Document 1 of 100

MORBID PLANS: NORFOLK CABINET, INC.

Author: Brandon, Sean; Stretcher, Robert

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INTRODUCTION

Roger Simkin, general manager of Norfolk Cabinet, Inc., sat in his office observing the last major shipment of kitchen and bathroom cabinets for the year being loaded into cargo containers. The containers would be loaded onto cargo ships headed for ports up and down the eastern seaboard and Gulf of Mexico, destined for retail outlets and contractors from Texas to Massachussetts. Unfortunately, the orders for these products were curiously seasonal. The slow season was beginning, from September to February. Roger faced the unpleasant task of reducing work schedules for the majority of his employees, and he knew from experience that some of them would simply be unable to make ends meet with so few hours to work.

Invariably, about half of his plant laborers would seek other employment. A small positive aspect of this was that it made slightly more work for the workers who stayed, but it was far from an ideal situation. In the spring, Roger would face the reverse task of hiring workers for the high production period from March until the following August. Roger thought about how much he hated doing both tasks. He was seriously considering initiating a new proposal that Ed, his assistant manager, had suggested; of all things, producing caskets in the offseason!

Roger had balked at the idea at first. It seemed a rather morbid thing to pursue. But as the end of the high production season had neared, he was seriously considering it. He had no idea who his customers would be. The ultimate consumer of the product could not be identified until, well, they were dead! Neither he nor Ed knew anything about marketing caskets. The idea, however, had merit; death and the demand for caskets probably wasn't seasonal, but if it were, wouldn't more people die in the winter?

The major benefit Roger saw was that his factory could operate year-round. This involved some major efficiencies in terms of hiring and training cost savings, and that, when the plant was operating at capacity it achieved around a 45% operating margin. Another advantage was that, according to Ed, the operating margin for caskets (that NCI already had the capability to produce) was about 48%. In essence, the firm could operate year round with a new product offering that was even more profitable than cabinets.

THE CASKET INDUSTRY

It is often said that there are two things that one can always count on, death and taxes. For a long time it could be said that at least one of those two concepts was easy to go through. However, times have changed, and the industry of death has changed along with it. The days when one would just send their deceased loved one to the funeral home and leave everything to them are virtually over.

The reason for this shift can be traced to a phenomenon that is sweeping across the United States. In an effort to cut the costs of funerals, consumers have started to look at the low cost alternative of buying the casket from a third party. This demand by consumers has led to an explosion of low cost casket outlets that offer quality caskets at wholesale prices. The concept is simple; you walk into your local casket outlet and look over the selections. Upon finding the ideal casket for your loved one, you would purchase the casket at the store and have it sent to the funeral home.

The popularity of this concept becomes obvious. The average funeral home marks up the price of a casket purchased from the manufacturer anywhere from three hundred to six hundred percent. The result is a $1200 casket that ends up being as much as $4000 by the time its lowered into the ground. Casket outlets are vastly cheaper because they apply a very small mark-up. The same $1200 casket may sell for just $1400 at a casket outlet. The reason that they can allow these small markups is twofold. First, they are not a funeral home, so the expenses incurred in the actual funeral process do not apply to them. Second, they sell so many caskets that they eventually reach economies of scale.

As discounters have increased in number, so have the number of casket manufacturers who are willing to sell their products to the general public. Regional manufacturers like the Catskill Casket company and Casket Royale have begun selling the same caskets to the public as they sell to the funeral homes. The difference is that they sell them with just a ten to twenty percent mark-up. This has become a lucrative business for the casket manufacturers with much of their profits now coming from either direct public sales or discounter sales.

Despite the benefit to consumers, funeral homes are fighting this movement tooth and nail. According to the Federal Trade Commission, up to forty percent of the average funeral price is the price of the casket. Funeral homes face a huge loss in profits if the discounters and casket manufactures are allowed to gain a foot-hold in the industry. The stakes are especially high for the big funeral chains. Public Corporations like Carriage Services incorporated stand to lose millions if casket prices drop even slightly.

GOVERNMENT INTERVENTION

Inevitably, funeral homes have tried to keep their advantage and hold on to their profits. In fact, they've been trying to keep their advantage for well over a decade. Up until 1984 funerals homes required customers to purchase caskets and coffins only from them. That rule was the main reason why there was no selling to the public. That changed when the Federal Trade Commission made the practice illegal (16 C.F.R. Part 453).

However, funeral homes found a way around the rule. If someone bought a casket from a discounter, the funeral home would charge a handling fee to move the casket from the discounter to the funeral home. The handling charge was often just as high, if not higher than their own mark-ups. That practice suppressed the discounters, but it also got the attention of the Federal Trade Commission again. In 1994 the FTC made it illegal for funeral homes to charge any handling fee (16 C.F.R. Part 453 (1994)). This paved the way for dozens of casket discounters to enter the market.

Even after the ruling, funeral homes have apparently found another loophole. They now charge a much larger amount for overhead than they did before. When a casket is delivered to them from a discounter or manufacturer, they have been known to charge as much as two or three thousand dollars extra in overhead. That move has casket manufacturers and discounters crying 'foul!' It probably will only be a matter of time before the FTC gets involved yet again.

The whole situation has left the casket manufacturers in a precarious situation. The vast majority of all their sales still occurs with funeral homes. Selling caskets to discounters or to the public would create a potentially lucrative source of sales, but would also strain their relationship with the funeral homes. Not selling to the discounters or the public would secure their relationship with the funeral homes, but might also lead to falling revenue if the discounters are able to use the basic rule of supply/demand to drive down casket prices.

A SAMPLE COMPANY

One example of the casket makers' dilemma is the case of the Catskill Casket Company. Seeing the shift in focus throughout the industry, Catskill attempted to start selling caskets to discounters and the public while continuing their accounts with the funeral homes. The result was the cancellation of their funeral home accounts. The casket maker also claimed that the funeral homes bullied Catskill's suppliers into not selling to Catskill anymore. While Catskill still does sell to the public, their relationship with funeral homes has changed from confederate to competitor. These boycotts from funeral homes are becoming more and more common as discounters cut into funeral home revenue.

Catskill ended up writing a letter to the Federal Trade Commission complaining about the practices that had been used by the funeral homes. Apparently, some funeral homes have managed to not only bully the casket makers into not selling caskets to the public, but the have also convinced vault and tomb manufacturers to not sell their products to any casket manufacturer that does sell to the public. Up until this case the FTC still had not taken any action against the funeral homes that Catskill claims tried to intimidate them.

So far, Catskill is considered an extreme example. However, as more casket manufacturers sell to the public, the funeral homes may become more aggressive with their tactics. Funeral homes are already in the process of using legal tools to stop the proliferation of discounters. In many cases this includes lawsuits and/or massive lobbying campaigns to keep archaic funeral laws on the books.

LEGAL ISSUES

In some states it is actually illegal for casket makers to sell their products to anyone else except to funeral homes. Discounters in Georgia have been under threat of being shut down for months now because of the funeral laws currently on the books in that state. Right now there are seven states that have laws against selling caskets other than to funeral homes. Most of the states are in the southeast (Alabama, Georgia, South Carolina) where funeral homes are keeping a death grip on the market.

The Funeral Home Directors Association has been fighting along with the large chain funeral homes to keep those laws on the books. They insist that only a trained mortician should handle a casket and that there is a loss of quality when using outside casket vendors. However, despite what they may insist, consumers are starting to wake up to the realization that the exact same casket selling for $4,300 at the funeral home is being sold for $1,200 by the discounter and $1,000 by the casket manufacturer.

There is even a small fringe of the industry that is now pushing the idea of homemade caskets as the ultimate low cost alternative. A company known as Homemade Casket Plans sells not the casket itself, but the plans to make one. For $19.95 you will receive eight pages of detailed plans showing you how to make your very own casket. The company estimates that it will cost about $300 on the wood for a basic casket and a little more for a fancy one. They even claim that you can modify it into a viable piece of furniture until it is needed.

If making one's own casket sounds like too much work then how about renting one? Massachusetts has actually passed legislation protecting someone's right to use rented caskets for funerals. The idea is that you rent a expensive looking casket for the wake and funeral, then buy a less expensive casket for the actual burial or cremation. While it may make some people squeamish, it is a potential low cost alternative to the standard funeral.

The funeral homes insist that their markups are warranted because they are offering more than the discounters are. They cite their embalming costs and the price involved in properly getting the body ready for the funeral. They also claim the discounters and direct manufactures simply don't give the personal touch that most funeral homes do. They also defend the laws against non-funeral homes still insisting that trained professional morticians should be the ones that deal with the casket.

With a rash of recent mergers, the funeral homes have a distinct advantage over the discounters in terms of resources. The two largest funeral home corporations have resources that dwarf those of the average casket manufacturer or discounter. The mergers have come about partly because of the discounters and partly because of slowing of business. In virtually every state there are more funeral homes than are actually needed. To gain an advantage in an already saturated market, funerals homes have merged with corporate funeral homes. They hope that their new parent company can give them the resource advantage that they need.

Some casket makers have already made the choice of which side they are on. The largest casket manufacture, Batesville (a subsidiary of the Hillenbrand Corporation) have held steadfast to the idea of only selling to funeral homes. Other, smaller casket manufacturers have followed suit and kept their relationship with the funeral homes. However, that approach does not do much for shareholder interests. The discounters represent a high growth, potentially lucrative market.

PRELIMINARY EXPECTATIONS

Roger had read about the situation in the industry, and was skeptical about the ability of his current sales force, accustomed to dealing with home improvement chains and contractors, to find and nurture relationships with casket retailers. He was even less confident about selling directly to the public. He assumed that any sales to funeral homes were probably done through long-standing relationships between the homes and suppliers. The key, he thought, was to either contract with other manufacturers to make caskets for them, thus increasing their market share, or to hire some salespeople accustomed to developing relationships with casket retailers, where the caskets could be sold. He decided that if he was going to make the attempt, that it would be good to attempt both strategies. For the immediate future, he didn't see selling direct to consumers as a viable option, although he was willing to be convinced otherwise if a good argument could be developed.

To produce the average casket, Roger estimated total operating costs of about $570, and an average selling price directly to consumers of $1,100, to retailers, a price of $980, and to manufacturers, a price of $780. Roger didn't expect any new capital needs. The firm had a term loan on its real property which earnings were able to pay down each month. The firm also had a $2 million line of credit that it used only during the beginning of the busy season when cash needs were high. Even at these times, liquidity did not seem to be a problem. Warehousing of finished goods, on the other hand, had always been a problem in the area. Warehouse space had been prohibitively expensive for NCI, and available space was far removed from NCI's shipping point. Roger did not see the need for space, however, if customers could provide a ready outlet for finished goods. The decision required some old-fashioned analysis of NCI's financial information, and an accurate and realistic look at the market for caskets. Time is of the essence, Roger thought, because this was the time of year he normally began laying off production workers and reducing workloads for those remaining.

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

Volume: 6

Issue: 1

Pages: 17-24

Number of pages: 8

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412435

Document URL: http://search.proquest.com/docview/192412435?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 2 of 100

CONTINENTAL GENERAL TIRE

Author: Calvasina, Gerald E; Beggs, Joyce M; Jernigan, I E

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Abstract: None available.

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CASE DESCRIPTION

The primary subject matter of this case concerns human resources management/labor relations. Secondary issues are business strategy, international management, and labor law. The case has a difficulty level of four, which is appropriate for senior level courses. The case was designed to be taught in a one hour and twenty minute class. Approximately two hours of outside preparation are required by students.

CASE SYNOPSIS

In 1995, the members of Local 850 of the United Steehvorker s of America made significant contract concessions to keep the Continental General Tire plant in Charlotte, North Carolina open. Three years later in September of 1998, riding the tide of one of the longest economic booms in US history, General Tire and its union were back at the bargaining table. This time though, the union was not looking to give back but rather to receive. The union wanted to not only get back what was given up in previous negotiations, but to get their share of the prosperity pie that they felt the concessions of the past contract had made possible. The company had other ideas.

Continental General Tire's management was attempting to improve its competitive position in an industry that had been characterized as having too much capacity. Bloated inventories, stagnating prices, and reduced demand in Asia and Latin America were all driving a wave of consolidation in the industry. During the past two years, there had been more than a dozen acquisitions, and it was speculated that further alliances would be needed if the remaining competitors were to reduce costs, boost earnings, and survive. On September 21, 1998, the 1,450 union workers walked out after contract talks broke down. It was the fourth strike since General Tire opened the plant in 1967. The previous three, 1977, 1983, and 1989, had lasted from six weeks to six months. The union and management were deeply divided over two issues, hourly wages and cost-of-living increases. Wages average $17.50 an hour and the company offered a one-time increase of 35 cents. The union wanted 80 cents the first year, and 40 cents in each of the next two years of the contract. The company also offered to pay 65 percent of the increase in cost of living, with two adjustments a year. The union wanted 100 percent. From comments in the press by both sides and Federal Mediators assigned to the strike, it appeared that another long strike would be forthcoming. When management began to hire replacement workers 19 days into the strike, Earl Propst, president of Local 850 observed "I guess it will be a war now."

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

Volume: 6

Issue: 1

Pages: 25

Number of pages: 1

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412264

Document URL: http://search.proquest.com/docview/192412264?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 3 of 100

MARKETWATCH.COM RELATING MARKET VALUES AND ACCOUNTING FUNDAMENTALS OF AN INITIAL PUBLIC OFFERING

Author: Coffee, David

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BACKGROUND

MarketWatch.com was formed as a limited liability company (LLC) in October 1997. It was a joint venture, 50% owned by Data Broadcasting Corporation (DBC) and 50% owned by Columbia Broadcasting System (CBS). It was formed as the successor to DBC's online news business, which commenced operations in October 1995. Since the formation as an LLC in October 1997, MarketWatch.com has operated on the internet as a provider of business news, financial programming and analytic tools such as stock quotes and charting. These services are available free of charge. Their core source of revenue is advertising.

In the formation of the limited liability company, DBC agreed to contribute $2.0 million in cash and the intellectual property of the DBC online news business for its 50% ownership interest. CBS agreed to contribute $50 million in rate card advertising and promotion over five years for its 50% ownership interest.

In addition, the limited liability agreement called for a five year contract in which DBC would provide MarketWatch.com with certain operational and administrative services at DBC's cost. CBS simultaneously entered into a five year agreement to license its CBS "Eye" design and certain CBS news content, in exchange for royalties approximating 30% of MarketWatch.com's advertising banner revenue.

Late in 1998, MarketWatch.com retained BT. Alex Brown as a lead underwriter and put together an initial public offering (IPO) of 3,162,500 shares of common stock. At that time it was decided that the IPO would have a price range from $10 to $16. At the closing of the offering the LLC would be re-organized into a corporation with 12,162,500 shares of common stock outstanding. CBS and DBC would each own 4,500,000 of the common shares and the owners of the IPO shares would own the remaining 3,162,500 shares.

JANUARY 15, 1999

Late Thursday January 14, BT. Alex Brown priced the IPO shares at $17. All of the 3,162,500 shares in the offering were sold. On Friday January 15 Wall Street eagerly waited the opening of trading for the MarketWatch.com shares. The shares opened at $35. At 1:15 PMEST they traded for 108 3/4. They reached a high for the day of $130 and closed at 97 1/2.

MarketWatch.com's close represented a 473.5 percent increase - one of the largest ever for an IPO. The record for the largest opening-day percentage gain at closing is currently held by the globe.com, which closed up 605.6 percent for its November 13, 1998 opening. The record was previously held by Broadcast.com, which closed up 248.6 percent.

The market performance of MarketWatch.com over the first nine days of trading is presented in Exhibit I. The market valuation of MarketWatch.com based on its January 15 close of 97 1/2 approaches $1.2 billion (12,162,500 shares *97 1/2). Market valuation based on the February 11 closing is $875 million. The net assets on the books are about $45 million.

MARKET VALUES AND FINANCIAL PERFORMANCE

The Income Statements for MarketWatch.com from its initial inception on October 29, 1997 through December 31, 1997 and for the nine months ended September 30, 1998 are provided in Exhibit II. An exert from MarketWatch's S-1 filing with the Security and Exchange Commission is presented in Exhibit III.

QUESTIONS

1. Discuss how B.T. Alex Brown might have arrived at the $17 IPO price.

2. Was the $17 IPO price a mistake? Who benefited and who lost because of the wide spread between the $17 IPO price and the 97 1/2 closing?

3. Does the market value of the MarketWatch.com shares, as reflected in the first 17 days of trading, have any relationship to the financial performance of the company, as measured by the Income Statements provided in Exhibit II?

4. What factors could justify the market value of MarketWatch.com, as reflected in the first 17 days of trading?

5. What levels of future earnings (and related revenues) would be required to justify the market values of the MarketWatch.com common stock reached in the first day of trading?

6. Discuss the level of risk associated with the purchase of MarketWatch.com shares at the 1-15-99 high of 130.

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

Volume: 6

Issue: 1

Pages: 26-29

Number of pages: 4

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412492

Document URL: http://search.proquest.com/docview/192412492?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 4 of 100

INVENTORY SHRINKAGE: FINANCIAL REPORTING CONSIDERATIONS

Author: Coffee, David; Kauffman, Leroy; Miller, Eric; Swanger, Susan

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BACKGROUND

Roberts is a discount retailer located in a medium sized mid-western city, operating three stores. For the calendar year ended December 31, 1998 annual sales were approximately $50,000,000. Gross profits based on the perpetual inventory system run about $10,000,000, providing a gross profit margin of 20%. The perpetual inventory system indicates inventories of $8,000,000. Pre-tax income based on the results of the perpetual system is $1,500,000. These numbers are before the entry Roberts' annually makes to adjust the book inventory to the amount determined by the year end physical count.

Roberts has been, and continues to be, a well managed, family owned merchandising operation. The business has shown consistent profitability and stability, with a steady, but modest growth in sales over the years, expanding from one to three stores. Unlike many small retailers, the company has been remarkably resilient and successful in competing with Wal-Mart, K-Mart, and other larger regional and national competitors. Management has passed to younger family members. There is now some discussion of expanding the business and perhaps even going public.

LUNCH AND A DISCUSSION ABOUT INVENTORY SHRINKAGE

Michael Roberts, who now functions as the chief operating officer, and Cathy Owens, the partner in charge of the Roberts' independent audit are meeting over lunch to discuss the audit. The discussion quickly focuses on an adjustment Roberts has made for inventory shrinkage.

"Cathy, as you know, each year we make an inventory adjustment, adjusting the balances in our perpetual inventory accounts to reflect the physical inventory count. Our perpetual accounts had a balance of $8,000,000 and the physical count was $7,040,000, a $960,000 difference. We made the adjustment as we always do, debiting inventory shrinkage and crediting inventory. We use the inventory shrinkage for internal management information but it is recorded as a component of cost of goods sold for external reporting, which is how we have recorded it in the past," Michael states.

"Michael, this write down is 12% of inventory value. Isn't this out of line with past years?" Cathy asks. "I don't remember write downs this large in the past."

"Yes, this is quite a bit larger than the amount we have previously experienced and I am concerned. We have, I think you will agree, a pretty strong perpetual inventory system....state of the art, I think it's fair to say. It may be as we are refining the system and implementing better controls, we are simply getting more reliable perpetual inventory numbers. The increased accuracy of these numbers, when compared with our actual physical counts, may be identifying shortages which existed in past years, but were not recognized as shortages." Michael's comment makes it clear that this is something which he has given considerable thought and attention.

"Well, we are confident about the reliability of your physical count. We observed the entire process and have made extensive test counts. I think we both agree that $7,040,000 is the correct value of your inventory," Cathy replies.

"Agreed," states Michael. "We are looking into the differences...it will be a priority in the coming year. We might want your help, but I am waiting for a preliminary report from the controller, so I don't want to draw any conclusions before we have had a chance to look at the report. Without getting the cart in front of the horse, one would have to assume that we are going to have to take a long hard look at our physical controls over inventory."

"Well, it appears that you are on top of this and I agree with your approach," Cathy replies. "A concern I have relates to the external reporting. As this thing has become more material, I am starting to wonder about the need for separate disclosure."

Cathy's comment about the external reporting takes Michael by surprise. His reaction, evidenced by facial expression and body language, is clear, and not unexpected. "Cathy, this kind of information is proprietary, it's confidential, and to be blunt, it's embarrassing. We are still a closely held company and the distribution of our audit report is limited, but it could fall into the wrong hands, and there are people who would use this kind of information against the company and against me personally."

"Okay Michael," Cathy interrupted. "Don't get upset. Let me look into the external reporting issues and get back to you." Cathy's smile and her calm mannerisms reassure Michael.

QUESTIONS

Why is Roberts reluctant to report the inventory shrinkage debit as a separate item on the income statement and to disclose information about the adjustment in their financial statements?

What arguments can you give to support the inclusion of inventory shrinkage loss as a component of cost of goods sold?

What arguments can you give to support disclosing shrinkage loss as a separate item in the income statement?

What responsibility does the independent auditing firm have with regard to the inventory adjustment?

What implications does the inventory shrinkage have for the internal controls of Roberts?

If you were Cathy, how would you treat Roberts' reporting of the adjustment as cost of goods sold and their omission of a disclosure about the shrinkage?

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

Volume: 6

Issue: 1

Pages: 30-32

Number of pages: 3

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412307

Document URL: http://search.proquest.com/docview/192412307?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 5 of 100

LOTTO EXPRESS: A CASE STUDY

Author: Forbes, Maggie; Clark, Aleksander

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Abstract: None available.

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INTRODUCTION

My name is Maggie Forbes. In 1986, I left my full-time job to realize the American Dream of Free Enterprise. First you need to know my dream was not originally for Lotto Express, the case you are about to read. It was to open one of the first compact disc stores in Connecticut. It was to be called "Slip-A-Disc". The logo had been designed, loan secured, checking account was opened and I was in the process of securing the location. My brother David Kelley came to Connecticut in December of 1986 from his home in Virginia. His purpose was to talk me into helping him put his idea for Lotto Express on the map. He had already incorporated and opened Lotto Express in Virginia and subsequently was arrested and charged with illegal gambling. At this time, Virginia was a non-lottery state.

This case will spark your interest simply by presenting the facts. You be the judge, does Free Enterprise exist?

THE LONG ROAD

After serious consideration I decided to put all my efforts into Lotto Express, Inc. On May 19, 1987 the Potomac News reported," The illegal gambling charge, a felony, usually carries a maximum sentence of five years in prison," said Paul Ebert, the Commonwealth's attorney for Prince William County.

"The charge carries a 10-year maximum sentence if the criminal made more than $20,000 in a 30-day period or more than $2,000 on one day," Ebert said today.

"There is no question about [Kelley] making a profit," Ebert said, "If somebody wants to do somebody a favor and go up and get a ticket, then that 's not in violation of the law".

During the next several months we concentrated on getting organized and opening new locations. Order forms were designed, printed and ready to go. This is how the system would work. A customer comes to the store and picks the legally sanctioned State lottery they wish to order from and for what drawing. The order is placed and signed authorizing Lotto Express, Inc. to act as their agent in obtaining and delivering the legal tickets. For this service the customer pays the face value of the ordered ticket/s and a one-dollar per ticket service charge. Out of that dollar, the principal amount needed to purchase the tickets and either a flat fee per order or a percentage, whatever was agreed upon, is wired to a buyer. The buyer stands in line just like anyone else and purchases the tickets. We set up a national account with Airborne Express to fly in the packages. We hired local couriers to meet the flights and deliver the tickets to the proper stores.

Kelley concentrated on opening new outlets in Virginia, South Carolina, and Pennsylvania. I focused on Connecticut, New York, and New Jersey. We embarked on an advertising campaign that brought the television crews to our grand openings. Unfortunately, it also brought investigations and future court battles.

December 4, 1987 The Free-Lance Star reported that Kelley was cleared of all charges in Virginia. The jury expressed afterwards that they felt it was entrapment when the police raided the business and arrested Kelley without warning." If they really felt he was doing something wrong, why couldn't they have at least warned him ...we had no trouble coming to our conclusion" one j uror said.

With this going on, we felt secure in our resolve that we were doing nothing illegal. Yet, our legal battles were mounting and after winning the case in a non-lottery state and in the middle of the Bible belt we felt good, but maintained extreme caution.

In November 1988, we received a professional opinion from Floyd Caldwell Bagley, a Virginia lawyer. At no cost to us he offered to research the Federal laws involving Interstate Commerce and lottery tickets being transported and delivered to customers who order them. His credentials showed he had been a member of the Virginia House 76-86, County Attorney 72-76, and a USMC Military Judge 70-72. He served as the Dumfries, VA, attorney 63-69 and was a USMC Judge Advocate 56-59 and was in private practice at the time.

In his professional opinion he cites a 1986 Federal Case of the United States vs. Stuebben and concludes:

"I am therefore of the opinion, for the foregoing reasons, that not only can a citizen buy the lawfully authorized tickets of legal lottery states in those states if they reside in no-lottery states, but can certainly hire someone as their agent or friend to do so for them under the law of agency without fear of state prosecution so long as such contracts are fully governed by the law of the state selling the tickets.

I am further of the opinion that re-sale of legal lottery tickets in non-lottery states would be prosecuted both Federally and by such non-lottery states.

The Congress of the United States, as quoted in Stuebben, the Louisiana case above, in regard to lotteries and the prosecution of people under 18 USC 1953, as amended in 1975, declared that the amendments "would not dilute the ability of the Federal Government to move strongly against illegal lotteries with interstate ramifications."

This leads me to the conclusion that the Stuebben case in Louisiana was prosecuted because, as stated in 1987 by a Minnesota United States District Judge;

"The Louisiana Lottery (not Illinois) had become so pervasive that only action at the federal level could deal with it." (677 F. Supp. 1400 at 1405)

I am therefore further of the opinion that the Stuebben case was decided on the unstated premise that Congress intended to prohibit interstate transportation of legal lottery tickets such as those involved in Stuebben.

It is my final opinion that if it is not lawful for a citizen to cross state lines to buy a ticket where such sales are lawful, it is not unlawful for him to hire someone to do that for him, particularly an agent or courier (Lotto Express, Inc.) incorporated for that purpose under the law of the state of incorporation (Virginia).

The Justice department in 1975 informed the Congress that it did not want it to be possible for criminals to engage in interstate traffic of lottery tickets. (See Stuebben at p. 228).

Any opinion whether a United States District attorney will prosecute in any given case, a citizen or his agent, for carrying a legal lottery ticket across state lines into a non-lottery state, would be more conjecture. Suffice it to say, it was done in the Stuebben case in Louisiana against a Louisiana citizen who was not authorized by his state, as is Lotto Express, Inc., to lawfully act for its customers (principles) in any state to do legally what they can lawfully do for themselves in person."

In March 1989, we had approximately 70 locations in four states and plans for almost one hundred more in two additional states. Victory was sweet. We were confident, stronger, and ready for success; this would be our legacy.

Instead, Kelley and others were arrested and charged with bookmaking and pool selling in South Carolina three days after opening in Spartanburg, South Carolina. The trial was set for June. Television and publicity surrounding the business and arrests were high, yet we thought it looked good for us. Pennsylvania was next to notify us that an investigation was underway, then Georgia.

Word came from the lawyer in Connecticut that we were free to open. There were no State or Federal laws/restrictions that would prohibit me from opening this type of service. Correspondence on the issue came from all applicable sources, the State of Connecticut Division of Special Revenue who oversees the lottery, Revenue Department, Public Safety Commission, Department of Transportation, State Police, and many more. To top it off the Federal Laws of Agency clearly state "that it is not illegal for someone to provide a service for another person, that they could provide for themselves". So, if you can cross a state line and purchase a lottery ticket from that state, you can provide the service to anyone willing to pay for it. This in itself gave us great confidence that we would win the other pending cases. My husband and I drained the equity out of our house and proceeded with opening Connecticut locations.

April of 1989 we opened ten outlets in Connecticut, five in New Jersey, six in Pennsylvania, and several in Virginia.

In May of 1989 we found out that there was an undercover investigation of Lotto Express being conducted by the State of Connecticut, Department of Public Safety, Division of State Police, case number R-89-00286-5, dated May 25, 1989. A June 6, 1989 letter from the U.S. Department of Justice, United States Attorney's office to the Connecticut State Police documents the outcome of the investigation. This letter states:

"Dear Mr. Pickett:

After conducting some preliminary research into the matter of Lotto Express, Inc., it seems that there is no legal basis at the current time on which we can enjoin their activities in Connecticut. Additionally, Bill Sullivan, Director of Security of the Connecticut State Lottery, has been unable to find a state violation as lotteries are exempted categorically from consideration under the gambling statutes, so long as the "betting information" (i.e., lottery tickets) transported into the state are legal in the state of origin.

The Strike Force will not pursue prosecution of this matter at the current time due to its low priority status."

February 1990 brought information that the Public Safety Committee of the State of Connecticut had proposed a bill that would render Lotto Express illegal. A public hearing was set for May 19, 1990.

We summoned the press and worked with all locations in the state. Each location had every customer of Lotto Express and those who weren't sign petitions, then they were delivered to the Public Safety Committee. We kept the spotlight focused on everyone's constitutional right to purchase a lottery ticket. Kelley managed to persuade several prominent legislators from the Commonwealth of Virginia to contact those concerned legislators in Connecticut in efforts to change their views on the subject. I personally met and spoke with each member of the Public Safety Committee in hopes of gaining their support.

Attendance at the hearing was overwhelming and supporters not only filled the room but also spilled into the halls of the Capital. Television crews and reporter's were present. More petitions were presented and anyone wanting to address the committee was welcome to and several did. Our attorney, customers, friends, family and supporters one by one addressed the issue. I waited till the end of the day and informed the committee that:

"We opened the business in good faith, checked all the laws and felt secure in the venture, we find it hard to believe that the business we have placed our life savings into, so that our children might have a better future could be in jeopardy. I never realized that we lived in a society that enacts laws to benefit the insecurities of certain state departments. We live in America, the home of free enterprise and constitutional rights. What have we done so wrong that we should have to fight for a right that is already ours? This bill would violate every American 's constitutional right and it restricts Free Trade. If this bill passes you might as well reconstruct the Berlin Wall around the State of Connecticut with border patrols. Because this is what you will need to enforce it."

March 28, 1990 we received a letter from Senator Marie Herbst, 35th District. The contents are as follows:

"Thank you for your letter concerning H.B. 5323, An Act Concerning Vendors of out-ofstate Lottery Tickets.

I wanted to let you know that this bill has died in Committee. A public hearing was held, but the Public Safety Committee took no action on it, thus letting it die in Committee. At this point the stipulations of the bill could be raised again in an amendment to another bill on the floor of the legislature, or the bill could be petitioned out of committee if there is sufficient interest. However that is highly unlikely with this bill."

EPILOGUE

With this resolution and the confidence gained by such a reaction, Kelley and I thought we had it made. We found the American Dream and it was ours.

The beginning of our fourth year we had 276 locations in six states and were in negotiations to open more including one in Bermuda. The battles were subsiding and we were flourishing. Nothing could stop us now. After all, we were living the American Dream.

In March of 1991, our dreams turned into a nightmare. Within three weeks we received letters from the State of Connecticut, State of South Carolina, and the Commonwealth of Virginia informing us that bills had been passed making Lotto Express and similar businesses illegal. All locations were to cease operation or be subject to arrest by October 1991. Georgia, New Jersey, and Pennsylvania followed suit with similar laws and Lotto Express ceased to exist.

During the four years in business several copycat companies emerged and were subject to similar legal battles. It is my understanding that some of these companies have taken this case to the Federal Courts for a ruling. The problem is that this case is of extremely low priority and buried within the system.

Unfortunately, we were ruined. Not only did we lose the business we lost our homes. More than that, we lost faith in what our country calls FREE ENTERPRISE!

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

Volume: 6

Issue: 1

Pages: 47-51

Number of pages: 5

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412494

Document URL: http://search.proquest.com/docview/192412494?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 6 of 100

THE BREWING EXPERIENCE: NORTH CAROLINA'S FIRST BREW-ON-PREMISE COMPANY

Author: Fuller, Barbara K; Saffer, Scott

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Abstract: None available.

Full text:

LOCATION

The Brewing Experience secured 3 1 00 square feet for its operation along the popular South End Urban Revitalization corridor. Price-Davis Construction refurbished the building creating an Urban Mixed-Use Complex call South End Steel Yard in the heart of the Historic South End. Equipment consisted of a six-kettle system that employed extracts or full-grain infusion through the use of a mash lauter tun for its recipes. The equipment was engineered, designed and installed by Price-Schonstrom Incorporated of Ontario, Canada.

PRODUCTS/SERVICE

The Brewing Experience gives Charlotte area residents a unique entertainment alternative by giving the patrons the opportunity to utilize state of the art equipment to brew over 50 different recipes of beer. Customers enter the brewery, select a recipe, gather the supplies throughout the store, and personally brew their own beer in less than an hour and a half. They return two weeks later to bottle, cap, and label the beer to take it home. The customer's beer is the freshest available in the market as well as 100% free of all preservatives. The Brewing Experience's clientele can choose to give their creations personality by utilizing the customized labeling system to denote a party, rehearsal dinner and wedding, or company logo.

HISTORY

The industry term for this unique niche is "brew-on-premise" (B.O.P.). The first B.O.P. establishment opened in November of 1993 by Patricia Spiritus and her partners, Hamilton-Gregg Brewworks, in Hermosa Beach, California. Spiritus lobbied at the Federal and State legislative levels for almost a year and a half to obtain the proper licenses to open for business. Today there are B.O.P.'s in Chicago, IL; Denver, CO; Boulder, CO; Tacoma, WA; Seattle, WA; Bellingham, WA; San Francisco, CA; St. Paul, MN; Alexandria, VA; Atlanta, GA; Cuppertino, CA; Cleveland, OH; Kansas City, MO; Portland, OR; as well as other cities across the country. North Carolina law before 1997, made it illegal to operate a Brew-On-Premise business. NC Statute 18B-307 (a) & (b) makes it a misdemeanor for anyone to sell or possess equipment or ingredients for the use in the manufacture of any alcoholic beverage or to allow real or personal property owned by him to be used by another person to manufacture any alcoholic beverage without the appropriate permit. Representative Jim McMahan sponsored legislation that allowed the Alcohol Beverage Control Board to issue permits for "Brew-On-Premise" operations. The North Carolina General Assembly ratified House Bill II 08 on August 20, 1997. The new law allows a Brew-On-Premise license of $200 annually.

COMPETITION

The competition between microbreweries in a particular market is quite interesting. The more microbreweries, the more market share these companies obtain from the major American macrobrewers. The South End Development Complex supports two established microbreweries: South End Brewery and Johnson's. The presence of these microbreweries has helped to educate Charlotteans to the spectrum of beer available in the market. The Brewing Experience has not looked at these companies as competitors but rather as partners. While there is no direct competition for the brewon-premise business in the Charlotte market, there is substantial indirect competition for the entertainment dollar. The Performing Arts, the Panther's, and the Hornets are all vying for the same entertainment dollars.

THE MARKET

The Brewing Experience's market consists of Mecklenburg county, and the surrounding cities including Lake Wylie, Rock Hill and Fort Mill, SC, as well as, Monroe, Gastonia, Concord, Kannapolis, and Lake Norman, NC. Mecklenburg County's population is currently almost 600,000 and the Charlotte metro area is over 1 million. With Charlotte establishing itself as a world-banking center, there is a myriad of financial service and support companies that are relocating to the Charlotte area. The influx of these kinds of industries makes Charlotte a dynamic sector for growth. The microbrewery market is growing at tremendous pace and new entertainment alternatives are valuable assets in Charlotte. These trends will allow The Brewing Experience to flourish in the existing market.

