest of the company or the nation; however, there are many incentives for private action/corruption. GWL operations focus on functions which offer opportunities for private/personal benefit.

3) Additional observations about GWL include:

a. GWL performs badly at the task of maximizing long-term natural gas revenue for Wurundi . By tying operators up in red tape, GWL imposes massive costs and burdens on the natural gas sector of the Wurundian economy.

b. GWL functions well as an instrument of patronage; each transaction generated by its huge bureaucracy provides opportunities for individuals to profit by being gatekeepers (that is, by giving or withholding permission for private companies to move forward on natural gas-related initiatives).

c. GWL will be difficult to reform. Patronage and corruption multiply the number of transactions required to accomplish anything, and each transaction creates multiple opportunities for personal gain for GWL employees.

ADDITIONAL INFORMATION: LEGAL CONSIDERATIONS

As indicated earlier, Adams works for a NYSE-listed U.S. multinational company with very substantial operations in the UK. As such, he is subject to both the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. Appendix 1 overviews major provisions of the FCPA; Appendix 3 and Appendix 4 overview major provisions of the UK Bribery Act. It may be worth noting that while the FCPA allows "facilitating payments" (that is, payments to officials to expedite routine governmental action):

1) Under the UK Bribery Act, such payments are illegal.

2) Appendix 2 indicates that the U.S. Department of Justice and the U.S. Security and Exchange Commission have "pressed a narrow view of the exemption" and that "companies that permit facilitating payments face an increased risk of FCPA liability in today's enforcement environment."

THE CHALLENGE

Please assume you are Mr. Mike Adams. What actions will you take, to ensure that PIWI is paid for the world-class work PIWI has done for GWL?

Subject: Studies; Multinational corporations; Foreign business; Emerging markets

Location: Brazil, Russia, India, China

Classification: 9130: Experiment/theoretical treatment; 9510: Multinational corporations; 9179: Asia & the Pacific; 9176: Eastern Europe; 9173: Latin America

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 5

Pages: 59-71

Number of pages: 13

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: Case Study, Feature, Business Case

ProQuest document ID: 1465226332

Document URL: http://search.proquest.com/docview/1465226332?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-12-16

Database: ABI/INFORM Complete

Document 41 of 100

DEMAND MEDIA, INC.

Author: Anderson, J Richard; Blumenthal, Gary

ProQuest document link

Abstract:

As Demand Media, Inc. approaches its initial public stock offering, analysts begin to raise questions about its accounting for Media Content Costs, which are the small fees it pays to independent contractors to write or film the millions of "how to" articles and videos that form the basis of the company 's numerous websites. Unlike some of its competitors, Demand Media has chosen to capitalize these costs and amortize them over a five-year life. The student is asked to debate the relative merits of capitalization versus expensing these costs, and then is encouraged to discover the importance of this single accounting decision in understanding recent trends in the company's net income, cash flow from operations, and its own internally-developed non-GAAP measure of performance. Then students are presented with an unusual development: a decision by Google to change its search engine algorithm which causes an immediate sharp decline in the number of visitors to Demand Media 's sites, and thus triggers possible declines in the economic value of its massive library of articles and videos. This new event can then lead to a discussion about the possible impairment of their large Media Content asset. Instructors who wish to go further can then provide (or require students to provide) updates on the company 's fortunes after its public offering. [PUBLICATION ABSTRACT]

Full text:

DEMAND MEDIA, INC.

The following headline appeared in CNNMoney.com on December 23, 2010:

Demand Media IPO Stalls Amid Accounting Questions

"Online content creator Demand Media filed for an IPO back in August, but the company is still answering regulators' questions about its unorthodox accounting practices. Demand CEO Richard Rosenblatt has been insisting for years to media outlets, including Fortune, that his company -which chums out vast amounts of low-cost content optimized to grab search-engine clicks - is profitable. But in its IPO filing, Demand disclosed that it was more than $6 million in the red for 2010 as of August. It posted a net loss of $22 million in 2009, a $14 million loss in 2008 and a nearly $6 million loss in 2007. All Things D reported Thursday that regulators are taking a closer look at Demand's unusual accounting practices. Demand Media filed an amended Form S-l to the Securities and Exchange Commission (SEC) on Tuesday that shed more light on its accounting..."

Having previously raised $355 million in private funding, in late 2010 Demand Media tried to become the first internet-related company to go public with a valuation of over $ 1 billion since Google in 2004. Their initial public offering involved selling 7.5 million shares of its common stock for $125 million, thus creating a total market capitalization for the firm of $1.5 billion. However, the SEC has ultimate jurisdiction over the accounting methods used by publicly-owned firms and its questions can cause investors to shy away from new securities offerings, especially if they suspect that the accounting methods used may be obscuring a company's true performance. After the dot.com craze of the late 1990's when buyers paid very high prices for stock in internet firms that never made any money, wary investors have demanded either demonstrated current profits or at least a discernable trend in that direction as a precondition for investment in new public offerings. Was Demand Media a rising star among internet-related investments, or simply an eye-catching idea chasing elusive profitability?

COMPANY HISTORY

Richard Rosenblatt, a quintessential serial entrepreneur, founded Demand Media, along with Shawn Colo, in June 2006. Rosenblatt, no stranger to Internet ventures, had previously founded iMall and later became affiliated with such startups as Great Domains and Web Million, as well as drkoop.com. In addition, he partnered in Superdudes and served as CEO of Intermix as well as the hugely-popular My Space.

This background was a springboard for the formation of Demand Media, which in its IPO prospectus describes itself as "a leader in a new Internet-based model for the professional creation of high-quality, commercially valuable content at scale." Critics, on the other hand, have described it as a "content farm", where an army of amateur writers contribute materials of questionable quality to a continually-growing library of over 3 million articles and 200,000 videos.

Demand Media "identifies, creates, distributes, and monetizes in-demand content." The company accomplishes this through two very different businesses: it earns fees as a registrar for internet domain names, and it produces media content for sale to customer-owned websites such as AOL, as well as for distribution on its own portfolio of websites, the most popular of which is e-How. Through a proprietary algorithm, it pinpoints the most popular search keywords on the Internet and tailors its written or video content to meet that demand for practical information. For example, using the eHow website a consumer may want to know how to fix a flat tire. By typing in "how to fix a flat tire", the user is directed to a YouTube video produced by Demand Media. Here is where revenue is created, as companies such as Goodyear are willing to buy advertising space on the same page, knowing that they are reaching an audience with tire-repair problems. Every time a reader "clicks" on the site, ad revenue is generated, which either goes directly to Demand Media or is split with search engines such as Google, who has the power to drive web traffic to the content/advertiser site.

While they will occasionally partner with high-priced celebrities such as Rachael Ray or Tyra Banks to provide specialized cooking or skin care content, in order to fill its cavernous daily need for 6,000 new text articles and videos the company cunningly taps into the desire of thousands of free-lance writers to see their work in print and assigns them topics involving search-friendly keywords at commissions averaging $20 per article. In 2010 Demand Media spent $42.8 million acquiring over a million articles or videos (labeled "Media Content") from over 10,000 independent contractors. Interestingly, the quality of the written text is not considered a key factor in Demand Media's success; as long as the company's search engine optimization techniques work effectively, traffic is drawn to the sites (and revenue earned) simply by determining what web surfers are interested in reading and the types of audiences advertisers are interested in reaching.

Demand Media's strategy is to avoid topical news articles and focus on creating web content that has a "long tail;" articles with a staying power that will bring searching users back at any point in the future simply by typing in a search term. Thus they argue that their enormous collection of media content is not made up of one-hit wonders, but rather represents a revenue-producing annuity which they expect will last an average of five years. Using their algorithm, they assert that they can estimate the ad revenue-generating ability of their content before it is even produced, and then track this revenue-generation daily as users are steered by search engines to its articles and videos.

THE ACCOUNTING ISSUE

As can be seen in Exhibit 1, the twin businesses of managing internet domain names and selling advertising built around consumer-driven articles and videos created almost 50% revenue growth from 2008 to 2010, but were not successful in producing any profits. Those who like Demand Media's basic strategy and are looking to buy shares of its IPO will then try to justify their investment by looking at alternative measures of success: are its net losses decreasing, is it producing positive operating cash flows, and is its performance improving using pro-forma non-GAAP measures of profitability? Using Demand Media's 2010 10-K report, the surface answers to these questions are all reassuring:

The company's net loss before preferred stock dividends declined from $22.4 million in 2009 to $5.3 million in 2010.

The 3rd and 4th quarter income statements for 2010 show the first profits in its history.

Operating cash flows improved from $39.2 million in 2009 to $61.6 million in 2010 (see Exhibit 3).

"Adjusted OIBDA" (Adjusted Operating Income before Depreciation and Amortization) increased from $38.6 million to $62.0 million in the past year (See Exhibit 4).

However, with the reporting by CNNMoney and others of "unorthodox accounting practices" in December 2010, investors must carefully consider how profits and operating cash flows were calculated before placing any reliance on these encouraging positive trends.

When the SEC reviewed Demand Media's public stock offering registration statement, it raised the following question regarding the commissions paid to the thousands of article-writers and video-makers who create the company's media content inventory:

"Explain why you believe that capitalizing media content as an intangible asset instead of expensing as incurred is appropriate. Cite the accounting literature that supports your accounting.

In this regard, explain why articles and video can be directly linked to revenue being earned from your websites or to customer."

As Exhibit 5 shows, Media Content Costs formed the largest and fastest-growing part of the Intangible Assets account in Demand Media's balance sheet.

CONCLUSION

On January 26, 2011 Demand Media completed a successful public offering at $17 per share, and enthusiastic investors quickly bid the stock up to a high of $25 per share, which gave the company a market valuation of $1.5 billion. Two weeks later Google introduced a major change to its search algorithm with the goal of moving better quality content to the top of Google search results and a corresponding reduction in ranking for low-quality sites or sites with unoriginal content. In spite of Richard Rosenblatt's assertion that the algorithm change would not hurt his company's results, in the following two months the percentage of people who navigated to a Demand Media site after a Google search fell sharply from .57% to .34%. Possibly as a result of Google's algorithm change, Demand Media's second-quarter 2011 Content and Media Revenue fell 4% to $49.8 million from $51.8 million in the first-quarter, the first quarter-to-quarter decline in the company's history. From a high of $27 in April, Demand Media's stock price had fallen to about $7 per share when the firm's second-quarter results were released in mid-August, 2011.

Subject: Studies; Financial reporting; Initial public offerings; Media

Location: United States--US

Company / organization: Name: Demand Media Inc; NAICS: 541840

Classification: 9130: Experiment/theoretical treatment; 3400: Investment analysis & personal finance; 9190: United States

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 5

Pages: 79-87

Number of pages: 9

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: Case Study, Feature, Business Case

Document feature: Tables

ProQuest document ID: 1465226225

Document URL: http://search.proquest.com/docview/1465226225?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-12-16

Database: ABI/INFORM Complete

Document 42 of 100

AN ACCOUNTING CHANGE AT AMERICAN ROCK SALT COMPANY

Author: Hunt, Allen K; Reed, Brad J; Sierra, Gregory E

ProQuest document link

Abstract:

A change in accounting method is treated as a change in accounting principles if the change is made from one acceptable principle to another. The application of an accounting principle sometimes involves the estimation of certain parameters such as the useful life of assets. In this case ARSC changed from the straight-line method of accounting for depreciation on mine-improvements to the units-of-production method for a year in which the annual report had already been filed with the SEC. Of added interest, the FASB had issued SFAS 154: Accounting Changes and Error Corrections- a replacement of APB Opinion No. 20 and FASB statement No. 3, which became effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The student is put in the position of an accountant at a company that is considering acquiring ARSC. The student is then asked to respond to a series of questions to help gain an understanding of the financial statements and accounting changes at ARSC. [PUBLICATION ABSTRACT]

Full text:

HISTORY

ARSC is a private company that registered securities with the SEC in 2004 to comply with the covenants of its secured senior notes. ARSC's primary asset is the Hampton Comers Salt Mine located in New York, serving industry and northwestern municipalities (road salt). The mine's construction was essentially complete in 2001, and operations grew in 2002. By the end of 2003 the Hampton Comer's mine had attained full production capability.

According to the September 30, 2004 annual report; mine development costs were being depreciated over a 20 year life. According to ARSC mine development costs included:

...engineering; site preparation and earthwork; site utilities; roads and paving; surface buildings; surface material handling; truck and rail loadout; railroad work; emergency generator; electrical systems; substation; hoists and headframes; service and production shafts; fans and ventilation; and underground development (ARSC a, p. 4, 2006).

In 2004 the ARSC reported that there were approximately 70 years of proven and probable reserves at the Hampton Comers Salt Mine. According to a SEC filing ARSC relied on its interpretation of a publication written by a big four accounting firm that opined on allowable depreciation methods for mining companies to justify its use of straight-line depreciation for mine improvements (ARSC b, p. 4, 2006). Most other public salt mining companies, however, were using the units-of-production method.

SFAS 154 was issued to provide guidance regarding accounting changes. Accounting changes include changes in estimate, changes in principle and correction of an error. The following is taken from the new pronouncement:

SFAS 154 was issued in May 2005 and became effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. SFAS 154 specified that: Early adoption of an accounting pronouncement, when permitted, shall be effected in a manner consistent with the transition requirements of that pronouncement (FASB p. 4, 2005).

With respect to the early adoption of SFAS 154 itself, the FASB stipulated:

This Statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date this Statement is issued (FASB p. 11, 2005).

The explanatory notes of ARSC amended 2005 10-K contained the following information related to the new method of depreciating its mine development costs.

This Amendment No. 1 to the Company's Annual Report on Form 10-K (this "Form 10K/A") for the fiscal year ended September 30, 2005, initially filed with the SEC on December 27, 2005 (the "Original Filing"), is being filed to reflect the retrospective application of the Company's new method of amortizing its mine development costs. This change affects the Company's Balance Sheets at September 30, 2005 and September 30, 2004 and its Statements of Operations, Statements of Changes in Members' Equity (Deficit) and Statements of Cash Flows for each of the fiscal years ended September 30, 2005, September 30, 2004, and September 30, 2003. The Company has elected to change its mine development cost amortization to the unitsof-production method, instead of a 20-year amortization life as the Company had previously used. The Company has adopted Statement of Financial Accounting Standards No. 154 ("FAS 154"), effective as of October 1, 2005, and in accordance therewith, retrospectively applied the change in amortization approach as a change in accounting principle to the financial statements included in this Form 10-K/A. (ARSC p. 2, 2006)

The change that ARSC made in the amended 2005 10-K resulted in increases to income of $1,934,000 in 2005, $2,036,000 in 2004 and $2,919,000 in 2003.

ACCOUNTING ISSUE

Harley Merle is the Controller for Interstate Mining Company (IMC). The Executive Committee of IMC has decided to look at diversifying into salt mining, and they asked Harley to look at the financial statements of ARSC to provide any feedback that he might have. After examining the 2005 annual report and a few other SEC filings Harley was intrigued by a few issues.

Harley puzzled over the accounting change that was discussed in the explanatory notes of the September 30, 2005 10-K/A. After reading through the relevant parts of the 2005 annual report Harley wanted to find out what sort of accounting change was made. In the 2005 annual report Harley found the following statement.

The financial impact of this accounting change is a reduction of annual amortization expense as the mine development assets are effectively amortized over a longer useful life (ARSC, p35, 2005).

Harley made the following notes. The treatment for a change in an accounting principle differed between ABP Opinion No. 20 and SFAS 154. Under APB No. 20 a change in accounting principle was treated retrospectively. Under APB Opinion No. 20. a change in depreciation method was treated as a change in accounting principle, not as a change in estimate.

Under SFAS 154 voluntary changes in accounting principles resulted in a cumulative adjustment to income in the year of change. Under SFAS 154 a change in depreciation method is treated as a change in estimate that is effected by a change in accounting principle. SFAS 154 specifies that a change in estimate should be accounted for prospectively, with no retrospective adjustment to retained earnings or prior year numbers. A correction of an error receives similar treatment under APB Opinion No. 20 and SFAS 154 in that an error correction results in a retrospective adjustment to retained earnings with a change to prior year numbers.

Harley is concerned that the accounting change implemented by ARSC has distorted ARSC's income. Since the acquisition price is often influenced by the target company's income, Harley has determined that an investigation of ARSC's accounting change is warranted. After reviewing the two accounting standards, Harley realized that ARSC could have used either APB Opinion No. 20 or it could have adopted SFAS 154 early to account for the change documented in the annual report.

QUESTIONS

1. Make a table of the correct accounting treatments according to SFAS 154 of 1) a transition to a new accounting standard, 2) a voluntary change in accounting principle, 3) an error correction and 4) a change in estimate. For each of these four columns, describe the method of transition accounting, whether or not the comparative numbers are changed and if disclosures of the change are required. The table should be formatted as follows:

2. Discuss which type of accounting change treatment matches ARSC's accounting for the change in the Amended September 30, 2005 Annual Report. Also, discuss the circumstances of the accounting change that ARSC made to the September 30, 2005 amended 10-K.

3. Was it appropriate for ARSC to apply SFAS 154 to the accounting period beginning October 1, 2005; which is before SFAS 154 became effective?

4. Does ARSC's income increase or decrease with a change from the straight-line depreciation method with a twenty-year useful life to the units-of-production method, given full production?

5. Do you think a retroactive adjustment to ARSC's income is appropriate in this circumstance? What is a possible motivation for ARSC to treat the change in this manner?

6. What did ARSC mean when it wrote the following with respect to the September 30, 2005 amended 10-K?

The Company has adopted Statement of Financial Accounting Standards No. 154 ("FAS 154"), effective as of October 1, 2005, and in accordance therewith, retrospectively applied the change in amortization approach as a change in accounting principle to the financial statements included in this Form 10-K/A. (ARSC p. 2, 2006)

7. What is your opinion of the explanatory notes to ARSC's 10-K/A as presented on page four above?

Subject: Studies; Mining industry; Accounting changes; Error analysis

Location: United States--US

Company / organization: Name: American Rock Salt Co LLC; NAICS: 212393

Classification: 4120: Accounting policies & procedures; 8500: Extractive industries; 9130: Experiment/theoretical treatment; 9190: United States

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 5

Pages: 89-94

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: Case Study, Feature, Business Case

Document feature: Tables References

ProQuest document ID: 1465226309

Document URL: http://search.proquest.com/docview/1465226309?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-12-16

Database: ABI/INFORM Complete

Document 43 of 100

Wirtz Beverage: Adding automation to the distribution mix

Author: Trebilcock, Bob

ProQuest document link

Abstract:

As the wine and spirits industry consolidates around fewer and larger distributors, leading players are looking to automation to transform their businesses. In suburban Chicago, Wirtz Beverage Illinois is taking the next level of automation. A family-owned, multi- state distributor with 2,500 employees and revenues of $1.8 billion Wirtz Beverage worked with a systems integrator (W&H Systems) to consolidate operations from three facilities into one new 555,500-square-foot distribution center near Midway Airport in Cicero. The facility is one of the first in the industry to feature an automated storage and retrieval system. While the new facility appears to be a showcase for materials handling technology, Wirtz Beverage did not automate for the sake of automation. Rather, the distributor took a balanced approach to the design of the facility. As the company considered higher levels of automation, three criteria became paramount for now and in the future: Uptime, efficiency and financial feasibility.

Full text:

As the wine and spirits industry consolidates around fewer and larger distributors, leading players are looking to automation to transform their businesses. An industry that was once characterized by lift trucks, floor storage and manual palletizing is embracing high-speed conveyor and sortation systems, voice-directed picking, and a warehouse management system that can deliver cartons in the right sequence for delivery stops.