The American Institute of Brewers reports that microbreweries have captured a 5% share of the domestic beer market and could grab as much as 10% share by the year 2000. Charlotte is very fortunate to have a diverse employment base that is not dependent on one or two professional sectors for it's economic viability. The rapid growth of a robust city like Charlotte produces young professionals and entrepreneurs that have significant dollar to spend on entertainment for themselves.

TARGET MARKET

Demographically, the target market is college educated and has an annual income of more than $35,000. It is made up of middle to upper/middle class adults between the ages of 25 and 45. The Brewing Experience provides an entertainment/educational alternative for these beer-loving individuals. Another less obvious market is in contract brewing for restaurants and bars that want to have their own private label beverage. A fresh unique brew is furnished daily to the restaurants or bars with their name and logo on the label.

There are two distinct groups: brewers who want to have fresh microbrewed beverages in their homes and brewers who want to brew once or twice a year to have a specialty beer with personalized labels denoting a party or event.

MARKETING

The Brewing Experience first and foremost used a one-on-one marketing approach with past customers recommending the experience to friends. The product is shared in a social atmosphere and this exchange with potential customers is an excellent promotional medium. Groups (home brew clubs, sporting teams, small companies, etc.) were targeted to brew during the week after work hours. A local home page on the Internet was developed to inform, advertise, and gather information for the database. Brewing Experience merchandise (T-shirts, sweatshirts, baseball caps, and beer coolies) was available for purchase. A monthly newsletter was sent to all members in the database to generate repeat business. Specials and customer loyalty programs were also developed to try to get repeat business. Once a month there was a beer tasting night featuring at least 5 recipes and regional beers. Each participant purchased a souvenir glass for $6 and the beer was complementary.

FINANCIAL

The Brewing Experience required approximately $271,700 of capital to launch the start-up. The owners provided $50,00 and the 7 members of the Limited Liability Corporation (LLC) committed $5,000-$7,000 each to bring the Brewing Experience's capital contribution to $90,000. The LLC needed a bank loan to finance the remaining $186,700 to commence business activity. The primary source of repayment on the loan was cash flow from operations. Approximately 4.5 to 5 brews/day were the break-even point.

STRATEGIES FOR GROWTH

The Brewing Experience has several options in looking at the future direction of the business. The first option is to concentrate on the brew-on-premise opportunity, which is the basic bread and butter focus of the business. Individual and group brewing is fun and exciting but provides a lower gross margin for the business. Another option is to increase the contract brewing option for local restaurants and bars to market their own privately labeled beverages. This creates a larger gross margin for the business but requires direct selling efforts. A third opportunity exists in the Kids and Teens Root Beer Party market. Birthdays and other special events can be catered. Labels can be individualized with children's pictures and specific themes. Finally, the creation of a "brew club" using the Internet can be used to develop business. The "brew club" allow cost-conscious customers to legally buy just one case of the beer they'd made and let other club members purchase the rest. This could cut the $150 cost (buying a minimum of five and a half cases of beer, plus paying a one time $35 fee for the bottles) to a more acceptable level for the consumer.

QUESTIONS

1. The brewing on premise concept is new in the Charlotte, NC market. How would you introduce the concept to the marketplace? What barriers to entry do you see? How long do you think it will take to educate the consumers to the new concept? What educational strategies would you use?

2. Are there additional growth strategies that you would recommend to The Brewing Experience?

3. Evaluate the pros and cons of each of the growth strategies outlined above and any others that you recommended in question two.

4. Could more that one of the strategies be implemented? If so, what should be the order and timing of the implementation of the strategies?

5. In light of the latest figures that indicate that a third of the brew-your-own beer businesses that started in the mid-1 990's have gone under, what advice would you give the Brewing Experience to make sure they are not one of these statistics in the future?

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

Volume: 6

Issue: 1

Pages: 52-55

Number of pages: 4

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412259

Document URL: http://search.proquest.com/docview/192412259?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 7 of 100

WHAT'S IN A NAME? A CASE STUDY IN CHANGING IDENTITIES

Author: Gilchrist, Neil D; Kerby, Debra

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Abstract: None available.

Full text:

INTRODUCTION

The members of the Northeast Missouri State University's Board of Governors had just received the report of the President's Commission to Study the University's Name. The commission concluded that the name was not congruent with the mission and recommended that a name change be pursued.

Name changes have not been unusual at Northeast Missouri State University (NMSU). The university was founded in 1867 as the North Mssouri Normal School and Commercial College. The name changed to the First District Normal School in 1871 after it became the first state college for training teachers west of the Mssissippi River. While pursuing accreditation, it was learned that the accrediting agency (North Central Association of Colleges and Secondary Schools) would not consider a "normal" school for full accreditation as a college, leading in 1919 to another name change, Northeast Missouri State Teacher's College. By 1967, the comprehensive educational opportunities offered at the college no longer matched the name, and it became Northeast Missouri State College. The Missouri legislature authorized the regional schools in Missouri to substitute "university" for "college" in 1972 and the university became Northeast Missouri State University.

During the 1970s and 1980s the university developed a number of assessment instruments to measure performance outcomes. In 1983, in recognition of its leadership in the assessment of higher education, the university received the G. Theodore Mitau Award for Innovation and Change in Higher Education.

As part of a comprehensive plan to restructure Missouri's public four-year institutions, in 1984 the Mssouri Coordination Board for Higher Education recommended a new role for NMSU. In June 1985, a new law was signed designating Northeast Missouri State University as the state's public liberal arts and sciences institution. NMSU assumed its statewide mission January 1, 1986.

There was considerable discussion at this time concerning a name change both at the local level as well as at the state legislative level. It was decided that no name change would take place until the university had achieved its statutory mission. The university had to transform from an open admission regional university to a statewide liberal arts and sciences institution with restricted enrollment. The university's Five Year Planning Document (covering years 1988-1993) would guide this transition. Its new mission read, in part:

The mission of Northeast Missouri State University is to offer an exemplary undergraduate education, grounded in the liberal arts and sciences, in the context of a public institution of higher learning. To that end, the University offers undergraduate studies in the traditional arts and sciences, as well as selected preprofessional, professional, and master's level programs that grow naturally out of the philosophy, values, content, and desired outcomes of a liberal arts education.

Early goals reflected the mission change:

Average high school class rank of incoming freshman 85th percentile

Average ACT entrance exam score of incoming freshman 25.1

5-year graduation rate of 70%

Thirty percent of baccalaureate graduates continue on to graduate school

After the mission change, the university established a 72-hour liberal arts and sciences curriculum component and reduced its offerings from 178 academic programs to 39 undergraduate degree programs and nine graduate degree programs. Despite the program reduction, enrollment remained stable at about 6,000 students.

The Coordinating Board for Higher Education, on October 14, 1993, recognized that NMSU had completed its five-year plan and its transition. In its public statement, the CBHE reported that "Northeast has clearly distinguished itself nationally as a premier public institution and one of a small group of institutions known as the 'Public Ivies.' The goals and objectives contained in the initial five-year plan have been substantially realized."

Located in a part of the state that has registered declining populations, Northeast has received more than three applicants for each opening in the freshman class during the 1990s. It no longer primarily serves the Northeast Missouri region. Approximately 70 percent of the student body is from Missouri, the remainder are out-of-state or international students. Half of Northeast's competition for students comes from private schools, and much of the remainder of Northeast's competition comes from out-of-state land-grant institutions.

Northeast has been recognized for its academic excellence by many external reviewers. It has been ranked as a "best buy" by Money magazine since 1992. In 1988 U.S. News and World Report featured Northeast as one of the five most innovative colleges and universities in the country in its study "America's Best Colleges." In both the 1990 and 1994 reports, U.S. News ranked Northeast's quality as a "best buy." Northeast's educational programs have been featured in such journals and newspapers as USA Today, St. Louis Post-Dispatch, The New York Times, The Wall Street Journal and Changing Times. It has also been featured in a number of books, such as Martin Nemko's How to Get an Ivy League Education at a State University. The university is also included in Peterson 's Competitive Colleges as one of the approximately 300 "selective" or challenging colleges in the nation.

As the university continued to receive national recognition for its educational programs, various groups suggested the need for a name change. In April 1991, the Student Senate recommended, "a more drastic program should be undertaken to further change the University's image. This should include breaking the largest and last major tie of its image as a regional university by renaming the university." The university's 1992 master planning document stated, "as the campus environment adopts a liberal arts and sciences culture, the name of the University should reflect the new environment. Therefore, the University will consider a name appropriate to its mission as a statewide liberal arts and sciences institution with a national reputation."

In 1992 the CBHE required the state-supported four-year institutions to designate whether they would adopt open admission criteria, moderately selective criteria, selective criteria or highly selective criteria. Northeast was the only university in the state to designate the highly selective criteria. (The admission criteria apply to first-time freshmen and to transfer students with 23 or fewer transferable hours. To fulfill the requirements of the designation, 90 percent of these students would need an ACT composite score of 27 or higher or a composite score of at least 140 achieved by adding their high school rank and ACT percentile scores.)

A commission of alumni, students, faculty, staff, legislators and local community leaders was appointed by the university's President, Russell Warren, in January 1993 to study the university's name. Its charge was to determine whether the name, Northeast Missouri State University, reflected the university's statewide mission. In September 1993, the commission determined a name change should be pursued for the following reasons:

1. Mssion Change in 1985

House Bill 196 gave Northeast a statewide mission. Prior to 1986, Northeast was a multipurpose regional school, mainly servicing students from the northeast quadrant of Missouri. As the statewide liberal arts and sciences university, it serves students from all over the state of Missouri.

Change in Academics

Northeast has a very specific mission, admission standards that are among the highest in the state, and is nationally recognized for providing a high quality education.

Confusion Surrounding the "Regional" Sounding Name

Despite Northeast's increased recognition, the University suffers from considerable confusion among other Missouri institutions of higher learning that have "regional" sounding names. Northeast is also frequently confused with other regional universities nationwide.

Funding Issue in the Missouri Legislature

A lack of clarity exists among legislators concerning Northeast's statewide mission. If legislators perceive Northeast as a "regional" university, it is likely they fund Northeast as a "regional" university. The state's investment in Northeast's unique mission would be enhanced by a distinctive name.

The Board of Governors faces a decision about identity that will have significant long-term implications for the University. Should they recommend a name change to the state legislature (because it is a state institution, the legislature must approve a name change)? What are the implications of changing the name of the university?

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

Volume: 6

Issue: 1

Pages: 56-59

Number of pages: 4

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412298

Document URL: http://search.proquest.com/docview/192412298?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 8 of 100

NBA LOCKOUT

Author: Heath, Lynn; Howell, Leigh; McGuire, Bryan; Norton, Nicole; Yandle, Casey

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Abstract: None available.

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HISTORY OF N.B.A

Recently, the NBA celebrated its 50th anniversary; the NBA tipped off the 1996-97 season with the New York Knicks against the Toronto Raptors at Toronto's SkyDome. Toronto was also the site of the league's very first game on Nov. 1, 1946, with the Huskies hosting the New York Knickerbockers at Maple Leaf Gardens. The contest drew 7,090, a good crowd considering that virtually every youngster in Canada grew up playing hockey and basketball was hardly a well-known sport at the time.1

Let's forget that the Knicks won that night. The 68-66 score bore little resemblance to the leaping, classic ballet version of today's NBA. That game then was from a different era of lowscoring basketball, a time when hoops as a pro spectacle was just coming out of the dance halls. Players then did not show-off to the crowd with double-pumps or slam-dunks or three sixties. The fact of the matter was that the players did not have the verticals of today's NBA players. Also, there was not a 24-second clock; teams had unlimited time to shoot. The jump shot was a radical notion, and those who took it defied the belief of many coaches that nothing but trouble occurred when a player left his feet for a shot.2

The group of owners who met on June 6, 1946, at the Hotel Commodore in New York to talk about a league they would name the Basketball Association of America couldn't have imagined today's NBA. They were composed primarily of members of the Arena Association of America, men who controlled the arenas in the major United States cities. Their experience was with hockey, ice shows, circuses and rodeos. Except for Madison Square Garden's Ned Irish, who popularized college doubleheaders in the 1930s and 1940s, they had little feeling for the game of basketball.3

However, they were aware that with World War II having recently ended the conversion to peacetime life meant many dollars were waiting to be spent on products and entertainment. They looked at the success of college basketball at Madison Square Garden and in cities like Philadelphia and Buffalo and felt a professional league, which could continue to display college stars whose reputations were just peaking when it was time to graduate, ought to succeed.4

On Thursday, June 11, 1946 the franchises were formed to compete in two divisions. The East consisted of the Boston Celtics, Philadelphia Warriors, Providence Steamrollers and Washington Capitols, as well as New York and Toronto. In the West were the Pittsburgh Iron-men, Chicago Stags, Detroit Falcons, St. Louis Bombers and Cleveland Rebels.5

Each team paid a $10,000 franchise fee, the money going for league operating expenses including a salary for Maurice Podoloff, who like the arena owners who hired him was a hockey man first. Podoloff, a New Haven, CT lawyer who was President of the American Hockey League, agreed to also take on the duties of America, which three seasons later, in a merger with the Midwest-based National Basketball League, became the NBA.6

Seeing that there was only five months to get ready for the targeted Nov. 1 season opener, the playing rules and style of operation had been based as closely as possible on the successful college game. However, rather than play 40 halves, they decided to make it eight minutes longer and play in four 12-minute quarters so as to bring an evening's entertainment up to the two-hour period owners felt the ticket buyers expected. Also, although zone defenses were permitted in college play, it was agreed during that first season that no zones would be permitted, since they tended to slow the game down.7

Geography figured heavily in the makeup of the 11 franchises. The Providence Steamrollers relied heavily on former Rhode Island College players, while Pittsburgh chose its squad from within a 100-mile radius of the Steel City. The Knick players came primarily from New York area colleges. Even Neil Cohalan, the first Knick coach, was plucked from Manhattan College. However, all of Toronto's players were American, with the exception of Hank Biasatti, a forward, who was a native Canadian.

Salaries were modest, mostly around $5,000 for the season. As a result, players had to rely on off-season jobs for supplemental income.

By today's standards, the first training camps were primitive, often a day-to-day proposition. For example, The Warriors shuttled between Philadelphia-area gyms. They would usually scrimmage the local team at their gym. This brought about the curious spectacle one afternoon of a BAA team playing against a luxury team, the Knicks' outdoor court at the Nevele Country Club, a Catskills resort in Ellenville, NY.8 Today they workout in their own gyms with their own privacy and have intense workouts.

The owners nor the players had no way of knowing that the NBA would grow into a multimillion dollar business with 29 franchises, including two in Canada (although the Huskies did fold after just one season).

During that first regular season, the Washington Capitols, coached by Red Auerbach, ran away with the Eastern Division championship, finishing with a 49-11 record, 14 victories more than Philadelphia and 10 more than Chicago, the West leader. However, it was the Warriors, owned and coached by Eddie Gottlieb, who won the first championship, beating Chicago 4-1 in the best-of-7 title round.9

Joe Fulks of Philadelphia was the league's first scoring champion with a 23.2 average, finishing far ahead of runner-up Bob Feerick, who had a 16.8 average. Feerick, however, was the league's most accurate shooter, hitting .401 from the field-a far cry from the .576 mark which Cedric Ceballos posted to lead the league in 1992-93.10

WHY THE LOCKOUT?

The National Basketball Association announced it is locking out its players until a new collective bargaining agreement is reached. The lockout took effect at midnight on Tuesday, June 30, 1998. The lockout happened due to these six reasons:11

SALARY CAP

Owners' Side

The NBA already has some peculiar semblance of a salary cap. But owners were pushing for a "hard" cap similar to the one used by the NFL. The NBAs current salary cap is not much of a cap at all. There's a rule called the "Larry Bird exception" which allows teams to ignore the cap and resign a veteran player at any price. It also allows teams to renegotiate with a first-round draft choice that has completed two years of his initial three-year contract.

The salary cap for the 1997-98 season was $26.9 million per team. But the Chicago Bulls, thanks to the Bird exception, got away with paying Michael Jordan $33.14 million that season, more than 17 teams paid their entire roster. The Bird exception also is how the Minnesota Timberwolves were able to renegotiate Kevin Garnett's deal to give him $126 million over six years after his current contract expires.

The owners wanted to do away with the Bird exception or at least modify it, so the salary cap actually would mean something. NBA owners had a fistful of facts when they cry about escalating salaries killing the league. They claimed at least 15 of the 29 teams are losing money, and the teams say they're going to be paying better than 57 percent of their revenues into player salaries for the 1997-98 season. It probably will be higher next season.

Players' Side

If the owners wanted to play hardball on the Bird rule, things would get very, very ugly. Even uglier than they were. The players are firm on that one. The Bird rule has to stay to reward the league's best players, they say. The union flat-out disputes the league's bookkeeping, too. The NBPA claims that maybe four teams are losing money. The players agree that too much money is going to the rookies, and that there are too many veterans making too little. But eliminating the Bird rule is not the answer, they say.

ROOKIE CONTRACTS

Owners' side

The owners wanted to jack up the length of contracts for first-round draft picks. They're tired of paying big bucks for rookies just to watch them slip away after three years. The owners' first proposal called for the contracts to go from three years to six and there are reports that they'd love to make the final three years non-guaranteed. It may not end up being that long. However, the length of rookie contracts almost certainly will increase.

Players' Side

No player worth his union salt wanted to OK anything that wasn't guaranteed. But the two sides were closer on this issue than on the cap issue or the Bird exception.

There are plenty of veterans that blanche at the $126 million Garnett got from the Timberwolves and the six-year, $80 million deal that kicks in for Portland Trail Blazers forward Rasheed Wallace next season. But that's the owners' fault, they say, not the system's.

The players' big beef was the NBA no longer has a "middle class." Guys like Phoenix Suns forward George McCloud, a key role player who has averaged more than 20 minutes a game over his nine-year career, is stuck playing for the veteran minimum of $272,250. The players would like to see some kind of sliding pay scale based on how long a player has been in the league.

MARIJUANA

Owners' Side

Marijuana was not on the list of banned substances in the NBA, and the league wanted to change that. The owners also wanted to institute some kind of marijuana testing, whether it's mandatory for everyone or random. It's an image thing with the league. In the wake of Latrell Sprewell and others, the league wanted to make sure it at least looks like it has its players under control.

Players' Side

Players' balk at anything league-mandated and practically rebels when it's flat-out mandatory. They quietly fear that this would just be another way for the league to exercise its muscle over its players. But it was believed to be a negotiable point.

FREE AGENCY

Owners' side

There may be nothing worse for a team than to see a prized, young player go elsewhere when there's nothing the team can do about it. Owners wanted to get back what they lost in '95, when the current bargaining agreement was signed. They wanted a class of "restricted" free agents, which usually means the owners want to have the right to keep their guys by matching offers other teams make for their players.

Players' Side

Unfettered free agency after a minimum time in the league is the only way to go.

REVENUE SOURCES

Owners' Side

The salary cap is calculated on a formula of "basketball-related income." The owners wanted to narrow what is considered basketball related, therefore lowering the cap and lowering salaries. They said they could better keep ticket prices in check, too, with lower salary expenses.

Players' Side

The union wanted nothing better than to broaden what is considered "basketball-related income," which would push up the salary cap and bump up player salaries. For instance, the money companies pay to have their names on arenas, the so-called "naming rights", are not considered basketball-related revenues. The union thought that money should be.

NBA AUTHORITY

Owners' Side

The NBA wanted to maintain the power it has to suspend, fine and otherwise discipline players.

Players' side

The NBPA believed the NBA and commissioner David Stern went too far in voiding Latrell Sprewell's contract after his run-in with Coach P.J. Carlesimo. They wanted a clearer definition of what Stern and the NBA can and can't do in regard to the disciplining of players.

QUESTION WE'RE LEFT ASKING AFTERWARDS

Did the Owners and Players' Union accomplish anything with the six-month lockout? What do you think? Here are the agreements afterwards:12

AGREEMENTS

The union agreed to accept 55 percent of revenues in the fourth, fifth and sixth years of the agreement, a source close to the talks told The Associated Press. The NBA has an option for a seventh year, and the players would get 57 percent if it were exercised. In the first three years, there is no limit on the percentage of revenues players can receive.

The union agreed to a $14 million dollar maximum salary for players with ten years' experience. Players with one to six years' experience can get a maximum of $9 million dollars, and players with six to nine years' experience can get $11 million dollars.

The union agreed to a three-year rookie scale with teams holding an option for the fourth year and the right of first refusal in the fifth year. First-round draft picks will be grouped into three categories by where they were selected: 1-9, 10-19 and 20-29. The highest picks are eligible for higher percentage increases in their salaries from year to year.

The league accepted the union's proposal for an "average" salary exception and "median" salary exception, with both being phased during the next three years. As a result, every team will have the right to sign two additional players each season, even if they are over the salary cap.

The annual allowable salary increases will be 12 percent for players with so-called Larry Bird rights, those free agents re-signed by a team without regard to the salary cap, and 10 percent for others.

Changes to free agency timing rules will be phased in, with free agents counting 200, 250 or 300 percent against their old team's salary cap until that team re-signs them or renounces their rights.

CONCLUSION

We have mixed feelings afterwards. We feel that they accomplished some tasks, but left others out. The suspension control and marijuana issues were not even mentioned. We feel that these issues and others are important too and may lead to another lockout if not solved correctly by both parties.

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

Volume: 6

Issue: 1

Pages: 60-66

Number of pages: 7

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412279

Document URL: http://search.proquest.com/docview/192412279?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 9 of 100

EFFECTIVE IMPLEMENTATION: DOES IT REALLY MATTER? A MCDONALD'S RESTAURANT CASE STUDY

Author: Higgs, Roger; Higgs, Elaine J

ProQuest document link

Abstract: None available.

Full text:

ABSTRACT

Effective implementation is considered necessary to a firm's strategic success. Despite this long standing belief, implementation issues receive less attention than do other issues such as strategy formulation. Further, research into implementation issues has implicitly assumed that effective implementation is important and have examined how firms go about effecting successful implementations. The basic assumption that an effective implementation is important to a firm's strategic success has never been seriously challenged.

Most textbooks present some variation on the theme that a firm's policies, procedures, short term objectives, culture and leadership are important variables that help determine the effectiveness of the implementation of a firm's strategy. An examination of the assumption that effective implementation is important would necessarily include an examination of those variables thought necessary for effective implementation, in case format, this paper looks at the issue of the validity of the notion that effective implementation is necessary for a firm to achieve strategic success.

Specifically, it examines McDonald's policies and procedures, how they affect implementation at the individual store level and whether or not a store's effectiveness in correctly implementing the policies and procedures plays any role in the strategic success of McDonalds.

Secondarily, this case contains a wide variety of other management issues that could encourage lively classroom discussion since what appears to work for McDonalds at the individual store level often is in conflict with what students will learn in their management classes. The authors have heard more than one crew person (a non-management employee in a store) say that according to what they have studied in school, McDonalds should be failing!

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

Volume: 6

Issue: 1

Pages: 67

Number of pages: 1

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412257

Document URL: http://search.proquest.com/docview/192412257?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 10 of 100

THE TROUBLE WITH OUTSHOPPING: BIG PROBLEMS FOR SMALL TOWN RETAILERS

Author: Hopper, JoAnne Stilley

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Abstract: None available.

Full text:

THE CONSULTANT'S REPORT

It had been two months since the Bakersfield Merchants Association had hired the marketing consultant. As the merchants sat somberly in their seats, the consultant assumed her place at the podium to present the findings of her survey. Although most of the merchants knew that many of their customers shopped in Rightsville, the results of the survey indicated a problem much more serious than anyone had imagined.

The consultant had surveyed five hundred residents of Bakersfield. In the report she shared information about the frequency of the residents outshopping and the reasons many of the town's residents chose to shop out of town. Over seventy percent of the respondents of the survey reported that they shopped outside of Bakersfield at least once a month. All of the merchants were surprised to learn that 55% of the residents purchased more than half of their clothing and children's clothing out of town. Over 40% of the residents bought new cars outside of Bakersfield and half or more of their home furnishings. Even the grocery store merchants were unpleasantly surprised with the fact that 25% of the residents of Bakersfield bought half or more of their groceries out of town. The results of the survey indicated that every member of the merchant's association was affected by outshopping.

Angry merchants began to discuss their mutual crisis. How could the local residents abandon them to shop outside of town? Didn't they appreciate the convenience of their stores? Couldn't the town residents realize that the town was losing tax revenues that could help the local schools?

The consultant indicated that she had tried to determine the attitudes of the respondents toward the merchant's of Bakersfield. She had also questioned the survey respondents about their motivations for outshopping. As she passed out the findings in her report, the merchants reviewed the major findings.

The consultant also provided a profile of the outshoppers.

The merchants agreed to study the data and decide upon a course of action. With results of the study it was evident that each member of the Bakersfield Chamber Of Commerce faced serious problems with loss of retail sales to outshopping.

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

Volume: 6

Issue: 1

Pages: 68-69

Number of pages: 2

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412377

Document URL: http://search.proquest.com/docview/192412377?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 11 of 100

HEARTLAND FOOD PRODUCTS COMPANY

Author: Kunz, David; Smith, David K; Kellerman, Bert J

ProQuest document link

Abstract: None available.

Full text:

CASE SYNOPSIS

The case tells the story of the CEO of a rapidly-growing manufacturer of private brand foods (breakfast cereals, various sorts of snacks, pasta products, etc.) presented with the opportunity to acquire a company which manufactures dry dog food. The case includes both a model for malting acquisitions decisions plus the data needed to conduct not only a thorough financial analysis of existing performance (both ratio and trend analysis), but also the data needed to prepare proforma forecasts for this particular opportunity. Other facets of the case which students should find interesting include a description of the private brands food industry in the United States, an overview of this entrepreneurial company's evolution (over a forty year period) from local flour mill to half billion dollar corporation, and (using the case solution prepared by the authors) the way financial and non-financial considerations come together in the decision the company ultimately makes regarding the dog food M&A opportunity.

CASE DESCRIPTION

In 1998, global Merger and Acquisition (M&A) activity was the highest ever, and more of this activity took place in the United States than anywhere else in the world. This case exposes students to an M&A opportunity, and provides sufficient data plus analysis tools so they can decide whether the numbers support a decision to acquire. Unlike other cases known to the authors, our case solution provides both a complete financial analysis plus identification and consideration of various non-financial issues which can themselves become critical dimensions in acquisition decisions. Because in-depth M&A analysis is not typically an introductory finance topic, and because solution of the case requires students to conduct ratio analysis and prepare forecasts, we believe it is most appropriately used at a difficulty level of four (senior) or higher. The case is designed to be taught in one or two class sessions of approximately one hour and a half (undergraduates), or one such session for graduate students. It is likely to require at least four hours of preparation time.

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

Volume: 6

Issue: 1

Pages: 89

Number of pages: 1

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412375

Document URL: http://search.proquest.com/docview/192412375?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 12 of 100

THE MARKETING OF HIGHER EDUCATION: A CASE STUDY

Author: Solly, Linda Lawrence; Solly, David C

ProQuest document link

Abstract: None available.

Full text:

INTRODUCTION

In these changing times, as a new millennium is approaching, there are many new ways of marketing a university and letting the people of a region know what types of programs, opportunities, and services are available to them. This study examines the marketing efforts of Pittsburg State University.

For years, private universities have focused much attention and resources on marketing. Now, more and more public institutions across the country are substantially increasing their commitment to integrated marketing. Pittsburg State University is one among a growing number of university that is substantially stepping up its sophistication in and its commitment to marketing efforts.

BACKGROUND

An office of University Marketing was established and a Director of Marketing was appointed in 1997. One of the first actions by the Director of Marketing was to establish an Image and Marketing Committee to provide input and to help guide the initial marketing efforts. The committee was charged with development of a marketing plan as one of its first goals. Several considerations went into PSU's marketing plan including (but not limited to):

SWOT analysis (strengths, weaknesses, opportunities, threats) of PSU and its competition

The position of PSU amongst its peers

Analysis of the region's economic environment

Projected population growth areas

The committee was also charged with examining and evaluating marketing trends in higher education, reviewing the current image of PSU, and developing strategies to promote the desired image of PSU. This was accomplished by designing and implementing an image survey that was administered to past and current faculty, staff, and administration, alumni, graduate students, currently enrolled students, and community leaders. Student focus groups were also used to examine the impact of existing promotional efforts and communication materials. The results of this survey and utilization of student focus groups enabled PSU to take a good look at itself and see the perception held of PSU by its own constituents and others.

The Office of Admission was consulted to identify and define major target markets. This information was necessary in order to determine where to target marketing efforts and make efficient use of resources. Basic target audiences for broad PSU promotional efforts were divided into three major groups:

Primary Market

* Soon-to-be recent high school graduates (potential traditional students) in the local area (within a 90-mile radius of Pittsburg and the contiguous counties)

* Community College transfer students

Secondary Market

* Recent or soon-to-be high school graduates in the Johnson County (suburban Kansas City) and Wichita markets and other areas in Kansas

Tertiary Market

* Other local residents, including potential non-traditional students, community members and leaders, and university employees.

* Industry leaders in our region (being further developed by the PSU/Kansas Technology Center Task Force)

Additional Markets

* Students from out of state that may have ties to the university or Pittsburg Community

METHOD

One product resulting from the image survey was the creation of a new theme, which focused on 'success,' to be used in promoting PSU. The committee did not want the usage of this success theme limited only to currently enrolled students, but extended on a broader scale to include anyone associated with the university, including alumni, faculty, and staff. Hence, the following theme was developed:

Pittsburg State University. . . Where People Succeed

Another result of the image survey was the discovery that people adored the university's unique mascot, the mountain gorilla. The mascot is unique in that PSU is the only university in the country to have the mountain gorilla as a mascot. Combining the theme of success with the use of PSU's unique mascot was a natural progression for marketing efforts to follow. Graphic art versions of the gorilla have been used historically, but never have real images of a mountain gorilla been used in a total, integrated marketing campaign. Communicating this new theme to the campus community, alumni, prospective students, donors, and friends of the university as well as integrating it throughout upcoming collateral materials was a new challenge. To begin introducing this new theme, a poster featuring a gorilla from the Kansas City Zoo with the new theme was printed and distributed both on and off campus. The poster was received with overwhelming enthusiasm. Live footage of the gorilla was featured on a 30-second television commercial and the gorilla image was incorporated into a number of promotional pieces, including departmental, alumni, and admission publications. By September, 1998, PSU had a case of "gorilla fever."

In early fall, a Graphic Image Policy Committee was established as a subcommittee of the Image and Marketing Committee to recommend policy on the use and standardization of "official university images" on all documents and materials produced and disseminated by units from throughout the university. (This step was undertaken in an attempt to present a unified image of the university to the public.)

USE OF MASS MEDIA

By this time, communication of PSU's new image and theme was ready to be introduced in targeted areas utilizing various mass media forms. The next step in the process was to determine the appropriate and affordable media mix. Media considered included television, radio, newspaper, magazines (recruiting), billboards, movie theater and other (publications, videos, Internet and World Wide Web, CD-ROM, an electronic message boards.) Decision on media selection, content, and format were largely based on an understanding of target audiences (identified earlier), results from student perception surveys, focus group input, image surveys, research data and costs. Projected growth areas within the university were also selected to be initial targets of the marketing campaign.

Students surveyed indicated a preference for television as the number one medium to see PSU advertised. Interestingly enough, follow-up surveys indicated that television commercials were not the deciding factor or strongest influence on students' college choice. This should come as no surprise, since several factors weigh into a decision of this magnitude. Therefore, it was important for PSU to establish a presence in the television medium, but other media needed to be utilized as well to establish a balanced presence. Television is also an expensive medium, with ratings, frequency, and time of day affecting prices. PSU's new television commercials featured the success theme and the mountain gorilla. The Director of Marketing chose the months of September through March as being prime time to air television advertising. These are the months that the university's admission ambassadors are on the road visiting schools, and the time when students are making their college selection decisions.

Radio advertising was 'runner up' to television in terms of what prospective student's listen to and are influenced by. Students were asked to identify their hometowns and the radio stations most listened to. This information was used in conjunction with ratings and audience analysis in choosing radio stations. Radio advertisements were used to promote PSU (regionally) and enrollment periods (locally) during the active recruitment months identified above.

Advertisements in high school newspapers were also suggested by students as a direct way to reach primary audiences. Ad space was purchased in selected high school newspapers to promote upcoming visits to their school by PSU recruiting ambassadors.

College Outlook Magazine was selected for placement of advertisements because it is one magazine publication that goes directly to counselors in high schools. Another attractive feature is that PSU chooses the schools that the magazine goes to by identifying 'feeder' schools. Feeder schools are identified as schools where PSU receives a large number of prospective students.

Movie Theaters were selected a another media for advertisement because of the increasing sophistication in advertising prior to movies being viewed. Entertainment is 'big business,' and movie theaters provide a captive and varied audience that is representative of the target markets identified by the Image and Marketing Committee.

Limited billboard advertising was used, and a video was produced to promote the Kansas Technology Center (a new $30 million facility on campus)

RESULTS

The most obvious results of the new marketing efforts were seen in overall university enrollment trends. Enrollment increased for the two consecutive semesters following the establishment of the Office of University Marketing and the initiation of the marketing campaign, following two years of enrollment declines. The increase was noted in spite of decreasing numbers of community college students and high school graduates in PSU's service area during the same time period.

External recognition was the second major result of the marketing campaign. Pittsburg State University's marketing efforts received five regional awards from the American Advertising Federation and six national awards presented by the 1999 Admissions/Marketing Report, including a first place gold award for the overall advertising/marketing campaign "Where People Succeed."

DISCUSSION

Although the results of this case study are only preliminary, long-term enrollment trends will best reflect the magnitude of the overall marketing effort, it is obvious that planned, deliberate marketing efforts can impact a university's image and enrollments.

It is important to initiate and maintain environmental scanning efforts and to be mindful of what the competition is doing. However, it should not dictate or control media planning. It is also becoming increasingly important for universities to market themselves in the competitive higher education arena by positioning individual institutions amongst the competition according to their strengths and uniquenesses.

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

Volume: 6

Issue: 1

Pages: 123-127

Number of pages: 5

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412362

Document URL: http://search.proquest.com/docview/192412362?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 13 of 100

SYNOVUS: THE BEST COMPANY TO WORK FOR!

Author: Thomson, Neal F

ProQuest document link

Abstract: None available.

Full text:

SYNOVUS: THE BEST COMPANY TO WORK FOR

Synovus Financial Corporation was named "the best company to work for in America" in Fortune Magazine's 1998 poll, up from 11th place in 1997 (Adams, 1999). In addition, Total Systems Services, the largest of the Synovus family of companies, was awarded Georgia's Oglethorpe award for performance excellence, which uses similar criteria to the prestigious Malcolm Baldridge award. What is it about this company, headquartered in Columbus, Georgia, that makes it so special? According to Fortune magazine, continual training and humane treatment of workers are key. Examiner's for Georgia's Oglethorpe award went further, and said that the company's "greatest strengths are its sense of family and teamwork." (TSYS, 1999). The key to Synovus' success, and that of their peers in the best companies list, is treatment of employees that goes beyond expectations. Their culture, referred to by some as its "culture of the heart" (Adams, 1999), is very community oriented, building a sense of family among employees. The following section will examine many programs and benefits offered by Synovus, which contribute to this culture.

A number of informal interviews were conducted with employees of Synovus (Total Systems Services to be precise). The most notable thing about these conversations was that every employee interviewed had a positive opinion of their company. They gave a number of reasons why they liked working for Total Systems, but some clear patterns emerged. Generally, they all felt that the company cared for them as individuals, and many employees made statements similar to that of an employee who said they were "one big family." As noted by Fortune, training was also mentioned frequently, as were pay and benefits. However, a number of non-traditional programs were mentioned as well, which merit separate examination. Each of these three areas will be examined in turn.

TRAINING

Synovus Corporation offers their workers a number of training programs, many of which are far beyond those offered by their competitors. Three programs are particularly noteworthy. First, Synovus offers tuition reimbursement for employees who pursue college degrees in fields related to their employment. With college costs growing at a rate significantly higher than inflation, this benefit is very desirable. However, of the education programs offered, this one is the least unique. Many other companies offer similar programs, particularly among Fortune's top 100.

Synovus also offers training through Synovus University, their internal instructional division. Synovus University offers programs such as The Leadership Institute at Synovus, available to all employees, Foundations of Leadership (companywide leadership training for supervisor positions and above), as well as a training in more mundane aspects of their jobs. However, Synovus has also recognized the inherent limitations of internal training of employees, and has jointly developed additional programs in a public-private partnership with Columbus State University (CSU) in Columbus, GA, Synovus's hometown.

This partnership, called ICAPP (Intellectual Capital Partnership Program), was developed by CSU, with input from Total Systems, to train mainframe programmers. This six month focused training program helps Total Systems fill mainframe programmer positions, despite a shortage of programmers nationwide (Adams, 1999). Since the inception of the program in 1990, over 600 ICAPP trained programmers have been employed by Total Systems (TSYS, 1999). This program has recently been expanded to provide business analyst training for Total Systems employees, again in a short-term, focused program. This partnership has been so successful that it has drawn national attention, including a visit to CSU by Vice President Gore. These programs provide Total System personnel with training beyond that provided by most companies, and foster a sense of loyalty among the employees.

PAY AND BENEFITS

For many companies, salary is considered the primary recruiting and retention tool, and benefits are an afterthought. Interviews with Total Systems employees seem to indicate a different pattern in this company. The employees interviewed generally described their wages as competitive, rather than lavishing praise in this area. However, their enthusiasm generally rose when the discussion turned to benefits. In addition to the training mentioned above, employees noted that the company offers generous retirement and medical plans, as well as numerous perks. Their retirement plan includes a 401K plan with employer contributions, which increase if company profits go up. In addition, employees are offered company stock at a 50% discount when purchased as part of their retirement plan. There is also an employee pension plan available.

They are offered a number of health plans from which they can choose, based on their needs. Spousal and dependent coverage are among the options given, as are different choices regarding specific benefits, such as deductibles and choice of physicians. Maternity benefits include coverage for medical costs, as well as paid maternity leave. Employees may also choose to include dental coverage as a benefit. While these medical benefits are generous, it is the other benefits, perks and less traditional programs that employees seem to mention most.

NON-TRADITIONAL BENEFITS

One of the most widely mentioned perks associated with working for Synovus, or their Total Systems subsidiary, was the friendly working environment, and caring management. One employee indicated that he felt it was a nice, personal touch that the company provided cake with co-workers on employees birthdays. In addition, the company gives out free T-shirts, Swiss-army knives, backpacks, raffle tickets to employees-only raffles, and lunch for employees (or they can leave and lunch on their own), they also hold Ice cream socials and barbecues. Furthermore, Fortune magazine (1999) was impressed by the fact that employees of Total Systems would have their names carved in bricks used to create a riverwalk at the company's new headquarters. Also, each employee is given stock options, for 150 shares of Synovus stock. Even more impressive, Synovus offers adoption assistance programs, providing financial assistance to those considering adoption, subsidized day-care and up to 20 hours a year time off for child related events, such as plays, ballgames, etc., as well as a half day off for shopping during the holidays. Some employees are even allowed to work from home.

THE FUTURE

While the treatment of employees by Synovus is impressive, the company has to continue to innovate, or will lose its edge. Rob Ward, Synovus's Communications Chief, described a call he received shortly after the Fortune ranking. The reporter asked what made Synovus so special. After Ward ticked off a list consisting of many of the above-mentioned benefits, the reporter noted that "half the companies on the list have those same benefits." Synovus CEO, James H. Blanchard, summed their problem up with the statement "Striving to be a great place to work is a never-ending process..." Similarly, Fortune Magazine Writer Shelly Branch says "However groovy your company may be today, keeping up with the best requires constant improvement. Synovus' next challenge is to find a way to remain atop the top 100 list, as America's "Best Company to Work for," Something even Southwest Airlines, last years winner, wasn't able to do (they dropped to fourth, among tough competition).

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

Volume: 6

Issue: 1

Pages: 133-135

Number of pages: 3

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412442

Document URL: http://search.proquest.com/docview/192412442?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 14 of 100

TULSA ANIMAL RESCUE FOUNDATION (ARF)

Author: Vozikis, George S

ProQuest document link

Abstract: None available.

Full text:

It was 1992 when Dr. Laurie Flavin, a Calgary chiropractor, decided that enough is enough! She made up her mind that somebody had to start rescuing stray and abandoned dogs from the pound of Calgary Animal Services in Alberta, Canada and finding them suitable homes. "It might as well be me," she thought. By 1994, Laurie had made so much progress in her quest, that the local community had given her the nickname of "Dog Lady." It was about that time that she was approached by the Animal Control Officer of the Siksika Indian Nation and was asked if she could take care of some of the abandoned dogs from the Alberta Indian Reservations. She did not hesitate one second and gave him an affirmative answer. Very soon after she started however, it became apparent that one person alone could not handle the extraordinary influx of puppies and dogs. Laurie, along with the help of two friends, decided to form a charitable organization and publicize her plight to the larger community. She knew they were many other "Dog Ladies and Gentlemen" out there that they would be willing to help. In July 1995, the ANIMAL RESCUE FOUNDATION (ARF) was formed for the United States and Canada.

ARF is a second chance for animals whose owners exhibit criminal lack of responsibility, in her opinion, in caring for their pets. ARF strives for a "No-Kill" operation and not only rescues cats and dogs from the pounds, but also gives them another chance to start a new life in a home that really wants them the second time around. The word is spread to the public via radio, television, and local PetsMart stores, while volunteers who truly believe in helping the defenseless animals in finding good caring homes, assist in all aspects of operations.

Indeed there are some alarming statistics by the Society for Protection of Cruelty to Animals (SPCA) that are on ARF' s side:

Seven puppies and kittens are born for every human born.

A female cat and her offspring can produce 420,000 cats in 7 years.

A female dog and her offspring can produce 67,000 dogs in 6 years.

Eight to ten million dogs and cats are euthanized in shelters each year.

Sixty-one percent of all dogs and 75% of all cats entering shelters are killed.

Every two seconds an animal is euthanized in the US.

Only 4% of cats and 14% of dogs brought to a shelter are returned to their owner.

A total of 9,182 dogs and 4,418 cats were impounded or admitted to the Tulsa, Oklahoma City Shelter in 1997 alone.

In Tulsa OK, owners of lost pets were able to pick up only 1.3% of their lost dogs and only 1% of the lost cats.

One can clearly see in these dreadful statistics, that there is indeed a need for organizations like ARF to help not only with the adoption, but also with the identification of the pet population. Other agencies such as the Animal Shelter, SPCA, and Animal Aid offer similar services with minor differences, such as providing the same services for older animals. They all are working toward the same goal of finding good homes for unwanted animals, in addition to trying to educate the public about the proper care and needs of pets. These organizations are not competing for animals to be adopted, but for adoptive homes, donations, and volunteers. ARF has tried to distinguish itself from the rest of animal care organizations, by specializing in younger animals and pet identification, and by being the only agency that offers tattooing for the easier recovery of lost pets. ARF takes great pride in their "Tattoo-A-Pet" program.

It is quite obvious that the biggest issue in this "industry" is not competition, but rather the problem that caused the "industry" to form in the first place. Many social issues affect the pet world, such as cruelty to animals, abandonment, and the overcrowding of shelters that leads to euthanasia. Adoption is one alternative, but many feel the real solution lies in the spaying and neutering of pets because of the lack of donations, qualified volunteers, and adoptive homes that still plague the pet world. However, on the bright side, there is now more and better education available to the public for the proper care of their pets, while there has been a sizeable reduction in the overall animal population as a result of spaying and neutering. Additionally, there has been a significant increase in animal wellness due to proper vaccinations, as well as scientific research that documents the benefits of pet companionship to elders and nursing home residents.

There are very few central authority figures in the national ARF organization. The majority consists of a base of volunteers that provides support for the national organization. On the local level, such as the Tulsa, Oklahoma chapter, there is another core group of volunteers that makes decisions affecting ARF operational issues, and other critical activities, such as the coordination of the efforts of other ARF volunteers, foster care, and the review of applications for final approval of adoption. Volunteers become ARF members and contribute a yearly fee in exchange of a newsletter that informs them on what ARF is doing in the community. They are encouraged to donate food and blankets, and become foster "parents" for pets waiting for an "adoptive parent." Helping defenseless animals find good caring homes is what really motivates the broad base of volunteers and the one paid employee. The ARF volunteers take excellent care of the pets they receive for adoption. If an animal is sick or injured, the ARF foundation will care for the animal until it is well. All animals are placed in secure and loving homes because all

potential adoptive "parents" are interviewed, their references checked, and then their homes are inspected to ensure a safe and secure environment.

ARF keeps expenses low by accepting donations of pet supplies and reduced medical fees from local veterinarians and businesses for services and products as well as by placing the animals temporarily in a foster home or participating veterinarians, where food, shelter, and medical care are provided. Foster home providers are also screened in order to provide a safe and nurturing environment. To help increase their adoption rate, ARF focuses exclusively on younger pets such as puppies and kittens. As mentioned earlier, along with the adoption of pets ARF offers an additional service, the tattooing of the adopted pets for identification purposes.

Donations, memberships, adoption fees, and fundraisers provide the main sources of funds for the organization. ARF's short-term goal is to increase the volume of adoptions by 2-3% and donations and the number of volunteer workers by 5%. Their long-term objective is to focus on educating the public to be responsible in spaying or neutering their pets, something that deters unwanted animal births. Another long-term goal is to capture the public's attention on the need for major financial contributions from wills or estates to this worthy cause. Specifically their objectives in their charter mission statement are as follows:

To provide an educational plan so people adopt an animal, volunteer their services and/or money in order to help provide good homes for these animals.

To protect animals from suffering from cruelty, carelessness, neglect, ignorance, accidents or abuse by supplying means of education, examples and enforcement.

To encourage spaying and neutering of pets in order to discourage overpopulation.

To foster public sentiment and gentleness toward animals, and to create awareness of the importance they have in our daily lives.

To promote a bond between people and animals in our community.

To encourage and promote responsible pet ownership by providing information on proper pet care.

To maximize the community resources available, including financial contributions, volunteer assistance and the news media, for the purpose of fulfilling our goals.

To offer refuge, medical care, and nourishment for unwanted animals in our community.

The typical adoptive "parent" for the Tulsa ARF chapter is someone who resides in Tulsa or the surrounding area; is able to provide a puppy or kitten a good home, food, and care; loves animals; has activities outside work; and is a giving, caring, generous, flexible, and above all responsible human being.

ARF uses a uniform pricing strategy for their adoption fee which is sixty-five dollars for a dog and forty-five dollars for a cat. This includes an examination, the first set of shots, spaying or neutering by a veterinarian, and an identification tattoo. Pets are available on weekends at PetsMart stores or by appointment at foster homes, and ARF volunteers are welcome to help out during the PetsMart viewings of potential adoptive pets every Saturday. About 85% of their adoptions are through these PetsMart store viewings. If any potential adoptive "parents" are unable to come to a PetsMart store to see the pets, they may go to foster homes to make a selection.

ARF/Tulsa as an organization started on a shoestring but has continually grown over the past three years. They have no debt, few assets, and only one employee. Revenues from adoption fees is ARF/Tulsa's main goal, but over time they have come to realize that income from this source is linked to a fluctuating demand for pets and barely covers the expenses incurred during the pets' tenure with them. As Table 1 shows, the income from total adoptions has remained more or less steady over the past three years within a thousand-dollar range. The income for the adoption for dogs is greater than that for cats.

Over the past three years, a steady growth pattern has emerged. Income and profits have steadily risen due to the increase in donations and fundraisers. However, creating a paid staff position dramatically increased expenses in 1997. Since increasing adoption rates is very hard and requires a great deal of advertising to increase the public's awareness of the offered services, ARF/Tulsa realized that they need to turn to other avenues of fundraising in order to accomplish their goals. Other organizations that are similar to ARF have turned to various types of fundraising such as:

Outlet Stores resembling pet stores

Collecting Aluminum Cans

Pet Pin-Up Calendars

Selling Pet Christmas Stockings

"Doggies' Day Out"

Flea dips and baths

Logo Credit Cards

T-shirt sales

Telethons

Dog Walks

Santa Photos

Garage Sales

"BowWow Bazaar"

The ARF/Tulsa Board realizes that even though these fundraising activities are worthwhile and are producing needed revenues, some dramatic actions need to be undertaken in order to help the organization survive over the long run. Most of the members of the ARF/Tulsa Board have no idea what the words "strategic management" or "organizational effectiveness" mean. All they know is that there are a lot of puppies and kittens out there that need help. Nevertheless, they developed a list of ideas after a great deal of discussion and brainstorming during their meetings, taking into consideration the almost all-volunteer based infrastructure of the organization, the labor intensive nature of fundraisers, and the long term needs of ARF/Tulsa. They have no idea what suggestion or idea would bring the most benefits to the organization and they wondered whether some "Strategic Management" class in any of the colleges and universities in the area could help them determine which of these suggestions would get them the most benefits for their buck and effort. They would indeed be grateful, and so would a lot of puppies and kittens!

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

Volume: 6

Issue: 1

Pages: 143-147

Number of pages: 5

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412314

Document URL: http://search.proquest.com/docview/192412314?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 15 of 100

INTEGRATING A LIVING CASE ACROSS TWO INTERNATIONAL CLASSES: AN OVERVIEW AND ASSESSMENT

Author: Wright, Newell D; White, Marion M

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Abstract: None available.

Full text:

INTRODUCTION

Much has been written in the education literature about how to provide "hands-on, practical experience" to business students and exposure to "real world" concerns (e.g. Buller, 1992; Limerick & Moore, 1991; McCleary, 1984). At the same time, another trend in business education is emerging, namely a movement towards integration across functional area courses. This article reports our experience integrating the use of a living case (Learned, 1991) as a project across an international marketing course and an international management course.

Using Living Cases

The use of "living cases" is a teaching technique designed to bring theory and practice together. Students are teamed with local businesses and develop strategic plans for these businesses. This provides a way for students to put knowledge into action and gain some practical experience (Learned, 1991).

White and Usry (1998) describe the use of living cases in an International Management class whereby students working in groups are required to complete a semester long consulting project as one of the course requirements for a local small business which is thinking of "going international." This is more or less a feasibility study and consists of identifying and analyzing new business opportunities internationally and developing a plan for the implementation of an international strategic plan for the company.

In light of the movement towards integration across courses, and in order to provide a better "end product" to the client company, we decided to do a joint project across the International Management class and the International Marketing class. In this way, the client company would be given a feasibility plan together with an in-depth marketing plan, and we would avoid the overlap that so often happens between these two classes.

OVERVIEW OF THE CONSULTING PROJECT

This section describes the project itself, how the client company was found and the framework provided to students for doing the project.

Client Company. The client company was found by the Small Business Development Center (SBDC) located at this university. It was a smaller sized company engaged in producing specialized computer software. The participating company was required to pay $100 to cover incidental expenditures. No additional payments were required. The SBDC covered the cost of photocopying and telephone calls, leaving no cost to the students.

Prior to the first day of class, the faculty members involved spoke with the client and outlined the scope of the project. This is an important step to avoid the company making excessive demands upon the student group. The client has to be made aware of the fact that this project is only part of a student's grade, typically about 30 percent and that the course has other requirements. The client also needs to know the time commitment that will be required to work with the various student teams and what kind of information the students will need to successfully work on the project.

The Project. During the first week of class, the project was explained to the students in general terms. The students were also required to sign a confidentiality form since they may have access to company information that the client company does not want to have divulged elsewhere.

During the second week of class, a representative from the client company came to both the International Management class and the International Marketing class (separately) to describe the company, the company's product line and any international experience the company may have. Separate visits were required since the two classes met at different times and on different days. This was also an opportunity for the students to ask questions. It is important for the company representative to tell students how best to contact the company for information. Better yet, is to give the students a contact person within the company.

The following class period, the students self-selected into groups of three to four in each class and each group in the one class was paired with another group in the other class. A framework was also provided to the students covering the expectations of what the project was to include. The instructors spent some time talking with the students on how to work as a team with members they may not initially know and members they may not meet with very often. How the work on the project was divided up between the various group members was left up to the students to decide. However, it was pointed out to the students that some portions may be more suitable for the group members from the International Management class to complete, and other portions may be more suitable for the group members from the International Marketing class to complete. In pointing this out, the instructors were very careful not to give clear-cut divisions, since the final product was expected to be well integrated.

In the International Management class, approximately two weeks of class were spent on discussing the various ways to enter a foreign market, how to choose which market to enter and how to conduct an environmental analysis. Students were also given guidance on how to find relevant information. In the International Marketing class, much of the material covered throughout the semester was required for the project. Overall, both sets of students were well prepared to work on the project.

The decision as to which country the company should try to enter and which mode of entry should be chosen was left up to the students. Since the project can be quite time consuming, and to make sure that the project was not left to the last week, we decided to have the students provide interim reports. We required an interim report covering the environmental analysis of the chosen country about one third of the way into the semester. Approximately one month later we required a draft of the section on marketing goals and tactics. The completed project was due three weeks later. We used the interim reports for feedback purposes only, to let students know they were on the right track. No grade was assigned to them. Since the completed projects involved an external client, it was essential to monitor not only for progress, but also for quality.

During the last week of class, both classes met and made formal presentations to the client company and handed over a copy of the report to the client company.

FULL PAPER

In the full paper, we will compare the results of this integrated project with a similar project carried out in another international marketing class which had the same client company but where the project was not integrated with another class. Whilst this cannot be considered a control group in the strictest sense of the term, it is useful for comparison purposes in evaluating the outcomes of the integrated project and deciding whether or not this type of integration is worth the time and effort.

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

Volume: 6

Issue: 1

Pages: 154-156

Number of pages: 3

Publication year: 1999

Publication date: 1999

Year: 1999

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: Feature, Business Case

ProQuest document ID: 192412373

Document URL: http://search.proquest.com/docview/192412373?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1999

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 16 of 100

ARTHUR WRIGHTSON V. PIZZA HUT OF AMERICA: A CASE OF SEXUAL HARASSMENT?

Author: Calvasina, Gerald E; Beggs, Joyce M

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Abstract: None available.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns human resources management. Another secondary issue is sexual harassment, and more explicitly same sex sexual harassment. Other secondary issues include employment law and the proper management response to sexual harassment complaints. The case has a difficulty level of four, appropriate for senior level courses of human resources management, employment law, and business and society. The case is designed to be taught in either a 50 to 120 minute class and is expected to require two hours of outside preparation by students.

CASE SYNOPSIS

Arthur Wrightson, a sixteen year old heterosexual male, worked for Pizza Hut as a cook and a waiter in Charlotte, North Carolina. His immediate supervisor, Bobby Howard, and five of his coworkers were male and openly homosexual. Three other coworkers were heterosexual males. Arthur and his heterosexual coworkers allege that Howard and the other homosexual male employees began to sexually harass them. It was made clear to Howard and the homosexual employees that the harassment was unwelcome.

Jennifer Tyson, the manager of the Pizza Hut restaurant, and her assistant, Romeo Acker, were aware of the harassment and of the objections to it. Arthur's mother also began to complain to the managers. Tyson had witnessed some of the allegations and admitted to Arthur's mother that she was aware of Howard's actions. Tyson called a meeting and "ordered the homosexual employees to stop harassing" Arthur and his coworkers. The homosexual employees made jokes about the "possibility of a federal sexual harassment suit, " and the harassment not only continued but also "intensified. " No formal action was ever taken against Howard or the other homosexual employees by Pizza Hut management.

Arthur Wrightson filed suit against Pizza Hut in the U.S. District Court of North Carolina. He alleged that he had been sexually discriminated against in violation of Title VII of the 1964 Civil Rights Act. The complaint alleged that Arthur was subjected to a "hostile work environment" in violation of Title VII in accordance with the Supreme Court's decision in Meritor Savings Bank v. Vinson.

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

Volume: 5

Issue: 2

Pages: 1

Number of pages: 1

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412383

Document URL: http://search.proquest.com/docview/192412383?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 17 of 100

THE TOLEDO FLYING CLUB (PART TWO)

Author: Joy, Arthur C; Trigg, Rodger R; Kundey, Gary E; Carter, Fonda L

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Abstract: None available.

Full text:

THE OFFER

Gary Fiodore is the general manager of The Toledo Flying Club. He had a meeting scheduled with Tom Swift who owned (along with his wife) the local general aviation fixed based operation (FBO), Flight One, at the Toledo Municipal Airport. When Gary entered Tom's office, Tom was curious as to the box of papers that Gary carried with him. Gary had not specified ahead of time what the meeting was about so Tom assumed it had to do with some general matters between Toledo Flying Club and Flight One.

After the usual pleasantries were exchanged, Gary got down to business. Gary briefly reviewed the history of the club for Tom especially the recent problems with declining membership and activity level of the club. Then Gary dropped the bombshell: the recent decline was so great and he was spending so much of his personal time on club matters that Gary was willing to turn the whole operation of the Flying Club over to Tom (i.e. Tom would become the general Manager of the club). Further, Gary had collected together all of the club's files and documents (the contents of the box) and would leave these with Tom. To say the least, Tom was surprised but had the presence of mind to say that "He needed time to think his decision through and would need to examine the documents first before making a decision."

Gary seemed to be a bit irritated by this but agreed to leave the documents and give Tom a few day's to think it over. As Gary left, Tom's initial reaction was that this was a real opportunity to help build his operation into the full service FBO he had always dreamed of, but was this the right time? The right organization to acquire? What were the legal implications? Did it make financial sense? How does one begin to think this through?

FLIGHT ONE (OPERATIONAL BACKGROUND)

Tom Swift had been flying since he was fifteen years old. Flying was one of his great passions in life. He had obtained most of his pilot certifications by the time he was twenty one years old. He had a great variety of flying experience, having done flight instruction, crop dusting, check delivery, corporate pilot, and unscheduled charter work. He had attended college and finally finished his business degree by taking classes at night between his pilot duties. He had always wanted to own a FBO. Tom Swift and his wife had started Flight One approximately four years ago to provide professional aircraft management for corporations and businesses in the greater Toledo area. He would have preferred to offer a wider range of aviation services but lack of financial resources, the already crowded market for flight instruction (The Toledo Flying Club and Flight Academy), and another company (Sawyer Aviation, Inc.) on the field holding the exclusive franchise to sell fuel limited the markets that Flight One could enter.

Flight One over the last four years had experienced moderate success. It's target market was local small and medium sized businesses that needed light single or twin engine aircraft for their operations but were too small to be able to support their own "flight" departments. Flight one provided maintenance, regulatory compliance, pilots, and general aircraft management of these business aircraft. Within the first year of starting Flight One it became apparent that many of the aircraft under management (which had increased from five aircraft in May, 1992 to fifteen as of June, 1996) could be better utilized. Tom arranged for several of the aircraft to be used for unscheduled charter work which provided income to the aircraft owners to offset part of the operating costs of the aircraft and a commission to Flight One.

Tom wanted to expand Flight One's activities. He had considered starting a similar service in other medium sized cities within a two hundred mile radius of Toledo but so far none of the situations he had investigated seemed worth pursuing. The alternative geographic expansion was to keep the operation centered at Toledo but to expand into other general aviation activities such as flight training, fuel sales, hanger rental, and aircraft sales. Regretfully these areas were fragmented at the Toledo municipal airport, already taken, or seemed to offer little chance of entry, much less, success.

Flight training was offered by two other operations. Flight training in general was not considered a "money maker" but did have synergistic "tie ins" to other parts of an FBO operation such as aircraft sales, maintenance, and fuel sales. The fuel sales franchise at the Toledo airport was controlled by the airport authority and traditionally had been put up for bids periodically to be controlled by a single firm (currently Sawyer Aviation, Inc.). Three different companies had held this franchise over the last twenty years; each with only limited success (and even losses), mainly because they did not have other activities on the field. Hanger space, as at many airports, was owned and controlled by the airport authority. New small aircraft production had been almost non-existent for the last decade, thus limiting new aircraft sales. Most of used planes were sold directly between pilots without use of dealers.

TOLEDO FLYING CLUB (OPERATIONAL BACKGROUND)

Gary Fiodore left the meeting with Tom Swift feeling a bit dejected. He had been a member of the club from the beginning, and general manager for the last four years. He remembered the good times that he had with the club and the other members over the years. Where had it all gone so sour that he would be willing to give the operation away (lock, stock and barrel) for nothing? He wasn't even sure legally if he could really just give it away (since it was a non-profit corporation) but was willing to chance it so that he could get away from all of the recent troubles he had operating the club.

The early days of the club were great. A group of ten experienced local pilots formed the club in the mid 1970's as a non-profit organization incorporated in Ohio. They each put up $50.00 for the legal work for incorporation and operating officers were appointed by the club members. Each of the ten original members "loaned" the club $500 for operating capital. Two of the original members signed lease agreements with the club to provide aircraft (a two seat trainer and a four seat aircraft for longer flight operations) to rent on a "per-operating-hour" basis with the club assuming the cost of insurance, hanger space, and maintenance. An informal office was set up in the back of the hanger of one of the leased aircraft. A simple accounting system was set up to record aircraft hour usage and collection of payments from the members.

The club dues were to cover the fixed cost of aircraft operation such as hanger space, insurance, annual inspection expenses, and office expenses such as telephone. The hourly rental charge to the club members was to cover the rental rate paid to the owners of the leased planes to the club plus a percentage "mark-up" to cover hourly maintenance and miscellaneous other expenses. Fuel used was to be paid directly by the member using the aircraft with the fuel tanks to be left full after each use.

The first year of operation was a success with high utilization of the two airplanes. The members leasing the airplanes to the club were glad to have others to share the fixed cost of owning and operating their aircraft while the other members had access to good equipment at reasonable rates. Perhaps the club was too successful! Word spread about the club and other pilots wanted to join. Expanding the membership of the club beyond the original ten members posed some very important questions. What of the additional aircraft needed? What of requirement for flight instruction especially for student pilots?

After much discussion, the club did expand its membership with hourly rates increased and monthly dues decreased to a minimal amount (this was more consistent with what the new members were use to when renting from regular for-profit enterprises). Flight instructor fees were paid into the club treasury and deductions made for liability insurance and a commission to the club with the residual (approximately 80% of the total) paid back out to the flight instructors.

Within three years, the club's membership base had expanded to one hundred members of which fifty were very active. Additional aircraft were obtained on lease from some of the club members which was advantageous for the member providing the aircraft. Soon the club had six aircraft under lease which was a small enough number to provide for good utilization of the aircraft but enough aircraft to prevent too many scheduling conflicts. These were good days. Membership held steady for over a decade but then began to decline during the latter part of the 1980's.

The decline started roughly eight years ago and could be traced to several sources. General aviation had a declining number of new students interested in getting their pilots license. The decline was so great that the total number of active pilots was shrinking since the small number of new pilots did not fully offset the number of existing pilots that lost interest in flying, who were not able to afford the rising cost of flying, lost their medicals, or went to that great airport in the sky upon their demise. This general trend had taken its toll on the club's membership. A further factor affecting the club's local market had been a flight training center (Flight Academy) that was opened approximately five years ago by a young couple. The couple had more enthusiasm and love for flying than experience. It was rumored that their operation was weak financially but they had at least been able to breakeven so far. They provided spirited competition to the club's operation.

One thing that had changed over the years in the operation of the club had been a loss of camaraderie among the members. Most of the original founding members had drifted away. The most active members in the club were those that leased the airplanes to the club. Gary himself was a good example since he currently leased two airplanes to the club and had been the general manager for the last four years. The lease payments to the aircraft owners and the assumption of the fixed overhead by the club were advantageous for the aircraft owners and had made it worthwhile for them to volunteer their time to the running of the club. These members ran the club with little reliance on the general membership. This seemed to be endorsed by the general membership who seldom voiced concerns about the club as long as planes were available when they needed or wanted to fly.

The burden of running the club had become more and more concentrated on Gary. Two problems had especially intensified in the last three or four years for him. First was the increased maintenance problems with the two planes still left in the club as the planes aged (one plane was twenty years old while the other was twenty three years old). New aircraft replacements were out of the question due to either their unavailability caused lack of new plane production or to the high cost of new aircraft (typically $150,000 to $200,000 each). On the other hand, perhaps older aircraft made sense since the number of active members had dwindled to ten and they typically only flew thirty hours per year. The general club membership did not agree with this last view, they were constantly complaining about lack of aircraft availability (especially when one of the planes was down for repairs) and what seemed to them the general poor condition of the aircraft when they were up and ready to fly. Gary believed that the problems with the aircraft by itself had caused several members of the club to quit.

The second problem Gary was spending a lot of time and trouble with was the turnover in flight instructors. Typically a flight instructor would stay only long enough to begin to be able to help with the club's operations before he was soon gone to corporate flying or to the commercial airlines. As Gary spent more and more time on keeping the airplanes in the air on a day to day basis, with little help from the flight instructors, he had less time to spend on paperwork. He had especially fallen behind on the annual paperwork (example: state and federal tax filings) for the club. Gary was not overly concerned with this since the club was not a "for-profit" business and had never paid any substantial amount of taxes except sales tax which was paid up to date.

CONCLUSION (TOM SWIFT'S QUANDARY)

Tom's initial reaction to Gary's offer was that this was a real opportunity to help build his operation into a full service FBO but was this the right time? The right organization to acquire? What were the legal implications? Did it make financial sense? Tom sensed that this was an important turning point for Flight One, and himself, but needed to think his options and strategies through carefully.

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

Volume: 5

Issue: 2

Pages: 2-6

Number of pages: 5

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412451

Document URL: http://search.proquest.com/docview/192412451?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 18 of 100

CENTRAL VERMONT PHYSICIAN PRACTICE CORPORATION

Author: Thompson, Ron

ProQuest document link

Abstract: None available.

Full text:

INTRODUCTION

Donna Izor, President of Central Vermont Physician Practice Corporation (CVPPC), was concerned. What started out as a small gesture of appreciation to their clients, was turning into a headache. When CVPPC had decided to send out a newsletter in July, Donna had expected the costs to run about $1,000. Now it looked like the costs could increase significantly. More importantly, the problems with the mailing list for the newsletter might indicate deficiencies with important administrative information systems, including Billing. Given their need to reduce costs in the turbulent health care environment, CVPPC could definitely not afford problems with their Billing systems.

THE ORGANIZATION

The Central Vermont Medical Center (CVMC) was formed in 1968 to establish a regional healthcare facility joining the Heaton Hospital in Montpelier, Vermont and the Barre City Hospital in nearby Barre, Vermont. CVMC was a not-for-profit, integrated organization that was comprised of three major components. These included the community based Central Vermont Hospital (which had a 100 physician medical staff), the Central Vermont Physician Practice Corporation, and the Woodridge Nursing Home. The Woodridge facility (opened in 1993) was a 153-bed nursing home located in Berlin, Vermont. In 1996, CVMC signed an affiliation agreement with The Hitchcock Alliance, an organization comprised of community hospitals and health care organizations, including the Dartmouth Hitchcock health system.

The Central Vermont Physician Practice Corporation (CVPPC) was organized in December 1992. Its mission was to provide access for area residents to high quality primary and specialty care, and management services to physician practices. It employed sixteen physicians, and five mid-level providers who were located at seven sites across the central Vermont region. CVPPC was a fully owned subsidiary of Central Vermont Medical Center, and faced competition both locally and within the larger region.

INFORMATION SYSTEMS AT CVPPC

The main information systems (IS) for CVMC were provided through Central Vermont Hospital. This arrangement provided minimal support for IS functions needed by CVPPC. General hospital applications such as electronic mail and access to the hospital information systems were available, but there was little management or ownership of specific systems to support CVPPC practices. Also, the Director of Information Systems and the Network Administrator for CVH had recently left the organization. Any additional information systems support for CVPPC from the CVH information systems group would probably not have a priority while these positions remained unfilled.

CVPPC owned the Medical Manager software, which included patient registration, appointment scheduling, and billing. CVPCC did not manage all of these systems, however. Instead, they contracted billing services to a third party, Information Systems Solutions (ISS). ISS was responsible for data entry of charges, electronic billing of insurers, payment posting, and report generation. All interactions regarding the Medical Manager systems, such as requests for new reports, were handled by ISS. CVPPC paid ISS over $20,000 per month to manage their Billing functions.

When the relationship with CVPPC and ISS was formed, the manager of ISS was hired to be the administrator for CVPPC practices as well as do the billing. He maintained good personal relations with some of the CVPPC staff, and the CVPPC account was the largest his company handled.

DONNA'S ROLE

Donna Izor had accepted the position as President of Central Vermont Physician Practice Corporation in April, and had started at the position on Monday, May 5. On Wednesday, two days later, the Chief Executive Officer (her boss and the person who had hired her) resigned from CVMC. Naturally, Donna received the news of the CEO's resignation with surprise and some apprehension. She had expected the CEO to act as a mentor for her, helping her to assimilate into her new role. Although Donna had a strong health care and management background, she was new to CVMC. She didn't know how the organization operated. In addition, she wasn't certain how secure her role would be.

Fortunately for Donna, the Board of Trustees for CVPCC reaffirmed the decision to hire her. Once assured her new position was not at risk, Donna worked with other members of CVMC senior leadership and leadership of the Hitchcock Alliance to plan for the transition of duties until a new CEO was recruited.

Donna believed that one of the ways CVPPC could help improve their position was to forge stronger links to their clients. As her first outreach activity, she thought that sending a newsletter that included short medical articles written by physicians, as well as general information, would be a good opportunity to connect with patients. This was something that she had been involved with in a previous position, and she knew that it could be of value. Donna gave responsibility for the newsletter to the Practice Manager. The writing, editing, and layout of the newsletter was done in-house, and Donna was quite pleased with the result.

Donna's first indication of problems was when she saw the boxes of mailing labels. The mailing labels had been supplied by ISS, the company that ran the Billing system for CVPPC. When she checked with the Practice Manager, she was told that there were approximately 30,000 mailing labels. Donna's immediate reaction was disbelief. The population of the service area (central Vermont) was less than 60,000.

"What? Why are there 30,000 labels? We certainly don't have any where near that many patients," she inquired. Donna was told that there were some duplicates in the mailing list, but that ISS was fairly confident in the accuracy of the labels.

Through further questioning, Donna learned that ISS had set up separate databases for each practice. That meant, for example, that a woman who received routine check-ups would be in the Primary Care database. If she became pregnant and went to a CVPPC obstetrician, she would be added to the O.B. database. After her child was born, she would be added to the Pediatrics database if she chose a CVPPC pediatrician.

Every time CVPPC set up a new practice, ISS would set up a new database. In addition, there seemed to be some deficiencies in terms of ensuring data consistency across the databases. A client might be recorded as Elizabeth in one database, as E. in another, as Betty in a third, and so on. Similarly, an address correction made in one database might not be changed elsewhere if the individual was also listed under different practices.

When Donna questioned how they were planning on handling the duplicates, she was told that the clients were asked to contact CVPPC if they received more than one newsletter. The responses from clients could be used to help identify duplicate entries in the ISS databases. Donna knew that receiving duplicate newsletters, with different spellings of the same name, would appear unprofessional. She was assured by Public Relations that, at this point, it would be the best way to handle the situation.

As events evolved, Donna noticed that many calls were coming in from patients with changes or notification of duplicates. She discovered that some of the newsletters were sent to deceased individuals; family members had called to explain. Furthermore, a request added under the return address for "Address Service Requested" resulted in thousands of undeliverable newsletters being returned by the U.S. Post Office at a charge of $0.80 each.

WHERE TO GO FROM HERE?