In suburban Chicago, Wirtz Beverage Illinois is taking that formula to the next level of automation. A family-owned, multi-state distributor with 2,500 employees and revenues of $ 1.8 billion, Wirtz Beverage worked with a systems integrator (W&H Systems, whsystems.com) to consolidate operations from three facilities into one new 555,500-square-foot distribution center near Midway Airport in Cicero. In addition to the above technologies, the facility is one of the first in the industry to feature an automated storage and retrieval system (AS/RS; Westfalia, westfaliausa.com).

Operating in a 42-foot high area with 22,470 pallet positions, the AS/RS stores and replenishes the 780 fastest-moving SKUs. In all, there are 1.3 million cases stored in just 110,000 square feet. These products represent nearly 75% of the case needs from the facility. The AS/RS is serviced by three tandem cranes, each of which is capable of handling two pallets at a time and a total of 200 pallet moves per hour. Pallets are stored 10 pallets deep. The cranes also replenish eight fully integrated pick-to-belt modules within the AS/RS.

Add in a voice-directed, split-case bottling picking operation, conventional pick areas for slower-moving SKUs, and a high-speed conveyor and shipping sorter, and the facility is handling more than 7,500 SKUs and 2.2 million cases in inventory. The facility picks and loads as many as 85,000 cases for delivery in a 10-hour shift.

"In our final year in our old facilities, we went from 50,000 to 84,000 cases a night with a shipping sorter that could run about 5,300 cases per hour," says Rocky Ruane, regional director of warehouse operations. "That was taking too long for us to get our trucks on the road and service our customers." Within four months of going live in the new facility, Ruane adds, Wirtz Beverage processed 85,000 cases in 10 hours. "Those were sustained rates that we hadn't seen before," he says.

What's more, the system was designed with room to grow. For instance, the AS/RS alone can be expanded to store more than 2.2 million cases in the future. That was important to a family-owned business that plans for the next generation and not just the next quarter.

Consolidation and growth

Wirtz Beverage is the largest wine and spirits distributor in Illinois. In addition, the company has operations in Iowa, Minnesota, Missouri, Nevada and Wisconsin.

The move to automate was driven by business growth, says Art Wirtz, executive vice president of supply chain and operations and grandson of the founder. The company was founded in 1945, when Wirtz's grandfather acquired Judge & Dolph in Illinois and Edison Liquor in Wisconsin. Soon after, Wirtz's father and uncle entered the business. Throughout the 1970s and 1980s, the family business expanded to Minnesota and Nevada and acquired other alcoholic beverage distributors in Illinois. In 1980, for instance, Judge & Dolph purchased Hiram Walker's wholesale operations. In 1989, it bought the Fox River Distributing Company in Aurora and Jaenicke Distributing Company in Rockford.

In the 1990s, the company expanded operations throughout the state of Illinois. In 2003, the distributor began adding warehouses to support its operations after it was selected as the exclusive distributor for all of Diageo's brands in Illinois.

In 2008, the company combined operations in Illinois with Glazers. "With that change, we went from shipping four million to eight million cases a year," says Wirtz. "We were now operating out of three metro warehouse facilities just in Chicago plus an additional office building." The company was also re-branded under the Wirtz Beverage name.

Each of the warehouse facilities in Chicagoland served a special purpose in a just-in-time order fulfillment process managed by Wirtz Beverage's warehouse management system (WMS). One facility, with pick modules and a conveyor and shipping sorter system, was used to consolidate orders and load trucks. A second facility was used for bulk storage, while a third served to consolidate slow-moving SKUs.

Pick modules in the order fulfillment warehouse were replenished with cartons from the bulk storage facility. In addition, slow-moving SKUs were pulled from the two satellite facilities and delivered to that facility. Those cartons were manually inducted onto the conveyor and sorter system and married with the items being picked in the facility. "If we sold 50,000 cases on Tuesday, on Wednesday we were bringing in as many of those 50,000 cases as we could so we could load the trucks," says Ruane. "It was truly just in time."

Although complex, the system worked. However, the company real- ized it had to consolidate its operations under one roof if it was going to continue to grow. Wirtz, Ruane and Mike Brown, the regional director of finance, along with Anthony Iatarola from Wirtz Realty, spent a year and a half looking for land in the Chicago area suitable for the kind of facility they envisioned. They settled on Sportsman's Park, a 35-acre site in the shadow of Midway Airport. Site of a defunct race track, the land was owned by the city of Cicero.

At the same time it was scouring the area for land, the Wirtz team researched a new approach to conventional beverage distribution. "We toured other facilities and we met with several different potential partners to understand best practices in our industry," says Wirtz. "We knew that we needed to design a system that would support the peaks and valleys of our business, reduce touches and work within our financial model."

A balanced approach

While the new facility appears to be a showcase for materials handling technology, Wirtz Beverage did not automate for the sake of automation. Rather, the distributor took a balanced approach to the design of the facility. "When we decided to build new, we had a clean sheet of paper," says Wirtz. "We knew that we were still going to floor-load our trailers based on the order profile; that we were going to use the same type of delivery equipment; and that we would have very few pallet deliveries. Knowing those things, we wanted to design a system that would accurately build our loads in the most efficient way."

What they decided on was something the Wirtz team refers to as a hybrid approach that combines conventional distribution with automation where technology could be justified. "We were very comfortable with the traditional approach to wine and spirits distribution," Wirtz says. "We understand its limitations and we know the workarounds for the seasonal spikes in our business." Still, they wanted a facility that would optimize the available space, meet their new throughput requirements and accommodate growth.

As the company considered higher levels of automation, three criteria became paramount for now and in the future: Uptime, efficiency and financial feasibility.

The choice of automated storage technologies represented a leap forward for the industry. Up to this point, only one or two other wine and spirits distributors had incorporated AS/RS technology in their operations. For Wirtz, one of the first decisions was how high to build that portion of the building. "We priced out facilities that were up to 100 feet high," Wirtz says. "We would have spent less money on land, but we would have spent more money on higher strength racking, the sprinkler system and a bigger concrete slab to handle the weight." More importantly, Wirtz adds, "a 100-foot high building isn't as versatile as a conventional build- ing should something change about our requirements in the future."

For that reason, the team decided on a maximum distance of 45 feet to the roof as the most cost-effective building for its purposes and its business model. Pallets are stored five high in the space. And while the AS/RS is currently stor- ing about 1.3 million cases, it can be expanded to close to three million cases in the future.

To streamline the receiving and put- away processes, the AS/RS was erected close to the receiving dock. It was also designed to handle both storage and replenishment duties to get more out of the system. Along with putting pallets away into storage, pallets are placed on flow lanes in each pick face. "On any given night, a pick location is going to go through 10 to 20 pallets," says Ruane. "That's a lot of lift truck moves if a driver has to go into reserve stor- age and replenish each pick location." In fact, the labor freed up by automat- ing the replenishment activities in the AS/RS was a key factor in delivering the ROI for the system.

Voice-directed picking was another new technology introduced in the Cicero facility. Previously, the com- pany used pick-to-light in its split case, bottle-pick areas in its order fulfillment facility. After visiting a voice reference site where an older associate was pick- ing 600 bottles per hour using voice, the Wirtz team adopted the technol- ogy. "The metrics made sense, and we get great reporting from the system," Ruane says. "Plus the associates like it. They challenge themselves to improve on their numbers."

The last improvement was a merge and combiner in the shipping sorter that significantly improved the flow of cases through the facility. That system increased the after-sort buffer from 80 to 90 cases per truck to 425 cases per truck.

Integrating software

Tying together storage, conveyor and picking technologies required the inte- gration of four different software sys- tems. "Prior to this new facility, the transfers between buildings led to a very complicated WMS," says Brown. "In the new facility, we simplified the WMS, but we now have four different systems talking together to synchronize activities across the facility" This was all accomplished with the support from a business partnership with Blue Horseshoe.

The software scheme begins with an enterprise resource planning (ERP) system that manages processes at the highest level. Incoming product is received into the facility and scanned into the warehouse management system. The WMS also directs put away processes into the conventional storage areas. Pallets that will be stored in the AS/RS are scanned and measured when they are inducted into the system by conveyor. At that point, management of the pallet is transferred to the warehouse control system (WCS) in charge of the AS/RS. That system directs the cranes to put pallets into storage locations and directs replenishment of the picking areas.

A third software system creates wave picking plans that are shared with other systems. The WMS directs all of the picking operations. "Once the cranes fill the pick line, the inventory belongs to the WMS again even though it's still in the AS/RS area," says Brown. "We want the WMS to manage all of our pick locations."

Finally, a WCS manages the conveyors, coordinates the delivery of cartons to the shipping sorter, and puts them in the right sequence for loading into trucks.

"Ultimately, we developed a business model when we were designing the system and we have executed that model with the labor we had forecasted," says Wirtz. "We're meeting our budget from a manpower and overtime standpoint."

What's more, the distributor is filling all of its orders and getting its trucks on the road ahead of the competition. "The key to the wine and spirits distribution business is to get your drivers on the road ahead of your competition," says Ruane. "We're doing that, with room to grow."

Subject: Beverage industry; Automation; Distributors; Distribution centers; Case studies

Location: United States--US

Company / organization: Name: Wirtz Beverage Group; NAICS: 492210

Classification: 9110: Company specific; 5160: Transportation management; 8303: Wholesale industry; 5240: Software & systems; 9190: United States

Publication title: Modern Materials Handling,   [Warehousing Management Edition]

Volume: 68

Issue: 7

Pages: 20-22,24,26,28

Number of pages: 6

Publication year: 2013

Publication date: Jul 2013

Year: 2013

Section: MODERN system report

Publisher: Peerless Media

Place of publication: Framingham

Country of publication: United States

Publication subject: Machinery

ISSN: 00268038

Source type: Magazines

Language of publication: English

Document type: Cover Story, Business Case

Document feature: Photographs

ProQuest document ID: 1419395651

Document URL: http://search.proquest.com/docview/1419395651?accountid=38610

Copyright: Copyright Peerless Media Jul 2013

Last updated: 2013-09-06

Database: ABI/INFORM Complete

Document 44 of 100

THE BEST OF BOTH GROCERS CASE

Author: Morrisette, Shelley; Hatfield, Louise

ProQuest document link

Abstract:

Joe Peterson is the owner and founder of an upscale local chain of grocery stores. In an effort to extend his local coverage, Joe enters a partnership to serve the cost conscious shopper, as well as the quality focused shopper. Joe's entry into the discount grocery business is successful. However, problems arise for Joe in one of his upscale grocery stores, and Joe begins to question his move into the discount grocery market and his location decision for his most recent upscale grocery store. Now he faces a difficult decision. [PUBLICATION ABSTRACT]

Full text:

INSTRUCTOR'S NOTES

Case Questions

1. Should Joe believe Frank Baylor's theory that the Save-More's target-market had cannibalized Real Grocer's market share?

2. Would it be better if Joe followed John's advice and just closed the under-performing Real Grocer? Or should he spend more time and money marketing this Real Grocer to the local market?

3. Is Frank's recommendation of transforming the Real Grocer into Save-More worth taking a chance on?

Subject: Grocery stores; Brand differentiation; Case studies; Site selection

Classification: 7500: Product planning & development; 9130: Experiment/theoretical treatment; 8390: Retailing industry

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 4

Pages: 17

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: 10784950

Source type: Reports

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1426973265

Document URL: http://search.proquest.com/docview/1426973265?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-12

Database: ABI/INFORM Complete

Document 45 of 100

MAGIC CARPET RIDE A FINANCIAL REPORTING CASE

Author: Watkins, Larry; Stell, Roxanne

ProQuest document link

Abstract:

Mecca Media's first foray into online entertainment is causing Joe Dixon, the somewhat colorful CEO of this small public company, more than a little discomfort. Mecca has invested millions in intellectual property rights, PP&E (property, plant and equipment), and (TV) set-top boxes, in addition to committing to a multi-year consulting agreement. Over a year into the Magic Carpet project, revenues are disappointingly below projections and now the CFO and the Board of Directors are questioning the viability of the project. In hopes of stemming the negative cash flow, the CFO has proposed drastically scaling back Magic Carpet and now she must determine the financial reporting consequences of her suggested actions. This requires significant research and analysis in the FASB's Accounting Standards Codification to satisfy the Board of Directors, Mecca Media's auditors, and her own personal standards. [PUBLICATION ABSTRACT]

Full text:

(ProQuest: ... denotes text stops here in original.)

INSTRUCTORS' NOTES

Recommendations for Teaching Approaches

This case requires students to identify several financial reporting issues and research them in the professional pronouncements literature. Students should be able to identify the issues presented by the case and conduct the necessary research assuming they are familiar with the Accounting Standards Codification. If the instructor desires, the four questions presented at ...

Subject: Financial reporting; Public companies; FASB Accounting Standards Codification; Online entertainment; Case studies

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

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 4

Pages: 21

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: 10784950

Source type: Reports

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1426972957

Document URL: http://search.proquest.com/docview/1426972957?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-12

Database: ABI/INFORM Complete

Document 46 of 100

INTRODUCING MICRO-FINANCE IN SWEDEN

Author: Barinaga, Ester

ProQuest document link

Abstract:

In late-March 2009, Linda Sandberg, leader for the introduction of microfinance in Sweden by the Swedish Association for Savings Banks, was considering relations with Feem (Forum for Entrepreneurs from Ethnic Minorities), the pilot project's non-profit partner. Relations had deteriorated culminating in accusations of plagiarism. Fredrik, Linda's supervisor, had asked her for an analysis of the tensions for their next meeting scheduled in one hour. [PUBLICATION ABSTRACT]

Full text:

INSTRUCTORS' NOTES

Theoretical Frameworks

The author thinks three bodies of literature are relevant in the analysis of this case:

1. Governmentality studies and its focus on the conduct of conduct: the bank's possibility to conduct Feem as well as other non-profit organizations through the technique of micro-finance. While allowing the bank to access a new market niche, it also permits the bank to govern the small organizations. Further, micro- Collaborating Partners

What are the interests of the actors involved in the micro-finance initiative?

How are these interests met by the micro-finance initiative?

Potential Of Social Change

Has the micro-finance initiative the potential to achieve social change?

How does collaboration with Feem and/or Yasta influence this potential?

WHAT HAPPENED "IN REALITY"?

Linda decided to let time go and don't make any fuss of Feem's conflictual approach to the collaboration. The micro-finance project culminated with a one-day conference on the potential of micro-finance with which the Swedish Association for Savings Banks formally ended the initiative.

One year after the formal end of the project:

1. Both Feem and Yasta were working with micro-finance. Feem had started Sweden's first MFI, although was unable to give loans of their own due to lack of resources. Yasta, on the other hand, had obtained a large funding for the European Social Fund (ESF) to develop micro-finance Yasta!, which works with Sörmnland Sparbank has been asked by the bank to co-operate with Feem in setting up microfinance..

2. The micro-finance product had been extended both by the Savings Bank of Sörmland and by the Savings Bank of Roslagen to include also unemployed youth.

3. Jazmin Nkoya, Feem's initiator and director, had been appointed member of the board of directors of the Swedish National Employment Agency.

4. Despite the low number of micro-loans granted to entrepreneurs coming from Feem, Jazmin Nkoya has been awarded the price "Entrepreneur of the Year", awarded by Veckans Affarer, a major Swedish business magazine.

Subject: Microfinance; Social change; Social capital; Entrepreneurs; Case studies

Location: Sweden

Classification: 9520: Small business; 1220: Social trends & culture; 8100: Financial services industry; 9130: Experiment/theoretical treatment; 9175: Western Europe

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 4

Pages: 27,35-36

Number of pages: 3

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

Document feature: References

ProQuest document ID: 1426972997

Document URL: http://search.proquest.com/docview/1426972997?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-12

Database: ABI/INFORM Complete

Document 47 of 100

IS NO UPGRADE A DOWNGRADE?

Author: Jackson, Lonnie L; Campbell, Nathanael S; Horvath, Brandon

ProQuest document link

Abstract:

Johnny and Marie Hastings own a screen-printing business that is very successful. The company owns various machines that are vital to its success. The most important machine, the automatic press, is developing reliability concerns that are associated with age. Johnny and Marie are contemplating three options regarding this machine: 1) keeping the current automatic press; 2) outsourcing the production to another company; or 3) buying a new press. The cost effectiveness and efficiency of the options begs the question: is no upgrade a downgrade? [PUBLICATION ABSTRACT]

Full text:

INSTRUCTORS' NOTES

Recommendations for Teaching Approaches

This case was written by the authors to require students to put themselves in the shoes of a small business owner. Students are required to integrate all of their knowledge of planning and decision making to help choose the "best decision." To justify their "best option," students will be required to incorporate their knowledge of accounting, economics, and management.

Subject: Small business; Decision making; Screen printing; Case studies

Classification: 9130: Experiment/theoretical treatment; 8690: Publishing industry; 9520: Small business

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 4

Pages: 37

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: 10784950

Source type: Reports

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1426973073

Document URL: http://search.proquest.com/docview/1426973073?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-12

Database: ABI/INFORM Complete

Document 48 of 100

DISTINGUISHING BETWEEN LIABILITIES AND EQUITY: TWO MINI-CASES FOR IMPROVING STUDENTS' CRITICAL THINKING SKILLS IN INTERMEDIATE FINANCIAL ACCOUNTING

Author: Gunderson, Konrad E

ProQuest document link

Abstract:

An overview of the instructional strategy is as follows. An introductory in-class exercise has students rank a series of financial instruments from most debt-like to most equity-like, and decide where the line separating debt from equity should be. Case A requires students to evaluate the representational faithfulness of debt and equity categories of an example company balance sheet, an experience which demonstrates the limitation of a dichotomous classification scheme. Case ? has students analyze characteristics of a financial instrument drawn from practice, making judgments about classification based alternatively on (1) application of existing authoritative literature, and (2) a conceptual analysis of essential features of the financial instrument. [PUBLICATION ABSTRACT]

Full text:

Subject: Financial instruments; Financial accounting standards; Case studies; Critical thinking

Classification: 4120: Accounting policies & procedures; 9130: Experiment/theoretical treatment

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 4

Pages: 45,59-60

Number of pages: 3

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

Document feature: Tables References

ProQuest document ID: 1426973058

Document URL: http://search.proquest.com/docview/1426973058?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-12

Database: ABI/INFORM Complete

Document 49 of 100

CARSON'S DEPARTMENT STORE: WHEN TO STAY AND WHEN TO GO

Author: Carson, Charles M; Cumber, Carol J

ProQuest document link

Abstract:

This field researched case focused on a small town long-standing department store. Chuck and Pam Carson are a husband and wife entrepreneurial team that has owned and operated a retail clothing store in Northeast Mississippi for over thirty years. Chuck has found success in another business venture and is pressing Pam to make some very difficult decisions regarding the future of the business. These decisions are complicated by the fact that there is no available family successor to take over the business. Another important issue is that these long-time marriage and business partners have different levels of emotional connection to the business and are not united as to what should be the store's future [PUBLICATION ABSTRACT]

Full text:

INSTRUCTORS' NOTES

Case Learning Objectives

Following class discussion of this case, students should be able to identify some of the challenges of family businesses, succession issues, exit strategies, and entrepreneurial decision making challenges. Specifically, the objectives include:

* To identify the major issues facing Carson's Department Store

* To identify key considerations that Chuck and Pam should examine when deciding their next steps

* To explore the working relationship between the husband-wife team of Chuck and Pam Carson

EPILOGUE

While the decision was much more difficult for Pam than Chuck, they ultimately decided to have a Going Out of Business sale, and closed Carson's Department Store. Chuck continues to be active in the management of G & O Supply. Pam, much to her initial surprise, found that she enjoyed the freedom of not being tied down to their clothing store.