As Donna completed the 45-minute drive home that evening, she had a lot to think about. As she saw it, the newsletter incident raised two very important issues. First, how much was this going to cost, both in terms of dollars and in terms of the intangible costs of a loss of confidence on the part of their valued clients? Donna now expected that the tangible costs of the newsletter would be significantly more than the original $1,000 estimate, perhaps as high as $20,000. How was she going to explain this unexpected, additional cost to the Board of Trustees? CVPPC was trying to create an image of being efficient and cost effective, and clients might view the postage for the duplicate mailings as being wasteful.

A second, and potentially even more important issue, was related to the Billing system itself. The errors and inconsistencies in the mailing labels led Donna to question just how good the Billing systems were. When the Collections department called some customers, the customers responded that that they had not received a bill. In the past CVPPC had tended to discount these explanations, but perhaps they were correct. Donna knew that if CVPPC was not billing their clients correctly, they were not collecting funds that were due. The need to re-bill insurance companies when errors were made in registration information was also causing a delay in collecting funds.

The more she thought about it, the more questions came to mind. Why were new records being generated for existing patients, just because they used services from a different practice? What could be done immediately to improve the system so that other mailing label needs would not result in the same problem? Who had access to the Billing information? The CVPPC employees from within each practice, or just ISS employees? Was this a staff training issue? Was $20,000 per month a reasonable charge for Billing? What could be done to restore confidence in the information systems of the practices?

Further questioning by Donna had revealed that other companies had put in bids to take over the Billing function for CVPPC during the past 12 months. In addition, the organization had also recently considered bringing the function in-house and had evaluated some Billing software packages. In fact, a woman had been hired several months ago as a Billing manager, and some computer equipment (hardware) had been purchased in anticipation of administering the Billing internally. Since CVPPC had not purchased any Billing software, however, the Billing manager, whose experience was in charge entry and billing for a small practice, was currently working on other projects.

Donna knew that this issue would have to be addressed, and quickly. Unfortunately, it seemed that she had at least a dozen other, equally important situations to deal with. In addition, she was new enough at CVPPC that she really didn't know all the players very well. On the one hand, she didn't want to appear too aggressive and to go against the culture of the community hospital. On the other hand, she knew that CVPPC was fighting for financial survival, and an efficient and effective Billing system was crucial. She was hoping that a good nights sleep might help her decide how best to approach the situation.

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

Volume: 5

Issue: 2

Pages: 7-10

Number of pages: 4

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412498

Document URL: http://search.proquest.com/docview/192412498?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 19 of 100

LOTEC TACKLE COMPANY - CASE A

Author: Wells, F Stuart; Pickett, Gary C

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Abstract: None available.

Full text:

INTRODUCTION

In 1948, Henry Logan began crafting freshwater fishing lures and selling them in his small bait and tackle shop near Nena Bend, Arkansas. Little did he know that, by the 1970's, his talent would be the basis for one of the most sought after, yet difficult to obtain, lines of fishing tackle. During a vacation to Tarpon Springs, Florida, in 1963, Henry met Victor Tecco, a charter boat owner and avid saltwater fisherman. Over a three year period the two men became good friends and in 1967 they formed a partnership to start LoTec Tackle Company, to produce fresh and saltwater lures. For the next decade, every lure sold. The Logan and Tecco families enjoyed the business prosperity and their children and grandchildren became active in the management of the company. Shortly after Victor Tecco's untimely death in 1977, the Logan family bought the Tecco family's interest in the company. With the realization that the company could grow without losing the uniqueness of the product and without compromising the quality of their handcrafted tackle, expansion occurred incrementally. The business was so successful that today it has twenty-four employees at the company's manufacturing and distribution site in Nena Bend and has six independent sales representatives aggressively selling the lures to selected sporting goods stores and bait houses coast-to-coast. Periodically the company will employee part-time workers to assist with warehousing and distribution work. LoTec occasionally even receives unsolicited orders from a few European stores. The company receives many calls from end-customers wanting to place orders, or to find a source of supply. New customers are told to send a request in writing with a check enclosed for their first purchase. Often, these orders are as large as some for some small shops; but the company has never really taken this kind of sale very seriously. LoTecs are never found in discount stores. They are considerably more expensive than typical lures and very highly regarded in the market. A sporting magazine did a story on LoTech a few years ago and stated, " LoTec lures are expensive, reflect the highest quality imaginable, and downright hard to get. A snagged LoTec lure can ruin a day of fishing a fisherman will take up scuba diving just to get the lure back! In fact some folks have even chosen to eat the fish and frame the lure!"

Today, most of the lures are designed at Nena Bend and completely manufactured under contract by several firms in Mexico and Indonesia. Some "blanks" are imported and "finished" at Nena Bend. These are mostly the expensive large saltwater lures and limited edition freshwater lures. Even with the international exposure and dramatic growth, quality is paramount, and each lure must meet the company's strict standards. After all, LoTec lures are synonymous with quality.

In spite of the company's dramatic success, Henry's grandson, Matthew Logan, the company's new president and general manager, realizes that there are some serious problems. At the annual company retreat recently, he said, "We've been doing the same thing for fifty years - just more of it each successive year. We've been profitable. Very profitable! Consequently we think we're doing everything right. There's new competition, there's new technology, and there are new opportunities for us to continue on our path of growth and prosperity. Granted, we don't want to "mess-up" a good thing. But we must anticipate the future, and we must cautiously react to demand and better serve our customers. I am not convinced that we are doing our best." Henry Logan bristled at the mere hint that things were not perfect.

Matthew Logan announced that he had employed a consultant to review the current operations in an effort to identify some problems and operational concerns. Unbeknownst to most employees, the consultant had already conducted extensive review of the operating systems, order entry, order processing, inventory, and so forth, over the past several weeks focusing on the flow of data and orders through the company. Matthew planned to present the findings to the company employees at a meeting a month away.

SUMMARY OF CONSULTANT'S REVIEW

After performing a preliminary business analysis for LoTec Tackle, the consultant noted the following items of concern:

* Many orders were shipped significantly later than originally promised. The company has grown to a point where it is difficult to know each customer well enough to predict overall demand for products.

* Over 4% of the orders were improperly filled. This includes errors of omission, substitution, and shipping items not ordered.

* Between 1% and 2% of all shipments shipped to the wrong customer.

* When problems do occur there are no standard procedures for handling them. Generally the company takes the customer's word about mistakes and ships additional or replacement items overnight. (If they are available)

* The company suffers from excess stock and stock outages as a result of both unanticipated sales and vendor delays in shipping.

* LoTec is quite inconsistent in its procedures for dealing with customers. Where one may receive a bonus pack of promotional lures with each dozen packs purchased at regular price, another may receive nothing at all in the way of promotional items.

* LoTec has grown from a basement business to a two million dollar a year enterprise with little change in its organizational structure. It is a large "small business."

* Paper trails are inconsistent and formal audit trails are non-existent.

* Sales, A/P, A/R, and G/L transaction processing is inefficient and error prone. Worse yet, due to the lack of controls, many errors are not discovered for quite some time if at all.

* Information technology is virtually non-existent; a fax, copiers, three older model microcomputers used strictly for limited word processing, with the exception of Matthew Logan and Sharon Cooper who do generate spreadsheets and graphs.

* Paying six outside sales personnel standard commissions when stores place direct orders was questioned.

* There is no systematic method to handle direct orders from end-customers.

* End-customer orders now represent 20% of all orders, but amount to less than 4% of gross sales. Profit margins are much higher on end-customer sales. This market segment remains virtually untapped.

* Average number of product models in inventory is one hundred.

Upon further analysis of her findings and creation of data flow diagrams of the current system the consultant noted the following additional areas that would probably require attention:

* Orders are received from outside salespeople, directly from both existing and new customers, as well as inside salespeople. Further, these orders are received via telephone, Fax, the U.S. Postal Service, and inside salespeople with virtually no way to track the quantities ordered by order method.

* Over eighty percent of all orders are hand written, leading to numerous mistakes, i.e. even the sales force isn't consistent in filling out orders as some salespeople slash alphabetic O's, others slash numeric zeroes, while others don't slash either.

* Rejected orders and out of stock notices are often held over two weeks before they are sent out to customers and salespeople. Some are never sent.

* The updating of inventory cards is often delayed until time is found to do so. This causes problems in filling orders and often results in misinformation about item availability.

* Salespeople frequently complain about delayed and incorrect commission checks.

* The current A/P system is too inefficient to allow management time to take advantage of prepayment and on-time payment discounts.

* Most processes identified in the data flow diagrams are labor intensive and error prone resulting in lost revenue opportunities as well as higher direct and indirect labor costs.

THE MEETING

Saturday morning was an odd time to call all of the full time employees together, but Logan felt it was best to address the entire group at one meeting. Every full time employee was present that morning, much to Matthew's surprise. He opened the meeting by stating " I want all of you to know that we have a great company; we have great people and great products, but my recent review of our operations and processes substantiate my perception that our methods, systems, and processes do not allow us to do our best in getting our product from production to the end customer in an efficient and timely manner. We do need to make some changes I should say 'some improvements.'" I firmly believe that we need a computer based order processing and sales support system that will help each of us to better do our job. Let me assure each of you that no jobs will be eliminated. My goal is to increase sales revenue by addressing efficiency and effectiveness. Furthermore, I see this change as a two phase process: first, I want to take advantage of relatively inexpensive technology to support basically what we are now doing; second, I want to explore innovative possibilities that will allow us to do some new things without losing sight of the fact that we are a tackle company. I am going to look at broadening our product line to include related fishing merchandise, rods and reels, tackle boxes, fishing vests, gift packs of lures, and so on. You know, we're really not a manufacturer any more. We design and contract the production, or buy carefully crafted products made to our quality standards and branded as LoTec and we sell and distribute. We are actually a very simple business; we have been lucky that competition has not threatened us but it is only a matter of time. There is too much money to be made with new business, and consequently new market share. In particular, the end-customer has been desperately trying to deal with us directly, and we have been committed to six independent sales representatives who see us as a cash cow, while also selling merchandise from other companies. We have been our own biggest problem."

Of immediate priority is the creation of a system that will give us the order taking to order shipment capability. Our consultant has analyzed the flow of data in our company and has stated that the data flow is our biggest problem. Data gets changed, gets lost, gets forgotten, and is often routed over different paths different times. It is not consistent and certainly not reliable. I also want to better serve the end-customer our channel of distribution is as primitive as our order processing system. We can then look at product line growth."

Logan went on to share the consultant's findings with the employees. Some of the workers appeared relieved with Logan's words. He was careful to keep stressing that the system was failing not the individuals. Logan ended his meeting by answering a few questions. Tom Logan perhaps best reflected the anxiety of the group by asking, "Matthew, you know many of us only finished high school .and some didn't even finish. You know completely well that most of us could not find another job. Do you really think we can work with something like you have described? I don't know anything about computers." Logan simply smiled and said, "absolutely, Tom. I promise you."

THE VISION

Matthew Logan sat at his desk thinking about the recent meeting with the company employees. Looking down at the old desk, he thought about all the years his grandfather sat at the very same desk, designing lures and running the business. Matthew had guilt feelings for sending chills throughout the company and, quite frankly, he wondered if he had made a big mistake. Most of these people are family, he thought; and work ethic and loyalty could not be surpassed at any company. But he knew that LoTec could grow from a two million dollar sales operation to twenty million. Efficiency and effectiveness were words that seemed so academic, but so appropriate as he pondered the company's growth. He knew that some current problems had to be fixed, but he also realized that there had to be some new opportunities for innovation to capitalize on the reputation of LoTec products.

As Matthew slipped on his herringbone lambs-wool jacket, he recalled ordering it from a popular upscale New England store using the toll free number provided in their ads. He also remembered seeing an Internet address in the latest flyer from the company, so he was now thinking about going home and logging onto the company's site to maybe do some shopping.

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

Volume: 5

Issue: 2

Pages: 11-15,19-21

Number of pages: 8

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412496

Document URL: http://search.proquest.com/docview/192412496?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 20 of 100

A STUDY IN GOVERNMENT POLICY CAUSING BUSINESS DISASTER: THE NEW ORLEANS CASINO PROJECT

Author: Blatz, Robert E; Mills, John R; Vreeland, Jannet M

ProQuest document link

Abstract: None available.

Full text:

CHRONOLOGY OF EVENTS

In June, 1992, The Louisiana Legislature authorized a single, land-based casino in New Orleans and designated the Rivergate site, which was owned by the City of New Orleans (the City) through its Riverfront Development Corp., as the location of the casino. In April 1992, prior to the enactment of this legislation, the City issued a request for proposals (RFP) for a casino on that site. In June 1992, Harrah's Entertainment, Inc. (HET) submitted a proposal along with a number of other applicants. The City narrowed the list and issued a second RFP in September 1992. HET joined in partnership with Mirage Resorts to make a second proposal. A joint proposal by Chris Hemmeter's Grand Palais Casino, Inc. and ITT/Caesar's World was awarded the right to exclusively negotiate a lease of the Rivergate site from the City. A lease was executed with the Hemmeter group in April 1993.

The State of Louisiana (the State), then issued an RFP in May 1993 to determine who would receive the right to negotiate the Casino Operating Contract to conduct "gaming" activities at the Rivergate site. A new joint venture between HET and the New Orleans Louisiana Development Corporation (i.e., Jazzville) responded to the State RFP in June 1993, and to a second State RFP in July 1993. In August 1993, HET/Jazzville was selected to exclusively negotiate for the Casino Operating Contract with the State. As a result, the Hemmeter group had the lease rights for the only site where legalized land-based gaming could occur in the State while the HET group possessed the exclusive right to engage in legalized gaining activities at that site.

To break this effective legal deadlock between the two aforementioned groups, then-Governor Edwin Edwards, helped mediate an agreement which led to the formation of Harrah's Jazz Company (Harrah's Jazz), an equal partnership consisting of Harrah's New Orleans Investment Company (an HET subsidiary), New Orleans Louisiana Development Corporation, and Grand Palais Casino, Inc. The Hemmeter group contributed its lease rights and certain other real estate interests in the vicinity of the Rivergate site while the HET group agreed to share ownership of the project with the Hemmeter group.

Negotiations began immediately with the City and the State relative to a new lease agreement (the Lease) and the Casino Operating Contract. The Lease was executed with the City in March, 1994 while the Casino Operating Contract was executed with the State in July, 1994. [In April, 1994, the State, in compliance with an Attorney General's ruling, had issued a third RFP. Harrah's Jazz re-submitted its proposal which was accepted by the State.]

Harrah's Jazz began operating a temporary casino in the Morris F. X. Jiff Auditorium in the City (the Temporary Casino) and constructing a new permanent casino facility on the site of the former Rivergate Convention Center in downtown New Orleans (the Permanent Casino). However, even as construction commenced, legal controversy arose concerning the planned removal of the Joan of Arc statue that stood in front of the soon to be demolished Rivergate Convention Center. The Louisiana Landmarks Society successfully convinced Federal Judge A.J. McNamara to issue a temporary restraining order against disturbing the Place de France, the plaza where the statue stood. Construction plans called for the incorporation of this plaza into the new casino and the removal of the statue to an yet-to-be-determined location.

Less than seven months later (November 19, 1995) representatives of the Harrah's Jazz bank syndicate informed Harrah's Jazz that the bank syndicate would not disburse funds to Harrah's Jazz under the terms of Harrah's Jazz's $175 million bank credit facility (the Jazz Credit Facility). Faced with an absence of funding, on November 21, 1995, Harrah's Jazz decided to cease Temporary Casino operations and construction on the Permanent Casino, as well as to file for bankruptcy protection. Of the projected $30 million a month in revenue from the Temporary Casino operations, only about $13 million a month were actually realized. Furthermore, initial cost estimates for the Permanent Casino had soared to $850 million from an original $425 million estimate.

The Jazz Credit Facility was accelerated and terminated by the bank lenders on November 21, 1995. Thereafter, on November 22, 1995, Harrah's Jazz and its wholly-owned corporation, Harrah's Jazz Finance Corp., filed for reorganization under Chapter 11 of the Bankruptcy Code. As of that date Harrah's New Orleans Investment Company (an HET subsidiary) owned approximately 47% of Harrah's Jazz.

In connection with the November 1994 "closing" of Harrah's Jazz's Public Debt (i.e., 14.25% First Mortgage Notes-due 2001) and the Jazz Credit Facility, HET delivered completion guaranties to (1) the trustee under the Public Debt (under which the City was an express third-party beneficiary), (2) the bank lenders under the Jazz Credit Facility, and (3) the Louisiana Economic Development and Gaining Corporation (the state agency regulating Harrah's Jazz (LEDGC), now the Louisiana Gaming Control Board (LGCB)). Each completion guaranty was subject to certain conditions, exceptions and qualifications (see Art. XXVI, Casino Operating Contract). Respecting these guarantees, HET maintained that (a) the failure of Harrah's Jazz to obtain the funds under the Jazz Credit Facility and (b) the acceleration of the loan by the bank syndicate terminated HET's obligations under the completion guaranties.

At that time HET had made total capital contributions to the project of approximately $90 million and had outstanding advances to the project of approximately $25 million. In addition, in December 1995, HET acquired from a commercial bank a $16 million loan to a Harrah's Jazz partner in satisfaction of HET's obligations under a preexisting agreement with the bank. HET wrote off these investments and other related costs in the project. During fourth quarter 1995, HET recorded a one-time pre-tax charge of $75.5 million, representing HET's write-off of its remaining investment in Harrah's Jazz, its advances to Harrah's Jazz in its role as manager of the Temporary Casino, and other related costs.

On March 4, 1996, Harrah's Jazz entered into a preliminary agreement with the City which provided for, among other things, an immediate $4.3 million cash payment by Harrah's Jazz to the City, of which $2.5 million was funded by HET as debtor-in-possession financing and the balance was funded from Harrah's Jazz's assets. Although the $2.5 million loan was an administrative priority claim in the bankruptcy, there could be no assurance that the loan would be repaid. In exchange for these agreements by Harrah's Jazz, the City agreed to waive any requirements to reopen the Temporary Casino and to negotiate in good faith numerous specified issues relating to the lease of the Permanent Casino site.

On April 3, 1996 Harrah's Jazz filed its first reorganization plan (the Original Plan) for the land-based casino project with the federal bankruptcy court in New Orleans. The approximately 200 page plan and related disclosure statement addressed: how the debtor partnership would be restructured; revised payments and schedules for all creditors; lease and operating proposals for the City; and the proposed size and scope of the project for the State.

State Proposal. (A) Compensation: The Original Plan did not provide for any concessions regarding the State compensation provisions mandated by the Gaming Act. The casino operator will pay the State 25 percent of gross gaming revenues of the temporary casino during an approximately two year time frame while construction of a permanent casino progresses. At the time the permanent casino is completed, no later than December, 1998, the casino operator will pay compensation to the State in accordance with percentages currently contained in the Operating Contract (ranging from 19 percent to 25 percent) with a $100 million minimum in annual payments. (B) Timing of Casino Construction and Opening: Under a fast tracking development schedule, a temporary casino at the Rivergate site of approximately 56,000 square feet of net gaming space would be ready for use on or about January 1, 1997. A second phase of up to 42,000 square feet of net gaming space is to be completed by second quarter 1997, including special event, food service and meeting room space. The next step would be to jointly pursue with the City the development of the second floor of the facility which would be a non-gaming entertainment complex. A third phase of the casino would be completed during 1998 for a total of not less than 100,000 square feet of net gaming space. Depending on market conditions, gaming space could be increased to up to 130,000 square feet. (C) Completion Guarantee and Other Issues: HET would provide a new completion guarantee in connection with the Original Plan, which guarantee would not be subject to financing conditions upon confirmation of the Original Plan. The guarantee would be supported by mutually acceptable third party guarantees and/or collateral. In addition, as a part of an approved Original Plan, the parties would exchange mutual releases for all events and claims arising on or before confirmation of the Original Plan.

City Proposal. The Original Plan outlined resolution of terms for interim lease payments to the City for the temporary casino site by Harrah's Jazz and a waiver by the City of any requirement to reopen the temporary casino at Basin Street. The City and Harrah's Jazz agreed to cooperate in development of certain areas of the second floor of the permanent casino established as non-gaming areas, subject to state approval. The City and Harrah's Jazz agreed to negotiate in good faith on all specific issues related to the operation of the permanent casino and to eliminate conflict between city agreements and the state gaming act. The Original Plan also proposed changes in the Open Access plan (i.e., a minority hiring plan) which did not change the general intent of the program, but rather, modified and refined the program given the practical experience Harrah's Jazz had over the previous 12 months.

Bondholder Proposal. The Original Plan contemplated that bondholders would exchange their current $435 million of 14 1/4 percent (plus contingent interest) First Mortgage Notes due 2001 for $187.5 million of 8 percent Senior Subordinated Notes due 2006 with contingent payments based on a percentage of EBITDA and Senior Subordinated Contingent Notes due 2006 on which all payments would be contingent based on a percentage of EBITDA, and 50.1 percent of the equity of a publicly traded holding company of the new Harrah's Jazz.

Unsecured Creditors Proposal. The Original Plan contemplated establishing a cash allocation of $8.5 million which would be sufficient to pay presently known undisputed unsecured creditor claims in full. The Original Plan further contemplated the assumption of the two major construction contracts. It was anticipated that the payments necessary to cure default would be negotiated with the contractors. The plan also contemplated that unsecured claims of HET of up to $40 million be contributed as equity.

Harrah's Jazz Company Proposal. The Original Plan contemplated that the sponsors of the Original Plan would purchase 49.9 percent of the new holding company's equity for $75 million. HET had entered into discussions with its partners in Harrah's Jazz regarding this issue but agreed that it would fund the entire amount if NOLDC or Grand Palais did not participate. In addition, as part of the Original Plan, HET agreed to put up $12.5 million as debtor in possession financing (of which $2.5 million had already been funded and approximately $4.4 million was expected to be funded), which would be credited against the $75 million.

The Original Plan was neither approved by the creditors nor confirmed by the Bankruptcy Court. The Court, however, extended the "exclusivity" time period to present an acceptable reorganization plan. As a result Harrah's Jazz entered into further negotiations with the interested parties: the City, the State, the secured creditors (i.e., the bondholders) and the unsecured creditors (i.e., the general contractor and others).

Further complicating matters, in April 1996 the Legislature passed H.B. 7 which required local option votes during November 1996, in all parishes, on the operation of gaming activities. As a consequence of this legislation long-term financing would be difficult, if not impossible, to arrange until after the vote. In light of the unknown impact of this legislation, Bankruptcy Judge T.M. Brahney III further extended the "exclusivity" time period till after the mandated vote. [The November 1996 vote in Orleans Parish supported the land-based casino project by a 2 to 1 margin.]

On October 14, 1996, Harrah's Jazz entered into a permanent lease agreement with the City which was approved by the Bankruptcy Court on October 16, 1996. In addition to various annual payments to the City, the Orleans Parish School Board, and the New Orleans Police Department, HET agreed to the following major lease terms:

* during the first 12 months of the casino's operation, 55 percent of its employees must be Orleans Parish residents. That minimum will rise by 2 percent each year until 65 percent of its workers live in Orleans Parish;

* contribute $1 million annually to a "destination marketing program" established by the City to promote New Orleans and the casino;

* guarantee completion of the casino;

* pay the City $1 million for expenses and legal fees associated with the bankruptcy proceedings;

* pay $200,000 for four studies monitoring the casino's effect on tourism, pathological gamblers, crime rate and real estate speculation.

* allocate to the City 50% of rent income generated from roughly 70,000 square feet of retail space to be located on the casino's second floor.

The City, meanwhile, agreed to:

* let Harrah's Jazz provide finger food to its high-rolling customers. But the gambling company must contract with a Louisiana restaurant to create the snacks;

* let Harrah's mount marquees on its exterior facade to advertise special events;

* Allow up to 5,000 square feet of the first floor of its gambling emporium for retail operations. Plans for the second floor will be finalized after a study that Harrah's will finance;

* allow removal of the Joan of Arc statue.

On February 28, 1997, the Bankruptcy Court approved the disclosure statement of Harrah's Jazz relating to the First Modified Plan and set a confirmation hearing to approve this for April 14, 1997. Under the First Modified Plan, the assets and business of Harrah's Jazz would vest in Jazz Casino Corporation, a newly formed corporation (JCC), on the effective date of the First Modified Plan. JCC would be responsible for completing construction of the Rivergate Casino. Under the First Modified Plan, existing public debt of Harrah's Jazz would be canceled and the holders of that debt would receive 37. 1 % of the equity in JCCs parent (JCC Holding). An additional 15% of the equity in JCC Holding would be allocated to debtholders who executed certain releases and HET would receive, in exchange for equity investments and other consideration to be provided under the First Modified Plan, the remaining 47.9% of the equity in JCC Holding, a portion of which would be assigned to certain Harrah's Jazz partner-related parties. In addition, holders of the public debt would receive (i) $187.5 million in aggregate principal amount of 8% Senior Subordinated Notes of JCC due 2006 with contingent payments, and (ii) a pro rata share of Senior Subordinated Contingent Notes of JCC due 2006.

In April 1997, the Bankruptcy Court confirmed the First Modified Plan. However, since the Legislature did not approve a key component of the First Modified Plan-a modified casino operating contract with the LGCB-this Plan, like the Original Plan, was not consummated. The stumbling block for the Legislature was the lack of a guarantee of the $100 million tax payment due the State.

Subsequently, Harrah's Jazz filed a Second Modified Plan with the Bankruptcy Court which contemplated, among other things, the assumption of the July 1994 casino operating contract and relief from payment of any gaming taxes under the casino operating contract. The demand for such tax relief was predicated on the fact that the State failed to enforce regulations requiring river boat gaming operators to actually cruise the river which effectively created other land-based casinos-a violation of Harrah's Jazz' monopoly rights under the July 1994 casino operating contract. Bankruptcy Judge T.M. Brahney III, however, expressed his reluctance to summarily waive tax payments to the State unless Harrah's Jazz could justify such relief. He asserted that, unless Harrah's Jazz could prove differently, such matters were more properly the subject of a separate law suit, not the bankruptcy proceeding. As a result of this and certain other matters, the Second Modified Plan was withdrawn by Harrah's Jazz. (Harrah's Entertainment, Inc., 1995, 1996, 1997)

During October 1997, Harrah's Jazz and HET attempted to gain concessions from the casino's bondholders (the project's most powerful creditor group) concerning their participation in the $100 million annual state casino tax guarantee, which Governor Foster demanded before he would support any reorganization plan. In the hope of forcing the bondholders to shoulder part of this guarantee, HET threatened to cut off further interim financing and to recommend liquidation of the project. The bondholders persisted in their refusal and talks broke down.

At that point U.S. Trustee Diana Rachal stepped in to help break the impasse by actually filing a motion to liquidate with the Bankruptcy Court. This motion, if approved by the Court, would have established a deadline for the parties to either agree on the casino project or face liquidation for cents on the dollar. This action spurred the parties to reach a compromise under which HET would guarantee the $100 million tax payment in exchange for lower interest rates and other concessions from the bondholders. The motion to liquidate was continued and finally dismissed by Bankruptcy Judge T.M. Brahney III on June 16, 1998.

In November 1997 and again in January 1998, on the heels of the October compromise, Harrah's Jazz filed a third reorganization plan. This plan (i.e., the Third Modified Plan), which was supported by, among others, Governor M.J. "Mike" Foster and Mayor Marc Morial, contemplated that a newly formed limited liability company, Jazz Casino Company, L.L.C. (JCC), would be responsible for completing construction of the Rivergate Casino, HET would receive approximately 40% of the equity in JCCs parent, and Harrah's would make a $75 million equity investment in the project (less any debtor-in-possession financing provided to the project), guarantee JCCs $100 million annual payment under the casino operating contract to the LGCB (the "State Guarantee"), guarantee up to $154 million of a bank credit facility of up to $224 million, guarantee timely completion and opening of the Rivergate Casino and make an additional $10 million subordinated loan to JCC to finance the construction of the Rivergate Casino. With respect to the State Guarantee, HET would be obligated to guarantee the first year of JCCs operations and, if certain cash flow tests and other conditions were satisfied each year, to renew the guarantee each year for a maximum term of approximately five years. HET's obligations under the State Guarantee would be limited to a guarantee of the $100 million payment obligation of JCC for the period in which the State Guarantee is in effect and would be secured by a first priority lien on JCCs assets. JCCs payment obligation would be $100 million at the commencement of each 12-month period under the casino operating contract and would decline on a daily basis by 1/365 of $100 million as payments are made each day by JCC to the LGCB.

The Third Modified Plan was confirmed by the Bankruptcy Court on January 29, 1998. Final consummation of the plan was subject to numerous approvals, including approval from HET's Board of Directors, the Legislature, the City, and others. Although Governor Foster endorsed the Third Modified Plan, he refused to call the Legislature into a special January or February session to consider its approval. Rather, he preferred that the Legislature call itself into session. The Governor also took the position that the casino operating agreement could be approved by the special fiscal-only session of the Legislature in March 1998.

The Legislature, imbued with both antigambling sentiment and a distrust of HET, not only failed to call itself into a special session; but, at the 1998 March fiscal-only session, it also failed to approve the casino operating agreement. In response to the recalcitrant attitude, the Governor, concluding that LGCB could approve the casino operating agreement without the Legislature's consent, ratified the LGCB's actions, thereby, effectively bypassing the Legislature. Later that Spring (May 1998), the Louisiana Supreme Court upheld the LGCB' s power to approve the casino operating agreement without Legislative consent. (Caywood, T., 1998)

Currently, the Louisiana State Police are completing background investigations of HET's New Orleans Casino employees. Once completed, construction may resume. A target date for completion of sometime in October 1998 appears reasonable. These background investigations not only check for criminal or ethical problems that would make casino employees or investors unfit to run a gambling hall; but also investigate the financial suitability of the casino developer. The LGCB is expected to hired an accounting firm to audit Harrah's Entertainment, Inc. as to its financial suitability. The LGCB must hold a hearing to examine the State Police report. These investigations and hearing are the last major hurdles facing the dormant casino project.

HET Executive vice President and Chief Financial officer, Colin Reed, predicted that the investigations would be finished in late September and that the company would emerge from bankruptcy protection a month later. He also predicted that the casino would be open for business by the Fall 1999. (Yerton, S., 1998)

CASE ANALYSIS

Type of Proposed Casino. The opening of the Mirage in 1989 forever changed the perception of a casino and the expected amenities that a casino should offer. Casino operators realized that success required more than merely providing the opportunity to gamble. To succeed, they needed to provide a full variety of services ranging from rooms to beverages, to restaurants, to entertainment. Unfortunately, the City and State failed (or refused) to recognize this and insisted on a "gambling only" casino which would not compete with existing clubs, restaurants, and hotels.

The Bidding Process. Prior to 1992, the states which chose to implement casino gaming (with the exception of Nevada), generally permitted an unlimited number of licenses, but restricted the location of such casinos. In 1992, however, a new philosophy emerged which restricted both the number of licenses and their location. The New Orleans project launched this new licensing scheme.

The selection mechanism for both the New Orleans lease and the State casino operating contract utilized the RFP process. This procedure requires a government entity to first define the parameters of a project and then request bids. For example, Illinois and Indiana allocate a limited number of licenses to specific cities who subsequently issue RFPs and select the winning bids. Once a casino operator is selected by a city, the state must then approve the license. An alternative approach was used by the Province of Ontario. There, the Ontario Casino Board selected both the city and the casino operator. The designated city was permitted to select the specific site for the casino.

The initial problem with the New Orleans casino project was that both the City and the State wanted the final say in the licensing process. The ensuing two-year political battle between the City and the State led to a shotgun marriage between three reluctant suitors.

The first salvo in this battle occurred in April 1992 when Mayor Sidney Barthélémy, facing major budget problems, issued an RFP for a casino to be located at the Rivergate site in downtown New Orleans. He took this action prior to the State actually legalizing gaming. The Mayor chose the Hemmeter group to negotiate a lease. This choice was subsequently approved by the city council. Meanwhile, in June 1992, the Legislature, by a one vote margin, finally authorized a single land-based casino at the Rivergate site. Shortly after this vote, the State requested that the City not sign a lease until the State chose a casino operator. The City ignored this request and entered into a lease with the Hemmeter group in April 1993. The State, however, refused to confirm the Hemmeter group as the casino operator and issued its own RFP on April 29, 1993.

On August 11, 1993, the State selected the Harrah's group to operate the New Orleans land-based casino. The ensuing stalemate between the Hemmeter group, the City's choice, and the Harrah's group, the State's choice, was successfully mediated by then-Governor Edwards, a staunch gaming proponent. The result of this effort was Harrah's Jazz which entered into new negotiations with both the City and the State. These negotiations led to a new lease with the City in March 1994 and a Casino Operating Contract with the State in July 1994.

Temporary Casino. Two years had now passed. The City and State, needing revenues, felt that they could not wait another 15 months for the Rivergate facility to open. Thus, an agreement was reached to open a temporary casino at the Municipal Auditorium which would cost $41 million to renovate. This temporary casino opened on May 1, 1995, four months later than originally planned. It was situated east of the French Quarter in an economically depressed, high-crime area, far from major hotels and restaurants. Access to this casino was limited to taxies and autos. Amazingly, City officials encouraged patrons not to travel by foot or to park outside of the designated parking facilities offered by the temporary casino. While there is no direct evidence that this was one of the reasons that the expected casino visitations did not meet projections, one can not dismiss the old adage that location, location, location is the key to success in any business. In addition, the Mississippi River flooded that spring causing a temporary shutdown.

Permanent Casino. The permanent casino site is situated at the end of Canal Street between the New Orleans French Quarter and the 10,000 room hotel district. It is also within walking distance of most major downtown attractions.

The Hemmeter group's original proposal was to demolish the Rivergate convention facility and build a new facility. The Harrah's group, on the other hand, proposed remodeling the convention facility in three phases, 40,000 sq.ft. at a time. Ultimately the Hemmeter group plan prevailed and a new structure was started.

Financial Constraints. Financial constraints for the New Orleans project should be viewed from two perspectives:

* restrictions placed on the casino operations, and

* additional expenses placed on the casino.

A modem casino needs to be a full service operation which includes providing its cliental not only with the opportunity to gamble, but also with quality food, beverages, lodging, and entertainment. The City did not want the casino to take business away from existing New Orleans food, beverage and lodging establishments; and therefore, issued a RFP that either totally proscribed such amenities or limited them to a few, low quality facilities.

Astonishingly, the RFP indicated that the City believed that a potential casino operator would be more than happy to provide additional funds to the city as a bonus incentive for the lease. The RFP stated: "The casino development potential is so significant and valuable to the proposers, that the City encourages proposers to provide monetary benefits or bonus items to the City. These long term economic benefits to the City that may be achieved by a combination of factors, such as:

* Contributions-in-aid in the form of facilities or services to the City and/or not-for-profit agencies;

* Specific commitment for other real estate development within the City limits;

* Ground lease participation rent based on percentage of gross revenues, over and above the "win tax" payable to the state."

These additional "bonus" expenditures, when coupled with sizeable shortfalls in temporary casino revenues ($13 million a month instead of $30 million a month), a required minimum annual State gaming tax of $100 million, sky-rocketing construction costs, and regular lease payments, doomed the project.

Competition. Both the City and the State believed that the New Orleans project's monopoly feature created a significantly more favorable gaming climate for the New Orleans casino operator than that faced by its Atlantic City counterparts. While belief is admirable, its reality that wins out. First the New Orleans population base more closely resembled Las Vegas than Atlantic City. Less than 11 million people live within 300 miles of New Orleans whereas the New Jersey market has a population base of 60 million.

Furthermore, the New Orleans project did not share the non-competitive Atlantic City environment. By the time the temporary casino was fully operational in 1995, six river boat casinos were plying the New Orleans waterfront. Up to 15 other river boats were slated to cruise from other Louisiana cities. In addition, Biloxi, Mississippi (less than 60 miles away) had opened major casinos. Other casinos were also scheduled to open at various sites along the Mississippi side of the River. Furthermore, the State had authorized up to three slot machines (i.e., video lottery terminals) each for bars, taverns, restaurants, and clubs. Thus, thousands of convenient limited gaining locations were now available throughout the state effectively eliminating the need for the casual gambler to travel to New Orleans.

Financial Viability. As Harrah's Jazz reached agreement with both the City and the State, the casino project costs had escalated from $425 million to $850 million. Harrah's Jazz' equity contributions amounted to only $170 million, 20% of the total project costs. Thus, the remainder of the required funding had to come from bank financing ($138 million), a junk bond offering ($435 million), and forecasted cash flows from the temporary casino ($72 million). This debt/equity ratio proved fatal in the face of sever revenue shortfalls.

More importantly, however, City and State officials, more concerned with collecting revenues than insuring a financially viable enterprise, failed to appreciate the nuances associated with the newly created joint venture (Harrah's Jazz). First, it was a shotgun marriage from its inception. Secondly, their monetary demands were based primarily on the financial stability of HET, which had neither given guarantees nor provided evidence that it would continue funding Harrah' Jazz in the event of continuing cost over runs or other financial difficulties.

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

Volume: 5

Issue: 2

Pages: 22-31

Number of pages: 10

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412401

Document URL: http://search.proquest.com/docview/192412401?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 21 of 100

IN SEARCH OF EXCELLENCE ON THE INTERNET: DELL COMPUTER CORPORATION'S DIRECT MARKETING STRATEGY

Author: Combes, Francisco; Habeeb, Mo; Steinbrenner, Derek; Sun, Lei; Embry, Olice H

ProQuest document link

Abstract: None available.

Full text:

THE ASSIGNMENT

Derek pondered with his fellow team members the latest assignment for their strategic management class. The professor wanted each team to find and write about an example of excellence in the selection and implementation of a strategy. The professor also requested that the students use the internet as their primary instrument of research. Derek had recently purchased a Dell Computer on the internet and had found quite a lot of information about the corporation from its web pages. (WWW.DELL.COM/) Francisco suggested that they could also find out a lot about Dell from articles found by an ABI Inform search of 800 journals and periodicals on GALILEO (WWW.GALILEO.PEACHNET.EDU/HOMEPAGE.CGI), the Georgia Library Learning Online system available to students of the University System of Georgia. The following is distilled from the 1,300+ references about Dell that they found on the internet.

INTRODUCTION

Dell Computer Corporation, the fastest growing company in its industry, and the leader in direct sales, was founded 1984 in Austin, Texas. It has been almost 14 years since Dell pioneered the concept of selling personal computer systems to customers; offering built-to-order computer systems; and providing direct, toll-free technical support and next-day, on-site service. The company designs and customizes products and services to end-user requirements, and offers an extensive selection of peripherals and software.

Dell is the pioneer and leader of the customer-direct, build-to-order computer systems business. Because customers are central to Dell's business, the company provides personalized services, outstanding price/performance in its products and is fast to market with the latest relevant technology. By exploiting Internet commerce and technology, offering new value-added services and expanding its global reach. Dell is evolving the scope and efficiency of its direct business model to unprecedented levels.

Dell designs, develops, manufactures, markets, services, and supports a complete line of personal computers compatible with industry standards. Dell is the world's leading direct marketer of personal computers and one of the top five personal computer vendors in the world. Its direct sales approach eliminates layers of middlemen by dealing with customers directly. It also reduces inventory costs by custom-making machines to customer specifications. That means the company carries no obsolete parts and can deliver both the newest technology as soon as it become available plus if any reductions in component costs are passed immediately on to the customer. These gave Dell an estimated price advantage of 15% over rivals who sell through distributors. The Dell's becomes the synonymous with the latest in technology at the keenest prices and backed up by superior after-Sales Service.

Today, Dell Computer Corporation is the world's leading direct marketer of personal computers. The company is organized into three core geographical business units: Dell Americas, Dell Europe, and Dell Asia Pacific. It has direct sales operations in 33 countries and customers in more than 160 countries. Manufacturing facilities are located in Austin, Texas; Limerick, Ireland; Penang, Malaysia; and Xiamen, China. Each of these core geographical areas has Dell sales, engineering, support, and service personnel to manage government, corporate, and multinational accounts. The Dell Direct-Sales model and broad-scale geographic representation allows better management of customer requirements on a global basis and provides consistency of product. Dell's global commitment is one of the best in the industry. Dell offers comprehensive, focused service, support, and asset management programs around the world in an effort to help customer reduce overall costs of the ownership (Dell Computer Corporation, 1998).

BACKGROUND

Michael Dell began his computer business at the University of Texas, Austin. His dorm-room business officially became Dell Computer Corporation in 1984. Two years later, Dell Computer grew to 250 employees, and the company introduced the 2866-12 machine, which PC Week said, ". . .may become next industry benchmark."

In 1987, the company opened an office in the United Kingdom. This was the first step for the company doing business globally. Within the following 10 years, Dell opens offices in 33 countries. In that year, Dell's incoming call rate reached almost 1,700 per day. Dell's initial public offering was completed in June 1988. The company's common stock trades on the Nasdaq National Market System under the symbol DELL. The company employed 650 people and has record sales of $159 million.

Dell became the first PC manufacturer to offer free installation of applications software as a standard service option in 1991. In 1992, Dell introduced a new product line of low-priced Dimension PCs, which is one of the most highly decorated systems in the industry, winning many awards. In 1993, Dell joined ranks of the top-five PC makers worldwide Subsidiaries in Australia and Japan are company's first entries into Asia-Pacific region. In 1996, Asia-Pacific manufacturing center in Penang, Malaysia, opened customers begin buying Dell computers via Internet, and begins major push into network-server market. In 1998, Dell sales via Internet exceed $4 million per day; Dell announces major expansion of European manufacturing center in Limerick, Ireland; to keep up with demand in China, Dell announced the building of a China Customer Center in Xiamen (Dell Computer Corporation, 1998).

CORPORATE ANALYSIS

It has been almost 14 years since Michael Dell pioneered the concept of selling individually-configured PCs directly to customers, and distribution strategy is still considered by Dell Computer to be at the heart of its outstanding performance. "Direct" is how the company describes its relationships with its customers, from home-PC users to the world's largest corporations. There are no retailers or other resellers adding time and cost to the distribution of its products to customers, or interfering in Dell's understanding of customer expectations. By selling computers directly to its customers, Dell achieves several advantages over its retail competition: (1) Price for performance-by eliminating resellers, retailers, and other costly intermediary steps, coupled with an efficient procurement, manufacturing, and distribution process, Dell is able to offer its customers computer systems with more power and versatility for the money than its competitors. (2) Customization-Dell builds every system to specifications chosen by each individual consumer. Customers get exactly, and only, what they want. (3) Service and support-by collecting and mamtaining information gained from direct contact with customers before and after the sale, Dell is able to provide responsive, tailored customer service and technical support. (4) Minimal inventory-computer systems have an extremely rapid "spoilage" rate, meaning that purchased components quickly become worth less than they were bought for, and that manufactured systems lose their value rapidly. With its direct method, Dell can minimize its components inventory as well as the time-to-customer of its manufactured systems, thereby substantially reducing costs. Inventory is turned over every 10 days. (5) Latest technology-Dell's direct model ensures that the latest relevant technology is introduced into its product lines much more quickly than the slower-moving indirect distribution channels allow.

Customer orders at Dell progress through three phases: pre-sales activity, manufacturing, and delivery and installation of the computer system. For new customers who are uncertain of their computer needs, Dell's sales force provides advice and configuration planning through its toll-free telephone number. The order is placed over the telephone or on the company's Internet site, and then verified and sent to one of its manufacturing facilities.

When the order arrives, it is built and configured in a controlled assembly process using automated software download systems and multiple automatic diagnostic test functions. Numerous and rigorous quality checks are performed throughout the computer manufacturing process. All system components, including memory, video circuits, and drives are tested to assure they are functional and match the customer's order.

Once this process is completed, the computer is ready for packing and shipping. A final check is dome to ensure that all components ordered by the customer are included in the product. The computer is then carefully packed in specially-designed protective cartons so that it arrives undamaged, and is shipped by FedEx directly to the customer. Since the computer ships with all ordered software factory-loaded, it requires minimal installation by the customer. However, if a customer has questions or problems with an order, Dell operates a 14-hour, 6-day toll-free technical support hotline that is ready to assist customers for the life of the product (Dell Computer Corporation, 1998).

Dell's direct model was challenged by a skeptical Jim McDonnell, Hewlett-Packard's marketing boss for PCs, who insisted that Dell could not deliver a custom-built computer to a customer in under a week (Kirkpatrick, 1998). David Kirkpatrick of Fortune logged on to Dell's Internet site on the night of April 17, 1998, and ordered a state-of-the-art system to be sent to his home. The fully assembled and tested machine arrived 5 days later, in the afternoon of April 22.

STRENGTHS

Dell combines its finely tuned direct model with other company strengths. The company's systems perpetually receive superior performance ratings from the major independent computer magazines' performance benchmarks and consumer response surveys, most often taking the number one or number two ranking overall among home as well as business computers. This high level of performance is maintained in part by a $250 million annual research and development budget (Briody, 1998).

Dell's strengths have lead to phenomenal growth rates in sales, earnings per share, and stock price. Dell's annual sales growth rate is over 60%, and is not expected to slow in the foreseeable future. Furthermore, in just the past five years, Dell's stock price has risen from below a multiple-split-adjusted $1 per share to over $80 a share. In the last year alone Dell's stock price has risen by over 200%. To put that in perspective, a $1000 investment in Dell in 1996 would be worth over $20,000 today.

WEAKNESSES

A substantial weakness of Dell's direct model is that it tends to exclude first-time and less technologically savvy computer buyers. The company makes no secret of the fact that its distribution strategy is targeted primarily towards second-system and technologically-minded consumers, and contends that market is the most lucrative place to be. Most first-time and new-user buyers shop for computers at retail outlets like Circuit City, where they can speak face-to-face with a salesperson, and actually touch and practice using a computer. To put together a customized system takes some degree of knowledge about computer systems, and a belief that once it arrives, the customer will be able to assemble it alone. In its ads, Dell puts together sample system packages in an attempt to take away some of the anxiety about shopping for a computer, but it is not the same as having a system in a store.

Dell's competition includes companies selling computers through direct and indirect distribution channels. The main competitor in the direct distribution business is Gateway. Other companies have also gotten into direct distribution after seeing Dell's success, including Compaq and CompUSA. Competitors who use a retail distribution channel include IBM, Compaq and Packard Bell. Dell has approximately 6 percent of the world market behind Digital/Compaq and IBM. Since 1997, Dell's US market share has also grown rapidly from close to 1% to almost 9% (Serwer, 1997).

OPPORTUNITIES

Technology continues to become increasingly embedded in our culture, and its rapid advancement has allowed the technology sector to continue this unprecedented growth stage of the market (some might even argue the market is still in its introduction stage). With a distribution method that appeals to the increasingly technophilic as well as cost-sensitive consumer, Dell is poised to continue to exceed the best efforts of its competitors.

America's computer giants are going global. Dell is already established internationally with plants and sales offices covering Europe, Africa, Asia, and most of the American continent. Dell manufactures its entire line of computers in its locations in Austin for the US and neighboring countries, Limerick, Ireland, for Europe, Middle East and Africa, and Penang, Malaysia, for Asia-Pacific and Japan. Even though Dell already has an international presence, there is still great potential for growth. According to Michael Dell, about 3 or 4 percent of the world's population owns a personal computer. This provides huge growth potential for the industry.

The Internet is also expanding at an astounding rate. Dell receives approximately 800,000 visits a day to its web site and uses it to sell more than $4 million worth of products and services every day. As the Internet is becoming more accessible to many people around the world, Dell's opportunities for growth increase.

THREATS

In an industry moving at the speed of electrons, threats to companies' survival continually plague even the largest of computer giants: (1) Rapid changes in technology have been a constant battle since the industry's inception. No other industry in the history of the world has advanced so rapidly as computers and computer technology. Computer companies don't know what standards will be accepted or rejected by consumers, or even what technologies they will be incorporating into their systems 6 months from now. This presents a huge challenge for a company whose order turnaround is under 1 week. (2) The economic crisis in the Pacific Rim, popularly referred to as the Asian Flu, has brought concern from investors and corporate analysts alike. Currency fluctuations can have drastic effects on an industry whose components are manufactured all over the globe. (3) Computer prices continue to fall. The "sub-$1000 PC" is bantered around the press and Wall Street analysts. Dell contends that these machines are merely inventory dumpings by companies who still use indirect distribution methods and so suffer under massive inventory pressures. But the decrease in even high-end computer prices is also noticeable. (4) Most computer manufacturers that have traditionally used indirect distribution channels to deliver their products to customers have started using direct distribution to compete with Dell. Though none have thus far achieved Dell's expertise in the method, Dell has much to fear as those companies improve their system. (5) Dell is also faced with competition that uses indirect distribution methods to get products to customers. Some of these competitors use better advertising campaigns that may in the long run benefit them against Dell. (5) Finally, the computer industry is currently faced with potential governmental regulation. Microsoft is engaged in a legal battle with the Justice Department over allegations of anti-competitive behavior. The outcome of this lawsuit will have a direct effect on Dell due to the close relationship the Company has with Microsoft and its products.

INDUSTRY OUTLOOK

While the personal-computing market has expanded dramatically since the 1970s, Dell believes that the industry's best days and its own are yet to come, for two broad reasons: First, the stream of software and hardware innovation from companies such as Microsoft Corp. and Intel Corp. is rapid and robust, and is sharply increasing system performance and reducing the relative cost of computing. For example, in February 1982, Intel introduced its 286 chip, which was capable of processing 2.66 million instructions per second, or MIPS, at a clock speed of 12 million cycles per second, or megahertz. Today's Intel Pentium II processors are capable of more than 500 MIPS at 300 megahertz, and the sharp upward development trend is expected to continue. Second, while computer performance is going up, the relative cost of computing computer prices per MIPS has steadily declined, encouraging new computer users and more rapid PC replacement. Customers, in turn, are using those savings to buy even more powerful, more richly configured systems. As processor transitions and expected cost reductions continue, many industry analysts foresee worldwide industry volume growth of 15 to 20 percent annually over the next decade.

DEVELOPMENT OF THE DIRECT MODEL

Dell is continuously refining its direct approach to manufacturing, selling and servicing personal-computing systems. The company is committed to extending the advantages inherent in what is already the industry's most efficient business model. Current Dell initiatives include moving even greater volumes of product sales, service and support to the Internet, and further expanding an already broad range of value-added services. The Internet, the purest and most efficient form of the direct model, provides greater convenience and efficiency to customers and, in turn, to Dell.

Kevin Rollins, Dell's head of corporate strategy, says that his company is eager to extend its Internet business as far as possible. "Our vision is to have all customers conduct all transactions on the internet, globally," he says. It'll be a while before this happens-large corporate customers, which deliver 35% of Dell's revenues, are not yet buying over the Internet (although they most likely will be by year-end), nor are European or Asian customers. Dell services are focused on enhancing computing solutions for, and simplifying the system buying decisions of, current and potential customers.

By taking its direct business model to even higher levels, through the Internet and value-added services, Dell intends to continue to grow its business at a multiple of the high-growth rate anticipated for the computer-systems industry as a whole. Dell still has significant opportunity for expansion in all parts of the world, especially in markets outside of the U.S.; in all customer segments; and in all product categories, ranging from home PCs to enterprise products, such as network servers and workstations.

RECOMMENDATIONS

Because of Dell's direct business model, Dell has the flexibility to meet the future head-on. When the future arrives, Dell will be ready for it-no lag time will be required. From incorporating new technology into it's machines to finding unique business opportunities, Dell will be on top of things. Since Dell sells directly to end users-and build every machine to order-it can easily drop the latest technology into place, be it the new Pentium® processor with MMX(TM) technology or special, long-lasting batteries for our notebook computers. This is a lot quicker than waiting for an inventory of old models to sell out first (and a lot more entertaining). Dell won't just meet the future by bragging about advances in its product technology, it will also use new technology in the service part of its business. Dell has always prided itself on the service and support offered to its consumers, particularly in the way that it has been able to establish personalized relationships with the people who buy machines from them-individuals and multinational corporations. One of their principal benefits has always been that they have been a single point of contact for service and technical support.

Taking practical advantage of what the Net lets them do can only further our relationship with our customers (and save on 800 calls from Djibouti). The Online Store enables users to check out exactly what is available and purchase it, right from their homes or offices. Further, they can check on the status of their order at any time. In addition, since Dell is always looking for a better way to do things, they should continue to adapt to use new technology to further customize their services.

Of course Dell is already working on some jazzy new technology (jazzy as only micro-chips can be). But their goal should be just to have the newest features, but the right features. For example, in designing their notebook computers they did their best to combine the hot features, such as speed and memory size, into a unit that people can actually take with them and use without needing to plug it in every five minutes.

Dell is also involved in a couple of exciting new initiatives that could profoundly affect its future. Dell is a key member of the NetPC Consortium, a broad industry effort to make PCs more manageable and lower the total cost of ownership. The NetPC is designed to address the total cost of ownership for a user group that doesn't require the flexibility and expandability of the traditional PC. NetPCs are one element of Dell's Managed PC offering. Dell's OptiPlex series of managed PCs reduces the total cost of ownership across all areas of IT management and the computing lifecycle as a whole.

Dell is excited that these and other initiatives will enable us to deliver one of the lowest total costs of computer ownership through its direct business model, products, personalized services and industry alliances. So, over-all, Dell's goal shouldn't be to give Buck Rogers a run for his money, but to use technology to improve on what they do in selling computers and servers or offering technical support to people using them.

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

Volume: 5

Issue: 2

Pages: 32-39

Number of pages: 8

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412339

Document URL: http://search.proquest.com/docview/192412339?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 22 of 100

SHOEMAKER STIMULATION SERVICES, INC.

Author: Earl, Ronald L; Lenamon, Jeff B; Reed, Paul R

ProQuest document link

Abstract: None available.

Full text:

INTRODUCTION

Larry Shoemaker, President of Shoemaker Stimulation Service, Inc. (SSSI), is sixty-eight years old and fast approaching retirement. He is currently looking into future plans for his company. Larry has 46 years of experience in the oil well servicing industry. SSSI services oil wells with acid and sand to help them produce oil or gas more efficiently. This service is performed with eighteen wheel trucks equipped with pumps that pump acid or sand down oil wells, in hopes of dislodging unwanted sediments from clogged perforations in the pipe that flow oil or gas. SSSI services wells within a 100 mile radius of Albany, Texas. Financially, SSSI has never had a loss since its inception in 1986. The past four years SSSI has averaged $500,000 in net sales, and sales are expected to increase in the future due to more oil wells being serviced in the industry.

HISTORY

In 1986, Larry Shoemaker retired from Halliburton, the largest servicing company in the area, after a 35 year career as the assistant district superintendent. After three months, he was bored and missed work. Larry had also heard that some of Halliburton's employees were dissatisfied with their jobs, and wanted new employment. With these things in mind, Larry decided to go into business for himself. In the process of starting his company, he hired six Halliburton employees as field workers. One of the employees, Paul Potter, was named Vice President. Paul had a great influence on the startup of the business, by helping Larry acquire trucks and equipment before they started the actual company. Larry and Paul started spreading the word to let oil well owners know that they were going to be available to do business.

ECONOMIC FORCES

The key economic force that helps drive the oil service industry is the oil imports we receive from foreign countries, particularly the middle east. If the United States imports more oil than it exports, the price of oil tends to go down. Thus, oil firms sell less oil, which decreases oil production and fewer servicing jobs will be performed. However, there is a period of time that can be very lucrative for the service industry during this time. For instance, when fewer wells are being drilled, there tends to be a slight increase in servicing the existing wells that are already in production. Larry says oil prices rarely affect his business. He is confident that he is in a safe industry to keep steady flows in revenue.

Another factor that affects servicing companies profits is volatile chemical prices. Larry says that chemical prices such as acid are constantly on the rise, increasing usually twice a year. As prices continue to increase, it becomes more difficult for companies to manage expenses.

Government taxation laws are another important economic factor that affects the oil well service industry. These taxation laws that face corporations are continually changing. It is very important for small companies to learn the tax advantages that are available. For instance, corporations can purchase preferred stock from other corporations and get a 80% tax break. This provides an excellent means of increasing cash reserves within retained earnings, while still keeping the cash liquid for any future purchases that might arise. Currently, SSSI has an estimated $180,000 cash from retained earnings that is in a checking account at the local bank.

COMPETITIVE FORCES

SSSI currently has competition in the surrounding area. The largest competitor is Halliburton located in Abilene, Texas. They have about fifty employees, along with four acid trucks and two frac(sand) trucks. Halliburton's main business is cementing, which is the process of pouring cement around the outside of the underground pipe to hold the pipe into place. The cementing business is a very profitable business and many well servicing companies have expanded into this area. Halliburton also does acid and frac(sand) jobs on the side. Due to Halliburton's pricing policies, the smaller companies in the area can beat them on price. Currently, Halliburton's markup is very high, thus, small companies in the area can beat Halliburton's prices on a servicing job by an average of 30%. One year after SSSI went into business, Halliburton decided to close its Albany office and move its trucks and equipment to Abilene, its main headquarters in the area. Halliburton does most of the large acid and sand jobs, which the smaller companies cannot perform due to lack of equipment. Larry expects Halliburton to move out of Abilene in the next few years, due to the low revenue producing area. SSSI is one of four small companies that compete for jobs in the local area. This keeps SSSI and the others so busy that they usually turn down jobs due to a lack of trucks, equipment, and employees. SSSI currently turns down on average seven jobs per month. The shortage of equipment forces well owners to use Halliburton when the other smaller companies have their eighteen wheel pump trucks out on location. However, Larry is hesitant to expand his company because he feels that there is not enough demand to justify the purchase of another truck. Another reason to not expand is that he is ready to retire and expanding his business would mean added time to his work day. Also, Larry feels that there are not enough good workers in the area that are willing to learn how to run the trucks and be safe. A good used truck can be purchased for about $180,000. The average oil well servicing job is priced at $2,500, with a range in price varying from $500 to $7,000. Prices are dependent on the depth of the oil well and the amount of chemicals the oil well driller requests.

GOVERNMENT REGULATION IN THE SERVICE INDUSTRY

There are several factors that threaten companies competing in the oil well servicing industry. First, companies such as SSSI uses hazardous chemicals to treat wells, which brings about tight rules and regulations from government agencies. The Occupational Safety and Health Administration (OSHA) regulates industry equipment and the safety of the work environment. OSHA can fine a company for any breach of regulation that pertain to a safe work environment. OSHA also regulates hazardous materials and the way they are handled. For instance, if a company spills a large amount of acid, they can be forced to dig up the dirt around the spill and ship it to Austin, Texas to be evaluated. The company that spills chemicals has to pay the cost of shipping new dirt to take the ruins' place.

The Department of Transportation(DOT) also plays an important part in the environment in which the oil well service industry operates. DOT can evaluate eighteen wheel trucks to see that they meet safety criteria for road travel. As a result, companies in the industry can be fined for not following the rules and regulations of the DOT. Thus, employees must be highly trained to run the pump trucks correctly, and must be well versed in DOT rules and regulations.

Another environmental concern for SSSI is the worker's compensation insurance inspectors. These inspectors investigate the safety of the work environment at SSSI every two or three months. Failure to comply with their regulations can result in a loss of worker's compensation insurance that allows workers to draw compensation for being hurt on the job.

MANAGEMENT

Larry and Paul are owners of the company, with ownership interest of 85% and 15% respectively. Joyce is the secretary, in charge of keeping records of each job performed and answering the phone during regular office hours, 7a.m. to 4:30p.m. Monday through Friday. SSSI has calls after hours transferred to an answering services. SSSI currently has no computer to track invoices, inventories, and other budgets. The rest of the employees are field workers, who perform the servicing jobs.

Exhibit 1 shows the organizational chart for SSSI.

The culture of SSSI is very laid back. SSSTs field workers come in and talk to Larry on a social basis when there are no scheduled jobs. Also, the workers are good friends and have worked together since their Halliburton days. This produces an atmosphere that is good for communication between all employees. Managerial decisions can be quickly passed down the line of employees at SSSI.

Larry is in charge of all production/operations decisions. He directly communicates to the field workers servicing job criteria. Larry and Paul take turns working weekends. If a job must be performed on the weekend, then whoever is on call performs the job. The field workers are on a similar weekend schedule, with two field workers always on call for weekend jobs.

Jobs in the industry are obtained by bids. Customers call on the phone and Larry calculates the price for them. If a customer wants the job done, Larry tells the field workers directions to the well and the criteria in which to perform the job. Usually the owner of the well is at the well location during the service job.

SSSI currently has two eighteen wheel pump trucks, one having the capacity to hold 1,000 gallons of chemical mixture, while the other capable of holding 1,500 gallons of mixture. Whenever SSSI gets more than two jobs at the same time, they have to turn down the job. Larry says its not as bad as it sounds because they can perform four jobs with the two trucks in a days work, performing two jobs in the morning and two in the afternoon. SSSI has a sand truck which can haul up to 25,000 pounds of sand, and various other transport trailers and accessories. (SSSI also has a contract diesel mechanic that is on call in case a truck breaks down.)

SSSI also has a 5,000 square foot office building, a 3,000 square foot equipment shop, and a 1,000 square foot storage building for sand and chemicals all on a six acres lot northeast of town. The field workers sometimes use the equipment shop for personal uses.

MARKETING

SSSI advertises in the yellow pages of the phone book, high school football and basketball programs, church bulletins, and The Albany News. SSSI also purchases five one minute radio ads during broadcasts of local high school sporting events. There is no specific budget SSSI follows pertaining to advertising.

Larry visions SSSI as a means of helping the community that he lives in by supporting local commerce. SSSI has also brought new jobs to the community of Albany. He feels that helping the community is his duty. Larry says:

"Albany is my home. Everything that happens around here is everyone's business. Helping people is a way of life for the people of Albany. I simple do my part in helping Albany be a great place to raise a family for hardworking people."

FINANCE/ACCOUNTING

SSSI outsources its finance/accounting needs to a local CPA who provides Statements of Income and Balance Sheets each month. Exhibit 2 displays SSSI financial data for the past three years.

SSSI has very good credit with the surrounding banks in town, due to Larry's community involvement and his commitment to debt management:

"My business has very little debt and that is the way it will stay. If I have the money to buy something, I will buy it, if not, I will probably pass it up. Debt to me is to used only in an emergency."

From following the guidance of Larry, SSSI has established itself as the premier servicing business in the area. Larry has more experience in the servicing industry than any other competitor. Well drillers from around the area call Larry on a regular basis and seek his professional advice on how to treat wells. Ask anyone in the industry, customer or competitor, and you will hear comments about how smart and experienced Larry Shoemaker is and how important he is the oil well servicing industry in West Texas.

THE FUTURE

The questions that concern Larry most are should he continue on working as president of SSSI, pursue a product development strategy by concentric diversification through cementing jobs, or just retire and maintain his ownership interest in the business? Another alternative might be to expand by picking up a new eighteen wheel pump truck to service jobs that are currently being turned down due to SSSTs lack of equipment and manpower. A plan of action needs to be developed for the near future.

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

Volume: 5

Issue: 2

Pages: 40-45

Number of pages: 6

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412394

Document URL: http://search.proquest.com/docview/192412394?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 23 of 100

TRANSFORMATION MANAGEMENT AT CSA, INC.

Author: Talor, Michelle; Gulbro, Robert D

ProQuest document link

Abstract: None available.

Full text:

BACKGROUND

CSA, Inc. (* actual name withheld, permission to use name was denied) was founded in 1966 with a single purpose; to solve the most demanding current technical problems. The company established itself as a technological innovator by working for the United States government and providing modeling, simulation, analysis and evaluation of integrated navigation and guidance systems for such high profile programs as the Minuteman Missile and the Space Shuttle. This work led to the firm's technically renowned reputation in the areas of geodesy, radio navigation, radar, sonar, mapping science, and optical systems. In the 1970s, its efforts spread into the areas of information management and decision-support systems for the government, analytical approaches for disposing of nuclear waste, and software engineering for embedded software systems. CSA broadened its expertise through acquisition of companies specializing in the areas of reconnaissance, communication, intelligence, and real-time weather information. These capabilities have enabled CSA to strengthen its market position as well as to break into new markets.

Then, in 1991 CSA ITSELF was acquired by a leading global information services holding company. The holding company's businesses were focused on the data intensive financial information and communications/ computer information markets. Today, CSA has more than 2600 employees, with annual revenues in excess of $385 million, and more than 25 offices throughout the United States and the United Kingdom.

SITUATION

In January of 1996, the firm's CEO and a group of senior CSA managers began evaluating the company's position and thinking about the future of the company. They knew that the world was changing and could easily leave the firm behind if changes were not made. Many external changes were occurring that had an impact on the company. For example, there was a continued decline in the Dept. of Defense budget, with more competitors strongly competing for the remaining customers. Also, major prime contractors were targeting CSA' s professional services business. At the same time, numerous external job opportunities for CSA employees were causing good employees to leave the firm.

Although CSA was doing well, the CEO knew that past performance was no guarantee of future success, and concluded that some key changes in how the company did business were necessary to sustain its record of success. The CEO knew that CSA would have to change whether it was directed to or not. During the early part of 1996, the CEO and other managers met with the employees to discuss what was happening in the various markets and why the firm needed to change.

CSA explained to its employees that several of the firm's goals were not being met and cooperation throughout the organization must improve to better serve customers. The company also recognized the need to improve the depth and focus of its technology/experience base. Lastly, in order to support and achieve growth targets, CSA had to improve its own technology infrastructure as well as curb turnover rates and competition for new employees. The CEO and managers also identified and presented the factors necessary for the change to be successful. The firm needed strong leadership that could involve employees in future activities but at the same time hold those employees accountable who did not accept those new company strategies.

The CEO held meetings with employees and ended each of them with this quote, "What separates the great companies from the good companies is the ability to adapt to the changing environment before being forced to change by a financial or business crisis." The CEO traveled to several of the company's offices to personally present the situation. For the locations he was not able to reach and for employees who missed the presentation, a video was put together and distributed to each and every office.

THE CHANGE PROCESS

CSA had never undertaken a formal change effort before and knew that a very high percentage of these types of programs fail. To avoid mistakes, CSA hired an outside consultant who had worked with other successful companies such as GE, Disney, and PepsiCo. As a change agent, the consultant provided the company with a ten- step process that was used to guide the change effort. These steps included communicating a sense of urgency, and to develop a clear, strategic framework within which change could occur. Also, the firm needed supportive managers that could focus on big ideas and involve people in the process. Management had to set realistic targets, obtain better coordination, benchmark important measuring points, and to find ways to relieve the pressure on all employees.

CSA began the change process in February 1996 with the CEO and top-level managers informing and enlisting the aid of all managers. The consensus of the CEO and managers was that the change process should set ambitious goals and institute change in areas that would have a beneficial and lasting, strategic effect on the future of the company. To do that, three task forces for addressing critical issues were created. These three task forces were:

Corporate Values Task Force. The CEO and managers felt that it was important to define the values of the company that should endure even in the face of change. This task force was chartered to identify and articulate the firm's enduring values.

Pricing Task Force. This task force was chartered to look at how the firm constructs its labor cost multipliers, how it compares with competitors, and what actions could, or should, be taken to reduce direct and indirect costs so it could be more competitive.

Operations Task Force. The charter for this task force was to investigate the issues surrounding alternative pricing strategies. This group would focus on making the firm more competitive while at the same time maximizing profits.

While the task forces were researching and reviewing their tasks, the CEO and management began development of a strategic framework. The framework began with a formal survey of customers, followed by an assessment of markets, competitors, and core competencies. The framework developed provides a high-level look at CSA's guiding mission, values, targets, and strategy for the next several years.

Once the strategic framework for the firm was developed, the change efforts were greatly accelerated. In July 1996, the "Transformation Staff" was appointed. This staff was made up of five employees who were reassigned to oversee the change efforts on a full-time basis. The transformation staff turned its attention to four major elements of the change process. These elements included the following: Being a great place to work - everyone must realize that people are the core of the company's capabilities and must enjoy their work. Sharpening the competitive edge - technologies, costs, skills, processes, etc. must all fit. Maximizing national security - the company must refocus on the core business without the exclusion of commercial or government diversification efforts. Thinking big - the company must have a large impact on any new markets entered or opportunities pursued, and must apply resources wisely to each activity.

Then in August, with the aid of senior managers, the change process was introduced to the employees. Again, the reasons for change and the requirements necessary for successful change were addressed, along with the 'Big Ideas,' which were the bases for the change process. The introduction of the four 'Big Ideas' presented a major opportunity for employee involvement and for employees to work as change agents for the company. The idea behind recruiting internal change agents was to actively involve CSA employees in the change process and obtain their commitment to the future of the firm.

It was recognized that if employees acted as change agents they could help identify areas that needed change, help to flesh out the challenges associated with changes in a particular area, recommend alternatives and timetables, communicate findings, and finally could promote and assist in implementation. At this time, two important groups in the change effort were identified (one internally focused and one externally focused) and began to address the first two big ideas.

1) Great Place to Work Task Force. This group was given the task of identifying, defining, and setting priorities, and then recommending specific actions that would make CSA a great place to work. This task force used employee insights gained through group feedback, surveys, and one-on-one interviews to understand what changes were needed to make CSA a better place to work. The group also looked externally by reading articles highlighting best practices and by visiting other companies to learn how to succeed in achieving an engaged and empowered workforce. Changes were implemented immediately after approval or within 90 to 120 days of approval. Some major changes that were implemented included an enhancement of the flexibility of the work environment through casual dress, flexible work schedules, and a pilot program for telecommuting. In addition, an Employee Awards Program was begun to recognize excellence and reward outstanding performance by individual employees. Finally, the firm eliminated bureaucratic procedures to help streamline decision-making and greatly reduce the number of approvals required on the company's most used forms. The firm encouraged the notion of fun in the workplace with the creation of 'fun teams' across CSA to bring people together and build team spirit. A program called 'life works' was introduced that provided information and consultation to support employees in facing the challenges of balancing work and family commitments.

2) Sharpen Our Competitive Edge Task Force. This group's purpose was to identify, define, set priorities, and recommend specific actions that would make CSA more competitive in its markets. This task force spoke with a large number of people to collect input and suggestions to help in planning. These benchmarks became instrumental in developing strategies to help CSA become more competitive in the industry. The company began to implement changes within 90 to 120 days. Some of the major implemented changes were to publicly reward and recognize those employees who had contributed exceptional technical performances to CSA or to customers. The firm provided intensive, high-quality training to a sizable number of staff members in strategically targeted technology areas. The company's internal R&D programs were enhanced through a concentration of efforts on fewer but larger programs that were aligned with corporate technological priorities. The firm recognized individuals who achieved advanced degrees through a tuition reimbursement program, thus demonstrating the value of having highly educated professionals. The potential for staff rotation between programs and geographic locations was considered to foster career growth and renewal for employees.

At this point, it was time for CSA to address issues more specific to individual groups and business units. These issues dealt with global, cross-organizational retention and competitiveness. The next two ideas, maximizing national security growth and thinking big, were to be targeted with task forces that would begin working in 1998. The groups would follow the same processes as its predecessors. The last two ideas would require the management team to continually ensure that line and administrative organizations recognized their responsibility for ownership of the transformation of the organization.

CSA was very successful in implementing the changes concerning being a great place to work and in strengthening the competitive edge ideas. The CEO, management, and many employees felt that the company did a great job in implementing the changes. Many of the employees appreciated the company for pursuing the great place to work idea first. In regard to the 'strengthen our competitive edge idea,' many employees felt that the changes would help CSA to be more successful, but only if the entire company truly makes a commitment to succeed.