Subject: Department stores; Family owned businesses; Succession planning; Case studies; Small business

Location: United States--US

Classification: 9130: Experiment/theoretical treatment; 9190: United States; 2310: Planning; 8390: Retailing industry; 9520: Small business

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 4

Pages: 61,69

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: 10784950

Source type: Reports

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1426972984

Document URL: http://search.proquest.com/docview/1426972984?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-12

Database: ABI/INFORM Complete

Document 50 of 100

CREATIVITY, INNOVATION AND ENTREPRENEURSHIP: THE CASE OF H. WAYNE HUIZENGA

Author: Finkle, Todd A

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Abstract:

The case begins with the background and personality of H. Wayne Huizenga, the 546th richest man in the world. Huizenga was the only person in history to build three Fortune 1000 companies and the only person to build six NYSE-listed companies. He was also the only person to ever own three professional sports teams in a single market. Huizenga created and grew Waste Management, Inc., Blockbuster Inc., and Republic Industries along with the countless other businesses that he invested in during his career (e.g., security alarms, professional sports franchises, hotels, portable toilets, lawn care, bottled water, pest control, billboards, and machine parts washing service). Students will have the opportunity to learn about Huizenga's background, keys to success, and strategies used to start and grow some of his businesses. Furthermore, students are required to make recommendations to Huizenga based on today's economic environment to expand Huizenga's business empire. [PUBLICATION ABSTRACT]

Full text:

INSTRUCTORS' NOTES

Recommendations for Teaching Approaches

This is an excellent teaching case for the following reasons. First, it gives students the ability to follow the decisions that were made by one of the most successful entrepreneurs renting the receptacles, renting tapes, renting automobiles). We recommend that Huizenga look into the education industry. Specifically, we recommend that he look at the online for profit education industry. Huizenga would sell information online to people. Yet he would maintain the copyrights to the material.

Enrollment at for-profit trade schools expanded about 20 percent a year the last two years, more than double the pace from 2001-7, according to the Career College Association (Goodman, 2010).

Our second recommendation is for Huizenga to continue to focus on the foundation he created, the Huizenga Family Foundation. Huizenga appears to have a soft spot for education by giving money for scholarships and university buildings. We recommend that he continue to do this. Huizenga can couple his online "for profit" education company, with scholarships as well. This would give disadvantaged or laid off workers an opportunity to retrain themselves.

Subject: Creativity; Innovations; Entrepreneurship; Case studies; Organization development

Location: United States--US

People: Huizenga, Wayne

Classification: 9190: United States; 9130: Experiment/theoretical treatment; 9520: Small business; 2500: Organizational behavior

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 4

Pages: 71,80

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: 10784950

Source type: Reports

Language of publication: English

Document type: Feature, Business Case

Document feature: References

ProQuest document ID: 1426972926

Document URL: http://search.proquest.com/docview/1426972926?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-12

Database: ABI/INFORM Complete

Document 51 of 100

ALTOS DE TINOGASTA, ARGENTINA

Author: Smith, D K (Skip; Aimar, Carlos; Clusellas, Gabriel; Stough, Stanley

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Abstract:

Gabriel Clusellas is President of Altos de Tinogasta-La Aguadita SA, a farming/real estate company located on 3000 hectares in the town of Tinogasta, Province of Catamarca, in Argentina. The business model Altos de Tinogasta (hence, AT) is using, and the results the company has achieved so far, are as indicated below: 1. The 3,000 hectares are being planted in two crops: olives and grapes. The first harvests will be in 2013. 2. The hectares being planted in olives have been divided up into 216 parcels of 10,000 square meters each; these parcels are being offered to investors at a price of $27,000 per parcel. The hectares being planted in grapes have been divided up into 208 parcels of 2,500 square meters each; these parcels are being offered to investors at a price of $15,000 per parcel. 3. To continue developing its infrastructure and to continue planting additional parcels with olives or grapes, AT needs to substantially increase its revenues.

Full text:

INSTRUCTORS' NOTES

As indicated in the case, the situation faced by Prof. Carlos Aimar is that he has been invited by the President of Altos de Tinogasta (AT) to identify (within the next 30 days) a set of alternatives for achieving the objectives which the President of AT has set, that is, to generate revenues of at least $2,000,000 within the next 12 months. As regards lessons and/or information which students should learn from this case, at least four points can be made:

1. At the beginning of the case, students will need to consider the extent to which developed-world models and conceptual frameworks can be applied to challenges and opportunities in the developing world. By the end of the case discussion, they will have discovered that some conceptual frameworks (for example, turnaround strategies) can be useful guides to managerial action not only in the developed world but in the developing world as well.

2 Students will be able to compare their alternatives to the ones developed by the hero of the case, that is, Prof. Carlos Aimar; also, they will also be able to see the feedback from the President of AT on alternatives suggested by Prof. Aimar.

3. Students will discover that the conceptual framework of managers and/or consultants (in this case, a "turnaround strategy" model developed by Sheth 1985) powerfully impacts the nature of the process and/or options used to address managerial challenges and/or opportunities. Specifically, a "turnaround strategy-based" approach to increasing Argentina. As noted above, the steep downward trend in sales over the past three years could be interpreted as support for the idea that ABC1 consumers do not find AT's current positioning especially compelling.

6. REDEFINE MARKETS. Sheth identifies four alternative approaches to using this strategy. Those four approaches, and data from the case relating to them, are as indicated below:

a. Generic to specialty products: The plots offered by AT are not a generic product; this option does not seem relevant to this situation.

b. Primary to secondary products: The case indicates that the plots AT is selling plus (for consumers purchasing a plot planted in olives) a pro-rata share of the olive oil-related assets and revenues or (for consumers purchasing a plot planted in grapes) a pro-rata share of the vineyard-related assets and revenues are its primary products. The products currently offered by AT are not secondary products.

c. Industrial to consumer products: The plots are already consumer products; this option does not seem relevant to this situation.

d. Consumer to industrial products: It seems unlikely that corporate bodies would purchase plots from AT.

Subject: Business models; Farming; Case studies; Sustainable agriculture

Location: Argentina

Classification: 8400: Agriculture industry; 9130: Experiment/theoretical treatment; 9173: Latin America; 2310: Planning

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 4

Pages: 89-90,104

Number of pages: 3

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

Document feature: References

ProQuest document ID: 1426973050

Document URL: http://search.proquest.com/docview/1426973050?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-12

Database: ABI/INFORM Complete

Document 52 of 100

Cranberries Of Wisconsin: Analyzing The Economic Impact

Author: Kashian, Russ; Peterson, Jeremy

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Abstract:

Once mainly known as a menu item in American and Canadian Thanksgiving dinners, cranberries have branched out to become a major commercial crop in the United States. Cranberries, along with blueberries and concord grapes, are the only native fruits grown commercially in the United States. Wisconsin leads the United States in cranberry production. The growth of this industry has led to a net economic gain to the community and region. This paper initiates the discussion of the cranberry industry to the State of Wisconsin's economy; adding it as a topic in the field of economic development. This paper uses "input output analysis" in an effort to estimate the economic value of this crop. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Berries; Agribusiness; Economic impact; States; Case studies

Location: United States--US

Classification: 1110: Economic conditions & forecasts; 8400: Agriculture industry; 9130: Experimental/theoretical; 9190: United States

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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

Document feature: References Tables

ProQuest document ID: 1418712070

Document URL: http://search.proquest.com/docview/1418712070?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 53 of 100

Case Study Of Employee Turnover At Ice Cream Deli In Mexico

Author: Hernández von Wobeser, Lorena; Ramírez Escamilla, Graciela; Wobeser, Irmgard von

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Abstract:

This case study focuses on a Mexican franchise - "Ice Cream Deli" - and its interest to reduce voluntary-avoidable turnover in order to lower costs and increase productivity. High turnover is a common problem in many organizations in Cancun and Playa Del Carmen, Mexico. The ten "Ice Cream Deli" stores studied in this case present a high voluntary turnover, even when the job conditions in the organization are better than the market. Arturo Mendoza, Director of Operations, is interested in analyzing the root causes of the problem and providing an action plan to reduce turnover of line workers. Some of the reasons for turnover and retention are stated from the perspective of the workers. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: International; Case studies; Restaurants; Employee turnover

Location: Mexico

Classification: 6100: Human resource planning; 8380: Hotels & restaurants; 9130: Experimental/theoretical; 9173: Latin America

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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

Document feature: References

ProQuest document ID: 1418712157

Document URL: http://search.proquest.com/docview/1418712157?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 54 of 100

A Cost Analysis Case Study Of A Small Chinese Manufacturer

Author: Landry, Steven P.; Chan, Canri

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Abstract:

This study investigated whether a small firm, China Umbrella Factory Limited (CUFL), and in fact any firm in a developing country (mainland China), could benefit from a formal, activity-based costing system. Many small firms, even more so than larger firms, find themselves particularly vulnerable to competitive challenges because the smaller firms lack the know-how and resources to know their true costs and profit margins. Smaller firms tend to use heuristics, or rules-of-thumb, in their estimation of costs as opposed to the bonafide use of more sophisticated and validated costing systems, whether traditional or activity-based costing (ABC). Comparisons of this firm's current estimations of costs were made using both of these costing systems. Results indicated differences across the three methods. It was discovered that cost distortions that disfavored the estimation and traditional methods favored the ABC method. Notwithstanding the benefits found with using ABC, the firm decided not to adopt this method. A major constraining factor rested with the limitation of human resources - particularly with training in ABC as well as general management accounting. Furthermore since ABC, in a greater fundamental sense, benefits firms with significant overhead (when measured as a proportion of total cost), ABC would only provide limited benefits relative to the cost of implementation given the low-tech, primarily labor-based nature of this firm and its products. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Case studies; International; Small & medium sized enterprises-SME; Manufacturers; Cost analysis; Activity based costing

Location: United States--US

Classification: 4120: Accounting policies & procedures; 9520: Small business; 8600: Manufacturing industries not elsewhere classified; 9130: Experimental/theoretical; 9179: Asia & the Pacific

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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

Document feature: References Tables

ProQuest document ID: 1418712073

Document URL: http://search.proquest.com/docview/1418712073?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 55 of 100

Apple, Inc.: Where Is It Going From Here?

Author: Gupta, Atul; Prinzinger, Joe

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Abstract:

Apple's central business model has not changed since the company's emergence in the late 1980s. While being a leader in consumer electronics innovation, Apple has reliably produced proprietary hardware and software, which has provided the company a competitive advantage in gaining a share of any market into which they have ventured. Apple's strategic management decision to include non-PC products in its portfolio has thrived so far, driven by the success of the iPod, iPad, and iPhone. However, iPod sales have slowed. The iPhone is facing increased competition within the smartphone industry. The success or failure of Apple's latest creation, the iPad Mini, remains to be seen. The combination of these events begs the question: Will Apple's existing and emerging product lines take it to the next level? This paper presents a synopsis of Apple's current and emerging product lines as a means to predict the future direction of the company. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Computer industry; Market strategy; Product lines; Case studies

Location: United States--US

Company / organization: Name: Apple Inc; NAICS: 334111, 334220, 511210

Classification: 7000: Marketing; 8651: Computer industry; 9130: Experimental/theoretical; 9190: United States

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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

Document feature: References Tables

ProQuest document ID: 1418712125

Document URL: http://search.proquest.com/docview/1418712125?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 56 of 100

Congressional Insider Trading: Is It Legal?

Author: Schieberl, Jeffrey; Nickles, Marshall

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Abstract:

This paper addresses the concern the authors have surrounding the legislation that governs Congressional "insider trading". While members of Congress can legally trade securities (with disclosure) for their personal account for financial gain, the authors believe that it is ethically wrong. This paper also addresses legal issues as well as the SEC position on why Congressional members are exempt from scrutiny or prosecution for insider trading. Since the last State of the Union Address and the call from President Obama for new legislative oversight that would provide visibility and rules designed to curb potential stock trading abuse by members of Congress, the Stop Trading on Congressional Knowledge (STOCK ACT) became law. However, the authors do not believe that the new legislation is sufficient. We contend that any privileged stock market trading activity or the passing of any "insider information" to others by Congress or the Senate for financial gain should be considered not only unethical but illegal. Finally, the paper also attempts to discuss why ethics, trust, and morality come into focus on this topic. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Insider trading; Stocks; Federal legislation; Senators; Case studies

Location: United States--US

Classification: 1210: Politics & political behavior; 4320: Legislation; 8130: Investment services; 9130: Experimental/theoretical; 9190: United States

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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

Document feature: References

ProQuest document ID: 1418712107

Document URL: http://search.proquest.com/docview/1418712107?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 57 of 100

The Improvement Project Of Science Construction PLC

Author: Erer, Mert

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Abstract:

This case is designed to be an introduction to preparing improvement projects for insolvent companies. After reading this text and answering the questions for discussion, the students understand 1) the major aspects that should be highlighted in an improvement project, 2) the links between the reasons for bankruptcy and countermeasures, and 3) the links between the planned measures and their representation in financial statements. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Insolvency; Bankruptcy; Regulation; Case studies; Business failures

Location: United States--US

Classification: 4310: Regulation; 3100: Capital & debt management; 9130: Experimental/theoretical; 9190: United States

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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

Document feature: References Tables

ProQuest document ID: 1418712069

Document URL: http://search.proquest.com/docview/1418712069?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 58 of 100

From Litigation To Arbitration: A Case Study In Water Resources Conflict

Author: Fernandez, Daniel P.

ProQuest document link

Abstract:

The business of water and competing uses for this precious resource in various parts of the United States often leads to conflict. Demand is outpacing supply, especially in the more heavily populated areas. This has led to intra-state and interstate disputes among prospective users of water and, in many cases, litigation. Against such a backdrop, this article examines a case that was litigated for more than five years. It was ultimately settled after a ruling by an administrative law judge. In order to provide sufficient background for the case, the discussion will first cover water law basics and water use permitting. Next, the discussion will touch on the salient parts of the litigation. Finally, the article will illustrate how an embittered five years of "water wars" litigation was resolved through an inter-local agreement providing for binding arbitration, generally a faster and less expensive form of dispute resolution than litigation. The choice of litigation vs. alternative dispute resolution can have significant economic consequences for public supply, industry and agriculture. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Water resources; Litigation; Case studies; Water utilities; Arbitration; Disputes; Sustainability

Location: United States--US

Company / organization: Name: Southwest Florida Water Management District; NAICS: 221310

Classification: 8340: Electric, water & gas utilities; 9130: Experimental/theoretical; 4330: Litigation; 1530: Natural resources; 9190: United States

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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

Document feature: References

ProQuest document ID: 1418712082

Document URL: http://search.proquest.com/docview/1418712082?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 59 of 100

Case Study Of U.S. Cotton Textile Industry

Author: Seock, Yoo-Kyoung; Giraudo, Andrea; Gautreaux, Leah

ProQuest document link

Abstract:

Ever since its introduction to the United States, cotton has played an important role in the U.S. economy and its position in the international market. The success of cotton production in the U.S. has, in the past, served as a major boost for the American economy and a catalyst for industrial improvements and inventions. However, the global market for cotton fibers and cotton-based textile products has undergone a few changes over the past decades. Competition surrounding cotton has placed the industry under pressure and intense competition among the largest producers such as China, India, and Pakistan. Due to the increased competition of the cotton production and international trade of cotton in the global market alongside the decreased production of textile products, the U.S. cotton industry had to look beyond its own borders to meet the demands of the global textile market. The purpose of this paper is to examine and discuss the important issues raised in the U.S. cotton textile industry and to look for the future of this industry. The case can be used as a tool to stimulate a critical evaluation of the industry and to facilitate discussion about the potential strategies to make the industry viable. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Cotton fabrics; Textile industry; Production planning; Consumption; Case studies

Location: United States--US

Classification: 8400: Agriculture industry; 5310: Production planning & control; 8620: Textile & apparel industries; 9130: Experimental/theoretical; 9190: United States

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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

Document feature: References

ProQuest document ID: 1418712140

Document URL: http://search.proquest.com/docview/1418712140?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 60 of 100

Teaching Notes; The "Bear Claw" Drywall Clips: Taking A New Product To Market

Author: Van Winter, Jerrold A.

ProQuest document link

Abstract:

The "Bear Claw" case study was published in the Journal of Business Case Studies (September/October 2011 issue, Volume 7, Number 5). The case study has been used in marketing and entrepreneurship classes at several universities. Based on feedback from these classes and comments from individual reviewers, these notes were developed to support the teaching of the case. The "Bear Claw" drywall repair clips provide a unique and effective method for repairing damaged drywall. The product received positive trade and press feedback. However, the "Bear Claw" has yet to achieve the commercial success expected. After working through the case discussion questions, students should be able to identify missteps made in the past in commercializing the product and suggest potential strategic directions for the future of the "Bear Claw" [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Fasteners; Manufacturers; Case studies; Marketing management; Entrepreneurship; Product development

Location: United States--US

Classification: 9130: Experimental/theoretical; 7500: Product planning & development; 8660: Metalworking industry; 9190: United States

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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: 1418712056

Document URL: http://search.proquest.com/docview/1418712056?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 61 of 100

Accounting For Operational Assets: From Acquisition Through Disposal

Author: Blunck, Ryan; Guymon, Ron

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Abstract:

For many firms long-term operational assets are the largest category of asset on their balance sheet. Accounting students need to understand how these assets are accounted for throughout the lives of the assets to understand the effects they have on a firm's balance sheet and income statement. This case includes all of the normal issues involving operational assets and walks the student through the entire life-cycle of one asset owned by Big Muscle Corporation. The case requires students to identify which costs are capitalized into long-term assets, calculate capitalized interest on a self-constructed asset, depreciate an asset, change depreciation methods, perform an impairment test, and, finally, dispose of an asset. When a student has successfully completed the case, they will have a good "big picture" view of how operational assets are accounted for in the United States and the various issues associated with the accounting for these important assets. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Disposition of assets; Capitalization; Depreciation; Case studies

Location: United States--US

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

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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

Document feature: References Tables

ProQuest document ID: 1418712126

Document URL: http://search.proquest.com/docview/1418712126?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 62 of 100

The Case For Case Studies: Deriving Theory From Evidence

Author: Klonoski, Robert

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Abstract:

While case studies appear frequently in business classrooms as learning exercises, they appear only infrequently in scholarly journals as an accepted basis on which to demonstrate a theory or test a hypothesis. While scholars have contributed much in recent years to improving the rigor and design of business case studies, this research approach may yet be underutilized. The academic approach to the study of law in the US and England draws heavily on the use of case studies; management scholars may benefit from an understanding of the ways in which lawyers construct, analyze, and draw lessons from cases. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Case studies; Business schools; Law schools; Curricula

Location: United States--US

Classification: 4300: Law; 8306: Schools and educational services; 9130: Experimental/theoretical; 9190: United States

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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

Document feature: References

ProQuest document ID: 1418712171

Document URL: http://search.proquest.com/docview/1418712171?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 63 of 100

A Supermarket Acquisition Case: Daring's Market

Author: Larkin, Joseph

ProQuest document link

Abstract:

This case chronicles the growth of a family-owned retail food store business across three generations. Stange's, Inc. is now managed by the grandsons of the founder, John Stange, Sr. Recently, the opportunity arose to purchase Daring's Market, a well-established local grocery store. Students will assume the role of business valuation consultants and prepare pro-forma financial statements for management. This business valuation engagement will utilize several approaches to determine an appropriate asking price, including a free cash flow model and an earnings-based estimate approach. [PUBLICATION ABSTRACT]

Full text: Not available.

Subject: Family owned businesses; Grocery stores; Valuation; Acquisitions & mergers; Business valuation; Pro forma financial statements; Case studies

Location: United States--US

Classification: 9130: Experimental/theoretical; 2330: Acquisitions & mergers; 8390: Retailing industry; 4120: Accounting policies & procedures; 9175: Western Europe

Publication title: Journal of Business Case Studies (Online)

Volume: 9

Issue: 3

Pages: n/a

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: 1418712060

Document URL: http://search.proquest.com/docview/1418712060?accountid=38610

Copyright: Copyright Clute Institute for Academic Research 2013

Last updated: 2013-09-17

Database: ABI/INFORM Complete

Document 64 of 100

Pacific Market International: Case Study and Teaching Note

Author: Wark, John; Phillips, J Mark

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Abstract:

Rob Harris, the founder of Pacific Market International, suffered a breach of trust early in his career that not only inspired him to found an international manufacturing and design company, but also influenced the manner in which he dealt with his employees, suppliers and customers. This case provides a unique look at an American entrepreneur forging partnerships in several Pacific Nations despite a lack of language skills or financial resources. While building his company, Rob faces challenges that force him to reexamine his business model, chart new growth strategies, and revisit his long-professed loyalty to his workforce. Ultimately Rob faces the choice of selling his company, staying the course or charting yet another course of expansion. [PUBLICATION ABSTRACT]

Full text:

INTRODUCTION

As he sat in his office in downtown Seattle and looked out at Elliott Bay just a couple of blocks downhill from his office, Rob Harris knew he needed to make some decisions. It was a time for transitions - the week of the 2000 presidential election. With a two-term incumbent leaving office, it meant a change in leadership. Rob wondered if that was an omen for what lay ahead for PMI.

Jerked Into Entrepreneurship

Rob Harris resigned his job as head of sales for a sheltered workshop in Seattle, WA in June, 1983. The workshop's Director had just proposed restructuring Rob's compensation. On joining the workshop in 1981, Rob had proposed taking a lower base salary and a greater commission on sales than had been offered by workshop leadership. They had been happy to agree to the proposed plan - lower fixed costs were always a good thing for a cash-strapped non-profit like the workshop. They had also agreed to Rob's proposal that his compensation plan be fixed for the next five years. A handshake sealed the deal.

Driven by Rob's success in sales, revenue at the 20 year-old sheltered workshop grew from approximately $500,000 to over $4,000,000 in 2 1/2 years. After his totally unexpected success, Rob was earning more than the workshop's Director. This could not stand, hence the proposal to renegotiate Rob's compensation, immediately followed by Rob's resignation. As Rob recalls, "It wasn't about the money, it was because I couldn't trust them any longer. I couldn't work with guys I couldn't trust. They jerked me around and broke our deal."

"When I left the workshop, I had no idea what I was going to do, but I knew I was going to start my own company," Rob recalls. That might not have seemed the most obvious answer. Rob had been in Seattle for less than three years. He grew up on the East Coast and had received a Master's Degree in Rehabilitation Counseling. After earning his master's degree, Rob had worked for a year at a short-term psychiatric hospital in New Jersey where he ran group therapy sessions and did individual therapy work. After a year or so of this, he decided that he wanted to live elsewhere and selected Seattle as his new home. Rob moved to Seattle and quickly found the sales position at the sheltered workshop. He says, "The workshop combined some of my interests. I had always been interested in business plus the sheltered workshop tapped into my interests in social service work and helping other people."

Looking For New Opportunities

Rob's success in growing the workshop was at least partially driven by his recognition of Seattle's role as an important port-of-entry for America's burgeoning trade with Asia. This created opportunities to provide light manufacturing, assembly and repackaging services to companies importing goods from Asia before those goods were routed to their ultimate destinations in the U.S. Rob made many contacts at the Port of Seattle, with importers, and with other organizations involved in Asian trade.

Rob knew the growing interest among American companies in sourcing products in Asia. He knew from his involvement in various international trade groups that everybody was talking about doing business in Asia but that very few knew how to do it. There were lots of people talking but there were few taking action. Rob decided that his business would source products from Asia for American manufacturers, wholesalers, and distributors. He would leverage the knowledge he had already accumulated, as well as the intense American interest in doing business with Asia, combined with the opportunity to manufacture products in Asia at very low cost. He launched his new business, Pacific Market International, on June 4 1983.

One potential issue with Rob's plan: Rob had never visited any Asian country. However, Rob points out that he had learned a tremendous amount about contract manufacturing during his 2+ years at the sheltered workshop. "That's really what we were at the sheltered workshop - a contract manufacturer. I learned to do cost estimating, I learned about assembly, delivery times, lead times, and so on. That's where I was exposed on a very nuts and bolts basis to assembly and production. The only difference with my new business was that this work would now be done in Asia."

Rob says that the other thing that really helped him during the launch of his new business was something he had learned from his father, "... it's a buyers world. If you get buyers lined up, you can always find sellers." Rob gained commitments from three or four Seattle-area manufacturers and distributors to buy products or components from PMI if Rob could deliver at lower cost and equal quality. Rob's proposal to these companies was that they could save 20% to 30% of their current costs.

Rob believed that if he first found customers (buyers) that he would have no problem finding factories (sellers) once he got to Asia. Indeed, that proved to be true. Rob says, "When I made that first visit to Asia, I had a bag full of goodies for the factories. I knew what I wanted to buy, I knew what kinds of factories I needed. I had the power of orders. So, factories lined up to pitch me. And instantly I had a business."

Well, not quite instantly. One of the things Rob learned was that the cycle between identifying a product that he wanted to have produced to having that product shipped in to the U.S. and receiving payment from the customer was 12 to 18 months. So while PMI started very quickly, the order to cash cycle was long. Rob supported himself during PMI's first year with consulting projects of one sort or another while he worked to get factories selected, products produced, shipments made and invoices collected. Nonetheless, PMI generated around $2,000,000 gross revenue in its second year of operation. And it ramped quickly from that point to $4,000,000, $6,000,000, $7,000,000, and then $10,000,000 in annual revenue (see figure 1).

When asked about the fact that he was able to start this business so quickly despite the fact that he had never been to Asia, Rob pointed out some compensating factors. First, he had a great self-confidence - he wasn't concerned about failing or making mistakes. Second, he had learned many lessons about business from his father; for example, the already discussed importance of buyers over sellers. Third, at a time where there was much interest and much opportunity in doing business in Asia, he didn't just talk about it like so many were doing, he took action and got involved directly in the market, from which he could learn and rapidly fill in his gaps of knowledge. Rob also points out the relevance of his prior experience, "What I was looking for in Asia were factories to do exactly what I had learned to do at the sheltered workshop. Also, my training in psychology and therapy had made me comfortable dealing with ambiguous situations - something that classic business training absolutely does not do. My experience in running group therapy sessions and individual therapy sessions had made me aware of non-verbal communication, of what was really going on underneath the surface in a meeting. I was very aware of buyers giving off signals. This really prepared me for going to Asia -1 could notice cultural nuances and tell what people were saying even when I couldn't understand a word that was being said. Many Americans mentally check out if they can't understand the language. I knew what was being said from the non-verbal communication. This background helped enormously in making me comfortable in working in Asia."

PMI never worked as an agent or rep for either factories or purchasers. Instead PMI took a position in the supply chain as a trading company. From the Asian factory's point of view, PMI was the customer (buyer) and from the American buyer's point of view PMI was the manufacturer (seller). However, PMI never actually inventoried goods which dramatically reduced PMI's cash needs. Rob says, "I started PMI without any outside capital, and there was no inside capital either since I didn't really have any money, so our business model in the 80s was forced to be one that was very cash efficient. Plus, we always had a very bootstrapping mentality to running the business." PMI didn't need much of a banking relationship as all ordering was done from firm purchase orders and/or letters of credit. PMI also always had its American customers act as the importer of the goods it was producing. "This was easy to convince buyers to do, because it gave them the feeling that they were involved directly in Asian trade even when we were doing all the work," Rob recalls.

Growing Pains

PMI grew quickly in those first few years. Rob was always ready to drop everything to fly to Asia in order to solve a customer problem, recruit a new factory, etc. Rob kept a travel bag packed in his car and says that more than once he drove directly from a customer meeting or phone call to the airport and bought a ticket to Asia. By the time PMI had been in business for six years, revenues were over $12,000,000 annually, there were 12 employees, and PMI was working with factories in four primary Asian countries: Taiwan, South Korea, Thailand, and the Philippines.

PMI started to experience challenges as it expanded. Rob says, "I was getting spread pretty thin. I was basically running PMI out of my checkbook, which I literally carried everywhere with me in my briefcase. Cash flow, along with everything else was on the back of a napkin." There were increasing numbers of issues with quality, delivery, and other customer satisfaction issues that needed to be resolved.

While PMI was experiencing growing pains, Rob also started to sense that American companies were beginning to look to grab more value for themselves by dealing directly with Asian suppliers. "Our margins were starting to get squeezed. Customers were looking to pick up a few more points of margin. And it was slowly becoming less mysterious for companies to deal with Asia." He also notes, "...it wasn't fun any more - the idea of not being a significant part of the value chain, of needing to wedge yourself into these relationships...when a lot of customers don't need you in the middle anymore."

Rob says it didn't threaten him to be confronted with the potential need to rethink PMI's business model. "I never thought that what we were doing in the 80s was where we would end up. The model just wasn't sustainable. It still always felt to me during this period that this was my MBA, that I was on a learning curve, that it was all about learning and building a foundation for something bigger and better that would come later. Plus, I remembered something that my father had said - find out what people want and give it to them; if they don't want it any more, you re-invent yourself."

Designing a New Business Model

After a couple of years considering options for reshaping PMI's business model, Rob determined in 1992 how PMI would move forward. "I decided that we would no longer provide products that we had not designed - we had to have intellectual property in the products we were having produced or we would just not make it. So I collapsed the old model, said we're no longer going to be a trading company. This was a huge shift."

The realization that this was the correct new business model for PMI didn't happen overnight. PMI had been doing some product creation work for the last few years. "It just kind of happened. Customers would ask us to come up with a product for them." PMI's wholesaler and distributor customers would hear from their customers of a need for a product but not have the design and engineering capability to create it themselves. They would pass the information along to Rob in the hope that PMI could create something. This gave PMI exposure to the process of creating a product design from scratch and then working with a factory to get the product engineered and produced. PMI transitioned from a trading company to a private-label product design and manufacturing company. PMI still did not market the products it designed to the outside world. PMI's customers were still primarily other manufacturers or distributors who contracted with PMI to design and produce products to be sold under the customer's own brand name.

The transition from sourcing to private-label manufacturing did not dramatically change the overall PMI business model. The sales model was very similar - it was still about finding buyers who needed products. Most of PMI's buyers in the first couple of years after the transition were still manufacturers who wanted products under their own brands in order to extend or supplement the products that they were designing and manufacturing. The supply chain part of the business was also essentially unchanged - PMI still contracted with Asian factories to build the products that PMI was designing. PMI was still working across multiple Asian countries although there was notable movement of production by many of PMI's partner companies into China.

PMI's corporate culture did not change significantly with the transition to private-label manufacturing. Both in terms of its internal culture and its external relationships with factory suppliers the PMI culture was based on an intense work ethic, loyalty, respect, openness and mutual commitment. Rob constantly stressed that loyalty was inherent in his approach to business. After all, Rob had started the business as a reaction to feeling jerked around by the breaking of a handshake agreement. In turn, he didn't want his employees to ever feel that way.

However, Rob also stressed that loyalty was earned and was based on a sense of mutual commitment. Rob says, "I reinforced to employees constantly that the commitment that the company would make to them was commensurate to the commitment that they demonstrated to the company. If they wanted to take a "1 foot in the company and 1 foot out approach", that wasn't demonstrating commitment and they shouldn't expect the company to reciprocate. I felt, and I wanted them to feel, that we were in this thing together. That we'd grow the business together. I was very much a believer in you're either in or you're out, that there was no middle ground. It was part of my job to move people out who were straddling the fence."

On the other hand, Rob had no problem with employees checking their value on the market, as long as they were up-front with Rob that they were doing so. "Just be honest about it and let me know. You won't get penalized about it if we've talked about it. But you better not get caught looking if I don't know about it because I'll immediately start evaluating replacements. And if you want to move on, that's o.k., just be honest about it and I'll help you."

One of the ways PMI demonstrated its commitment to employees was in shifting committed employees to new jobs and giving them chances to learn new skills rather than hire someone from the outside. Rob was also very slow to fire veteran employees even after mistakes or performance problems but would rather give them second and even third chances.

Rob's loyalty extended to his Asian suppliers. Rob says, "I told our suppliers that we were in this together. We'll buy from you, we won't shop the products we buy from you, we'll be open with information." This wasn't the way many Asian factories were used to being dealt with by buyers. Once PMI and Rob demonstrated that they meant what they said, it resulted in high levels of respect and trust between Rob and the factory owners. Rob says, "This really paid off for us in a number of ways. For example, when we needed cash and they were flush, we could count on them to help us out. Not just with extended payment terms, but often to get a loan for 3 or 4 months. They knew it was in their best interest to keep us alive and that they could trust us. Likewise, if we were flush and they were short, I'd lend them money. All of this was without contracts, all on handshakes."

One new dimension of PMI's business model was a focus on building businesses and expertise around specific product areas. For example, the first major product category that PMI specialized in was towable tubes for water sports. Seattle in the 1990s was the water ski capital of the world with several major manufacturers of water skis headquartered in the area. PMI designed towable tubes for several of these water ski companies and Rob hired an executive from one of the water ski companies to run this as a separate business unit. Over the next five years this business unit evolved into a $ 15,000,000 business.

A second business unit evolved in the area of backpacks and duffel bags. This business came out of work that PMI had done starting in 1990 with Eddie Bauer. PMI sourced numerous products for Bauer in Asia and then started to perform design work on bags it produced for Bauer. As PMI learned the bag business, it approached Nike and said that we are the people who have the expertise to get you into the bag business. This led to a sustainable private-label bag business, which became one of the foundations for PMI in its second incarnation. Here again, Rob hired people who knew this product category to help drive the business.

A third business developed in bicycle helmets. PMI had sourced customers bicycle components for several years. A maker of hard shell climber's helmets noticed that people were starting to purchase a lot of their helmets to use while riding bicycles. They approached PMI to see if they could develop a helmet with less than a full hard shell that would be lighter and better ventilated for bike riders. This led to a $7,000,000 business unit.

PMI's business model was still relatively cash efficient. PMI continued to order products to be manufactured in Asia only when it had firm orders in hand from its U.S. customers. So while PMI was taking risks in the design of products, it did not produce for inventory. Overhead in the new business model was up somewhat given the need for design resources, a bit more management, and so on, but margins were under less pressure. In fact, average margins grew from 12% in the 1983-1992 timeframe to 24% in the 1993-1998 period.

By 1994, PMI's annual revenue broke through $20,000,000. Employee headcount was up to 30+ people. The growth was creating new pressures on the business and on Rob. "With this new volume, I'm running out of money at certain times of the year. Our increasing operating scale was escalating the need for additional working capital and I needed to find some bank lines of credit. Plus, we're starting to get some pressure from certain customers to start to stage inventory for them, which will further increase our working capital needs. I needed help."

PMI and Rob found an angel investor who purchased a minority stake in the company in 1994. The angel was a friend of Rob's. They were co-investors in another company. The angel had lent Rob money on a few occasions to bridge tight periods at PMI. This had gone on for 18-24 months on purely a handshake basis. Rob finally approached his friend with a proposal. "I wouldn't have my company today without your help. How about I sell you 30% of PMI. We'll do the deal at a cheap valuation. This will help me get a bank line of credit and put in place the financing I need to fund growth." Jens Bruun accepted Rob's proposal and became the owner of one third of PMI.

Hot coffee brews hot growth

In 1994 PMI also entered into another new line of business. Eddie Bauer approached PMI in early 1994 with a problem and a proposal. During the 1993 holiday season Bauer had sold a ceramic travel mug. Sales of this mug had been a big success - the coffee culture was just starting to take off and Bauer sold all 100,000 of the mugs that it had purchased. However, returns of the mug due to breakage were a major issue. It turns out that ceramics are not the best thing to use as for travel mug. Because of the sales success of the mug, Eddie Bauer badly wanted to offer a travel mug for the 1994 holiday season but needed something more durable.

Eddie Bauer came to PMI with this problem because PMI was already supplying Bauer with a stainless steel vacuum bottle for transporting hot (and cold) beverages. The product PMI was providing was what is known as a "bullet bottle" - a standard design, almost a commodity product. But Bauer knew PMI to be a reliable vendor and knew PMI had the combination of design talent and Asian contacts required to meet their needs. Eddie Bauer's proposal was simple - "if you guys can figure out how to make a travel mug out of stainless steel, we'll buy 100,000 of them for Christmas."

Rob says this was not a hard decision, "...we're still a very entrepreneurial company. If a buyer says can you make this and we'll buy 100,000 units the answer was going to be yes before they finished their sentence. Long story short, we designed and produced our first stainless steel travel mug for Christmas 1994. Eddie Bauer bought 100,000 of them and blew through them - they flew off the shelves."

PMI looked at the success of the stainless steel mug at Bauer and said - "who else could sell travel mugs that we should approach." Being a Seattle-based company, it didn't take long for PMI to approach Starbucks. PMI offered to create unique designs for Starbucks. Starbucks told PMI, "We're interested. We are buying a stock design from Thermos. We'd love to have our own designs. We'd love a supplier that's easier to deal with and who will be reliable. If you can give us a good design we will buy from you." By holiday 1995, PMI stainless steel travel mugs were in Starbucks.

Insulated travel mugs and bottles became a new business unit at PMI. The business with both Eddie Bauer and Starbucks grew rapidly. Coffee was hot, travel mugs were hot, and PMI expanded the business by offering travel mugs to other retailers.

Back To The (Business Model) Drawing Board

By 1997 PMI's revenue was over $40,000,000 and there were 60 employees. Rob remembers, "The company at this time is still very, very entrepreneurial. While focusing on certain businesses had narrowed our scope somewhat, we're still very broad and don't have enough depth." Over the past five years there had been a lot of issues according to Rob, "We had quality issues that came periodically. We had growth issues, in particular learning how to hire and manage people. Almost all employees were still located in Seattle. We had three people in Bangkok and five in Seoul."

Also in 1997 Rob began to worry that PMI might need another change in its business model. PMI at this time was almost fully transitioned away from pure sourcing except as needed to complement PMI-developed products. And PMI had, in several of its businesses, started to deal mostly with retailers who bought products designed for their private label brands. Eddie Bauer was an example of this type of relationship. PMI created Eddie Bauer-branded travel mugs, backpacks and duffel bags that went directly on the shelves at Eddie Bauer stores. The same with Starbucks-branded stainless steel travel mugs. PMI was doing business with some of the largest retailers in the world, including WalMart, Target, and Costco.

Yet Rob worried that this still didn't create a long-term sustainable foundation for PMI. "I started to believe that for the next stage of our growth we needed a brand, a direct relationship between PMI and consumers. In our new business model we owned some intellectual property and provided greater value-added from our design and engineering capability. But once we got in with retailers and gave them a private-label branded product they often started to want to find ways to improve margins so they tried to eliminate PMI from the equation. We had some customers start to deal directly with Asian factories themselves. It just felt like for long-term stability we needed to have our own brand. But how are we going to do this? What market made sense for us to target? None of that was obvious - even if you believed we needed a brand."

By 1997 Rob had come to believe in the necessity of having PMI's own brand. Their rapidly growing business in the travel mug and insulated bottle market looked like it might provide a good place to launch their own brand. This was a hot market, growing very rapidly. The market had only one real branded player - Thermos. Rob recalls, "This looked like an opportunity to create a brand in an emerging market without a lot of established competitors. All of our other businesses were in less attractive markets - each had several better established brands, and none were as hot a market."