Of course, along with those employees that respected the efforts and changes, there were those who disliked the whole process. While a small percentage of the employees felt that although some of the ideas were great and could succeed, others thought the company just wanted to look good on paper. The majority of the employees, however, supported the changes that were implemented.

DISCUSSION

Smooth implementation of organizational change requires broad support for it to be successful. In this case the firm started the change process on a positive note by making it a better place to work. This action on the part of the firm communicated that the employees were the most important part of the change. Credibility by firm management is extremely necessary when making major changes in processes and activities. The majority of the employees thus bought in to the changes and helped to make them work instead of passively resisting the entire process.

FUTURE EXPECTATIONS

Although, the CEO and management know that while many important changes have been made thus far, they also know that there is still much to do to strengthen CSA and ensure the future desired by all. They feel that the next stage in the change process is about the business units and individual groups and the role of each in CSA reaching that future. They have no doubts that the change process of CSA will only succeed through the involvement of all of its many employees.

SOURCES

Company web site, interviews with selected employees, and various annual company reports.

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

Volume: 5

Issue: 2

Pages: 46-50

Number of pages: 5

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412399

Document URL: http://search.proquest.com/docview/192412399?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 24 of 100

COMPENSATION AND MANAGERIAL TURNOVER: WHEN SAMTEC'S INCENTIVE PROGRAM CREATED DYSFUNCTIONAL TURNOVER

Author: Hatfield, Robert D; Cheek, Ron; Sale, Martha L

ProQuest document link

Abstract: None available.

Full text:

PART I: BACKGROUND OF SAMTEC

Sam and his wife Betty Shine started a small manufacturing company in Southern Indiana to supply tiny wire connectors made of platinum, gold, and other metals to the fledling computer industry in 1976. Sam lead not only in originally defining the mission and strategy of the company, Samtec, but lead in designing its effective Human Resource approaches as well.

Today, Samtec, Inc., is a worldwide manufacturer of PC board level interconnects. Worldwide Samtec revenue is $125,000,000. Samtec has 5 manufacturing plants and a total of seven offices around the globe including offices in Scotland, Singapore, Germany, France, Italy, and Japan. Samtec is still privately held and continues to employ about 200 employees at the Indiana plant and office. The son of Sam and Betty is now the president, John Shine. Samtec, Inc. is ISO9001 registered with a 4-A1 Dun and Bradstreet rating, the highest available for a corporation this size. Samtec is recognized as the service leader in the connector industry.

Part of the founding strategy of Samtec was a niche strategy of providing fast and "sudden service" to manufacturers and industry users in a scheduling bind. This strategy demands that the workforce be willing and able to hurry orders, often small, through the manufacturing processes using the less stable "job shop" scheduling approach. In contrast, large manufacturers in the area, which includes Louisville, Kentucky, used more controlled scheduling approaches which leveled the work required of the employees and provided a more stable environment. Further, the Shines realized that supplying computer board connectors was a relatively new industry which was dependant on another fairly new high-tech industry - PCs and the expansion of computer technology. Being part of the early stage of the product cycle often creates instability and perceived insecurities among employees.

There were also important internal factors which effected the original personnel policies which were not necessarily linked to the strategy of Samtec. From an internal aspect, the work of producing and inspecting tiny connectors made of valuable metals can be considered light assembly or inspection work. In fact, the modem facility is comfortable and air conditioned. Further, while the production duties require detail and good eyesight, training requirements for the manufacturing jobs are not extensive enough to consider the jobs "highly skilled". Therefore, the majority of the staffing requirements are for semi-skilled, light assembly jobs.

There are least a couple of important external factors which are important to Samtec's personnel policies. Barriers to recruitment included name recognition, location, and skill requirements.

Since the development, manufacturing, and distribution of computer and solid state connectors deals with industrial clients, rather than the household consumer, few people outside the industry are likely to hear about Samtec and its products. This means that from a household consumer standpoint, Samtec is a very low profile employer.

The attractive new industrial park where Samtec chose to locate is in New Albany, Indiana, which has a limited population of only 14,500. In the 1970s the population was well below its current level. New Albany is located north of the population center of the region, Louisville, Kentucky, where the population is over 600,000. Most residents of Louisville would have to drive to, then through, the congested downtown area before entering southern Indiana. This means that the most likely applicant pool is limited to the small towns in and around New Albany.

The development of both the products (connectors and related hardware) and the manufacturing technology to produce these products requires a small but critical staff of specialized engineers. Historically, recruiting for engineers has been very competitive in the Louisville area.

Considering both the internally and externally driven challenges to staffing, the Shines decided to install a compensation and benefit package which would meet these challenges. As sole proprietors, the Shines decided that they wanted to share a significant portion of the profits with the employees. Sam told employees "I would rather split the company's profits with my employees than split it with the IRS." While job technology, community relations, managerial style, workplace justice, training, and other important issues were also focused upon, Sam believed that the total compensation program was a key to successful staffing in New Albany. In fact, the plan was for Samtec's compensation to be well above that expected based upon the location and skill.

PART II: THE BONUS

First, Samtec decided to use a wage survey to reveal the average wages for benchmark jobs, including light assembly. Such wages are higher in the urban areas of the region and somewhat lower in the more residential or rural areas.

Second, the decision was made to not focus upon the base wage as the special attraction of the pay approach. Samtec decided to pay the average wage (for the residential area) of the wage survey as its base wage. Sam was convinced that the sharing of any Samtec profits needed to be linked to performance.

Third, a calculation or equation needed to be determined which would link any profit-based with the performance(s) of concern to the Samtec owners and management. This required Sam and the five top managers to decide just what results they wanted to reinforce with their incentive approach.

Sam was dissatisfied with the typical profitsharing plans which were common in the late 1970s. Typically, employees received some percent of their salaries based upon the general profit results of the company for which those employees worked. Many companies would pay "up to 9%" (or whatever number) based upon the fact that the company was profitable that past year. Unfortunately, this generally does not provide a very clear link between the work or effort of the individual and the bonus received. In large companies, or in international companies, the efforts of any one individual are generally unrelated to the profits of the employer. Perhaps the only behavior being reinforced in such profitsharing schemes is that of staying with a profitable company.

Sam also wanted to help spawn entrepreneurs. He had started as an employee and had later ventured out successfully as a business owner. He stated that Indiana and, indeed the nation, needed for more people to step out and try to make a success in small businesses. Sam, later recognized as Entrepreneur of the Year in Indiana, philosophically believed that small businesses were good places to work and good for the economy. Sam knew that entrepreneurs need capital.

Based upon a determination of what performances were to be rewarded, two formulas were determined: one for nonmanagerial employees, and another for managerial employees.

Nonmanagerial employees, primarily 150 assemblers, receive a point value determined by job evaluation. Harder and more advanced jobs had a higher base wage and higher point values. These job evaluation points are then multiplied by the performance appraisal score. The review or performance appraisal reflects the performance of that individual over the past twelve months. Seniority was also given some weight. These three factors are then multiplied by a Samtec profit allocation amount, which is based upon the profits of the past year.

The results for many years in a row, through the 1980s, was that the assembler with good performance would receive a bonus equal to that assembler's annual income. For example, if the assembler made $10 per hour ($20,800 per year) then the assembler might receive about $20,000 in year-end bonus. An inspection of the plant parking lot always revealed a lot of new cars in January after the pre-Christmas distribution of bonus checks.

The fifteen managerial employees were under the same formula except another factor was added. The factor of meeting and exceeding departmental and plant goals (as appropriate to the job) strongly effected the formula. The effect of this added element in the bonus formula changed the functional maximum (there was no absolute maximum) from a factor of 1 times the annual base pay to a factor of about 3 times the base pay. The results were that for years without interruption a manager making $45,000 per year would receive a year-end bonus of $135,000. The effect of this huge comparative bonus was well beyond that of new car purchasing.

PART III: REASSESSING THE BONUS

In 1986 Sam and the Samtec managers had to deal with an unusual problem. Three of the top five managers had resigned. The reason these three top employees gave was that they had accumulated so much money over the past five years or more that they were each ready for a life style change. One opened a plant similar to Samtec and the other two also opened their own businesses. While Sam and the coworkers of these three were certainly outwardly happy for the exiting managers, they were also very concerned about whether the bonus system, as implemented, was effective for Samtec.

On the short term, the loss of three of the top five managers at once put great stress on the organization. There was some fear that other managers might decide to resign. Further there was a lot of discussion among nonmanagerial employees about the greater generosity of the managerial bonus.

On the long term, Samtec thought that it should reexamine the amount, formula, and timing of its bonuses. Sam had desired a bonus system which would create entrepreneurs. This goal was being met. However, Sam had imagined key employees leaving only one at a time. The formula was based upon individual performance factors and also included departmental or plant performances for managerial employees. Sam had always paid the bonuses prior to Christmas to enhance the holidays for his employees. Employees were growing to expect this large annual bonus. Sam predicted that there would be years in which there was little or no profit to share. Should the bonus system be changed to "prepare" employees for this likely event?

Samtec brought in one of the authors as a consultant at this point.

DISCUSSION QUESTIONS

1. Based upon the facts presented would you recommend that Samtec change any part of the bonus system? If so, would you change both the managerial and nonmanagerial bonuses? Give the details of any changes you recommend.

2. Are the goals and performances which are built into the current formulas appropriate for Samtec's stated situation, philosophy, and strategy?

3. Explain how your recommendations reinforce Samtec's philosophy and strategy, and explain if your recommendations properly reward the performances and goals seen as important by Samtec.

4. What is your approach to preparing employees for a possible year(s) in the future when there may be no profits to share, and therefore, no bonus check.

5. Would you like to work for Samtec?

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

Volume: 5

Issue: 2

Pages: 51-55

Number of pages: 5

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412320

Document URL: http://search.proquest.com/docview/192412320?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 25 of 100

SOUTHWEST AIRLINES: WHEN ARE WE NO LONGER SMALL?

Author: Jackson, William T; Watts, Larry R

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Abstract: None available.

Full text:

HISTORY

The early years provided numerous challenges to Southwest, and set the stage for what has followed over the last twenty-five years of operations. As management of the company insists today, this is when the Southwest spirit was born.

In 1996, Rollin King, a well-respected businessman of San Antonio, came to Herb Kelleher with an idea too preposterous to ignore. As Herb sat in his law office where he had been practicing for several years, he listened to King's vision of starting a Texas airline that would serve Dallas, San Antonio, and Houston using heavy jet equipment.

Although this idea was novel for Texas, it had already proven itself in California (a state very similar in regard to geographic separation of major cities within a state) through PSA and Air California. Both of these carriers had been extremely successful with intrastate coverage, even during a period of high government involvement.

Because of his legal prowess (not to mention his entrepreneurial spirit), Herb Kelleher was an ideal candidate to assist in getting the carrier off the ground. It took over three years from the time that Herb filed the initial application to fly these routes before the considerable legal positioning to counteract the activity of other competitors that were flying these routes-Braniff, Texas International and Continental. Numerous suits were filed against Southwest, and the early years involved standing up against these giants in the courts. These battles finally culminated with the U.S. Supreme Court refusing to hear the complaints of the other carriers, and Southwest was finally free to fly the skies of Texas.

The battle was not over yet though. The next two years of striving to become profitable was the next hurdle to clear. Then, just when the black ink was hardly dry, Southwest was again taken back to court by the cities of Dallas and Fort Worth for refusing to move their operations to DFW International Airport. Once again the fight went all the way to the U. S. Supreme Court. As before, Southwest emerged victorious.

Through these hardships, as well as those encountered after the implementation of the Airline Deregulation Act of 1978, Southwest developed its personality of doing things unconventionally. This maverick attitude continues to permeate throughout the company to this day.

As the most recent annual report states, the company has just completed their twenty-fifth year of profitable performance. Southwest has growth each year from a regional carrier with four airplanes to one with over 243 airplanes today, and serving a substantial part of the country. They must be doing something right.

MARKETING

Promotion

Southwest has long been known for its creativity in regard to promotion. Although the public was very cognizant of Southwest's ads, it was often more for each ad's impact rather than the quantity of ads. As Kelliher once said, ". . . we couldn't afford much out of the pocket, so we had to spend out of the mind." These ads certainly caught not only the attention but also the affection of the customers.

This flair for creativity didn't end in the seventies. A good example of this can be seen if this example of an ad that appeared in 1992. When Northwest Airlines advertised that they had the highest customer satisfaction level in the industry (even though Southwest was not included in the sample), Kelliher responded with this satirical essay.

A recent trend in promotion used by Southwest for those that are "connected" is the use of the Internet. While their home page (www.iflyswa.com) is used for reservations and as a source of schedules, it provides considerable information and entertainment for anyone interested in the firm.

Price

Low prices have always been the stalwart for this company. For Southwest it is more than just a functional strategic decision, it is a way of life. As the company's 96 Annual Report declared: "We're not a low fare airline, we're THE Low Fare Airline. The difference isn't in our prices; it's in our philosophy. " This is typically reflected in their promotion as can be seen in response to the ever present price wars within the industry.

As discussed in operations of the firm, this can only be done when you have extreme control over your costs. Many firms, not as efficient as Southwest, have tried this approach with little to no success.

Product/Place

While stressing a no frill product of transportation from point A to point B, Southwest has been extremely successful in customer satisfaction. As Herb recently pointed out to shareholders, the company had won its third annual Triple Crown for best baggage handling; best on-time performance; and fewest customer complaints per customer carried. This is very impressive considering that Southwest flew 624,476 flights, carrying 42,742,602 passengers. In addition, they were recognized as first in the Airline Quality Rating statistics.

Although the company had been started on the concept of inter-state Texas, flying between Dallas, Houston and San Antonio, their current route coverage reflects a strong national coverage. The carrier now provides service to 49 cities in 24 states with numerous localities requesting air service.

In addition to their increased geographical coverage, Southwest has engaged in their effort to increase the distance of their flights. While this approach is partially due to the vast expansion made in its geographical coverage, others would argue that it is in response to recent tax law changes. In July 1997, Congress implemented a new tax structure effective October 1, 1997. The basic change is to eliminate the flat ten percent tax on ticket prices and to implement a flat tax per flight. Therefore, a flier would be charged the same tax for a 400 mile flight as it would for a 1,000 mile flight. For short-haul frequent flight carriers such as Southwest, this represented a considerable increase in taxes for its customers. Further, for a firm that prided itself in offering affordable airfare, this represented increased costs for its customers. The increase in longer flights (more than a dozen over 1,000 miles) equates to an increase of two and one half times its average flight of 410 miles.

Things have not always gone smoothly for the carrier as they experience these massive growing pains. Probably one of the darkest days for Southwest occurred on January 11, 1995-a day referred to by the company as Black Wednesday. It was on this day that, due to bad weather in five of the Midwest cities the company serviced, that the company almost lost control. It was so bad that the company, which at the time was monitoring all scheduling with paper and pencil, lost track of scheduling for all five of those cities. This situation escalated to the point that by the next day the company was looking for crews and airplanes that were scattered all across the country.

EQUIPMENT

Southwest has for many years been recognized as a carrier with one of the youngest fleets in the industry. The company continues to follow the philosophy of utilizing only one type of aircraft-Boeing 737s. As Table 2 shows the average age of this fleet is only 7.9 years which is well below the industry average. Of the total number of aircraft, 124 are owned and 119 are leased.

In addition to the general benefits associated with a newer fleet, 81 percent are also equipped with the quieter, more fuel efficient Stage 3 engines. Of the older planes,

the company has order 20 hushkits (with options for 14 more) to be installed to allow these planes to meet Stage 3 noise standards.

Southwest will continue to ensure the youth and efficiency of their fleet by the aggressive acquisition of the newest version of the 737-the 700 model. The arrival of the first plane is scheduled for the fourth quarter 1997. The new 700 series will fly faster, farther, and higher than the previous models.

LEADERSHIP

Even though Herb Kelleher might disagree, at the center of the effectiveness of leadership within the company is Herb himself. It is through his unorthodox delivery of common sense principles that leaders at Southwest inspire the workers below them.

Herb suggests we need only follow a few simple rules to motivate people to do their best. These rules include: Walk your walk (do what you say you are going to do); Focus on things you can control; Be prepared; Sharpen your political skills (politics is really only dealing with people); Love people to action; and Listen for more than you hear.

SOUTHWEST AIRLINES OFFICERS

Herbert D. Kelleher

Chairman of the Board, President, and Chief Executive Officer

John G. Denison

Executive Vice President

Corporate Services

Luke J. Gill

Vice President-Maintenance and Engineering

Camille T. Keith

Vice President-Special Marketing

Pete McGlade

Vice President-Schedule Planning

James F. Parker

Vice President-General Counsel

Dave Ridley

Vice President-Marketing and Sales

Elizabeth P. Sartain

Vice President-People

James C. Wimberly

Vice President-Ground Operations

Colleen C. Barrett

Executive Vice President

Customers and Corporate Secretary

Carolyn R. Bates

Vice President-Reservations

Michael P. Golden

Vice President-Purchasing

Gary C Kelly

Vice President-Finance, Controller Chief Financial Officer

William Q. Miller

Vice President-Inflight Service

Robert W. Rapp, Jr.

Vice President-Systems

Joyce C. Rogge

Vice President-Advertising and Promotions

Paul E. Sterbenz

Vice President-Flight Operations

Gary A. Barron

Executive Vice President Chief Operations Officer

Alan S. Davis

Vice President-Internal Audit and Special Projects

Ginger C, Hardage

Vice President-Public Relations and Corporate Communications

William D. Lyons

John D. Owen

Treasurer

Ron Ricks

Vice President-Governmental Affairs

Roger W. Saari

Vice President-Fuel Management

Keith L. Taylor

Vice President-Revenue Management

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

Volume: 5

Issue: 2

Pages: 56-65

Number of pages: 10

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412284

Document URL: http://search.proquest.com/docview/192412284?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 26 of 100

COMPETING IN THE HIGHLY COMPETITIVE ISP INDUSTRY FROM THE VIEW OF A SMALL FIRM

Author: Morris, Linda J; Morris, John S

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Abstract: None available.

Full text:

CASE SUMMARY

Bob Dalton, the General Manager of CyberView, just received a telephone call from Tom Salmon, Chief Financial Officer for Cyber, requesting a meeting to discuss CyberView's operating results for the past year and its projections for growth and profitability. To prepare for this meeting, Bob needs the assistance of his marketing manager, Rian Tate, and his sales manager, Jessie Wheaton. The past year's financial reports show that CyberView is close to breaking even after four years of operation. After showing losses for the past three years, Bob was just starting to feel better about the operating results. However, industry trends show that the internet service industry is entering the shakeout period. Bob and his managers must come up with a strategic business plan that will not only help them survive during this shakeout period, but they must have a plan for growth in a very volatile, technology-driven industry.

Cyber, a large manufacturer of computer components, is the parent company of CyberView, a local internet service provider. Cyber's workforce consisted of highly trained mechanical, electrical, and computer engineers that developed many of its systems for manufacturing and management information. In particular, Cyber had developed a very sophisticated internal management information system to connect manufacturing units in its national and international offices. In 1994 Bob Dalton, a software engineer with Cyber, approached upper management with a plan to start an external internet service to the city of Boydton, population 200,000. The demographics of Boydton appeared to be a lucrative market for internet service because of the high educational level of its citizens and the percentage of households with computers. Also, there appeared to be a potential ISP market among the many mid-size and smaller businesses of the region. CyberView could build on its parent company's in-house technical expertise as well as its customer contacts in the computer industry. Furthermore the reputation of Cyber as the leading employer in the area and its international reputation for high quality computer components could help build the customer base for CyberView. The internet service business unit appeared to be a good idea as it allowed Cyber to diversify into another industry.

Four years have now passed and although the customer base for CyberView has grown, Bob Dalton has yet to see a profit from this business. As the internet service technology has improved the added costs of technology have limited the profitability of CyberView in its start-up phase. The standard $19.95 monthly fee seems to be the upper price point for most customers. In fact some of CyberView's local competitors have even priced at $10.95 per month with unlimited service. This pricing scheme has attracted many first time internet users and price- sensitive users. Many of these customers are not aware that these ISPs are not equipped to handle many customers. As a result, these ISPs will provide lower connectivity rates and there is likely to be more downtime problems due to the system overloads. It is little wonder that industry standards reflect that household users change ISPs every six months. Unlike its local competitors, CyberView offers the $19.95 for the first 100 hours of internet usage. Beyond 100 hours, there is an additional $1.50 per hour. CyberView maintains a sophisticated billing system that alerts the customer when they are within 3 hours of exceeding the 100 hour limit. For its business customers, CyberView offers five Internet access plans that varied in range of benefits and monthly costs to the commercial customer. A field sales staff along with technical support personnel would consult with each company to ensure that the network system requirements and the services provided fit with the needs of the customer. CyberView also held an annual User Conference to help their business and home-based business users on some of the latest technology development and business applications for internet usage.

As Bob Dalton plans for his discussion with Tom Salmon, he realizes that CyberView must be a profitable business unit in order for Cyber to maintain it beyond the four years it has currently existed. Furthermore, competing on price alone will not enable the firm to survive. Bob and his management team must think about how to market their services to a wider audience and to provide a level of customer service that surpasses its competitors. Bob Dalton has called a meeting with his marketing and sales managers, to go over the industry analysis and to formulate a business growth strategy. Bob feels it might be time for CyberView to expand beyond the Boydton region and provide service to a three-state region in order to gain economies of scale in certain facets of the business. CyberView has the upgraded its technology for expanded bandwidth and has established strong relationships with router systems and other technology companies so that the firm is capable of extending its internet service region. Bob feels the reputation of the parent company, Cyber, has certainly helped in these vendor and technology relationships and it is likely to help expand its customer base..

DISCUSSION QUESTIONS

The key discussion questions to be addressed in this case are:

How can a small ISP grow its customer base without diluting its customer service? How can a small ISP compete with the large ISPs with marketing muscle and partnership relations with computer firms and utility firms?

* How can CyberView gain economies of scale and scope that would help it compete with larger national ISPs?

* Should CyberView use a mass market appeal to households and commercial users or should the firm find a market niche? What are some other market segments they should pursue?

* Should CyberView expand to a three-state regional market or stay focused on the local market with fewer smaller ISPs competing with the national ISPs?

* What type of pricing scheme should be used to attract and retain commercial customers? household customers?

* What value added services should CyberView provide to maintain its existing customer base?

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

Volume: 5

Issue: 2

Pages: 66-68

Number of pages: 3

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412414

Document URL: http://search.proquest.com/docview/192412414?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 27 of 100

KING FOODS: A CASE STUDY OF THE RISK ASSESSMENT PROCESS

Author: Kraut, Marla A

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Abstract: None available.

Full text:

ABSTRACT

In 1992, a significant study on internal control titled Internal Control - Integrated Framework was published. It was sponsored by the Committee of Sponsoring Organizations of the Treadway Commission, a group of several accounting organizations. The study is often referred to as the COSO Report. In December 1995, the Auditing Standards Board issued SAS 78, which amended SAS 55 to adopt the definition and description of internal control contained in the COSO Report.

According the COSO Report, "internal control is a process, effected by an entity's Board of Directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

(1) effectiveness and efficiency of operations,

(2) reliability of financial reporting, and

(3) compliance with applicable laws and regulations."

In order to meet these objectives, the COSO Report requires that five components of internal control be present:

(1) control environment,

(2) risk assessment,

(3) control activities,

(4) information and communication, and

(5) monitoring.

Companies are currently involved in designing procedures to establish and maintain the five components of internal controls. CPA firms are designing audit procedures to evaluate the five components. Auditors have been evaluating the control environment and control activities components of internal control as part of external audits for decades, but the other three components are new concepts. In reviewing several popular auditing texts, it was noted that three to four chapters pertained to evaluating control environment and control activities, whereas only two to four paragraphs pertained to risk assessment, information and communication, and monitoring.

This case has been developed to describe a Fortune 500 company's risk assessment process (the company's Internal Auditor has asked to remain anonymous). Their risk assessment process consists of the following steps:

(1) identify the threats to an organization,

(2) determine any risks and concerns regarding the threats,

(3) determine how much potential loss is present,

(4) determine the probability of a loss actually occurring,

(5) estimate the risk,

(6) rank the risks,

(7) determine if controls exist to mitigate the above risks,

(8) design or formulate additional controls if necessary,

(9) implement controls,

(10) tests operational compliance of controls, and

(11) evaluate controls.

The case details the company's results of the risk assessment process, i.e., the actual threats and risks identified by the company's management as well as the process used by management to continuously implement the process.

This case is designed to be used in an undergraduate or graduate auditing course. In order for students to learn how to audit a client's risk assessment process, they must first understand the risk assessment process. This case has been developed to provide exposure to one company's process and therefore provide guidance for this understanding.

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

Volume: 5

Issue: 2

Pages: 69-70

Number of pages: 2

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412456

Document URL: http://search.proquest.com/docview/192412456?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 28 of 100

THEA COUNTY CONSTRUCTION GRANT: AUDIT DILEMMA

Author: Kraut, Marla A; Niles, Marcia S

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Abstract: None available.

Full text:

CASE DESCRIPTION

The primary subject matter of this case is the interaction of inappropriate financial dealings with the audit function. It raises a number of ethical, legal and professional issues as well as the dilemma of the actions the staff auditor should take. It is designed for an undergraduate or graduate auditing course, but could be adapted for a senior level or graduate policy course.

CASE SYNOPSIS

Thea County desperately needed a new sewer plant. The five county commissioners applied for a $5 million State grant and the county was awarded $4 million. The project would consist of a design and needs assessment phase lasting approximately six months with an assigned budget of $400,000. The construction phase would begin immediately thereafter and consume the remaining funds over the nine month construction period.

Twelve bids were received ranging from $ 5.5 million to $ 4.2 million. The bids covered both the design and construction stages of the project. The county commissioners accepted the third lowest bid of $ 4.8 million from Gordon Construction. The two lower bids were not accepted because the bids did not include services of a Certified Engineer, which was a requirement of the State grant. A month later the Certified Engineer left Gordon Construction. Since a crucial component of the contract was violated, the county commissioners voided the contract. The commissioners unanimously decided not to go out for rebid. Instead, they contracted with a local company, Castle Construction Company.

Nine months later Brown CPAs L.L.P., was engaged to perform an initial audit for Thea County. Brown had previously audited several smaller counties and was pleased to get Thea's audit. Thea had previously been audited by a sole practitioner who had died during the audit year.

During the evaluation of internal controls in the disbursement cycle, Fred, a staff accountant for Brown CPAs, discovered that the sole owner of Castle Construction Company is a Thea County commissioner. After a lengthy discussion with the audit partner Fred started investigating the potential related party issue. After several days of research, Fred had discovered a number of facts that he summarized for the partner:

(1) Castle Construction Company did not submit an original bid for the project.

(2) Neither Joe King, the owner of Castle Construction, nor any of Castle 's employees is a Certified Engineer. However, they did subcontract the review of the construction plans with a Certified Engineer.

(3) Castle Construction Company does not have any experience building sewer facilities. Their construction activity has focused on farm and industrial storage facilities. The amount of their largest previous building permit is $850,000.

(4) Joe, as the project supervisor has received $70,000.

(5) The project is not yet at the construction stage and is already $ 57,500 over budget.

(6) The county's bank account does not reconcile by $ 90,000.

(7) The county clerk, who is solely responsible for the county's checks/disbursements, is Joe King's wife.

Discussion Questions:

(a) What are the ethical issues Fred faces?

(b) What are the audit issues?

(c) Are there any additional audit procedures that Fred should perform?

(d) To whom should Brown communicate their concerns?

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

Volume: 5

Issue: 2

Pages: 71-72

Number of pages: 2

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412457

Document URL: http://search.proquest.com/docview/192412457?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 29 of 100

STATE ATHLETIC CLUB: GROWTH CHALLENGES AND OPPORTUNITIES

Author: Olson, Philip D; McClanahan, Heather

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Abstract: None available.

Full text:

INSTRUCTOR'S NOTES

To make best use of the material covered in the case, it should be utilized in an entrepreneurship class after the strategy and franchising topics have been covered. If an instructor does not plan to cover franchising or wants to use to utilize the case directly after covering the strategy topic, it can still be used. In this situation, discussion question number four on franchising should be omitted.

1. Perform a SWOT analysis. That is, discuss SAC's internal strengths and weaknesses, and its external opportunities and threats.

Strengths include: good business location; committed owners; profitable business; almost ten years of learning what does and doesn't work for a Clarkston athletic club; knowledge and experience in the area; personal attention that comes from a family owned business; invested interest in the community; roots in the community; and experience with a wide range of target markets. SAC's weaknesses are: inability to attract and retain weight trainers; limited capital; Sharon and Jack's limited business backgrounds and management experiences; Ben's lack of management experience or mentoring given his position in SAC; and SACs past reputation of offering inferior children's programs. Opportunities include: SAC is in a growing industry (physical fitness); SAC is located in a growing community. Threats are: current Clarkston competitors, in particular, the new YMCA plus gyms, swimming pools, etc. in Clarkston ; and other athletic clubs, gyms, swimming pools, etc., in nearby communities.

2. What can be done to reduce the weight trainer turnover?

There are at least two reasons weight trainers do not stay at SAC: salary issues and conflicts with Ben. Salary concerns could to some extent be addressed through the use of bonuses. Jack and Sharon, for example, could decide to share a portion of SACs annual profits with all their weight trainers, or with those who attain a certain performance level. Of course, to implemented either of these ideas, a process for allocating the profits would need to be established. Regarding conflict between Ben and weight trainers, Ben needs mentoring on how to manage employees. Although he has excellent equipment knowledge, he is young and lacks experience on how best to supervise these "key" SAC employees. If Jack and Sharon are not able to assist him in making changes in his style, they probably need to remove him as a supervisor.

3. Which strategy, of the four discussed, would be best for SAC to pursue? Why?

The first three strategies (children's programs, expand facilities, and reduce prices) are reactive strategies to YMCA's opening in Clarkston. Offering children's programs could potentially lead to more business, but it is an uphill battle based on SACs former attempts. Expanding SACs facilities is the most expensive option and Jack and Sharon would probably need to borrow capital, as they have done in the past, if they selected this route. A concern here is the degree to which they currently are in debt. Also, are they willing to assume more debt given the possible increase in sales may not cover the estimated increase in costs. Reducing prices is the least costly option and, in turn, it offers the smallest possible gain in sales. Again, this option is a purely reactive one to YMCA but it could be easily implemented; hence, it is appealing. The last strategy, targeting upper middle-class and single adult markets, is also attractive. There is risk as to whether these markets are large enough. However, given that Clarkston and the surrounding areas have been growing, the risk is reduced. Also, upper middle-class people and single adults typically have money to spend for memberships.

4. If Jack, Sharon, and Ben were to consider franchising their business, what would they need to have in place? Is franchising a viable option at this point? Why?

Three requirements exist for becoming a franchisor. First, a successful business pattern or formula needs to be developed. Included here are operating instructions, special equipment, personnel policies, and record keeping. Second, a franchising system needs to be formulated. Key franchising system items are trademarks (a word, logo or picture legally reserved for exclusive use), franchise contract (initial fee, royalty, etc.), advertising strategies, and state and community laws needing to be observed. Regarding trademarks, SACs logo that is placed on the workout clothing which Jack and Sharon sell would need to be reserved, if this has not yet been executed. Third, resources need to be available to implement the franchise structure. Items included here are the training program for new franchisees and the control system for ensuring that franchisees adhere to their contractual obligations.

At this point in time, it would appear that franchising is not a viable option. Although the owners have accomplished many of the items in the first requirement, no information was presented that they have satisfied the second or third requirements.

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

Volume: 5

Issue: 2

Pages: 73-75

Number of pages: 3

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412329

Document URL: http://search.proquest.com/docview/192412329?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 30 of 100

STRATEGIC MANAGEMENT OF R & D: A FIELD STUDY

Author: Onsi, Mohamed

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Abstract: None available.

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ABSTRACT

The purpose of this field study/case is to examine the critical factors for a corporation to strategically manage its R & D for competitive advantage.

An a priori model, based on a literature review, was developed integrating organizational, economic, marketing and financial factors that are significant for allocation of R & D scarce resources.

A field study of a growing mid-size company in the medical instrument field was the basis for intensive study, personal interview of key top managers, and data gathering and analysis.

The company developed a model, named Gateway, for managing product introduction for competitive advantage. The Gateway model captures critical information at different stages of product development from design - development - manufacturing - marketing to service throughout the value chain to assess and manage risk on a portfolio basis. The total risk is a function of: technical risk, time risk, and cost risk. The trade-offs between these three risk components are evaluated relative to the mission of each strategic business unit, based on multi-dimensional analysis.

The Gateway model enables the company to leverage its core comptency, avoid hidden risk, and increase its profits.

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

Volume: 5

Issue: 2

Pages: 76

Number of pages: 1

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412352

Document URL: http://search.proquest.com/docview/192412352?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 31 of 100

EMPLOYEE TURNOVER AT FASHION PRODUCTS INC.

Author: Shah, Dhruv; Shah, Shital; Brown, Sheryl; Embry, Olice H

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Abstract: None available.

Full text:

HISTORY

Neucor Manufacturing Company, Inc., was founded in the early 1900's in New York. From the early 1920's to date, Neucor pursued an ambitious program of growth by acquiring smaller companies. In the early 1970's, Neucor went public and shares were traded over the counter. Late in the 1970's Neucor Corporation was listed on the New York stock exchange. Because of its acquisition strategy, Neucor is a multi-billion dollar company today with several companies under its roof. One such subsidiary of Neucor is Fashion Products Inc. Fashion Products was founded in the mid 1960's in a rural community of west Illinois. Today, Fashion Products is a multi-million dollar company and a market leader in its industry. Neucor acquired Fashion Products, Inc. in the early 1990's. With its corporate headquarters in a suburb of Chicago, a local distribution center and huge manufacturing facility in west Illinois, Fashion Products employs about 2,000 people with about 1,400 employed at the manufacturing facility.

CORPORATE STRATEGY

Since Fashion Products is a subsidiary of Neucor, it is bound by Neucor standards. Since the late 1960's, Neucor has acquired numerous companies. In the 1990s alone, Neucor acquired over 10 major companies, representing over $2 billion in additional sales. Future acquisitions and growth will provide an EPS growth averaging 15% per year. By adhering to a tightly focused business strategy, Neucor has established a sustainable competitive advantage and has consistently attained its aggressive financial objectives. These financial objectives are: (1) Maintain return on beginning equity of 20% or more; (2) Achieve EPS growth averaging 15% per year; and (3) Increase Neucor's dividend consistently with its earnings growth.

INTERNAL ENVIRONMENT

The headquarters in the Chicago area consists of the executive staff, marketing and sales departments. Thus, this facility primarily employs salaried people. Their manufacturing facility consists of engineering, operations, purchasing and planning departments. Of the 1,400 people employed at this facility, about 1,200 are hourly workers and about 200 are salaried.

Fashion's products are considered to be low-tech requiring semi skilled workers. Fashion Products is strategically located in west Illinois. However, after being acquired by Neucor, Fashion Products has been forced to improve its productivity and to adopt the higher standards of Neucor. This has lead to the hiring of young and ambitious professionals who have the "go, get it" attitude. These young professionals prefer to live either in the suburbs of Chicago, or in other urban areas which are 30 to 40 miles away. The reason people commute so much is because the manufacturing facility is located in a remote town of just 5,000 people.

Fashion Products has a hierarchical organizational structure with a top down management approach. Management is highly centralized and employees on the floor are not allowed to make decisions. However, employees can participate in employee teams and try to resolve production or efficiency related problems. Professionals over a certain level are rewarded by yearly bonuses. These bonuses are based on the return on assets. These bonuses range from 0 % to 66%, depending on the position of the employee. Other employee raises are a meager 2% to 4% every year. These raises are 0 to 2% when adjusted for inflation.

The organization structure starts with the CEO of Neucor at the top. The chart shows only the Neucor and Fashion organization structure. It's corporate culture shows that management follows a top down approach. In markets where Fashion Products is competing, management needs to have feedback both from employees and customers in order to move faster than the competition. Marketing executives are unaware of what customers want in new products and hence marketing strategies are poor. This has been demonstrated by some recent failures in new product launches.

CORPORATE ANALYSIS

Fashion Products strengths include: (1) an established brand name that people associate with high quality, (2) deep pockets because it is under Neucor's umbrella, (3) excellent relationships with mass merchandisers that allow Fashion's products to be placed in the most strategic positions on the shelves, and (4) it is the market leader in its industry and focuses on its core competencies which are fashion and grooming accessories. Fashion Products weaknesses include: (1) poor distribution strategies and (2) high turnover of professionals. Fashion Products opportunities include: (1) retaining experienced professionals to make and successfully market more innovative products, (2) empowering employees to increase the pace that new products hit the market, (3) new product markets and market penetration are strategies which will create synergy and help Fashion Products increase sales (4) Fashion Products can export to Canada and the Latin American countries. Fashion Products threats include (1) intense competition from low cost manufacturers in the orient. (2) high turnover of experienced professionals that increases the cost of new hires, and (3) a very volatile market with short fashion life cycles that requires new products to be developed and introduced very rapidly.

EMPLOYEE TURNOVER AT FASHION PRODUCTS, INC.

In the past, the primary focus of business was profit. Now, Fashion Products is slowly realizing that profits come from productivity and productivity comes from happy and loyal employees. In the 1970's and 1980's the baby boom generation was entering the workforce and reducing the demand for unskilled, semi-skilled, skilled labor as well as for professionals. Analyst believe that between the mid 1990's and 2010, there will be a decline in the workforce. The employee relationship is a formal arrangement but it is a relationship, nonetheless. Like any other relationship, it will be successful only if both parties work at it. Looking at employee turnover data and conducting a systematic analysis of those trends is the first step in trying to reduce the turnover.

In trying to analyze these trends and to project turnover rates, three types of turnovers need to be analyzed (Connor 97). Job related turnover involves those factors over which the employee has direct control. Supervisory training programs can reduce this type of turnover along with clarification of the employer's purposes and identification of job satisfiers. The non-job related turnover issues are those in the employee's personal life that spill over into the workplace. These are factors such as relocation and family influences. Useful practices for this category include employee assistance programs and providing stress management training. The third type is a poor fit between the employee and the firm. Professionals at Fashion Products are hired by direct advertisements in newspapers and magazines as well as through recruiters. Professionals are promoted from within the company, from the same department or from other departments as well. Managerial positions are typically filled in a span of 3 months to 1 year. However, hiring may be delayed due to a hiring freeze. All potential new employees are sent for a psychological and aptitude test. This is a good method to measure a prospective employee's specific job related characteristics. This test measures an individuals personal communication techniques, leadership qualities, self-image, dependability, competitiveness, attitude and stress management.

PERCEPTION OF WORK BY EMPLOYEES

There are several reasons that force people to quit their jobs. Some of these are:

1) Location of the company

Fashion Products is located in a remote town in west Illinois. The population of this town is about 5,000. The nearest interstate is about 25 miles away. Most of the blue collared workers are local residents. However, more than 90% of the white collared workers commute either from the suburbs of Chicago or from other urban areas. It takes the employees about 45-50 minutes to reach the manufacturing facility traveling on state highways having low speed limits. White collared employees do not choose to live locally because of the size of the town and the fact that it has just a couple of schools and poor health care facilities. Commuting is one of the major reasons why professionals quit their jobs.

2) Benefits

A new employee starts off with a one week vacation. Employees in other firms, in similar companies start out with a two week vacation. Managers are rewarded with yearly bonuses and promotions, based on their performance. They are also invited for celebrations when the company has a profitable year. However, other professional staff, technicians and machine operators are left out of these celebrations. Is this conveying a signal that these employees are not important for the firm? Maybe so.

3) Poor relationships with supervisors

When supervisors are hired from outside or promoted from within, there is no training provided to them on managing employees. Not all supervisors have an MBA or even a four year degree; hence they are ill-equipped with proper management skills. This situation causes discomfort amongst employees and is one of the reasons why employees leave.

4) Better salaries elsewhere

Fashion Products is not one of the best paying firms. The living expenses in and around the area are amongst the highest in Illinois. The sales tax is 7%, the state taxes are fairly high as well. Today, when there are more jobs than people, it is easy to get better wages and benefits. The individual has nothing to loose, but the firm looses an experienced employee.

5) Little appreciation from supervisors

A technician typically works from 8 a.m. to 5 p.m. But, to finish up an important project which has cost savings of over a million dollars, he comes in at 4 a.m. and leaves at 6 p.m. The project is completed successfully and the Director of Manufacturing is very happy. The result is that the technician's boss gets promoted to a managerial position. The technician does not even get a few words of praises. Such situations spread dissatisfaction among employees. This technician left within 3 months. He had been with Fashion Products for over 10 years. He had been a very loyal and a hardworking person. Who looses under these circumstances? Obviously Fashion Products. Employees get a feeling that they are just another number.

6) No career advancement

Though the company does try hiring from within if possible, not every employee gets a chance. Some people leave their positions when they want to move higher up the ladder and do not see any chances of being able to do so.

7) Personal reasons

A person may quit if his/her spouse was transferred, or took up a job in another city. More often than not, people leave to be closer to their families. Women may quit if they have to take care of their young kids. Bad health could be another reason.

8) Stress

The individual is stressed out either because the job is too demanding and/or because of personal reasons.

9) Misfit of person and job

The personality traits required for a particular position may not be present in the employee. For example, a salesperson should preferably be a good communicator, organized, people oriented, honest and tenacious. If a salesperson does not possess these skills, it is very likely that if he is hired, he will leave or be fired.

CALCULATING THE COST OF EMPLOYEE TURNOVER

When an employee leaves an organization, it experiences substantial costs. Costs to the organization may include decreased productivity, costs of hiring a new employee, increased training time and other indirect costs. Turnover is usually computed as the number of employees separations divided by the total number in the workforce and expresses as a percentage. Younger, newer, unskilled and blue-collar employees tend to have higher turnover rates than their contrasting groups. Fashion Products does not have a severe organizational wide turnover of blue collared workers. This trend is prevalent in young white collared professionals.

Not only is the quantitative rate of turnover important, but the quality of personnel leaving an organization is important as well. Those who leave may be the company's most valued human resources. Special attention should be given to turnover among employees with unique skills.

The following worksheet is an approximate breakdown of separation costs, vacancy costs and replacement costs:

Separation costs include the following categories:

Cost of leaving employee's time (30 minutes @$30/hr.) $15

Cost of administrative functions related to separation (2 hrs. @ $20) $40

Total Separation costs $55

Vacancy costs

Costs of additional overtime (20 hrs. @ $40 for 4 weeks) $3,200

Costs of additional temporary help (20 hrs. @ $35 for 2 weeks) $1,400

Total Vacancy costs $4,600

Replacement Costs

Pre-employment administrative expenses (3 hrs. @ $20) $90

Costs of attracting applicants (Advertising, staff time, recruiters) $10,000

Costs of entrance interviews (5 interviews for Ihr @$40/hr.) $200

Testing costs (2 potential employees) $1,000

Staff costs (One 30 minute meeting with 3 people @ $40/hr.) $60

Travel and moving expenses (1 employee) $2,000

Sign up bonuses (1 employee @ 8% of salary) $3,500

Cost of post-employment medical exams $75

Total replacement cost $18,925

Training costs

Cost of informational literature $20

Formal training costs $200

Informal training costs (Socializing 1 day @ $40/hr and 1 day @ 30/hr) $560

Total training costs $780

Knowing the cost of losing and then replacing an employee will help Fashion Products determining how much it can afford to invest in keeping them. It will also help to analyze whether the investment in keeping the employees is adding to the bottom line (Pinkovitz, 1991). William Mercer, Inc. surveyed 206 medium to large US companies yielding the following:

ASSESSING TURNOVER

Fashion Products does not have any established system of exit interviews. Hence there are no official records for the reasons of an employee separation. By carrying out exit interviews Fashion Products can pinpoint major reasons for turnover and can thus improve the factors which will cause employee turnover.

CONCLUSION

Fashion Products tries to recruit the best, develop the best and retain the best employees. The relocation department is disjointed from the development and retention process. Keeping the relocation department involved in a quality human resource process will give Fashion Products a better chance of addressing dissatisfaction among new employees and with managing turnover (Oltman, 1998). The secret to retaining employees is to make the workplace a fun, clean, profitable, ethical and adventurous environment. Though this statement does not sound like business, this is what the future is about (Lauer & Gebhardt, 1997). The officers of Fashion Products should seek help in redesigning its HRM programs.

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

Volume: 5

Issue: 2

Pages: 77-83

Number of pages: 7

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412312

Document URL: http://search.proquest.com/docview/192412312?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 32 of 100

MEDIGROUP PURCHASING, INC.

Author: Smith, D K (Skip); Kunz, David

ProQuest document link

Abstract: None available.

Full text:

THE SITUATION

December 1994. John Smith stared again at the check and smiled. Three years of absolute agony had ended. The disastrous MEDNET partnership which Medigroup Purchasing Inc. (hence, MPI) had formed with three other Group Purchasing Organizations was finally terminated. Also, this financial settlement from its former partners would allow MPI to launch a new organization to offer hospitals the equity position which MEDNET had promised but never really delivered. Smith got out a pad, and started drafting a memo to his leadership team setting forth his initial thoughts regarding structure and strategy for the new organization.

THE COMPANY

MPI is a Group Purchasing Organization (hence, GPO) for hospitals. The company was founded by John Smith in 1971. Because it handles the purchasing of medical equipment and supplies for hundreds of hospitals and other providers of medical care, MPI is for most manufacturers a large and powerful customer. The company uses this power to negotiate low prices for its members on their purchases of medical equipment and supplies. Thus, hospitals and clinics purchasing through MPI pay substantially lower prices than all but the largest customers choosing to deal with the manufacturer directly. As for MPI, it makes its money through an administrative fee, paid to it by the manufacturers as a percentage of the total revenues on orders placed by MPI members.

A predecessor organization to MPI served clients within the midwest. Over the years, however, many GPOs including MPI have become national in scope. MPI currently has over 19 Regional Directors and Vice Presidents. The major responsibilities of these individuals are to service member facilities and to market MPI programs to prospective accounts in all 50 states. Field reps reporting to these managers are located throughout the U.S.

The key selling tools utilized by MPI sales and marketing staff include a variety of CD Rom, network-based, and/or hardcopy information sources designed to provide MPI members with the latest information on prices of various medical equipment and supplies. Specific tools include the following:

* Electronic Catalogue: materials management information on CD-ROM(also available on microfiche)

* Pharmacy Electronic Pricing System (also available in hard copy and microfiche)

* Laboratory Program: pricing information on pharmaceuticals (available electronically and in hard copy)

* Dietary Program: contracting information available in hard copy

In addition to its administrative and sales staff, and the negotiators responsible for developing contracts with medical equipment and supply manufacturers, MPI has over the years, developed a host of on-staff specialists to assist customers in managing the costs and operations of specific medical functions. Specialists on MPTs staff currently include laboratory, pharmacy, dietary, and materials management. MPI also has a compliance department to monitor and audit member participation in MPI programs and contracts, to ensure that members do receive the discounts to which their participation in MPI programs entitles them. The organization chart in Exhibit 1 identifies other MPI departments including member support services, teleservice, cost analysis, capital budgets, and management reports.

A relatively new area of endeavor for MPI is a division called "BESTPRAC." The mission of this MPI division is "to enhance MPI members' ability to deliver cost-effective healthcare." BESTPRAC does this through a process involving re-engineering, best practice/benchmarking, cost determination programs, and strategic information/group reporting. Through this unit, MPI members are provided on a fee-for-service basis with conceptual and implementation expertise on a variety of specialized areas, including:

* Materials Process Engineering

* Supply Flow Studies (operating room, pharmacy, labor & delivery, procedure-based, per diem-based, capitated-based)

* Procedure Costs by Physician

* Benchmarking Data (materials management operations, clinical repository, financial repository, food accounting cost and trend statistics)

* Implementation of Advanced Materials Systems (JIT stockless)

COMPETITIVE CONSIDERATIONS

In the beginning, MPI's primary competitors were GPOs based on a business model (that is, recruit large numbers of members, use the huge volumes of member purchases to win discounts from manufacturers, and then flow these discounts back to members) very similar to MPFs. In 1981, however, a new competitor called EQUIMED emerged. The business model underlying EQUIMED is a Sub-chapter T Cooperative, an organization form which allows EQUIMED to pass its profits to members tax-free. The hospitals become members, and because many are themselves non-profit entities, this arrangement allows EQUIMED member companies to avoid completely the payment of taxes on the profits generated by their EQUIMED purchases and ownership.

EQUIMED's original purchasing program was neither especially good nor especially effective. Over the years, however, EQUIMED's management team worked diligently to improve it. By 1984, EQUIMED had assembled a substantial portfolio of very favorable contracts with mainline suppliers, was becoming much more competitive, and was attracting (through its equity-based approach) substantial numbers of new tertiary (that is, very large and specialized) hospital members. So, while MPI in 1985 aggressively expanded its operations in both Louisiana and Texas, and acquired a GPO named WESTCO which was serving hospitals in Colorado and Montana, EQUIMED was at the same time successfully selling its services on an equity basis to tertiary institutions in most of the largest U.S. cities. It became clear to Smith and the MPI management team that unless MPI was able to address the equity issue, it was not likely to continue to have access to and/or win major amounts of business from the large tertiary hospitals.

FORMATION AND EVOLUTION OF MEDNET

In 1986, in response to increasing competition with EQUIMED, MPI and three other group purchasing organizations (CLINICARE, based in Southern California, ERIEMED based in Eastern Ohio, and ASTROCARE, based in Massachusetts) formed a company called MEDNET. MEDNET was based in Chicago, Illinois. Like EQUIMED, MEDNET was designed to provide hospitals the ability not only to benefit from large discounts associated with group purchasing, but also to invest in and have an equity interest in the GPO. In other words, the underlying concept was that hospitals would be both owners and customers of MEDNET.

While the concept (or structure) underlying MEDNET was clear, it began to be clear to Smith and his colleagues at MPI that their partners in MEDNET might have different aspirations and objectives. When MEDNET was founded, the four partners had agreed that there should be pro-rata sharing of revenues and equal sharing of expenses. However, over the next several months, MPI's partners protested with increasing vehemence that dividing expenses into four equal shares was not a satisfactory arrangement. This was galling to Smith, especially in the case of CLINICARE, where MPI had turned over MPI accounts in CLINICARE's service area to CLINICARE, as compensation for their participation in MEDNET.

Late in 1986, Smith accidentally discovered the full extent to which the difference between the objectives and aspirations of MPI and its three partners had diverged. In the mail, Smith received anonymously a 17 page business plan prepared by the three MEDNET partners. Reading the plan, Smith was stunned to discover that his MEDNET partners were engaged in a long-term plan to takeover MPI, and that their initial short term objective was to persuade MPI customers to divert revenues to MEDNET and away from MPI.

Early in 1987, MPI terminated its partnership in MEDNET and initiated a "cease and desist" action in Chicago circuit court. A jury trial was initiated. However, after three years, when the judge named a figure which by Smith's reckoning gave the company back most of what MPI had lost through its affiliation with MEDNET, he agreed to an out of court settlement.

THE EVOLVING HEALTH CARE ENVIRONMENT IN THE UNITED STATES

Health care in the United States is a huge and growing business. Key players in the U.S. health care system include the American Medical Association (the primary trade group for physicians), clinics, doctors, Group Purchasing Organizations (GPOs), Health Maintenance Organizations (HMOs), home health providers, for-profit and not-for-profit hospitals, manufacturers of medical equipment and supplies, nursing homes, nurses, manufacturers of pharmaceuticals, private and public health insurance programs, statewide hospital trade groups, and surgery centers. The system is complex and expensive. However, for individuals with health insurance (approximately 50% of the U.S. population), the system is capable of delivering a very high standard of health care.

Over the decades of the 1970s/1980s, the cost of health care services in the United States increased as much as 10% per annum. In response to these huge price increases for medical services, the federal government revamped the Medicare and Medicaid payment programs. A key provision was the decision to cap the amount that these programs reimburse hospitals for the various medical services which they provide.

The Medicare and Medicaid caps on medical procedures had an extremely powerful impact on hospitals, clinics, and other institutional providers of health care services. Suddenly, providers found themselves scrutinizing as never before the expense side of their operations, attempting to squeeze out enough costs so that the reimbursements provided by the federal government would cover the out-of-pocket expenses of providing the services. Thus was born a huge opportunity for HMOs, GPOs, and other organizations dedicated to the proposition that the costs of providing healthcare could be managed and reduced.

Ultimately, the HMOs, GPOs, and other organizations devoted to the management and control of health care costs achieved a major impact. By the decade of the 1990s, the rate of growth in health care costs in the in the United States had fallen from the double-digit annual increases of the 1980s to single digit annual increases for the decade of the 90s.

THE GROUP PURCHASING INDUSTRY

The trade organization for the industry is the Professional Society for Healthcare Group Purchasing. The society is based in Ladover, Maryland. Articles of incorporation indicate that "society membership is open to executives and senior level managers from healthcare group purchasing and shared services organizations, multi-hospital systems, and other healthcare provider organizations." The purpose of the organization is "to provide educational and professional networking opportunities for the growing number of healthcare executives involved in group purchasing."

The society's 1997 membership list indicates that there are currently 66 GPOs headquartered in 22 states and Canada. Nearly all of these GPOs are located in the east and the midwest, with very few in the south (2 in Georgia) or the west (2 in California, 2 more in Washington). States and numbers of GPOs headquartered in each are as indicated below:

California 2

Connecticut 2

Georgia 2

Illinois 4

Indiana 4

Kansas 3

Maine 1

Maryland 2

Massachusetts 2

Michigan 1

Missouri 10

New Hampshire 1

New Jersey 2

New York 4

Ohio 7

Pennsylvania 4

Rhode Island 2

Tennessee 1

Texas 3

Virginia 2

Washington 2

Wisconsin 3

Ontario 1

Quebec 1

Total 66

GPO STRUCTURE AND OPERATIONS

Historically, the mission of GPO organizations has been limited to and focused on reducing the costs of medical equipment and supplies for member hospitals. Over time, however, and as indicated earlier, GPOs including MPI have broadened their product-based focus to include providing specialized services which provide high value and benefits to hospitals and other health care providers. We turn now to consideration of these customers and their needs.

CUSTOMER CONSIDERATIONS

As one of the largest GPOs in the United States, MPI currently represents over 2000 facilities accounting for more than 100,000 beds. Exhibit 2 indicates that hospitals are the largest single customer category. Within this category, MPI has found over the years that small to medium-sized hospitals tend to benefit most from the services and skills which MPI can provide. Extremely large hospitals and/or hospital groups are by themselves large enough to receive volume discounts from manufactures of medical supplies and equipment. Also, these very large organizations and/or groups (for example, Baptist Medical Center in Memphis) tend to have inside their own organization a very large set of specialized skills and departments. Smaller to mid-sized hospitals, however, can't justify the expense of such specialized units and thus benefit greatly from the specialized expertise and services which MPI can provide.

The economic impact on communities of these medical facilities, even the small to medium-sized hospitals likely to benefit most from an affiliation with MPI, can be large. Hospitals tend to employ large numbers of employees, and many of these employees are highly paid. In 1998, the modal income for a newly-graduated medical student starting out as a general practitioner exceeded $160,000. In the small to medium-sized towns and cities in which these hospitals are located, doctors and senior-level medical staff are often among the highest-earning individuals in the community. Thus, not only for quality-of-life reasons but also because of economic considerations, communities are usually very eager to retain and/or support the expansion of local medical facilities.

While most communities are very eager to retain even very small local hospitals, this desire is not necessarily consistent with the new economic realities and the changing payment environment described earlier, in which control and/or reduction of costs has become extremely important. In the short run, joining a GPO has enabled many small- to medium-sized hospitals to achieve substantial cost reductions and to survive. In the longer run, however, these small to medium-sized hospitals face severe threats from large regional hospitals in major metropolitan areas. Most of these large hospitals are working intensively not only to reduce costs but also to increase revenues. One way they increase revenues is to open small clinics in remote locations (that is, in smaller towns and cities throughout their regions). The two primary missions of these satellite clinics are 1) To provide customers in these remote locations with inexpensive treatment for day-to-day medical problems, and 2) To pull as much as possible of the high-cost, high-margin specialist business out of the small to medium-sized local hospitals and into the big regional medical centers. As indicated earlier, developments to date suggest that the satellite clinic strategy places many of the small to medium-sized hospitals, which are MPFs best customers, at substantial risk.

YOUR ASSIGNMENT

Please assume you are John Smith. Please set forth your thoughts regarding the strategy and structure for the new entity you will introduce to replace the failed MEDNET organization.

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

Volume: 5

Issue: 2

Pages: 84-90

Number of pages: 7

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412328

Document URL: http://search.proquest.com/docview/192412328?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 33 of 100

WEST LAFAYETTE LEVEE PROJECT: TO BUY OR NOT TO BUY? - THAT IS THE QUESTION

Author: Vandeveer, Rodney C; Menefee, Michael L

ProQuest document link

Abstract: None available.

Full text:

LOCATION

The property is located in West Lafayette. West Lafayette is a city of 25,000 people located 60 miles northwest of Indianapolis and 120 miles southeast of Chicago. West Lafayette and Lafayette, a city of 45,000, together form the Greater Lafayette community. Greater Lafayette is known for its central location, strong local economy, educated and skilled workforce, quality of life, low crime rate and enthusiastic support of industrial and business development. The property is located adjacent to State Road 26 which is a major connector route between West Lafayette and Lafayette and State Road 43 which connects West Lafayette to Interstate 65. The property also has a pedestrian walkway over the Wabash River that connects downtown Lafayette to the Levee area and serves a gateway to the West Lafayette community. The Levee area is also a short walk from Purdue University that has 36,000 students and 12,000 employees. With the university comes many attractions such a football games with 55,000 fans attending, basketball games with over 14,000 in attendance, concerts, conferences occurring year round, the bug bowl attracting over 35,000 participants, and numerous other university and student activities. This area also connects the city with the Wabash Heritage Trail, the John T. Myers Pedestrian Bridge and the James Riehle Depot Plaza on the East Side of the Wabash River. The population of Tippecanoe County in which West Lafayette is located is 138,000, excluding the students at Purdue University. See Appendixes D and E.

The Levee also benefits from activities in the Riehle Plaza area on the opposite side of the Wabash River in Lafayette. The Plaza area is a major attraction for summer events such as concerts featuring a variety of musical groups from modern rock to country to classic rock such as the Coasters and the Drifters. The Plaza also hosts art shows, car shows, food feast, and family nights. The Levee is also on the local bus routes and is close to the train station in Riehle Plaza. The Levee is also located between two of the area's most prestigious historical sites, the Tippecanoe Battleground and Fort Quiatenon. The Tippecanoe Battle field was the site of William Henry Harrison's victory over the Indians led by the Prophet and draws people from throughout the United States especially on celebration weekends. Fort Quiatenon was the site of an early French settlement which draws people year round and over 65,000 on The Feast of the Hunter's Moon weekend.

INTRODUCTION

In November 1995, Sears decided to relocate from its Levee location to the newly renovated Tippecanoe Mall on the south side of Lafayette where it would be one of the anchor stores. Sears is wanting to sell the 116,000 square foot building which has been vacant for almost a year. Since that time the building has been vacant and has fallen into disrepair. Estimates show it will cost over $225,000 on roof repairs alone to put the building in leasable condition. Also during this time, the city of West Lafayette has been haggling among themselves whether it should purchase this seven-acre property. The city of West Lafayette spent $33,500 for Level I and II Environmental Assessments, $15,000 in Consulting, and $7,900 in Consulting Engineering to evaluate the site, determine what minimally needs to be done and how it could best be used. All this with no guarantee at the time that they would become the owners of the Levee's keystone property.

The study found no significant contamination on the site. A geotechnical study of the property found the land could support just about any type of development desired. The only contamination discovered was from heating oil and waste oil tanks that were stored under the property and these were removed at a cost of just a few thousand dollars. The West Lafayette Board of Works also has contracted with Tecton Construction for $7900 to evaluate the site, determine what minimally needs to be done and how it could be best used. Demolition of the 116,000 square foot building is estimated to cost about $300,000, but other costs relating to asbestos abatement are unknown. (Higgins, 1997) Vacancies, deteriorating buildings, and underdevelopment of what would normally be valuable riverfront property typify the general appearance of the Level area.

Negotiations between Sears and the City of West Lafayette to purchase the vacant property have been ongoing for a year. Attempts to buy time through options to purchase were unsuccessful. In Sears' hurried efforts to sell the property to the first viable offer, the City of West Lafayette grew increasing concerned over the value of proposed development ideas. Local citizens began to voice some of the same concerns. Since moving from their State Street location, Sears has had several offers from private developers, some more serious that others. In the end, deals that private developers tried to build fell through. Is it time for the City to step forward and take a leadership role?

Across the river, Lafayette has recently developed it river front area and the adjacent downtown area to once again attract people to the area. As part of a 25-year railroad relocation project, new access between the two cities has become easier with the addition of two new vehicular bridges. The old Main Street bridge has been reworked and made into a pedestrian bridge connecting Lafayette with the West Lafayette Levee area, Tapawingo Park, and the Sears' property.

IDENTIFYING THE PROBLEM

With the property becoming available, should the city of West Lafayette try to purchase the property? The present West Lafayette City Council voted against the purchase of the Sears property; however, the final approval to purchase must come from the West Lafayette Redevelopment Commission. The Redevelopment commission is now authorized to purchase the Sears property for $1,650,000. Several meetings involving the citizens of West Lafayette indicates a majority of the citizens wanted the city to make the purchase and develop the property. Some note this is "a quality of life issue." "It's just really ugly and I'm sick of looking at it," complained some. (Rahner, 1997) However, some citizens and council members worried that the project could run far in excess of the proposed $1.65 million, and they wanted the city to stay out of the speculation business and let developers worry about the property. City Commissioner James Fenn said, "I strongly believe that free enterprise should be the one to develop the site and not the city of West Lafayette. While the intentions of the city are good, it is not their place to determine who shall have the right to build on this land." (Showalter, 1997) Some cite the example of the county's investment in the Tippecanoe County Amphitheater over six years ago and it has yet to pay for itself and may never. Jim McCallister noted, "It's easy to imagine exciting things to do when you're spending other people's money." (Rahner, 1997) Steve Lovejoy, a Purdue University agricultural economics professor, called the idea of the purchase 'ludicrous' outside the context of the free market. "How," he asked, "could West Lafayette purchase the property and then successfully market it to developers when Sears and Roebuck - one of America's most successful marketers - couldn't even do it?" (Rahner, 1997)

Other considerations and concerns have been expressed in the area of development. Demolition is estimated to cost around $250,000 to $300,000. (Redevelopment Meeting Minutes, 1996) This would be grinding up the building and dumping it in the basement. This would fill up about half of the basement. It has not been tested for asbestos, but the ceiling tile and possibly the floor tile will have asbestos present. The estimated cost for this removal would be $300,000 to $350,000, maybe even $400,000. If it cost the city $1.65 million to purchase the site, $600,000 to tear it down and to take care of the asbestos, and hopefully it would not cost any more than $100,000 to do other remediation, bringing the total to $2.35 million for this property. There are seven acres there which would work out to about $335,000 an acre or $7.15 per square foot.

Backing for the Redevelopment Commission's recommendation to purchase has been impressive. The majority of the citizens attending commission meetings are in support of the commission. Realtors, bankers, Chamber of Commerce members, art groups, business owners and Purdue and West Lafayette High School students have all favored the purchase as the best means for the community to guide the redevelopment of the Levee and improve the quality of life along the Wabash riverfront. (Margerum, 1997) Last spring, over 100 members of the Strategic Planning Forum approved the Levee/Sears redevelopment as a major action item. Twenty community groups have also endorsed this concept. Regardless of position or argument, one common view is shared by all - the Levee is an eyesore and it needs some ownership and renovation.

Other findings noted that the soil is river bottom and trying to put a six or eight story building there could create some foundation problems. The present foundation would support a single story structure provided the demolition was done properly. (Glon, 1996)

How far should the local government intervene in private development to see that key areas become nice places? Another citizen noted that there are several other vacant buildings in the city and wanted to know if the city was planning to buy them. The same individual asked, "What other kinds of things will we be asked to fund with our dollars?" (Rahner, 1997)

A STRATEGY FOR THE CITY OF WEST LAFAYETTE

In considering a strategy for the City, the Steering Committee, Task Forces, and Advisory Committee established the following strategies as part of the 1987 Strategic Plan. In 1988 an Urban Design Plan for the City of West Lafayette was completed following the recommendation, "That physical identify and vitality be fostered by systematic, high quality, scheduled development for the Levee and Village."

The strategy should pursue quality. While West Lafayette will grow in numbers, emphasis should be given to high standards in urban design, construction, city services, appearance, etc.

The strategy should preserve and improve livability. This calls for vitality in residential neighborhoods and a balance between preservations and new housing construction.

The strategy should pursue a sense of physical identity. Focal parts of the city where people congregate should foster a sense of place by attractive design, hospitable public space, and public amenities such as art and sculpture.

The strategy should foster expanded private participation in City development. This should take several forms: Greater business input in City planning and marketing; negotiation with developers over quality development goals; and private investment or joint ventures with City Hall.

The strategy should build upon a richness in social character. West Lafayette should continue to be a blend of small-town lifestyle, cosmopolitan atmosphere, and varied cultural amenities and programs.

The strategy should recognize the inevitability of change. Community-wide planning should be participative, anticipative, creative, and long-range.

SUMMARY

In the complex relationships between the government, businesses and the citizens, a decision is needed that will weigh proper consideration for each faction. So, the debate over the Sears building and property redevelopment continues. Although the West Lafayette Redevelopment Commission has adopted a resolution to make an offer to purchase, negotiations continue to ensure all parties involved concerns are met before the city signs any agreement. What may be several acceptable outcomes? What would be you best informed decision?

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

Volume: 5

Issue: 2

Pages: 91-98

Number of pages: 8

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412500

Document URL: http://search.proquest.com/docview/192412500?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 34 of 100

KING OF THE BOARD, INC.

Author: Wagner, Bradley W

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Abstract: None available.

Full text:

KOB CONCEPT

King of the Board, Inc. wants to get into the business of delivering board game entertainment to adolescents and young adults. The company plans to design, manufacture, market, and distribute a snowboard board game to snow sports equipment retailers for resale through traditional channels and directly to consumers over the Internet.

The venture's founders, Matt Kimball and Bob Oaks, want the game to achieve core board game status with the X and boomlet generations. They feel that the fundamental soundness of the game provides numerous product/market development opportunities. They have conducted initial market research with a prototype of the game on college students. These market tests were very encouraging in the young adult market. The research indicated that snow boarders are also heavy board game players and purchase board games at twice the rate of non-snow boarders. However, they have not tested the game on younger age groups. Although the game offers entertainment and social opportunities, they are concerned that current family and computer game trends run counter to the venture concept. They are not sure if the concept of the game is strong enough to overcome current social and computer game trends.

The game, which was developed by Bob Oaks, will compete with "thinking" board games that have tactical and strategic elements in their play. Direct board game competition is chess, checkers, the triangle game, backgammon, Mancala, Monopoly, Stratego, and Risk. Out manuvering your opponent is a primary objective in all of these games. Bob thinks that a weakness of these games is the predictability of the game play. For example, winning strategies for chess revolve around your level of expertise while winning at Monopoly generally involves acquisition of high rent properties. One exception is Risk, which combines elements of luck and skill similar to King of the Board.

Consultant Matt Kimball developed the market penetration strategy. Matt plans on marketing the game directly to snow sport shops and over the Internet. Distribution through retailers is designed to sell games through traditional retail channels and to promote the game in order to generate direct sales over the Internet. Matt has not forecasted substantial direct sales over the Internet until the second year of operations, after market acceptance is achieved through snow board equipment shops. Wholesale price to retailers is planned at $10.00. This price allows retailers the traditional 100% markup for a suggested retail price is $19.95. Direct sales over the Internet will also be priced at $19.95, plus shipping costs.

THE OPPORTUNITY

The growing popularity of snow boarding provides a number of new product opportunities. King of the Board will sell a leisure/accessory product to snowboarders. No board game is marketed directly to snowboarders at this time. A number of online and Windows 95 based strategy games are targeted at this market. King of the Board's concept is contrary to the high growth computer games trend. The strategy is to capitalize on the "high touch" backlash to "high tech." Bob and Matt hope the product will appeal to snow sport retailers because it provides additional product offerings. Retailers need to keep their product offerings fresh. Once the snowboard is sold, only apparel allows significant opportunity for repeat sales. King of the Board offers additional revenue opportunities for snow sport retailers.

Toy and game industry research shows that the industry is very concentrated and not very innovative. Although the large toy and game companies are not very innovative, they do rely on large marketing budgets to compete. They have repackaged "Barbie and Ken" and "GI Joe" in almost every manner possible. Bob feels that these companies are essentially ignoring the game board market, in favor of high growth computer games and joint marketing of movie characters. It has been innovative independent companies that have produced product hits in recent years. Tyco developed the tremendously popular Beanie Babies and a Japanese firm developed the Teenage Mutant Ninja Turtles. The last game board to achieve core product status, Trivial Pursuit, was also developed by an independent firm. There have been no core product "hits" in the board game market since Trivial Pursuit in the early 80's.

PRODUCT DESCRIPTION

The core product of the venture is 'King of the Board: The Snow Board Edition.' The rules of the game resemble an ancient version of Chinese chess, but with major modifications. There are thirty-two plastic characters, a plastic game board, game instructions and a nylon carrying case. There are seven snow board characters ranked in a descending power structure similar to western chess. Some characters have more mobility on the game board than others. The object of the game is to take opposing characters to the point that the opponent cannot win the game. Game setup begins by randomly placing all characters face down on the game board. This random setup brings a large amount of luck into play. Play begins by turning a character face up on the game board. Play continues with players taking turns either placing a character face up, moving a character one space at a time, or taking an opponent's character.

THE TOY AND GAME INUDSTRY

The Toy and Game industry is an oligopoly. The top five firms control 67.6% of the market, with $6.55 billion of the industry's $9.7 billion sales in 1995. Company sales, market share, and international sales are shown in Table 1. The industry is currently in a consolidation phase with a number of successful and unsuccessful mergers. Hasbro successfully bought Tyco (Beanie Babies) in 1997. A merger between Mattel and Hasbro fell through in 1997 over Justice Department warnings that they would likely challenge the merger. In Japan, a Sega-Bandai merger was called off due to cultural differences between the two management teams and corporate cultures. Five critical aspects affect the competitive position of industry firms. They are:

1) Product positioning

2) Production and distribution resources to support growth

3) Financing of growth

4) Brand recognition

5) Product development

Competition for shelf space is very intense for games and toys due to the limited number of powerful retailers. Mass merchandisers include WalMart, ToysRUs, K-Mart and Target. The large retailers rely on factory sales forces and independent representatives to inform them of new products. Another retail outlet is specialty stores. King of the Board plans to avoid shelf space competition by marketing the game directly to snow sport retail shops and direct sales over the Internet.

TOY AND GAME COMPETITION

Meaningful statistics on the number of games sold, revenue and profitability by board game is not available. Details for Parker-Brothers, a division of Hasbro, are buried in corporate financial statements. Milton-Bradley is an independent company but does not publish or make unit sales available. Future opportunities are projected in movie characters, plush toys and video games. These categories are forecasted to grow 20% a year.