In 1998 PMI launched the Migo brand by taking a small booth at a sporting goods trade show. The brand concept had expanded well beyond travel mugs and bottles. Migo was now an "on the go" brand, a lifestyle brand for the mobile lifestyle. The product assortment was very broad: hats, bags, umbrellas, mugs, etc. "It was sort of what the heck - we're going to have this lifestyle brand so let's have everything."

Rob remembers the launch of Migo, "We tried everything, but the only thing that worked was the mugs." The Migo travel mugs and bottles were all double-wall insulated and available in both plastic and stainless steel. They were stylish with distinctive designs compared to the mostly generic products then on the market. PMI secured four feet of shelf space in the housewares department at Target dedicated to Migo mugs and bottles. "This really got Migo off to a fast start. Target was a very hot retailer in the late 90s. It's very exciting. We quickly had a $5,000,000 then $6,000,000 then $8,000,000 business in Migo. But then it just stalled."

In 1999-2000 Migo growth plateaued. "We just could not get more traction. We did not have the marketing expertise. We did not have the brand understanding. We were still private label guys. We didn't understand how to do forecasting. Plus we had this big private label business that we were feeding and at the same time we're trying to launch this little brand and it just wasn't working." Migo maintained its presence at Target but had very limited success in getting placement at other retailers. In fact, some at PMI began to wonder if Migo was more than a private label brand for Target.

Not only was Migo stuck, there were other issues at PMI. Two of the private label business units - water sports and bicycle helmets - were suffering due to changes in those markets and changes in customer business strategies. Both units were shrinking rapidly.

However, the problems in the private label business were not all externally generated. As Rob recalls, "What happened in launching Migo, we took our eye off the ball in the private label business. Suddenly in 1998 business went from $43,500,000 to $34,000,000. That was devastating. I laid off 15 people. That was gut wrenching. It was the only time we ever did a layoff." While he considered the layoffs to be a necessary step for firm survival, Rob had invested so much energy in developing a firm-wide culture of trust and commitment, and he worried that laying off a single employee, let alone 15, might jeopardize the trust he built. Rob continues, "We were a mess. We were schizophrenic. I was talking about the brand as our future, people in the private label businesses started feeling left out. Plus we were putting a lot of our key creative people on the brand side. It was just disastrous. I realized that building a brand wasn't so easy."

Rob came to believe that it would be difficult to grow a brand and transition PMI's business model in a purely organic manner. In addition to refocusing on shoring up PMI's existing businesses, Rob started to look for one or more existing brands to acquire. He believed that he needed to make at least one acquisition in order to provide greater critical mass that would allow transitioning away from private-label work. He looked at 10 different companies but hadn't found anything that looked right for PMI.

At this point Rob was approached by another CEO on the hunt for suitable acquisitions. Ari Chaney was CEO of Nashville-based Aladdin Industries. Aladdin Industries was an old-line family-owned firm located in Nashville, Tennessee. Chaney had been brought in as CEO about a year earlier from GE and given a mandate to turn around the struggling manufacturer. One of Aladdin Industries primary lines of business was insulated and non-insulated food and beverage containers. Aladdin's iconic metal lunch boxes had gone to school with the baby-boomer generation. The equally classic green Stanley insulated steel bottle had kept coffee and other beverages hot and water cool for blue collar workmen since the early 20th century. However, Aladdin's product line had gone stale and it's Nashville-based manufacturing infrastructure was aging badly.

Ari and Rob held two or three meetings in the first quarter of 2000. The two CEO's found they had good personal chemistry. Each also saw things to like in the other's business. Rob saw Aladdin having things that he had been searching for - greater critical mass as well as two established, even if a bit down at the heels, brand names (Aladdin and Stanley). And Ari said that he saw PMI possessing exactly what he had been looking to add to Aladdin: creativity in product design, new product development/engineering expertise, the Seattle location, and deep expertise in manufacturing in Asia.

Buy, Sell, Or Stay The Course?

In April 2000 Ari made Rob a proposal for Aladdin Industries to acquire PMI. Rob recalls that, given that PMI had lost money in 1999, the offer wasn't bad. Rob, despite the bad 1999, asked for $30,000,000. Ari indicated that $30,000,000 was a bit rich but that he said he felt he could do $25,000,000. As Rob recalls, "That's not a bad offer. It was tempting. After that terrible 1999, it felt like I should maybe just take the money and run. But I wasn't ready right then to make a decision -1 needed some time to think about whether I was ready to sell and to consider my other options. So, being the sales guy that I am, I made a counter-proposal to Ari. Let's get to know each other a little bit. Why don't we start to work together. We'll take stuff you're making in Nashville and move it to China. You'll get the benefit of lower costs and be able to use our expertise, we'll get another customer, and we'll both get to know the other a lot better."

Realizing that he wasn't going to get an immediate decision on the acquisition but not wanting to take the option off the table, Ari agreed that the two companies work together. Aladdin would give PMI components to make in Asia and Aladdin would keep final assembly in Nashville. Ari's stated goal was that the two companies get to know each other, Rob would get comfortable with Aladdin and Ari, and Rob would agree to sell PMI to Aladdin within six months to a year. The two companies began to move quickly down that path.

By September 2000 PMI was shipping components from Asia to Nashville for Aladdin. And the clock was ticking on Ari's six to twelve month decision time-frame. Rob had continued to look at candidates for PMI to acquire that would give him the brand strength that he thought they needed. And he evaluated how he felt about the possibility of selling PMI.

"I felt like I had three options on the table," Rob recalls. "There were definitely factors in favor of each of the options. It was a mixed bag." The three alternatives facing Rob were: 1) sell PMI to Aladdin, 2) find and acquire one or more brands for PMI to help transform the company's business model again, or 3) stay the course with PMI's private label manufacturing business.

It wasn't out of the question to stay the course. Yes, PMI had lost money in 1999 after taking its eye off the ball. But, based on the current forecast, 2000 was shaping up to be profitable and to show some growth. There were at least two solid business units to continue to build on. The bag business (backpacks, duffel bags, soft sided luggage, laptop bags, etc.) continued to be a good performer. PMI had strong relationships with a number of major brands, including Nike and Eddie Bauer, as well as some of the strongest retail chains, including Wal-Mart. The insulated travel mug and bottle business was also a strong and growing business. PMI had a great relationship with Starbucks which was continuing to open new stores at a rapid pace. Many other retailers were offering PMI-designed mugs and bottles. And even if Migo had not established itself as an independent brand it had a strong presence at Target and PMI had built a good working relationship with Target. Some of PMI's other private label businesses had weakened or gone away, for example pool toys and towables was down to a very small business. PMI also continued to have strong relationships with a wide range of factories in Asia, much of which was secured by Rob's strong personal relationships built over many years with the owners of these factories. The private label business wasn't a write-off by any measure.

There were other factors in Rob's evaluation of the options. Most importantly, there were Rob's employees. "Remember, I started the company because I was irritated with my boss who was jerking me around. I made the commitment when I started PMI that I was going to reward loyalty. People who were loyal to me and to the company were going to see that loyalty returned. I had career employees that were signing up for their life here. It didn't necessarily feel right to sell the business and put that loyalty at risk, even if Aladdin was saying that the PMI team was very valuable."

Rob also wrestled with his personal feelings about PMI. As already noted, he admitted that after the failures of 1999 there were definitely feelings that it would just be easier to take Aladdin's money and run. Or if not run, to transition PMI under Aladdin's control and then use the money from the sale to start over again.

But there were also feelings to stay the course and transform PMI. "I wasn't entirely sure if I was ready to call it quits. Was I really finished with PMI? Was I selling the company a little early?" Rob noted some clear evidence that PMI was still a work-in-progress. "I'm still very hands-on in running the business. PMI has a pretty limited management team at this point. I'm running back and forth to Asia and have my hands in everything. I'm handling 60 plus phone calls a day."

The problems with launching the Migo brand and the financial losses in 1999 reinforced in Rob's mind that he had not yet established PMI as a truly sustainable business. Not only was he involved in everything but he still believed that the private-label model was a risk - that at some point they would be cut out of the value chain. Rob also felt a pull to fix things, "I wasn't done seeing what I could do to grow a company myself from nothing. I still needed to prove something to myself." But Rob also notes, "It did seem that Aladdin Industries offered a way to fix many of PMI's problems. They had money and critical mass in brands. And they wanted and needed what we had to sell."

There were also important personal issues for Rob during 2000. "I was in the middle of a very difficult divorce. My two girls were younger and I'm trying hard to keep them the primary focus of my life. Would it be easier to do that if I sold the company? Would there be more time for them?" It was not an easy time for Rob, "Between the business issues in 1999 and then the divorce, these were dark, dark, difficult days. I was feeling pretty alone. I mean, I know that there's a major business transition that needs to be made, and the company really needed me to get through it. So I'm feeling really torn because I also want to spend time with my kids. There's this real convergence on both the personal and business sides of my life."

By early November, Rob had wrestled with these issues for some time. Should he accept Aladdin Industries' offer for PMI? Would that decision save him from a third reinvention of PMI? Or did his existing business model have what it would take for Rob to achieve his vision for the company? What was the right decision for Rob, for the business, and for his team?

PACIFIC MARKET INTERNATIONAL: TEACHING NOTE

This teaching guide provides direction for instructors wishing to teach the Pacific Market International ("PMI") Case. In doing so it highlights the central question facing Rob Harris, the founding entrepreneur of this private-label manufacturing company, as he seeks to align his personal and professional goals with a new corporate strategy. The question posed at the end of the case presents Rob with three disparate choices: 1) accept an attractive financial offer made by Alladin Industries and sell his company outright, 2) continue on PMI's current course with private label manufacturing, or 3) transform PMI's business model (for the third time) by purchasing and managing outside branded product lines.

The examination of these three options enables students to analyze a number of issues that are vital to the success of an entrepreneurial venture. The guide below presents an analytical and instructional outline to assist instructors in the use of the PMI case.

Teaching Objectives

This case promotes several key teaching objectives. First, it provides a rich description of a manufacturing and branding company's growth in order to enable students to assess an entrepreneurial venture's stage of growth and align a entrepreneur's goals, actions and strategies to the appropriate level of growth. Second, it encourages readers to evaluate Rob's level of self-assessment with respect to his future goals, his capabilities and his future strategy. Third, the case provides an opportunity to assess Rob's capacity for adapting his business model to changing market forces, and evaluate the prospects of the current choices facing him. Fourth, it provides a unique portrait of the role that trust and loyalty play in an entrepreneur's journey, and as such it provides students an opportunity to evaluate the role that trust and loyalty play in both the early and late stages of a company.

Case Synopsis

This case study captures the journey of an entrepreneur whose choice to start his own business is catalyzed by a striking breach of trust from his former employer. Once galvanized, Rob Harris established Pacific Market International ("PMI"), a manufacturing and trade company that bridged the gap between US buyers and manufacturers in Asia. Rob's timing was critical-during the early 80's many US companies were looking for a presence in Asia but were unable or unwilling to establish the necessary connections. Rob's willingness to do so, despite a paucity of resources and international experience, enabled him to establish Pacific Market International, a company that reflected not only his entrepreneurial acumen, but also his core values.

Rob enjoys early success with PMI and quickly establishes both a strong US customer base and network of manufacturers in Asia. Throughout the startup phase, Rob demonstrates strong examples of bootstrapping (i.e., by running the company out of his personal checkbook, and by making ends meet with consulting projects during the initially sparse cash-flow cycles) and running an extraordinarily lean start-up (by securing orders prior to sourcing, and by maintaining no inventory). Yet despite his success, Rob faces the constant threat of eliminated from the value chain by companies who may choose to work directly with manufacturers in Asia.

In response, Rob adjusts his business model and transitions PMI form a trading company to a private-label manufacturing company. His intent in doing so is to establish intellectual property to secure sustainability for his business, while also offering clients the added service of product design. This move translates into increased sales and margins, as well as an enhanced customer-base, including LL Bean, and eventually Starbucks.

As PMI continues to grow, Rob still sees weakness in the sustainability of its long-term value proposition. He answers this perceived weakness by launching the Migo product line, a branded line of travel mugs belonging exclusively to PMI. After brief success, Migo's sales plateau, and the attention and resources devoted to Migo negatively impact other aspects of PMI's business. In the span of one year, sales drop by nearly $ 10 million, and Rob is forced to lay off a sizable portion of his employees-an act that is anathema to Rob's core values.

At the conclusion of the case Rob is presented with several options, 1) sell his company outright to Alladin Industries, 2) find and acquire one or more brands for PMI to help transform the company's business model again, or 3) stay the course with PMI's private label manufacturing business This presents a fundamental entrepreneurial dilemma in which the entrepreneur must decide whether or not he has achieved his entrepreneurial goals and is ready to walk away. If Rob chooses to stay with PMI, he faces challenge of charting a future strategy of the company in a way that balances his core values and provides the long-term sustainability he desires.

These key issues present ample opportunity for discussion and analysis in the classroom setting, as will be discussed in the sections below.

Intended Use

This case may contribute to graduate and undergraduate courses focused upon entrepreneurship, international business/entrepreneurship, business strategy and new venture management. For students interested in entrepreneurship, this case provides a particularly descriptive story of an entrepreneur bootstrapping, over-coming business related growing pains, and adapting his business model to dynamic market pressures.

In addition, this case may be of unique interest to graduate level students looking to shift from their current job or career into the field of entrepreneurship, given that the main character quits his profession and then builds an entrepreneurial venture as an income replacement endeavor. There are also likely contributions for business practitioners and working entrepreneurs looking for perspectives on handling growth, the role of trust, loyalty and passion in decision making, and assessing readiness to sell an entrepreneurial venture. The case highlights several key issues that illustrate aspects of the entrepreneurial process, such as:

* Entrepreneurial goal-setting, maintenance and fulfillment;

* Assessing level of growth and aligning entrepreneurial tasks to growth level;

* Adapting, or "pivoting" business models to changing markets and assumptions;

* The role of trust, loyalty and employee commitment in growing a venture;

Suggested Discussion and Assignment Questions

This section provides targeted questions that instructors may use to guide classroom analysis and discussion of the case. Each of these questions is constructed in order to support the overarching question posed by the case; namely, which of the three options presented to Rob Harris is the proper course of action (for the future of PMI as well as himself). The following discussion questions may be taught together in a comprehensive manner, or individually, depending upon the goals of the instructor:

1. What stage of development or maturity is PMI currently at and which course of action best aligns with that stage of maturity?

2. Does the founding entrepreneur possess an adequate assessment of his own goals, capabilities and strategies in order to match them to his future business strategy?

3. How has Rob Harris adapted, or pivoted, his business model in the past and what implications do those adaptations have upon his current choices?

4. What role has trust and loyalty played in the founder's business dealings? Does those factors enhance or detract from his ability to make an optimal choice regarding the future of his business?

Teaching Outline and Analysis

The following discussion will provide a detailed analysis of each of the aforementioned questions. This analysis may be used by instructors to guide an in-depth classroom discussion or to aid in the development of written assignments that similarly treat issues raised in the case.

1. What stage of development or maturity is the business at, and which course of action most aligns with that stage of maturity?

Rob Harris faces a crossroads in which he can chart the future course of his company on three very different directions. In order to best decide upon future strategy, Rob Harris would benefit from assessing the current state of his business-in particular, assessing the stage of organizational growth in order to see which choice best matches that particular stage. Doing so will help Rob avoid the mistake made by many entrepreneurs and business owners wherein they embark upon a particular growth strategy without first having achieved the proper level of organizational development to support such growth.

Flamholtz and Randle (2007) provide one useful tool for undertaking such analysis is the pyramid of organizational development (see Figure 1 below). Flamholtz and Randle suggest that as businesses develop through four stages as they approach the maturity of a professionally managed firm (Flamholtz & Randle 2007). These four stages of organizational growth are "New Venture," "Expansion," "Professionalization," and "Consolidation." The Authors utilize a pyramid shaped model to represent the shifting tasks that entrepreneurs or business managers must focus upon as their business attains increasing levels of maturity (Flamholtz & Randle). This model may be used to assist entrepreneurs assess the organizational progress of their venture and focus their energy on the actions and strategies that are most appropriate for their given level of growth.

The facts of the PMI case suggest that the company my best be categorized as a firm working through the stage of professionalization. Flamholtz and Randle provide guidelines with which to ascribe each stage of growth according to the approximate size of a business (2007). Manufacturing firms with gross sales between $10 million and $100 million typically find themselves squarely within the stage of professionalization. At the time Rob Harris faces his decision, PMI's sales hover in the $50 million range, placing it within the Professionalization stage.

The most important task at this stage of development is the development of management systems, as illustrated in the quadrant of the triangle second from the top (see Figure 1). Firms at this stage of development should focus upon developing formal organizational structure and strong management teams. Rob appears to recognize his short-comings in this regard, remarking at the end of the case that he has a limited management team in place and that he was still personally taking around 60 phone calls a day and flying to Asia with frequency (pg 20-21). This suggests Rob possesses some awareness of the appropriate focus of his actions.

However, Rob also finds himself engrossed with the prospect of developing or acquiring new brands, product-lines and/or resources. Specifically, one of Rob's three choices entails him seeking out and acquiring new brands to secure PMI's future with intellectual property. According to Flamholtz and Randle, focusing upon the acquisition of new resources of such scale would be more appropriate for companies in the expansion stage of their businesses (as delineated by the middle two quadrants of the pyramid in Figure 1). This is not to say that companies in the professionalization stage cannot expand and explore new opportunities, but in order to do so successfully, the proper organizational foundations must be established. As a result, a general application of this model may suggest that Rob forgo the pursuit of additional brands and intellectual property at this point because he has not established sufficient management systems to support such expansion. Rob, in fact, suffers from lack of adequate organizational support for PMI in its current iteration, and therefore the notion of significantly expanding one of its most maligned product lines appears misguided.

It bears noting that Flamholtz and Randle themselves recognize some limitations in the broad categorizations of their model. As just one example, they admit that ascribing a phase of growth to a company based solely upon its gross sales may overgeneralize (i.e., the $10-$ 100 million category may only cover 90% of firms in the professionalization stage). Yet this issue may provide a useful point of debate for classroom discussion.

2. Has Rob, as the founding entrepreneur, assessed his own goals, strategies and capabilities in order to enable him to match his future strategy with his personal profile?

"An entrepreneur's personal and business goals are inextricably linked (Bhide, 1996)." Rob Harris launched PMI after quitting his job in a sheltered workshop due to a breach of trust by his boss. He began with the goal of building a business that capitalized on his experience, skill-set, and willingness to forge overseas relationships. He also set out to incorporate his core values into the venture he would create, with a particular focus upon trust and loyalty. While growing his venture, Rob repeated two central themes; 1) developing a company that rewarded employee loyalty and built relationships based upon trust, and 2) continually adapting the business model in order to build a self-sustaining firm.

Along with other issues associated with his current choices, Rob faces the critical task of ascertaining the extent to which the above goals are adequately reflected in the choices that now lay before him. In aligning his goals with his potential business strategies, Rob may benefit from utilizing Bhide's framework of questions that entrepreneurs should ask (1996). This framework provides a simple yet powerful feedback loop of three questions to help guide entrepreneurs in big decisions (see Figure 2).

The model suggests that the first question to ask is whether or not an entrepreneur has well defined goals, particularly with respect to his personal aspirations, business sustainability, and risk tolerance. Once these aspects are clearly defined, Bhide suggests that the entrepreneur must then ask themselves whether or not they have the right strategy, and finally whether or not they have the capability and resources to execute that strategy (1996). The second and third questions should only be answered after the first one has been definitely answered, and if the second or third question is unclear or unanswerable, the entrepreneur is encouraged to return to the prior question in order to more clearly answer it before proceeding.

In the context of PMI, Rob's analysis falls primarily within the first feedback loop. He is faced with at set of decisions that impact his strategy for the future growth (or sale) of PMI, and thus the choices clearly fall within the dilemma of having the right strategy (see circle 2 in the Figure 2). Because Rob's three choices present such a wide range of options regarding PMI (from outright sale of the entire company, to the expansion of brand attainment and development), it would serve him to revisit his personal and business goals in an attempt to clarify them (see circle 1 in Figure 2).

As alluded to above, the case reveals some critical insights with regard to Rob's personal and business goals. He consistently works toward building a sustainable business model as well as a business that reflects his core values of loyalty and trust. Rob appears torn as to whether or not he's ready to sell PMI, not only because he believes he can still build the company further, but also because he worries that selling the company would undercut the commitments he made to his loyal employees. In essence Rob feels that he has not yet achieved the level of sustainability needed to satisfy his long-term business goals or his core value of commitment and loyalty to his partners and employees. This analysis suggests that selling PMI outright would contradict his business goals as well as his core values. This leaves Rob with a choice between staying the course with his private label business or expanding his commitment (and investment) in brand acquisition and development.

3. How has Rob managed to adapt, or "pivot" his business model over the course of running his business, and how might his past pivots inform his current choice?

Since launching PMI Rob has adjusted (or "reinvented," as Rob puts it) his business model at least twice due to the perceived threat by competitors and clients pushing him out of the value chain. A close look at Rob's prior business model adjustments may shed light on the decision he currently faces. One useful tool for performing such an evaluation is the business model canvass created by Osterwalder and Pigneur (2009). This canvass provides a concise representation of essential aspects of a business model, including: value propositions customer segments,customer channels, customer relationships, key resources, key activities, key partnerships, revenue streams and cost structures. Blank and Dorf, in their book The Startup Owner's Manual (2012), utilize the business model canvass and stress that it helps illustrate the salient changes that a business undergoes as it pivots over time. Taken together, these tools and analyses may help examine Rob's prior business model development and chart a course for his future development.

PMI began as a trading company that sourced its orders from businesses in the Seattle area and delivered specified goods from manufacturers that Rob developed relationships with in Asia. Rob's initial value proposition was to provide local businesses with well-manufactured products at a 20%-30%

discount by networking with low-cost manufacturers in Asia. In doing so, PMI eventually earned 12% profits while enjoying low overhead (no inventory, all production after orders secured by contract). These aspects, among the others highlighted in the canvass of PMI's first iteration (illustrated in Figure 3(a)) suggest the original business model was sound at its inception.

However, PMI's clients quickly came to understand that they could work around PMI as the middle man and begin to work directly with Asian manufacturers. This threatened the sustainability of PMI. In response, Rob pivoted his model from a trading company to a private-label product design company wherein PMI would not only supply specified products to their clients, but also design the products. The design aspect enabled PMI to retain intellectual property and preserve a stronger value proposition. While several aspects of their business model remained the same (see Figure 3(b)), key aspects of it changed significantly. Of particular note they expanded their target customer to include sellers of bags, water sport products, bicycle helmets, and most importantly, coffee mugs. This expansion resulted in enhanced sales and an increase in profit margin.

Yet from Rob's vantage point, he still remained short of long-term sustainability. Customers still pressured him for lower margins and for inventory staging services. He felt that to truly reach the next level PMI needed to develop and manage its own brand of product. This enhanced the value proposition further (see Figure 3(c)), but exposed a multitude of internal issues (i.e. resources and attention diverted from core private-label business, alienation of critical employees). The launch of the Migo brand brought in additional revenue, but quickly plateaued. Rob recognizes that brand management, marketing and forecasting simply was not a part of PMI's core competence, and the time, energy and money spent on Migo hurt other areas of PMI's business. This led to an overall $9.5 million drop in sales in the course of one year, and Rob was forced to lay-off a significant portion of his workforce.

With respect to Rob's current choice, if he does decide to forgo selling PMI, he must choose between sticking with his private-label design and production business model and investing further in established brands to incorporate into PMI's offerings. In essence, Rob faces the choice between committing to the business model outlined in Figure 3 (c) or Figure 3(b). This comparison offers a focal point for debate, specifically regarding which model offers more long-term sustainability. While it may be easy to write off PMI's experience with the Migo brand, the problem may have been due to market forces just as much as internal strife at PMI. In addition, the prospect of purchasing brands that have already been established may offer a higher likelihood of future success. This remains a point of open discussion.

The comparison between the different iterations of PMI's business model represented in the Figure 3 provides an opportunity to clearly evaluate PMI's strategic pivots since its inception. This not only illustrates the changes made within PMI, but opens the door to comparisons to other businesses that face similar opportunities and challenges.

4. What role has trust played in Rob's business? Does it enhance or detract from his ability to face his current challenge?

Rob launched PMI in large part because of a breach of trust he experienced in his prior career. This experience imbued Rob with a deep reverence for the role of loyalty and trust in the workplace. These values are evidenced by Rob's behavior towards his business partners as well as his employees. He establishes a high level of trust with manufacturers in Asia by agreeing to contracts on a handshake basis. Similarly, he promotes loyalty among his employees by reciprocating their commitment to PMI, often in the form of giving them second and third chances after making mistakes.

Upon initial analysis, such adherence to a core value may appear to have only positive effects upon a growing venture. However, potential downsides do exist and are worthy of exploration. Welter (2012) provides a broad synopsis of trust related literature that provides a wealth of information on the various forms of trust as they relate to the entrepreneurial process. Welter details the literature's general agreement on three distinct levels of trust; 1) personal trust formed between individuals as a result of emotions and experience, 2) collective trust formed among a community (such as an organization) due to characteristics of the group, and 3) institutional trust formed at the macro level of governments and natures due to formal regulations and cultural rules (Welter, 2012). Rob established personal trust with his partners in Asia by developing a pattern of behavior that fortified a handshake as bond possessing strength similar to a handshake. Welter notes that such dealings not only lower transaction costs in commercial transactions, but also help entrepreneurs overcome the liability of newness (Welter, 2012 citing Aldrich and Fiol, 1994).

However, Welter recognizes the potential dark side of trust as well. Citing Goel and Karri (2006), Welter notes that "entrepreneurs may deliberately over-trust in order to create resources," and then use self-fulfilling logic to pursue objectives while trivializing the accompanying risk (Welter, 2012). With regard to Rob's current decision, attention should be given to PMI's history with brand development and management.

The case details how Rob's pursuit of the Migo branding effort required a massive commitment of PMI's human and financial capital, and resulted in alienation many seasoned employees working in other (more profitable) departments. The loyalty that Rob cultivated was damaged by this strategy (as well as some of the resultant layoffs). Yet at the conclusion of the case Rob begins to forge a relationship with Alladin with the intent of either selling PMI outright or acquiring (and managing) some of their steadfast brands. Given the impact of his previous foray into the Migo brand, it warrants discussion as to whether Rob's simpático with Alladin's CEO may lead him to once again trivialize the risk he is taking with the culture and commitment that Rob has established with his employees.

Taken together, the above discussion questions highlight critical aspects of a vital business decision facing a founding entrepreneur. The choices that lay before Rob Harris are unique to his industry, but the analysis of those choices may provide insights and guidance for other entrepreneurs. The analysis set forth in this instructor's guide is intended to aid in the analysis the issues critical Rob choosing the most sensible path forward.

Supplementary Reading

Mullins. The New Business Road Test: What Entrepreneurs and Executives Should do Before Writing a Business Plan, 2010, Prentice Hall. The first chapter of this book lays out a framework that enables students to map out the competitive environment of a business including the micro and macro view of the market and industry of a business, as well as the cohesiveness of the management team. Applying this model to PMI may enable students to identify areas in which more information may be needed in order to adequately assess the competitive environment.

Subject: Entrepreneurship education; Business models; Strategic management; Case studies; Entrepreneurs; Teaching aids & devices

Location: United States--US

People: Harris, Robert

Company / organization: Name: Pacific Market International; NAICS: 326199, 332999

Classification: 8306: Schools and educational services; 9190: United States; 9110: Company specific; 2310: Planning; 9520: Small business

Publication title: Journal of Business and Entrepreneurship

Volume: 24

Issue: 2

Pages: 97-125

Number of pages: 29

Publication year: 2013

Publication date: Spring 2013

Year: 2013

Publisher: Association for Small Business and Entrepreneurship

Place of publication: Durant

Country of publication: United States

Publication subject: Business And Economics--Small Business

ISSN: 10426337

Source type: Scholarly Journals

Language of publication: English

Document type: Feature, Business Case

Document feature: Graphs Charts References

ProQuest document ID: 1398476809

Document URL: http://search.proquest.com/docview/1398476809?accountid=38610

Copyright: Copyright Association for Small Business and Entrepreneurship Spring 2013

Last updated: 2013-09-06

Database: ABI/INFORM Complete

Document 65 of 100

CASE OF A PRIVATE UNIVERSITY DEVELOPING THE COMMUNITY THROUGH A HOLISTIC EDUCATION INITIATIVE

Author: Zivkovic, Jelena

ProQuest document link

Abstract:

The case will encourage students to think about the characteristics of a developmental university in general and how AUN in particular can be positioned as such a university that will benefit its local community in Adamawa state, the national community in Nigeria, and the international community in Africa and worldwide. [PUBLICATION ABSTRACT]

Full text:

OVERVIEW

Only six years since its inception, AUN is relatively a young and vibrant institution. The Strategic Plan 201 1-2016 presents a fresh and pragmatic vision for the university's future. It also provides a framework for implementing university-wide strategic plans and formulates strategies to achieve the goals. Presently, the number one goal for AUN is to establish itself as an institution that promotes development in Africa and particularly Nigeria. This goal encourages AUN faculty members, administrative staff and students to strive for excellence. The newly appointed president who took over the reins early July 2010 is committed to creating AUN' s presence in the community as an institution that provides holistic education and that works to uplift and better humankind.

The youth of today will shape the future of the country. They are expected to assume leadership roles and be the drivers of change in the community.

Development in the community would entail analysing the processes and transferring knowledge and experience to radically transform the lives of those in the poorer sections of society. One step in this direction would be to learn from the Western countries* approach at solving developmental issues and apply these methods to Africa. The view among social entrepreneurs is that the economic, political, and social factors at play are largely universal. However, since the learning environment, resources, and culture vary from country to country; the outcomes also vary. There is also an opinion that Western science and technology could benefit and learn from indigenous knowledge methods.

According to Martin and Osberg (2007, p. 39), "the social entrepreneur should be understood as someone who targets an unfortunate but stable equilibrium that causes the neglect, marginalization, or suffering of a segment of humanity; who brings to bear on this situation his or her inspiration, direct action, creativity, courage, and fortitude; and who aims for and ultimately affects the establishment of a new stable equilibrium that secures permanent benefit for the targeted group and society at large."

With its strong emphasis on teaching and research, AUN attracts students from all over Nigeria and across the globe. It draws on the experience and expertise of its faculty as well as its students' sense of duty, service, and commitment to the welfare of its community and country. This course has been designed for students at the undergraduate level, focusing on the philosophies and practices of social entrepreneurship. Students are expected to refer to research on developmental theories by specialists in this area and to have a critical and analytical approach to solving development issues facing the community.

The Strategic Plan provides a solid foundation for a course of action to overcome the developmental problems facing the community. Furthermore, this case study will enable students to make a critical assessment of the economic, political and social problems confronting Nigeria.

THE SITUATION

AUN aims to become a developmental university that provides knowledge for tackling the pressing economic and social reform needs confronting Nigeria, West Africa, and the entire African continent. To achieve this vision, we must attract superior talent for our faculty who will embrace our vision, hone their potential, and nurture them so they can excel as teachers and scholars in their fields. Furthermore, we must attract students who have leadership qualities and are passionate about serving the community and implementing social reforms. We also need to equip our instructional programs with the latest technology and continue to develop the university campus on a priority basis. Last but not the least, we must gather funding resources to stabilize and strengthen our financial position and develop the university.

To achieve these set goals we have to overcome our constraints, especially financial and operational. Simply, AUN provides USD $50,000 per student for a year of education and charges the student only USD $20,000 a year for tuition and fees. The reasons for this gap are high faculty salaries, fringe benefits for the faculty such as housing, transport, payment toward utility bills and other subsidiary expenses, and management and maintenance costs for off-campus housing.

To overcome these financial constraints, the university needs transparent and accurate financial information, including a comprehensive set of financial statements, balance sheets, income statements, sources and uses of fund analysis, cash flow analysis, cash budgets, and capital budget statements. AUN is already taking constructive steps in this direction to streamline and formalize its financial management systems. We have to formalize our fund campaign to increase financial resources from both traditional and non-traditional methods, mostly unrestricted funds. To be successful, we must create awareness and enhance the image of AUN as a high quality institution that will make a valuable contribution to the development of Nigeria and the African continent. Overcoming financial constraints would enable us to attract faculty and students of a high calibre, which in turn would help us raise additional tuition and other funds. It would also enable us to realize our mission, financial, and other important goals in the near future.

A harsh environment in Nigeria, poor construction in some buildings on the main campus, and lack of proper maintenance for the past few years have made the need for significant repairs rather urgent. As the university continues to expand, we also will need more classrooms and dormitories. Moreover, it is necessary to provide proper accommodations for the faculty. Presently, they reside quite far from the main campus. Given the current transportation system in Yola, Nigeria, it would be preferable to house the faculty close to the main campus. This would reduce expenses related to off-campus housing and foster better teacher student interactions and a sense of belonging to the local community.

AUN is committed to carving a niche for itself in Nigeria and in the African continent as an institution offering high quality education based on the American pattern and style of teaching. The university achieved an important milestone when its first class graduated in 2009. The institution faces many challenges as it strives to develop from a fledgling institution to a university with an established track record. The strategic plan for AUN is focused on transforming it into an institution that emphasizes holistic education and research and fosters creativity and leadership, one that makes teaching, working, and studying a rewarding experience and that contributes to Nigeria's development.

A SNAPSHOT OF NIGERIA

Located in the western part of Africa, Nigeria is the most populated country in the continent. The country gained independence from Britain on October 1, 1960. Presently, the government follows the presidential system of governance with executive, legislative, and judiciary branches. A new constitution was adopted in 1999. The current President and the Vice President of the Republic of Nigeria are His Excellency Goodluck Ebele Jonathan and His Excellency Namadi Sambo, respectively. In 2004, the population of Nigeria was estimated at 137,253,133 people spread over 500,000 square miles, an area roughly two and a half times the size of California. There are 36 states in Nigeria; Abuja is the capital. It is a very diverse country, with more than 250 ethnic groups and 4,000 dialects. The country has approximately 25 federal, 22 private, and 24 state government universities. More than 18 million students are presently studying at various levels. Nigeria has followed a 6-3-3-4 education system since 1982. The educational policy requires six years of primary (elementary) education, a two-tier (three year junior, three year senior) secondary education, and four years of university education.

Often referred to as 'the Giant of Africa*, Nigeria is a land of dichotomy. Nigerians have been reported to be the happiest people on earth, but since independence from Britain in 1960, the country has been through a major civil war and a series of brutal military dictatorships. It is the second largest oil producer in Africa, yet 70% of its population lives below the poverty line. For the past 11 years, the country has tried to instil democracy, but ethnic violence between Muslims and Christians has proven a major challenge. Moreover, ongoing conflict and violence in the Niger Delta, which is the oil-producing region, has become a cause for concern.

The rich and the affluent in Nigeria have amassed a lot of wealth, mostly from corrupt practices. Abuja became the capital of the country in 1991, and it is an ideal city, serving as a model for other cities. However, Nigeria is a country of contrasts. Many parts in the country have poor infrastructure, bad roads, and inadequate health care and education systems. Since the 1970s, the country has become more dependent on oil for income, but that money does not percolate down to the population, most of whom are poor and downtrodden. Many Nigerians do not care about the development of their country; they only want to make a living.

Nigeria has hardly any social service mechanisms. There are no welfare and civic departments, and pension schemes are limited to government employees. Presently, the minimum average wage per person is 8000 Naira a month (approximately US $54). For many male Nigerians, the most lucrative jobs are in government departments, where salaries are high and comparable to those paid to civil servants in the developed world. Nigeria is a maledominated country, and women are hardly eligible for government and other jobs. Women make a living through home-based microbusinesses such as cooking or selling goods and groceries as street vendors. Some women venture into home-based beautician businesses, but this opportunity is only available to those who can afford to set up such enterprises. Women entrepreneurs could in fact help Nigeria out of poverty, propel the economy towards growth and development, and reduce the country's dependency on oil.

Nigeria is composed of the Federal Capital Territory (FCT) plus 36 states, one of which is Adamawa State.

SNAPSHOT OF ADAMAWA STATE

The population as of 1991 was 2,102,053, and at the last count was 3,552,470 in 2010. The population density rate for the state was at about 68 persons per square kilometre (2000), whereas in the Delta region, one of the southernmost states of Nigeria, population density is 1,311 (2003).There is a large ethnic presence, including the Argi, Higgi, Bwatiye, Fali, Verre, and Fulani tribes, just to name a few. These groups tend to congregate and segregate along ethnic divides. They live in quaint communities and speak their local language. Crops such as maize, sorghum, rice and yams are staple foods. Cash crops are groundnuts, sugar, cotton, and rice.

The national poverty level is 70%, according to the Nigeria Economy (2007). The majority of the people affected reside in the northern region, and poverty is very prevalent in Adamawa. Many beggars and disabled people affected by polio and malaria populate the street corners and shop fronts.

The economic state of the region is quite good in terms of the farming industry, which employs about 80% of the active workforce. Large manufacturing concerns include Savannah Sugar Company, S ebore Farms, Affcot Nigeria Limited, and Mubi Burnt Bricks; small-scale industries include Mubi Groundnut Oil Mills, Gombi Chalk Industry, Michika Animal Feed Mill, and Yola Office stationary. Livestock breeding (cattle, goats, poultry) is a stable and important economic activity. Furniture-making, hairdressing, motor mechanics, tailoring, welding, and iron fabrications are other industries that represent job opportunities. There are countless informal businesses that are either home-based or by the roadsides. Although a large river runs through Adamawa, it is grossly underutilized, and only few fish are caught for the market. Little to no other sea trade occurs.

Culture has a strong presence and the state's largest commodity that is untapped by outsiders. Traditions, customs, conservatism, national dress, and religious affiliations are dominant. State pride is evident, and generous hospitality can be seen in many places.

The vision and missions of the state are clearly centred around eradicating poverty, increasing education levels, and stimulating the local economy. The Adamawa State Economic Empowerment and Development Strategy (2006) describes the vision and mission of the state as:

Vision

Making Adamawa State great, peaceful with prosperous economy for sustainable growth and development.

Mission

* Promotion of efficiency and effectiveness in the implementation and execution of programmes and projects to actualise objectives.

* Foster values of patriotism, honesty, hard work and diligence, merit and excellence, trust worthiness, personal discipline, tolerance, mutual respect, justice, fairness, love, care, compassion and peace.

* Induction and inculcating modern management techniques and procedures in government in order to increase rapid productivity and service delivery to the public.

* Promotion of code of conduct to express our commitment to the crusade against corruption and due process.

* Ensure security of life and property, economic and social well-being of the people to enable the state economy proper.

* Eschew nepotism, bitterness, prejudice, indiscipline and manifestations of antisocial behaviours to give way to progress.

* Strengthen partnership in working with the private sector, to a better appreciation of the wealth-creating and job creation capacity of the sector, creating an enabling environment for the sector to function efficiently and make it the major promoter ofthe economy.

Yola is the capital city of Adamawa state. Adamawa state was formerly known as Gongola state until 1991. Yola was founded by Modibbo Adama, a foremost Muslim cleric. The name Adamawa is an elongation of Modibbo' s surname, Adama. The current governor is Multala Nyako, elected in 2007. The prominent ethnic groups are Chamba, Hggi, Longuda, Bwatiye and Fulani. Other groups are the Marghi, Kilba, Bura Fali, Kanakuru, Yungur and Mbula. The name 'Yola' comes from the word 'Yolde', which means a knoll or elevated surface. Yola is a peaceful and beautiful port city on the Benue River in the northeastern part of Nigeria. The climate is characterised by alternating hot rainy seasons and cool dry seasons. The population in 2004 was estimated at 88,500. Yola is the administrative centre of Adamawa and the township's traditional leader's domain. Yola forms part ofthe 'twin' cities consisting ofthe traditional Yola township and the cosmopolitan Jimeta metropolis. The city is largely agrarian; people earn their livelihoods through farming, fishing, raising poultry, and trading.

The natives of Yola peacefully coexist with the academic community in the city. Yola offers access to a sophisticated, modern infrastructure and advanced technology. The university campus provides wireless connectivity, which is by far the largest wireless network in Nigeria.

SNAPSHOT OF THE AMERICAN UNIVERSITY OF NIGERIA

The American University of Nigeria opened its doors in 2005. AUN was founded by the former Vice President of Nigeria, His Excellency Atiku Abubakar, with the assistance of prominent officials in the country and administrators at the American University (AU) in Washington, DC. AUN is situated in Yola, near the Vice President's hometown. Having been exposed to the American system of education as a young man, Mr. Abubakar sought to offer this style of instruction, which emphasizes critical thinking, small classes, student participation, problem-solving, a U.S. -style general education program, and American-trained instructors, to qualified youth from Nigeria and across the globe. AUN was initially named the ABTI American University of Nigeria, but the name was changed to conform to the practices of other AU affiliates such as the American University of Beirut and the American University of Paris. AUN now joins AU of Cairo in claiming to offer high quality American-style education on the African continent.

Since AUN' s inception, former presidents Dr. David Huwiler and Dr. Michael Smith have contributed to the development and progress of the institution. Presently, Dr. Margee Ensign is the president of AUN. Prior to this, Dr. Ensign was dean of the School of International Studies at the University of the Pacific, where she was also the associate provost. The AUN campus is spread over 500 hectares of land. Recently, His Excellency Mr. Atiku Abubukar has acquired land and suggested improvements to the existing campus. Initially, AUN started its activities in the northern part, which is now called North Campus. The ABTI School, some administrative offices, and residences are still situated in this area. Classes at AUN are conducted in the South Campus, which is the hub of academic activities and where faculty members have offices and students reside in dormitories. Moreover, a new library is under construction, and there are plans to open a new University Centre. At a walking distance from the campus, a University Club is under renovation for students, faculty, and administrative staff to unwind, socialize, and network.

AUN currently enrols approximately 1,400 students and has 85 faculty members. It has successfully graduated two classes of students. The university is comprised of three schools: Arts and Sciences, Business and Entrepreneurship, and Information Technology and Communications. On October 25, 2004, many notable individuals from the cabinet ministry, state government; National Assembly, and embassies watched as the Nigerian President, His Excellency Mr. Olusegun Obasnajo, laid the cornerstone to initiate the first phase of construction. There are plans to convert the 200 acres of campus land into 47 state-of-the art buildings that will resemble a sophisticated American-style university. The vision of AUN is steadily becoming a reality, thanks to several years of planning and collaboration.

Every year, thousands of West African families send their children to study abroad, especially in the United States. However, many students would prefer to study in their home country if they were offered a high quality Western-style education. AUN was created in partnership with the American University in Washington, D.C., internationally renowned for its excellence, and the university now offers students an education in Nigeria that is comparable to that offered in American universities. Most of the faculty are Americans, and the facilities are state-of-the-art. The academic programs are consistent with U.S. accreditation standards. AUN focuses on career progression to train students in the necessary skills required by the job market in Nigeria and abroad. Moreover, all students will be trained in the practical applications of information technology. Until recently, upon arrival at AUN, students received laptop computers equipped with the necessary software. Now, students are expected to purchase their own laptops with support from the AUN IT department. Additionally, they have access to the high-speed wireless network on the campus. We aim to train every student in the fundamentals of entrepreneurship so that they can attain leadership positions and contribute to the country's growth and development. AUN offers a holistic education; students are required to take courses in math, science, social science, the humanities, information technology, entrepreneurship, and ethics. AUN graduates will shape the future of the country and help lift it out of the clutches of poverty. The main AUN campus consists of 1 1 buildings, including eight dormitories, a spacious cafeteria, a building for classes, and a block that is utilized for general purposes. The north campus provides dedicated space for dorms, a gymnasium, an admissions office, finance and accounts department, and a book shop. All buildings are fully air-conditioned. Dorms have DSTV cable network in common rooms.

The first graduating ceremony in 2009 attracted potential employers, statesmen, academicians, and world leaders. The university board members are distinguished academicians who have made valuable contributions in the field of education as well as humanitarian projects. The university board is comprised of Chairman Alhaji Ahmed Joda, who was formerly a permanent secretary in the Nigerian civil service. The other members are the former American Ambassador to Nigeria and Undersecretary General of the United Nations, who is also a board member. The world-renowned Nobel Peace Prize winner Archbishop Emeritus Desmond Tutu and the Chairman of the Tulsi Chanrai Foundation, which provides eyesight and maternity health services to thousands of impoverished people every year, are also members.

Vision, Mission, and Values

Vision Statement

The American University of Nigeria endeavours to be a hub of learning and research contributing to the growth and development of Nigeria as well as West Africa. In the words of its founder, it sees its role as a 'developmental university*. It respects its traditional role of a repository that imparts cutting-edge knowledge and encourages research and innovation. But most importantly, it is committed to imparting holistic education to the youth of the country and grooming them to be strong leaders who will shape the future of this great nation.

Mission Statement

AUN will strive to create leaders who feel responsible for the development of Nigeria and who believe in democracy, diversity, and humanity. The youth shall be proficient in technology to advance in education and move the country forward on the path of progress and prosperity. AUN will be an institution where students can fulfil their dreams and transform themselves for a lifetime of service and leadership in Africa.

Values

Our values reflect what binds the members of the AUN community and are part of our vision and mission:

* We believe that tolerance and understanding among national, ethnic, and religious groups is essential to the success of this or any other nation. The university will actively work to instil these values in its students, and it shall be part of our academic policies.

* We believe that the university in all of its activities shall demonstrate the highest standards of integrity, transparency, and academic honesty.

* We believe that freedom of expression is fundamental to the growth of the intellectual, and we affirm that all members of the AUN community will have the freedom to express any opinion without fear of reprisals of any kind.

* We believe that entrepreneurship and technology are essential to the transformation of Nigeria and Africa, and we affirm that every graduate will know the basics of innovation and entrepreneurship and will be technology savvy.

* We aspire to train youth for leadership roles in Africa and to incorporate leadership training curriculum at AUN.

Academic Community at AUN

The Chief Executive Officer at AUN performs the role of president and manages the dayto-day affairs of the university. The president is assisted by the executive vice president, who is in charge of finance and administration, and the vice president, who is in charge of admissions. Each of AUN's three schools is headed by a dean.

The university staff also includes a librarian, the dean of student affairs, the assistant vice president for finance and budget, the assistant vice president for public relations and communications, the assistant vice president for administration and development, the director of admissions, the director of public relations, the director of human resources, the director of campus planning, the director of works and maintenance, the director of financial operations, the director of budgets, the director of development, the director of institutional research, the director of resident life, the director of sports and recreation, the director of unified digital campus, the director of purchasing and procurement, the director of internal audit, the director of judicial affairs, the director of IT, the director of study abroad, the director of operations, and the registrar.

The faculty members at AUN are highly qualified; over 85% of them hold master's or doctorate degrees from American universities. Some members of the teaching staffai AUN have taught in American institutions. Furthermore, professors are rigorously recruited from international universities and institutions. They have proved their capabilities in research and other scholarly pursuits and actively participate in conferences and meetings all over the globe. They also publish their work in leading journals.

Information Technology at AUN

AUN prides itself on being the only 24-hour wireless campus in the country, thanks to its hi-tech satellite connection. However, this service has not been used to its fullest capacity. The service needs to be adequately managed so it can be used efficiently for research, learning, and teaching, and to curtail unwanted expenditures on IT services. Fortunately, the university has recently negotiated a contract with a fibre optic company to double the bandwidth and reduce expenses by half. IT is changing the way people work, think, and interact, but AUN and other Nigerian universities have not been exposed to this revolution. Now they are slowly waking up to its potential.

Globalisation and technological advancements are bringing rapid changes worldwide. Nigeria must follow the trend and keep itself updated with the latest developments. This would require a new approach to education and curricula. Individuals must be flexible and creative problem-solvers and life-long learners who are well-versed in technology. Cognitive science, neuroscience, and learning theory have shown us how people learn, but this new research has not been implemented in traditional classroom teaching.

Research has shown that there are multiple learning styles. Learning is an active process, and it is necessary to regularly assess the results. Additional research has shown that education has best learning outcomes when faculty meet for a short duration with students and cover the rest of the course using online technology (Stanford Research Institute, 2004). This learning model, also known as 'blended' learning, will be formally implemented for the at AUN. This learning model will be later be assessed and if there is a positive feedback from the participants, teacher and administrators, this model will be integrated into the undergraduate. With the availability of technology on campus, this style of blended learning may also support the MBA program.

Technology at AUN is not just restricted to learning; it is also extensively used for administrative purposes. The university has been using Banner software to support the registration process and teaching administration tasks such as entering final grades.

Social Entrepreneurship

Social entrepreneurship is a relatively new academic field that is rapidly growing around the world. Professor Martin Burt, renowned internationally for his contributions to social entrepreneurship activities, will be offering two new courses: 1) Introduction to Social Entrepreneurship and 2) Microfinance to Grow Economically.in the School of Business & Entrepreneurship which lead to a minor in social entrepreneurship President Ensign believes that AUN has the responsibility to train its students so that they become productive, innovative and dutiful citizens of democratic and modern. The new Centre for International Development and Social Entrepreneurship (CIDSE) was unveiled at AUN with the objective of imparting social entrepreneurial skills to the students and giving them the tools and skills to make a difference in the country.

Mr Burt will be offering these two courses from his home in Asuncion, Paraguay. He works actively in the field of social entrepreneurship in his native country, other Latin American countries, the UK, and the United States. Mr. Burt has received several international awards for his efforts in bringing about social and economic change. Mr. Burt emphasized the importance of introducing social entrepreneurship at AUN to address the social issues troubling Nigeria; he feels that it would promote self-reliance and transform the lives of people in the rural areas in Yola and throughout Nigeria. President Ensign, who has consistently expressed a strong interest in social entrepreneurship, worked with Mr. Burt in the United States, where they were instrumental in initiating social entrepreneurship programs at the University of the Pacific.

AUN Initiatives

AUN takes it role seriously as a developmental university for Nigeria. At a developmental university, faculty apply their knowledge and expertise to solve the social and economic problems prevalent in the society. Teaching and research requires an interdisciplinary approach. The social, cultural, economic, technological, ethical, environmental, and political problems confronting Nigeria and Africa are complex and interrelated. Increasingly, leading universities are realizing that traditional methods of learning is not suitable for educating today's youth, who have the potential to become future leaders.

For example, an economist or a politician should have knowledge of ecology, culture, and other disciplines. Lack of an interdisciplinary approach to education limits our thought processes and hampers our ability to solve complex problems. However, implementing this approach in Nigeria can be very challenging. AUN is ready to stand up to this task.

A developmental university actively works with local entrepreneurs, who are change agents, to understand the economic, social, cultural, and political environment of the country so that they can together find creative solutions to nagging problems. AUN as a developmental university has identified some of these change agents in community groups, so that students can learn from these leaders and contribute to the local community. The land-grant colleges in the U.S. are role models for institutions in Nigeria that want to be developmental universities. In the 1860s, Congress established the 'land-grant* universities that are charged with conducting research in agriculture, science, and engineering that is tailored to the real and immediate needs and problems of agriculture. These land-grant colleges not only developed new understandings about biology and agriculture, but they also created new products and production methods. Moreover, they developed new methods of irrigation and cultivation of land and introduced these concepts to farmers. These agents were also called 'extension agents' because they extended the knowledge, research, and solutions from the universities to the people who needed them the most.

As a developmental university of Nigeria, we intend become the change agents, extension agents, and problem-solvers for Yola, Nigeria, Africa, and the whole world.

Our Priorities

a. Develop and publish a paper on 'The African Developmental University: A Model for the Future*. Circulate and review this paper among the faculty, board members, and other key stakeholders in the Nigerian and African academics.

b. Based upon the responses from the community, hold an AUN-sponsored conference to create a plan for the university in Africa.

c. Depending upon the results of this conference, publish a monograph describing and defining the developmental University.

d. Examine the five top-ranked African universities to determine how much developmental university curriculum is offered.

e. Redesign course and departmental offerings to include the needed core courses for a developmental university learning experience.

f. Establish a developmental university advisory group to ensure that AUN' s curriculum, teaching and research priorities are connected with local, regional, and global developmental needs.

g. Establish a government relations advisory group to ensure that AUN' s curriculum, teaching, and research priorities are linked with national development policies and priorities.

h. Implement new courses and, when needed, establish new departments and hire faculty to teach the same,

i. Begin process for U.S. accreditation in late 2011.

j. At the end of three years, have AUN staffed and teaching according to developmental university standards.

The Challenge

Three varied tasks that can be undertaken for this case study: 1) written, 2) discussion, and 3) presentation,

Written

Assume you are the course coordinator and you have been asked to:

* prepare a SWOT analysis of the current condition of AUN and use your findings to draft a strategic plan explaining how you would apply classroom knowledge to practical situations;

* use a SWOT analysis to propose a course in which students are expected to get involved in their local community to address the needs of the community; and

* draft a syllabus for a new course that will connect theoretical knowledge to solving social and economic problems within the AUN community.

One or all three of the written tasks can be completed.

Discussion

Take on the role of the president of the university or the dean of the school. Brainstorm about six social issues that the local community faces. Now try to identify the opportunities that exist and provide a solution for each of the social issues. Brainstorm on how the university can go about participating in the resolution of some of the most pressing issues. Discuss the benefits and drawbacks of each of the resolutions you have highlighted.

Presentation

Present your SWOT findings, the strategic plan, the new course proposal, and/or the syllabus.

Each group can also make a presentation about the brainstorming activity. Share the social issues, opportunities, and resolutions. Allow time for questions and further discussion once you have disseminated the information to the rest of the class.

Subject: Private schools; Colleges & universities; Social entrepreneurship; Strategic planning; Case studies

Location: Nigeria

Classification: 9177: Africa; 2310: Planning; 2410: Social responsibility; 8306: Schools and educational services; 9130: Experiment/theoretical treatment

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 3

Pages: 1-14

Number of pages: 14

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: 1370361571

Document URL: http://search.proquest.com/docview/1370361571?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-12

Database: ABI/INFORM Complete

Document 66 of 100

PRICING REI MEMBERSHIPS: THE USE OF SEGMENTATION AND VALUE ESTIMATION PRICING

Author: Kutsch, Kristin; McDermott, Maggie; Finch, James

ProQuest document link

Abstract:

Throughout the past decade, Corporate America has developed a tarnished reputation. Scandals and investigations such as those surrounding Enron, Fannie Mae and WorldCom have fueled suspicions regarding how businesses operate. More than ever, consumers are wary of being exploited and have learned to place greater emphasis on the value of integrity in business. As a consequence, the cooperative model of business has grown in popularity over recent years. Recreational Equipment Incorporated (REI) is one of the nation's largest consumer-owned cooperatives. Founded in 1938 by a group of 23 mountaineering friends, today REI is America's largest consumer cooperative, operating more than 110 retail stores nationwide in addition to a strong online and direct sales operation. REI is a business operation founded on a passion for the outdoors-to inspire, educate and outfit people for outdoor adventure and stewardship. At its core is a commitment to get people outside and leading healthy active lives, caring for our planet by protecting shared natural spaces, and engaging others in making a difference. Members share this commitment and, in return for their loyalty to REI, receive an annual dividend. In 2010, through a 10% dividend on purchases, REI returned $94 million to members, retaining $30.2 million in net income to re-invest in the company while supporting the great outdoors with $4.3 million in community grants (REI.com, 2011). Membership in the REI co-op is voluntary. Those who shop with REI are encouraged, but are not required, to join. The challenge for REI is in pricing their memberships in such a way that the member believes there is value in belonging to the cooperative-that membership provides a distinct advantage over shopping at REI without owning a membership share. This case study discusses alternatives for pricing co-op memberships in a challenging economic environment. [PUBLICATION ABSTRACT]

Full text:

THE COOPERATIVE STRATEGY

Cooperatives have existed in the United States since 1752 and have thrived in part because the concept is so fundamental and universally appealing - people or businesses banding together to form an independent business entity to serve the needs of the collective membership, customer base, employees or other user group. Consumers gravitate to the cooperative business model due to several core concepts - community involvement, economic savings, democratic control, and social responsibility (International Co-operative Alliance, 2007).

Recreational Equipment Incorporated (REI) has been a trusted retailer of outdoor gear since 1938 and is now the nation's largest consumer co-op. What began as a group of 23 mountain climbing buddies now boasts more than three and a half million active members and more than 1 10 retail stores nationwide in addition to a strong online and direct sales operation. The company provides the knowledge and confidence to explore and discover new adventures through frequent educational clinics and expert advice from REI staff who share members* passion for outdoor recreation. Their focus is a convenient and seamless shopping experience, whether at an REI retail store, online, by phone or by mail order. REI also offers adventure trips in the outdoors through REI Adventures, their travel division. And it's not just the members who benefit, REI has been named to FORTUNE magazine's list of the "100 Best Companies to Work For" since the list was first published (REI.com, 201 1).

REI' s purpose is simple - to inspire, educate and outfit people for outdoor adventure and stewardship. At its core is a commitment to get people outside and leading healthy active lives, caring for our planet by protecting shared natural spaces, and engaging others in making a difference. Members share this commitment and, in return for their loyalty to REI, receive an annual dividend. In 2010, through a 10% dividend on purchases, REI returned $94 million to members, retaining $30.2 million in net income to re-invest in the company while supporting the great outdoors with $4.3 million in community grants. These monies support conservation efforts nationwide, and send scores of volunteers to build trails, clean up beaches, and teach outdoor ethics to children. Through responsible business practices, REI strives to reduce their environmental footprint. The board of directors is the voice of the membership, working with co-op management to ensure that members* best interests are served. While REI realizes that the company must be successful and profitable, leadership also defines success by the value added to the lives of members, their communities and society overall (REI.com, 201 1).

Because businesses such as REI are member-owned, member-controlled, and generate member benefits, there is a sense of accountability against measurable and public goals. Member benefits ensure that the profits made by the cooperative are being returned to the members. These profits are not returned based on the investment the members made in the cooperative, but rather the amount of business that members conducted with the cooperative throughout the year.

Why is the cooperative model successful for REI? The company measures its efforts - the board holds itself accountable for making continuous progress and makes their efforts transparent. Though the challenges and obstacles of running a successful cooperative exist as in any other business model, by answering to its members, maintaining a strong focus on environmental stewardship, community involvement, and what the company describes as a "rock-solid code of ethics," the co-op has continued to grow its membership base year after year (REI.com, 2010).

The Role of Membership within a Co-op

A business, regardless of its legal structure, is concerned with building customer loyalty and consumer-owned co-ops are no different. Consumer cooperatives can only be sustained by an active membership pool and, therefore, growth in memberships becomes the lifeblood of these organizations. For most consumer cooperatives of all kinds, members are the most active of all customer segments and represent the great majority of the company's patronage base. Consequently, co-ops have the advantage of a more explicit understanding of who their customers are, what they buy, and how often. Further, these organizations establish a more formal, contractual agreement of customer loyalty through the membership process. In this sense, co-ops have a significant advantage over other business organizations since co-op membership represents a sustained commitment to the organization over a specified interval.

One of the most significant barriers that exist to the process of converting customers to co-op members is the price to join. Consumers primarily make this decision based on an assessment of the costs and benefits associated with membership. Since the growth in membership rates ultimately determines the success of a cooperative, the strategy of pricing coop memberships is of paramount importance to the organization's overall success. As in all forms of business, the ultimate goal in pricing decisions is a close alignment of value with price (Nagel et al., 2010).

Value Drivers of Coop Membership: Tangible and Intangible Benefits

The greatest pricing challenge that all businesses face lies in setting prices that capture the true value of a product or service (Nagle et al., 2010). The types of benefits that REI offers to members can be separated into two categories: tangible and intangible benefits. The tangible benefits are most readily quantifiable and represent a financial savings over the prices paid by non-members. These tangible monetary benefits are often the primary reason that consumers join cooperatives. However, several significant intangible benefits are available to members as well. These include the sense of belonging and ownership conveyed to owner-members. Beyond that, however, some members derive a sense of satisfaction that comes from participating in what they perceive to be a less commercial and more equitable way of doing business. Each individual consumer ultimately makes the decision to join REI based on a unique combination of tangible and intangible factors. However, members with similar bundles of factors and motives can be combined into managerially useful market segments.

The first and perhaps most significant tangible benefit to joining the REI co-op is the patronage dividend. REI members receive a patronage refund or annual dividend in the amount of 10% on all eligible purchases. Only items purchased at a retail discount of greater than 15% are excluded from the patronage refund policy. At a cost of $20 for a lifetime membership, customers who spend more than $200 over their life span will recoup the cost of their membership in full. Patronage refunds are issued during the month of March following the purchasing year. Consequently, members must wait three to fifteen months to receive their refund check for any given purchase.

Another significant monetary benefit is member-only, 20% off discount coupons which are available four to five times each calendar year. REI has positioned itself as a reputable, highend retailer of outdoor gear and apparel and retail-price discounting has not been a substantial part of the co-op's competitive strategy. Since most of its products are offered at a premium price point relative to other retailers, the monetary value of these limited-time discount coupons is significant for many members. The discount coupons are not tied to the promotion of any specific category of goods, although products such as boats, bicycles, and GPS units are often excluded from the offer. It is anticipated that the rate of new memberships will typically increase during these coupon events as non-members decide to join the co-op in order to take advantage of savings on particular items. In essence, anyone who joins the co-op during a 20% off coupon event essentially receives a free membership if the item is $100 or more. If prospective members make a purchase greater than $100 during these event periods, it would actually cost them money not to join the co-op.

There are several additional financial benefits to members beyond patronage refunds and discount coupons. REI members get discounted rates on rental gear, including items tents, boats, and backpacks. REI stores also offer reduced bicycle repair shop rates at a significant savings to members. Often, the savings realized from the cost of a basic bicycle tune-up or members* first camping gear rental will exceed the initial $20 membership fee.

There are numerous special features that appeal to different segments within the pool of members. REI Adventures is a more recent addition to the product mix which offers members discounts of up to $350 on a variety of adventure travel trips across the globe. Several REI locations offer an indoor climbing wall with routes appropriate to beginners and experienced climbers alike. The co-op charges $5 per climb but offers unlimited lifetime climbing to members. And REI recently introduced free shipping offers exclusive to members who make purchases exceeding $75 from the organization's website.

Though the financial benefits of membership are clearly evident and easily evaluated by prospective buyers, it is also critical to understand that a substantial number of individuals who choose to join the co-op are influenced to do so by non-monetary benefits. Though more difficult to quantify, these intangible benefits are significant influences on the decision to become a co-op member. This finding is true for REI as well as a wide range of other types of cooperatives throughout the world.

The organizational structure of a co-operative allows its members a democratic voice in decisions that affect the co-op as a whole. Owner-members of the REI co-op receive a voting ballot annually, allowing each member the opportunity to elect Board of Director (REI.com, 2010). Members may also nominate individuals for this selection process. All decisions that affect the overall operations and long-term growth of the co-op are approved by this governing board. For many individuals, having a voice in how the co-op is run is meaningful on several levels. The significance of this has only grown as consumers have become less confident in traditional corporations. Many members are motivated to join because they perceive the cooperative model embodies a relationship of trust, honesty, and authenticity between members and the organization as a whole.

A second intangible benefit that is valued by owner-members is REI's commitment to environmental stewardship. The REI co-op is a collection of individuals who are passionate about the outdoors and this community of recreational enthusiasts believes in taking responsibility for the care of the environment. As one member said of this cooperative, "REI was green way before it was ever popular to be a green business.". The validity of this statement is evident in the $3 million to $4 million that REI has donated annually to like-minded non-profit organizations since 1976 (REI.com, 2009). Those who are passionate about outdoor activities are also passionate about preserving the land on which they spend time in the outdoors and this is a motive behind the decision to join REI for many people. As it relates to membership benefits, many individuals choose to join REI for the pure purpose of being part of an organization that is making a positive difference in the outdoors.

The final and perhaps most significant intangible benefit to co-op membership involves REI's 100% Satisfaction Guarantee. Although this guarantee is made available to all patrons, REI members can rely on the co-op's electronic receipt storage system to return any item they are unsatisfied with dating back to the year 2000. "Our 100% satisfaction guarantee ensures that every item you purchase at REI meets your high standards - or you can return it for a replacement or refund" (REI.com 2010). While most retailers provide strict guidelines, allowing only unused items to be returned within a short, 30-day time period, REI's Satisfaction Guarantee provides a much stronger promise to buyers. If a customer buys a pair of hiking boots only to find them uncomfortable on the trail, they can return the boots for a full refund even after extensive use in the field. In essence, the value of this guarantee is equal to the amount each customer spends at REI. The guarantee takes a significant element of "risk" out of the buying process and this level of buyer assurance holds tremendous value to members over the long run.

PRICING ALTERNATIVES

Pricing is one of the most important, yet least understood, dimensions of marketing strategy. Despite the growing role of non-price factors in the marketing process, there is no escaping the direct cause-and-effect relationship between pricing decisions and profitability. As increased competition from international competitors and the growing sophistication of buyers have pushed prices down in the market for many goods and services, marketing managers have had to become more knowledgeable in both the art and science of setting prices.

Pricing decisions are always critical to the firm achieving its overall financial goals. In general, there are three approaches to making pricing decisions: cost-based, competition-based and demand-based. More specifically, the process of setting prices must be based on a fundamental understanding of what the organization is trying to accomplish with its pricing strategy. Because REI attempts to attract members by offering them the best value for thendollar, for the purpose of this case the focus will be on demand-based (value-based) pricing.

Demand-based pricing is sometimes referred to as value-based pricing since prices are derived from buyers' perceptions of value rather than the seller's cost. This approach to setting prices includes several specific pricing methods that include price skimming, penetration pricing, price discrimination, psychological pricing, price lining, premium pricing and all forms of valuebased pricing.

As with all approaches to price setting, extreme care and thorough analysis is required. Though price changes are easily executed, the financial and strategic consequences are often substantial and enduring. In light of this, it is essential that all pricing decisions be made with the organization's pricing objectives in mind.

Value-Based Pricing

Companies whose differentiated brands enjoy significant advantages over competing products often turn to economic value analysis and value pricing strategies as a means of capturing greater profitability and market share. Value-oriented pricing recognizes that buyers often make purchase decisions based on perceived value rather than simply on the basis of lowest price. Value represents an assessment by the purchaser of the product's perceived quality or benefits relative to its cost. The goal of value-based pricing is to align the price of the product with the total value it delivers to the buyer. Although value-based pricing is a more difficult strategy to implement, it typically yields greater profits in the aggregate than simpler cost-plus pricing methods.

Among the most widely adopted variants of value-based pricing strategies is Economic Value Estimation or EVE. The fundamental tenets of EVE are straightforward: "A product's total economic value is the price of the customer's best alternative the reference value) plus the economic value of whatever differentiates the offering from the alternative the differentiation value). Differentiation value may have both positive and negative elements" (Nagle and Hogan, 2006).

REI Membership Pricing

The cost to join the REI co-op has changed little over the past decade. All members pay a single flat price for membership that lasts for the lifetime of the member. However, in January of 2008, the co-op made a decision to increase the price of a lifetime membership from $15 to $20. Despite the change, the co-op's membership sales continued along its trajectory of steady growth. Total memberships increased at an average rate of 8.3% between 2001 and 2007. Following the 33% membership price increase in 2008, membership in the co-op grew by 9.9% over the previous year as shown in Table 1 .

The sustained growth in membership despite the price increase is particularly noteworthy in light of the challenging and uncertain economic climate of 2008. Most retailers were experiencing substantial declines in patronage for this period (Federal Reserve Board, 2009) and REI was not immune to the downturn. The rate of growth in annual sales slowed significantly, declining by nearly 50% from 2007 to 2008 (Table 2).

The contrast between the rates of change in membership growth and sales growth is not an anomaly. Rather, it reflects a perceived increase in the value of membership in the co-op in the midst of challenging economic conditions... despite an increase in membership price. This relationship has been observed in similar contexts.

Membership in REI conveys distinctive tangible and intangible benefits to patrons. Table 3 shows how an economic value estimation of REI membership could be structured differentially according to membership benefit. We also could hypothesize that REI membership could be structured according to member type, also known as market segment.

Market Segmentation in Membership Valuation

One of the challenges to using economic value estimation involves assigning a monetary value to both tangible and intangible benefits. Co-op members are a diverse group of REI patrons who place varying levels of importance and value on each membership benefit. Though price segmentation is not currently being utilized by the co-op, a detailed understanding of market segmentation may create a case for price segmentation in the future. Alternatively, it may support the desirability of unbundling the whole one-size-fits-all basket of benefits offered to new members in favor of adopting a more custom- fit approach since each segment of potential REI patrons perceives membership benefits at different levels of value. Beyond assessing the value of each benefit differently, each segment may differ on their frequency of using each feature.

Assumptions in Value Estimation

In order to assess the value of co-op membership on a segment-by-segment basis, several estimates need to be made. These include the monetary value of each benefit and the frequency with which each segment will take advantage of each benefit. An additional consideration is that REI co-op memberships are lifetime memberships. Consequently, the value of benefits should be considered on both an annual and accrued lifetime basis.

In 2009, $72,670,000 in dividends was distributed among 3,680,147 active members (REI.com, 2010). The average amount of full-priced merchandise an active member purchased in 2009 was $197.46, or an average annual dividend of $19.75. These values provide a useful baseline against which to assess the relative economic value of an REI membership across different segments of owner-members.

Effective Pricing through Segmentation

If the ultimate goal in pricing is to closely align value with price, REI could develop value-based pricing by pursuing segment-specific policies. The usage rates for different tangible and intangible benefits are at the core of how segment perceptions of value will differ.

One interesting consequence of price segmentation is that certain pricing structures serve to "push" customers toward more expensive options, based on relative value. For example, consider a customer who currently pays $88 per month for cable television and Internet service. If he were to cancel the cable service, he would still pay $74/month for Internet only service. It is likely that he would feel compelled to pay the $88 and retain both services simply because the perceived value received for $88 per month is greater than the value received by paying $74 per month for Internet alone. The decision may be based exclusively on the perceived relative level of value they receive in comparison to the alternative. This price segmentation phenomenon has several implications to the pricing of REI memberships.

Based on usage profiles, four possible segments emerge - young families, weekend warriors, serious outdoor enthusiasts and active singles. Each group has its own set of value estimates based on demographics and priorities for that segment. Value estimations for the "Young Families" segment include the following assumptions:

1. Average family size is four

2. Recreational activities are limited to two vacations annually

3. Unlikely to travel with REI Adventures at this stage

4. Conservative with items purchased; conscientious of price; concerned with quality

An example of how this information could be used in a value estimate segment is outlined in Table 4.

Closing

A large part of REI' s success is due to their co-op business model and the impact that this structure has on pricing decisions. Yet, as times change, the businesses that survive do so because they constantly review their pricing decisions. For REI, this review includes an analysis of their segmentation and value estimation of their membership pricing. However, in discussing potential membership pricing structures and the economic future of the cooperative, REI marketers must consider the implications of price segmentation and whether a value-based system is the most beneficial to all concerned.

One possible price segmentation strategy centers on the sale of annual memberships versus lifetime memberships. A large number of REI patrons join the co-op for the simple fact that it is cost-effective to do so based on the amount they spent in the store on one given day. These individuals represent a segment of the market that may not join the co-op for any other reason other than the monetary benefit they will receive either immediately or at the end of the year. In fact, some within this group may consider themselves one-time shoppers with REI. That is, they may have no specific interest in the outdoors, environmental stewardship, community involvement or the unique philosophy represented by cooperatives. Many of these individuals may not actually understand what they are joining ...or even that they are becoming lifetime member-owners of something. Their sole motivation is the cost-effectiveness of purchasing a membership on that occasion.

An alternative price segmentation strategy is rooted in the distinctly different value that individuals receive from membership as compared to families. Given that estimated values differ significantly for each segment, families may be willing to pay more. However, as with all approaches to price setting, extreme care and thorough analysis are required. Though price changes are easily executed, the financial and strategic implications and consequences are often substantial and enduring. Thus, it is essential that all pricing decisions be made with the organization's pricing objectives and corporate future in mind. Some questions for consideration include:

1. How do you think the co-op business model impacts the pricing decision at REI?

2. If REI did not use a demand-based model, what other choices what are their other model could they use?

3. REI has split their target market into several segments - Young Families, Weekend Warriors, Serious Outdoorsmen, and Active Singles. How do their profiles differ? What are the implications of these differences for REI' s overall marketing strategy?

4. Using Table 3 as a template and Table 4 as an example, create an economic value estimate for the following market segments: Weekend Warriors, Serious Outdoor Enthusiasts, and Active Singles.

5. At the end of the case the authors suggest possible segmentation centered on the sale of annual memberships versus lifetime memberships. What implications might this have for REI? And what long term affects might they want to consider with regard to this model?

Answers to these questions must be reviewed in light of the long-term effects on what is currently a successful business model.

Subject: Pricing policies; Recreational equipment; Market segmentation; Case studies

Location: United States--US

Classification: 7100: Market research; 8600: Manufacturing industries not elsewhere classified; 9190: United States; 9130: Experiment/theoretical treatment

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 3

Pages: 87-97

Number of pages: 11

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

Document feature: Tables

ProQuest document ID: 1370361597

Document URL: http://search.proquest.com/docview/1370361597?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-12

Database: ABI/INFORM Complete

Document 67 of 100

AV CORPORATE: SOFTWARE TOOL PROJECT

Author: Manuel, Manuel C

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Abstract:

Change is a key factor that often makes or breaks an organization. The ability to adapt to change, however, must go hand in hand with the ability to manage change. Many Information Technology (IT) companies and organizations nowadays have difficulty managing change due to the dynamic nature of the Information Technology industry where standards, processes, products and the like continually evolve and where new product development is the norm. In this case study, we examine the effects of such a dynamic culture to a company's people, process and technologies. [PUBLICATION ABSTRACT]

Full text:

(ProQuest: Text stops here in original.)

INSTRUCTOR'S NOTES

Technological change is inevitable for many companies. As such, processes are often realigned in order to serve customers better, faster and more efficiently. The case narrates the issues raised by the three teams under the Anti Virus operations team related a software tool development project under Kenneth Tirona, the project manager. In the case, it can be seen that, as the software tool was being developed, the File Analysis Services team streamlined its process to remove unnecessary tasks, which led to new requirements arising for the software tool. The learning curve of employees affected should also be taken into consideration as they cope with the changes in their tasks and responsibilities as a result of the process streamlining.

These changes often bring about "perpetual projects" with requirements that continuously evolve. Therefore, all stakeholders need to understand the impact such projects will have on the company, its processes and its resources.

If the class is divided into case groups, the instructor can assign one group to present the case in a class session, explaining their 1) identification and analysis of the problem and 2) recommendations to resolve the problem, which can include answers to the guide questions. The ...

Subject: Technological change; Information technology; Software industry; Case studies

Classification: 8302: Software & computer services industry; 5220: Information technology management; 9130: Experiment/theoretical treatment

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 2

Pages: 1

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: 10784950

Source type: Reports

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1426972881

Document URL: http://search.proquest.com/docview/1426972881?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 68 of 100

AV CORPORATE: PC ANTI-VIRUS 2.0 PROJECT

Author: Manuel, Manuel C

ProQuest document link

Abstract:

The technology landscape is continually evolving - throughout the history of Information Technology (IT) we have seen how companies manage changes like advances in processing, the smartphone revolution, the introduction of social networking and the like. This has radically transformed human - technology interactions. Therefore, the challenge in the IT industry is for companies to constantly keep abreast with technological advances as these affect not only their business processes but those of their suppliers and customers as well. In this case study, we reveal how such a shift in the IT industry recently affected a company's product development and its relationship with its suppliers and customers and the challenges that resulted which the company had to deal with. [PUBLICATION ABSTRACT]

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INSTRUCTOR'S NOTES

One of the most challenging issues a company can face when it comes to product development is learning about changes being introduced by external forces that impact on the feasibility or viability of the product being developed or to be launched, as in the case of AV Corporate. The announcement from Microsoft was definitely not something J. M.'s product development team and Connie's marketing team were expecting, and it could not have come at a worse time than just a few weeks after the announcement of the new product.

Given the impact of Microsoft's announcement on the new product, J.M. and Connie had to think of ways to deal with the expected questions and fears coming from the owners, their customers and the company's investors. Dealing with such would allow J.M. and Connie to show ...

Subject: Information technology; Software industry; Case studies; Technological change

Classification: 5220: Information technology management; 9130: Experiment/theoretical treatment

Publication title: Journal of the International Academy for Case Studies

Volume: 19

Issue: 2

Pages: 7

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: 10784950

Source type: Reports

Language of publication: English

Document type: Feature, Business Case

ProQuest document ID: 1426972918

Document URL: http://search.proquest.com/docview/1426972918?accountid=38610

Copyright: Copyright Jordan Whitney Enterprises, Inc 2013

Last updated: 2013-09-11

Database: ABI/INFORM Complete

Document 69 of 100

SKÁLHOLTSSTÍGUR 2A: ECONOMICS, IMPLIED PROMISES, AND THE ETHICS OF A $1,200 A MONTH BALCONY

Author: Luthy, Michael R; Padgett, Barry L

ProQuest document link

Abstract:

Introducing students to the topic of customer service from the organization's point of view is always challenging. Students' experiences as consumers provide insights to various principles for developing a rationale as to why organizations do what they do. A difficulty often arises however, from the need for students to know when to divorce their instincts, built upon their experience base, in order to make decisions as managers. In this case, students will draw on their own experiences, those of their friends and family members, and any assigned readings as they take the role of the business owner. As the instructor leads a discussion of the case and proposed questions, terminology and constructs are defined and explored and students try to determine where to draw the line between the needs of the customer and those of their business.

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