Core products provide consistency in sales and earnings growth. (Barbie, GI Joe, Disney, Fisher-Price, Monopoly, Tonka, and Playskool). They accounted for 87% of Mattel's gross sales in 1996. The main goal for top firms is to establish movie, plush toys and video games as core products to secure future stability in revenue and earnings.

Some fad products have become core products. Recent product fads that have turned into core product lines are Super Soaker, Ninja Turtles, Barney, Troll Dolls, and Beanie Babies. Other fad products, such as pet rocks and giga pets did not enjoy long shelf lives.

The competitive strengths of the big "four" appear over whelming to Bob and Matt. The big "four" have multi-million dollar advertising budgets, established productive resources, multi-million dollar R&D budgets, economies of scale production costs, mature market channels and their products enjoy powerful brand equity. After decades of being given as gifts during holidays, Monopoly and other games are stashed in the closets of almost every household. These products have achieved core product status that provide the "big four" predictable and significant revenue and profit streams.

BOARD GAME TRENDS

1) Average growth rate of from 1987-1996 of 5.2%

2) High growth years 1991 (15.4%) and 1992 (12.2%)

3) Video game decline in 1994-5: 21% growth in 1996

4) Toy industry growth by category (1995 to 1997):

Action fig's (70.7%)

Vehicles (31.2%).

Activity toys (-1%)

Plush toys (62.4%)

Educat'l toys (5.4%)

Ride-Ons (-7.8%)

Videos (62.1%)

Dolls (1.3%)

Games/Puzzles 3.3%

THE SNOWBOARD INDUSTRY

Future sales of snowboards will depend on the ability of manufacturers to differentiate their products and maintain strong distribution channels. The larger manufacturers, Burton, K2, Ride and Morrow command fifty-five percent of the snowboard equipment market. The remaining forty-five percent is split between a number of small companies. Market share growth for large firms is anticipated to come at the expense of the smaller companies as the industry enters into the shakeout stage of the product life cycle.

SNOWBOARD TRENDS

* Industry is eighteen years from the growth apex

* 72 million members of the boomlet generation (ages 4-21)

* 66 million members of Generation X

* Eighty-one percent of snowboarders are under 24

* Males make up 72% of snowboarders

* Female snowboarders continue to grow

* Riders tripled from 1.2 million in 1992 to 3.9 million in 1997

* Compounded growth rate of 30% from 1992 to 1997 is expected to continue in the near future

* 1997-98 will be shakeout years (2.3 million boards produced, only 1.7 million were sold in 1996)

GEOGRAPHIC MARKETS

Worldwide, there are eight million snowboarders. Fifty percent of snowboarders reside in the U.S. The largest concentration of snowboarders is in California, Oregon and Washington. Mountains states (Colorado, Utah, Idaho and Nevada) also have high populations of snowboarders. The other fifty percent of snowboarders reside in Japan and Europe. These two markets have large population centers near snow resort areas.

The target market that King of the Board plans to sell the game to is males and females between the ages of ten and twenty-five. Market development calls for selling in the mountain states (Colorado, Utah, Idaho), pacific northwest states (California, Oregon, Washington) and Texas in the first year. A total of sixteen million people between ten and twenty-five reside in this geographic market. There are 7,000,000 inCalifornia, 1,700,000 in Washington and Oregon, 5,600,000 in Texas and 1,500,000 million in Colorado, Utah and Idaho. Bob and Matt have assumed that these states contain 2,000,000 snowboarders.

Geographic expansion is planned in year two by marketing the game in the upper mid west and the northeast where the remaining two million U.S. snowboarders reside. Geographic growth in the third year is planned by distributing the game in Europe and Japan. Each planned geographic expansion doubles market size and sales over the preceding year. Table 2 shows King of the Board's plan to double sales for the first three years and then grow twenty-five percent per year for the next two years.

PRODUCT DEVELOPMENT

King of the Board plans to develop new products to sustain revenue and profit growth after the fifth year. Matt and Bob believe that new themes can be marketed to different market segments within the X and boomlet generations as well as other revenue generating opportunities.

* Package and sell single player games that can be attached to the two-player game. This increases the social aspect of game play to include more players.

* Develop themes targeted to new market segments. For example, military, geographic, automotive or industrial themes.

* A graphic and sound rich online game can also be developed.

* Revenue can be generated through online game play fees and by selling website advertising space to the snow sports industry. Potential advertising clients are equipment manufacturers, apparel manufacturers, ski resorts and retailers.

* Develop an educational product that combines game play with educational subjects to facilitate learning.

* The game could be sold to companies for promotion and advertising. For example, the Nike slash could be printed on the back of game pieces and the board to promote Nike.

KING OF THE BOARD'S BUSINESS MODEL

The game's inventor, Bob Oaks, contacted consultant Matt Kimball to help define the business, research the industry and develop the idea further so that a business plan could be written and financing arranged. Matt brought a work sheet that contained two scenarios estimating the start up, direct and operating costs of the venture. The first was a "buy" scenario (Table 3) where KOB would buy the majority of venture requirements from vendors. The other extreme was a "make" scenario (Table 4) where KOB would perform the majority of tasks in house.

HOW TO PROCEED

Bob and Matt knew that a lot of work must be done before the King of the Board ever hit the store shelves. Bob is a former ski champion and understands the snow sports industry but does not have extensive business experience. Matt on the other hand has helped start a number of businesses in various ways. In addition to operating a sole-proprietorship out of college, Matt also has extensive corporate experience in operations, manufacturing, accounting/finance and dealing with subcontractors. They have a large network of friends that can lend further expertise to the venture but none of this experience is in the game board industry. They had not even considered approaching investors with their business plan for the $200,000 needed, in addition to the $50,000 they had in savings and from family sources. They felt comfortable with the cost numbers after numerous discussions with plastic and packaging companies and toy manufacturers. Yet their market numbers were based on a number of assumptions they were uncomfortable with. They had not finalized the design of the game because they had not tested it on all target market age groups. They had tested a version of the game on college students and had received positive feedback about the concept of the game. But without a final prototype to test they knew the $19.95 price was just an educated guess. They were also uncertain whether the promise of Internet sales would materialize, or if $50,000 in advertising the first year will be sufficient enough to reach their customers. The final uncertainty was that they have yet to approach snow sport retailers to see if they will even stock the game in their stores.

CASE QUESTIONS

1. Generate a profit and loss statement for the first three years of the venture under the buy scenario.

2. Generate a profit and loss statement for the first three years of the venture under the make scenario.

3. Calculate the 1) fixed cost and 2) fixed cost plus semi-variable cost breakeven points for King of the Board's buy scenario.

4. Calculate the 1) fixed cost and 2) fixed cost plus semi-variable cost breakeven points for King of the Board's make scenario.

5. Identify the assumptions that Matt and Bob have made which could substantially affect the profitability of the venture. Challenge these assumptions and perform a new fixed cost plus semivariable cost breakeven analysis based on your challenges.

6. Evaluate the opportunity that these two entrepreneurs have identified.

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

Volume: 5

Issue: 2

Pages: 99-106

Number of pages: 8

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412366

Document URL: http://search.proquest.com/docview/192412366?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 35 of 100

SMITH & WESSON TAKES FIRE WHILE MARKETING HANDGUNS TO WOMEN

Author: Whitehouse, Francis R

ProQuest document link

Abstract: None available.

Full text:

INTRODUCTION

Smith & Wesson entered the American handgun market in 1857 when they began selling the first commercially available revolver to chamber a metallic cartridge. While its .22 rimfire cartridge would be rather weak, subsequent models would chamber considerably larger, more powerful cartridges and gain widespread distribution, particularly in the West.1 Smith & Wesson would become a leading supplier of handguns of all types for the next 141 years. The company would become a primary supplier of handguns to police, the military, and to the civilian marketplace. By 1998 the Smith & Wesson had expanded its product lines to include thirty revolver models and thirty-two pistol models, many with two or more variations.2 In addition, Smith & Wesson provided custom gunsmithing services, firearms training, apparel, products for police (including bicycles and handcuffs), and specialty metalworking services. (All major product lines are depicted on the company's website.3) Handguns for the civilian market, however, remained the company's mainstay.

BACKGROUND

The civilian market for handguns had evidenced little growth for 25 years, with between 1,500,000 and 2,000,000 handguns produced and sold each year.4 During that period there had been, however, two surges in volume. The first surge ended in with production peaking in 1981 at 2,656,965 handguns. The second ended in 1994 with 2,824,809 produced. A significant shift in the type of handgun demanded also occurred. Revolvers represented 72.1 % of production in 1973, but fell to 19.6 % by 1994. Pistols had supplanted them as the handgun of choice. Production and sales volumes were echoed by lack of a clear trend in ownership. National surveys of gun ownership data showed no clear trend either up or down since 1958. For 1989 and 1990 they suggested that about 48 % of American households owned a gun of some type, with about 26 % owning a handgun.5 More recent estimates, while displaying some sampling variability, had not changed appreciably.

Annual gyrations in production had obscured some important developments. The handgun market had traditionally been viewed as breaking down into five important segments: recreational, competition, hunting, self-defense, and police/military. Emergent interests in each category tended to dominate product development and sales. A surge in interest in handgun hunting during the 1970's had, for instance, driven an increase in sales for large caliber, more powerful handguns such as .44 Magnum revolvers and the development of more specialized handguns chambering rifle cartridges. Similarly, the popularity of cowboy action shooting (a new competitive genre) during the 1990's had fueled an explosive rise in sales of 1870's period-piece revolvers and their newly-manufactured replicas. The U.S. Army's adoption of a new 9 MM service pistol in the 1980's had stimulated civilian sales of similar models. Both revolver and pistol sales received a boost during the late 1980's as media reports and concerns about crime encouraged more people to purchase them for self-defense. Production of pistols chambering typical self-defense cartridges (.380 ACP, 9 MMM, .45 ACP) climbed 276% between 1988 and 1993 in response to sharp growth in demand.6

Some of that expansion was attributed to an increase in the number of states that passed non-discretionary concealed weapons carry permit laws. Such laws require state judges to issue a permit to carry a concealed handgun to any citizen who is not legally barred from owning a handgun (such as convicted felons). Thirty states had passed such laws by 1996. Eighteen states passed them in 1995 and 1996 alone.7 Thirty-three had done so by 1998, and another five legislatures were considering them. Heavily populated states such as New York and Illinois had not passed such statutes, however. Moreover, a number of major cities, notably Washington D.C, still made it extremely difficult for civilians to carry a concealed handgun or made handgun ownership illegal.

Another impetus to the pistol sales growth experienced during the 1990's was the passage of the 1994 Omnibus Crime Bill, which most recognize as the assault weapons act. That bill, beyond banning the sale of certain types of rifles, reduced the maximum allowable capacity for all newly produced magazines to 10 shots. Pistols chambering the 9 MM cartridge had become popular in part because of the U.S. Army's adoption of the cartridge, but mainly because of their high capacity (16 shots or more) magazines. Production and sales soared from 353,941 to 752,801 between 1992 and 1994 in anticipation of the law's passage.

THE CHALLENGE AND RESPONSE

Hard times, however, ensued. In 1995 it became evident that handgun sales were in sharp decline. By 1996 sales had fallen to a little over half of their 1994 peak. Smith & Wesson, like its competitors, was hit hard. At a time when new gun sales had become very price sensitive, it had also to deal with a low-price competitor. Taurus Mfg. of Brazil, which had become a major player in the American market, was gaining popularity - particularly in revolvers. Taurus produced revolver models that closely copied Smith & Wesson's, but sold them at 30 to 35% lower prices. Taurus had also closed what was once a large quality gap between their revolvers and the comparable Smith & Wesson products.

Smith & Wesson, like all industry participants, worked diligently to find a way through the decline. One approach was to search for segments where demand potential might yet exist. This led the company to develop a focus on women as potential buyers. It had long been observed that women owned and used guns, of all types, at lower rates than men. National surveys reflected this. In 1988 roughly 16% of women reported owning a gun, while 39% of men did so. By 1996 ownership had risen to about 27% of women and 53% of men.8

In fact, Smith & Wesson had been the earliest firm to respond to the gender difference in ownership rates. It had begun production of a new model revolver, under the LadySmith line, in 1986. Five revolvers and one pistol were listed in the catalog as LadySmith model variations by 1998. These came with special grips and display cases. LadySmith guns were small, chambered cartridges with adequate power for defensive purposes, and had manageable recoil. Their grips were configured to be more suitable for smaller hands, and trigger pull weights were lightened somewhat. The company was one of the earliest advertisers in a new publication, Women and Guns, first published in 1991. In addition, Smith & Wesson devoted several pages to women on its first website as well as in its print catalogs. Other companies, such as Lorcin Manufacturing, would follow suit with models intended to appeal to women.

THE CONTROVERSY

None of this was lost on interested observers. Smith & Wesson's, and subsequently others', efforts to target women as first time buyers became embroiled in the more general controversy over personal ownership and use of handguns. A number of organizations such as Handgun Control, the Violence Policy Center, and Physicians for Social Responsibility opposed the ownership and use of handguns as a means of self-defense - whether by women or men. Others such as the National Rifle Association, the Gun Owners Action League, and Women Against Gun Control supported their ownership and their use as a self-defense tool. Interested spectators to the often-heated arguments between proponents and opponents of handguns could quickly become confused. Opponents, while diverse in their arguments, were uniform in asserting that:

- handguns were of little value - in fact, often counterproductive - when used in self defense;

- the presence of handguns escalated the chance of violence in a given situation;

- handguns presented an unacceptable risk of accidental death, particularly among young children;

- handguns contributed to the suicide rate;

- and that there was no constitutionally guaranteed right to ownership or use of handguns;

Proponents demurred vigorously on all these points as well bringing other considerations to bear. Discussions between opponents and proponents often broke down into ad hominem attacks. In fact, some observed that arguments often seemed to have less to do with questions about the instrumental value (or lack thereof) of handgun use than they had to do with broad cultural differences.

Whatever the arguments, companies such as Smith & Wesson did not have the luxury of detachment from the fray. The success of their product lines depended, at least in part, upon how the public policy debate played out. The company's officers had also to consider the opprobrium which vigorous efforts to market handguns to women might produce. Decisions about such efforts would be required soon.

NOTE: One should browse the following websites before answering the questions below. For the arguments opposing handgun ownership or use see http://www.handguncontrol.org and http://www.vpc.org. For arguments favoring handgun ownership or use see http://www.nra.org and http://www.wagc.com. See http://www.amfire.coin/afistatistics/menuhtml for information from the industry perspective.

1. What is the current state of the handgun market in the United States? What are the implications of this for Smith & Wesson?

2. How attractive is the female market segment for Smith & Wesson?

3. What ethical and public relations issues does Smith & Wesson confront when marketing handguns to women?

4. How should Smith & Wesson resolve those issues?

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

Volume: 5

Issue: 2

Pages: 107-110

Number of pages: 4

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412387

Document URL: http://search.proquest.com/docview/192412387?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 36 of 100

GASTINEAU GOLF

Author: Dye, Janet L

ProQuest document link

Abstract: None available.

Full text:

ABSTRACT

Ned and Nita Nerd are considering either opening or buying an exclusive golf club in Juneau. Neither Nerd knows accounting so they have asked you to help them evaluate this venture. In chatting with Ned you gather the following facts:

1. New applicants will be considered for membership in January of each year. The membership fee for the club is a one-time payment of $10,000 payable at the time of admittance. Each member must also pay annual dues each January. The amount of dues depends on the type of membership. Golf-only memberships have annual dues of $1000, while tennis and pool membership dues are $800. The one-time membership fees will be used to pay off part of the principal of the mortgage and will not be considered in the club profits and losses used to calculate the manager's salary.

2. Ned expects a total of 600 applicants in the first year of operation and 400 in the second year. He estimates that a maximum of 500 members can be accepted if the club is restricted to golf-only memberships and 800 members could be accepted if a combination of golf memberships and pool and tennis memberships are sold. He forecasts maximum membership will be achieved by the beginning of year 2. The marketing firm hired to assist Ned estimates that 60% of applications each year will be interested in golf-only, 40% will be tennis and pool. The members using the club at any given time are expected to be in the same approximate proportions as the types of applications accepted.

3. In addition to the membership fees and annual dues, Ned expects to receive revenue from the shop selling golf and tennis supplies as well as from the club dining room and bar. Sales are expected to average $400 per member in year one. The $400 per member is expected to increase by 5% a year for the first 5 years. The cost of merchandise sold and of labor is expected to run 60% of sales.

4. Each member is assessed a minimum monthly fee of $100 for the club dining room and bar whether they eat there or not. Ned estimates that 4% of patrons will have monthly bills of $50, 10% will have tabs of $100, 50% will have dining room charges of $200, and 35% will charge meals and drinks of $300 per month. Based on the average mix of drinks and food experienced by other golf courses, Ned expects cost of the food and drink sold will average 60% of the revenue from the meals.

5. Members are required to use electric golf carts on the course to speed up play. The carts rent for $20 for 18 holes of golf and can carry two golfers ant their clubs. The club can lease the carts for $250 per cart per month. The leasing company is responsible for all repairs and provides replacement carts if there are breakdowns. Alternatively, the club can buy the carts for $12,000 each. The carts are estimated to have a useful life of 4 years. At any one time, three carts are expected to be out of service for repairs and maintenance. Maintenance is expected to average $200 per cart per year. The company's cost of capital is 10%. Electricity to recharge the carts is expected to be $3 per cart per 18 holes of golf. Golfers are expected to complete 18 holes of golf in four hours or less. No more than seventy-two carts can be on the thirty-six hole course at any one time. The lighted course is open twelve hours a day during the week and sixteen hours a day on weekends. Average utilization of the golf course is expected to be 90% on weekends and 60% during the week.

6. Other costs of the club will include personnel. Ned wants to assure good service. He estimates that no more than one third of the persons will be at the club at any one time during the week and no more than eighty per cent will be at the club at any given time on the weekends. Of those at the club he believes no more than 50% will be in the restaurant bar at any given time. He wants to provide one waiter or waitress for every 100 patrons using the club, one lifeguard on duty at all times on the weekdays and two on the weekends. The waiters/waitresses will be paid $8 an hour (including benefits). The lifeguards will receive $10 per hour. The dining room will be open 15 hours a day on the weekends and twelve hours a day during the week. The pool will be open 8 hours a day on the weekdays and 12 hours a day on the weekends. No employee is allowed to work more than 8 hours a day. The two chefs are each paid a salary of $50,000 a year. All wages and lease payments are paid at the end of each month. The golf pro will be paid a salary of $2,000 a month and gets to keep any fees for golf lessons.

7. Ned estimates that there will be twelve weeks a year when the weather will keep the golfers from using the course, but he believes the indoor driving range will lure them out to the pro shop and dining room.

8. Maintenance costs are estimated to be $30,000 per month for the golf course, $1500 per month for the pool, and $500 per moth for the tennis courts. These are paid in cash as they occur.

9. Property taxes on the club are expected to be $50,000 per year, liability insurance another $20,000, and salary to the manager for running the place has been set at $20,000 plus some form of profit sharing. All items except the managers' salaries are paid at the end of the year.

10. The golf course, tennis courts, pool and club house will cost $20,000,000 to buy. Ned anticipates paying $500,000 in cash and financing the rest at 8% interest over 30 years. The annual payment will be made at the end of the year. Depreciation expense is estimated to be $50,000 per year. If only golf is offered, the purchase price is only $16,000,000 for the course and clubhouse and depreciation would be $40,000 per year.

11. Gastineau Golf ' s federal income tax rate is expected to be 30%.

REQUIRED:

1. Looking at item #5:

a. Show computations of the net present value, internal rate of return, and payback period for the purchase option.

b. Should the Nerds lease or buy? Use your selection here in the rest of the problem.

2. Should the club sell golf-only memberships or a sales mix of the two types of memberships?

3. Based on your answers above, prepare a forecasted income statement for years one and two for the club. Any cash needs can be met through short term borrowing at 10%.

4. Would you recommend that Ned proceed with this investment? Why or why not?

5. Assuming Ned does proceed with this venture, discuss how you think the various business operations should be organized and how the mangers (restaurant/bar, golf course, pool, pro shop, and overall) should be evaluated?

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

Volume: 5

Issue: 2

Pages: 111-113

Number of pages: 3

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412342

Document URL: http://search.proquest.com/docview/192412342?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 37 of 100

FINANCIAL INSOLVENCY: THE CASE OF A SMALL COMMUNITY HOSPITAL

Author: Stretcher, Robert

ProQuest document link

Abstract: None available.

Full text:

THE PAST AND THE PRESENT

Dr. Noland Wright*, newly appointed manager of Newport News General Hospital, sighed as he reviewed the hospital's financial records. He had been given the responsibility of leading the hospital's next steps, but was perplexed by the financial condition highlighted in the financial statements before him.

Newport News General Hospital had initially begun in 1914 as Whittaker Memorial Hospital, a community-run hospital serving the black population of Newport News, Virginia. To meet the needs of an economic expansion of the community largely due to increased commercial activity during World War II, the hospital expanded facilities and scope through federal funding. In the 1940's the hospital increased its census and gained accreditation by the American College of Surgeons. In the 1950's and 60's the hospital enjoyed a bustling business in the segregated health care industry.

With the advent of the desegregation movement in the 1960's, the hospital experienced several threats as black physicians gained the ability to admit patients to the large and better equipped traditionally 'white' hospitals in the area. The civic organization that governed the hospital began to be concerned for the hospital's survival. It was experiencing a falling census, a deteriorating reputation concerning the quality of its health care, and picked up the reputation of being a 'public' hospital (which it was not). While the City of Newport News was willing to help, it was unwilling to acquire full responsibility for the costs of a public hospital. During the 1970's, the hospital drew on an emergency fund set up by the city.

Throughout the 1970's, the hospital suffered from losses and bad debts. By 1982 the civic board that guided the hospital became inactive. The following year, the last of the segregation practices ended by court order at the large surrounding hospitals. Few patients desired to be admitted to the small, modestly equipped hospital, preferring the large, modern hospitals they now had access to. The hospital ended 1983 with a $402,000 budget deficit. Suppliers began demanding cash payments for purchases. Employee layoffs, tightening of admission criteria, and refusal of non paying patients were some of the steps taken to alleviate the dire financial situation. It was hoped that a new facility, new location and a future change of name to Newport News General Hospital would help the hospital to survive. A $15 million bond issue and $1.5 million in community pledges allowed the hospital to continue to operate. At the end of 1984 the fund deficit was $749,000. Private healthcare management firms were solicited for help, but these efforts were short-lived.

In July 1985, Newport News General Hospital was dedicated, with a new facility and equipment, and a higher occupancy rate. Between 1979 and 1985, seven different administrators had been in charge of the hospital. Continued losses after 1985, and continued difficulty in retaining continuous management, convinced the hospital's supporters to seek some solution to the ongoing problems. Political avenues were tried with some success, but did not last. The sale of the hospital to a doctors' investment group was considered, but the hospital's supporters ultimately rejected the deal.

By 1990 the debt was in excess of $20 million. The 'board' of supporters agreed to file for bankruptcy. The Guarantor of the mortgage, the U.S. Department of Housing and Urban Development, took over the mortgage debt. The hospital continued to operate as the board sought affiliations with other area hospitals. The quality ratings for the hospital continued to suffer. In 1993 the hospital was granted its bankruptcy petition. HUD settled for $4 million, and other creditors were held at bay. Political solutions were sought, and ultimately, did not help the hospital's condition. Administrators were hired, but their tenures were short-lived. By mid 1996 the hospital was again running a large fund deficit and was seeking direction in what appeared to be a rather hopeless situation. The financial statements for Newport News General Hospital appear in Exhibits 1,2, and 3.

QUESTIONS

1. What is the 'fund deficit' in the firm's balance sheet? What account would be its equivalent for a for-profit organization?

2. What is the hospital's financial condition and its prospects for continued operations?

3. Develop alternatives for Dr. Wright. Which alternative do you think is the best solution?

4. To whom is Dr. Wright responsible? Is there any group or individual that would claim NNGH as its own and take responsibility for it? How does this situation illustrate the need for a principal stakeholder to whom management would be accountable?

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

Volume: 5

Issue: 2

Pages: 114-120

Number of pages: 7

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412355

Document URL: http://search.proquest.com/docview/192412355?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 38 of 100

FIRST BANK SYSTEMS - US BANCORP: THE NATURE OF A BANK MERGER

Author: Stretcher, Robert; Kariuki, Omar

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Abstract: None available.

Full text:

FIRST BANK SYSTEMS PRE-MERGER CONDITION

First Bank Systems, Inc. of Minneapolis, Minnesota is a regional, multi-state bank holding company that offers a considerable number of financial products and services for individuals, businesses, and institutions. First Bank Systems has expanded out of its upper midwest base to establishing representation in eleven states as far west as Colorado and Wyoming.

First Bank Systems is a leader in corporate trust services as well as electronic credit card payment systems. First Bank Systems has the largest share of deposits in North Dakota, and in bigger states such as Minnesota, Colorado, and Nebraska, it's share is second largest.

First Bank Systems is able to effectively serve customers through several distribution channels including 359 banking and non-banking offices, a network of 3,235 automated teller machines (ATMs), and through 24 hour centralized telephone service centers.

First Bank Systems is committed to maximizing shareholder wealth. The bank began streamlining senior management in 1996, and realigned the entire organization into five lines of business. The businesses include:

1) Retail Banking through convenient, cost-effective channels such as supermarkets, ATMs, and 24 hour banking by telephone.

2) Payment Systems, which include corporate cards and merchant processing.

3) Business Banking and Private Financial Services which provides credit and other financial services to middle market companies, and investment services to extremely affluent customers.

4) Commercial Banking includes credit products, treasury management, trust and other financial services, predominantly serving large companies in the midwest region.

5) Corporate Trust and Institutional Financial Services provide custody services to corporations, municipal debt services, 401k's and other employee benefit programs.

First Bank Systems is one of the country's top performing banking companies in terms of profitability and efficiency. One hundred dollars invested in First Bank System's common stock on December 31, 1989 would have been worth $991 on March 31, 1998. That compares with $585 for the KBW 50 bank index and $390 for the S&P 500 stock index.

First Bank Systems has been able to achieve high returns while at the same time maintaining a low risk profile. Another reason for First bank System's continued success is their pledge to benefit employees through employee stock purchase plans. Management in particular is especially interested in maximizing shareholder wealth, because senior managers owned more than $100 million in First Bank Systems stock at the end of 1996. First Bank Systems pre-merger financial statements appear in Exhibit 1.

U.S. BANCORP PRE-MERGER CONDITION

U.S. Bancorp of Portland, Oregon is among the 30 largest bank holding companies in the United States in terms of assets. The principal subsidiaries of U.S. Bancorp as of December 31,1996 includes U.S. National Bank of Oregon, U.S. Bank of Washington, U.S. Bank of Idaho, U.S. Bank of California, U.S. Bank of Nevada, and U.S. Bank of Utah. The subsidiaries of U.S. Bancorp are involved in general retail/corporate banking, investment and trust services, commercial banking, lease financing, discount brokerage, investment advisory services, and credit life insurance services. Moreover, U.S. Bank of Oregon advised a group of mutual funds, the Qualivest Funds. U.S. Bancorp also has the largest share of deposits in Oregon and Idaho.

As of December 31, 1996, U.S. Bancorp and it's subsidiaries have 14,055 full-time employees. A number of benefits programs are available to all eligible employees (including officers) of U.S. Bancorp and subsidiaries.

U.S. Bancorp has made it a priority to continue to consolidate operations & subsidiaries, with ongoing acquisitions to continue effective cost management and achieve operating efficiency while meeting corporate objectives. On December 31, 1996, U.S. Bancorp banking subsidiaries has more than 600 banking offices, and 1300 automated teller machines located in Oregon, Washington, Idaho, Northern California, Nevada, and Utah. U.S. Bancorp also has 24 hour telephone banking, a full service loan center by phone, and a U.S. Bancorp on-line personal computer banking. Loan services offered by U.S. Bancorp's banking subsidiaries include mortgage loans, real property loans, and individual lines of credit, both unsecured and secured.

Because of its large branch network and the rapidly growing economic growth in their service area U.S. Bancorp has long been considered a hot prospect for takeover. It has been the position of U.S. Bancorp chairman and chief executive Gerry B. Cameron if anyone offered more than 3 times the company's book value, they would agree and avoid the risk of a shareholder suit. US Bancorp's pre-merger statements appear in Exhibit 2.

FIRST BANK SYSTEM RATIONALIZATION FOR MERGER

On March 21, 1997 First Bank System Inc., confirmed it would acquire U.S. Bancorp of Portland, Oregon in a stock swap valued at the time to be $8.44 billion (later determined to be $9.98 billion), the fourth largest bank merger of all time as of 1996. First Bank Systems paid a premium of 3.4 times the U.S. Bancorp book value and 17.1 times U.S. Bancorp' s estimated 1997 earnings. Surprisingly, analysts agreed that the price was within the range for which high quality banks were selling. First Bank Systems stock traded at more than 3.4 times book value, enabling them to somewhat justify the deal.

The newly created company, which took the U.S. Bancorp name, and uses First Bank System's Minneapolis headquarters, has $70 billion in assets, and 26,630 full-time employees. As in all mega-mergers, however, there were layoffs. Approximately 4,000 positions were estimated to be cut. Fortunately First Bank Systems and U.S. Bancorp don't have overlapping banking branches or geographic territories, so no branches had to be closed as a direct result of the merger. The company combines back office operations and administrative functions, hoping to cut out nearly 30% of the expense base of U.S. Bancorp, or about $340 million annually [7]. While 4,000 jobs will be cut, only half that many may actually occur once retirement, job changes, and attrition are factored in. For those employees whose jobs are being cut, the severance packages available are among the best in the industry. Severance packages in the banking industry typically range from two to four weeks of pay per year of service. Severance pay for U.S. Bancorp employees will be four weeks for each year of service, with minimum nine weeks pay. Some managers are guaranteed a minimum of twelve months severance pay.

Technology played a major role in U.S. Bancorp's decision to be acquired by First Bank Systems. According to analysts, U.S. Bancorp would have had to spend $200 million over the next several years to purchase systems to provide customer and product profitability data [2]. First Bank Systems, on the other hand, has managed to unwaveringly invest in technology that can accurately track customer satisfaction and profitability.

In 1990 First Bank Systems moved to centralize operations, and though the company is legally organized as seven banks from a technological standpoint it functions as a one-bank company. This has made it easier for First Bank Systems to integrate 23 acquisitions over the past five years. Moreover, the last big bank First Bank Systems acquired, Firstier Financial Inc. of Omaha, was transfigured to First Bank Systems' computer system within two days following the close of the deal.

MARKET REACTION

On August 1, 1997 First Bank Systems closed on its acquisition of Portland based U.S. Bancorp. First Bank Systems agreed to pay .755 shares of stock for each U.S. Bancorp share. First Bank Systems closed Friday August 1, 1997 at $86.94 down $2.06, while U.S. Bancorp closed at $65.41 down $1.34, making the deal worth $9.98 billion.

As far as the structure of the new company's management, two U.S. Bancorp executives would get prominent roles, reporting to the President and Chief Executive Officer John F. Grundhofer. Vice chairman Robert D. Sznewajs would be Vice chairman in charge of retail banking. Gary T. Duim, president of retail banking, would become vice chairman in charge of corporate banking in U.S. Bancorp's region. U.S. Bancorp's current chairman, Gerry B. Cameron, would retain that title until 1998, when he had previously said that he would retire.

AFTERMATH OF THE MERGER

The Minnesota-based Company has become one of the largest corporate trust services by targeting the labor-intensive services (while others are abandoning those services). The firm is a national leader in electronic credit card payment systems, commercial lending, and mortgage financing, direct real estate lending and corporate financing.

This past year U.S. Bancorp surpassed each financial goal they set. U.S. Bancorp earned a record $23.5 million or $4.61 on a diluted per share basis in 1997. The Company's performance reflects a 17.4% earnings increase and a 20.4% increases increase in diluted earnings per share when compared to the $20.0 million or $3.83 per diluted share reported in 1996. U.S. Bancorp's goal to achieve and maintain a 15.00% return on equity was also accomplished in 1997. The significant growth in earnings has led to 121% appreciation in U.S. Bancorp's stock price over a two-year period. The annual total return on U.S. Bancorp common stock over the last five years has averaged 32%. This 32% exceeds S&P 500 Index average annual total return of 20% for the same time period.

QUESTIONS

1. How was the high bid for US Bancorp justified?

2. What was the stock market's reaction to the merger announcement?

3. List as many factors as possible to explain the wave of bank mergers in the 1990's (you should use outside resources). Which of these were apparent for the FBS-USB merger?

4. Using a search in your library or on the internet, summarize the condition of the combined firm today. Does it appear that the merger was good for USB's shareholders? For FBS's shareholders?

5. The FBS-USB merger occurred in a stock market bull run approaching record length. 1998 has presented a much different character for the stock markets. Do you think either firm would have been interested in merging in a bear market? Justify your answer with theory and facts.

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

Volume: 5

Issue: 2

Pages: 121-139

Number of pages: 19

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412398

Document URL: http://search.proquest.com/docview/192412398?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 39 of 100

BASA: A CASE OF SMALL BUSINESS FRAUD

Author: Carland, JoAnn C; Carland, James W

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Abstract: None available.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns fraud in a small business. The case has a difficulty level of three. Secondary issues involve business valuation and succession. This case may be taught in small business or accounting classes. The case is designed to be taught in a three hour class or two or three one-hour classes and is expected to require up to two hours of outside preparation by the student.

CASE SYNOPSIS

BASA is a small service company which repairs buses. The owner has behaved in an expense preference manner for the entire tenure of his business. He was diagnosed with cancer about three years earlier and had entered into negotiations with a buyer to purchase the business prior to his death. Yet when his doctor later suggested that the cancer was in remission, the owner decided to keep the business and continue running it. Because he was small, he had performed his own bookkeeping or had a friend come in on occasion and help him out. After his brush with death, however, he hired a defrocked CPA to take care of the day to day accounting activities. Several months ago, the owner felt ill, entered the hospital for some tests, and died within the week. He had not finalized his plans concerning what to do with the business upon his death, and the widow was forced to take over the business quickly as it began to have severe cash flow problems.

We were asked to come in and value the business for sale and when we asked for the financials for restatement purposes, the accountant admitted his guilt. He had taken over $10,000 from the company. The case deals with the particulars of that event.

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

Volume: 5

Issue: 2

Pages: 140

Number of pages: 1

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412379

Document URL: http://search.proquest.com/docview/192412379?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 40 of 100

TOWARDS A CRITICAL PEDAGOGY FOR MANAGEMENT EDUCATION: A POSTMODERN ANALYSIS OF THE INTERNATIONAL MONETARY FUND AS A LIVE CASE

Author: Dyck, Loren; Whatley, Art

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Abstract: None available.

Full text:

ABSTRACT

The process of globalization requires a rethinking of the key competencies and abilities held by graduates from our MBA programs. Prior knowledge is made increasingly obsolete in this new era where global economic forces supersede the power of all but the most powerful the nation states. Business education must break with its long standing reliance on teaching that is conventional, driven by a learning model based on knowledge acquisition through the medium of standard textbooks and "fact the front" classroom designs. This type of learning maintains existing organizational arrangements and established ways of managing more appropriate for stable environments. It fosters reliance on past experiences and traditional modes of action that are inappropriate for the novel problems and circumstances created by globalization and the information revolution.

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

Volume: 5

Issue: 2

Pages: 141

Number of pages: 1

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412301

Document URL: http://search.proquest.com/docview/192412301?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 41 of 100

THE CUSTOMER COMES SECOND: EMPLOYEE SATISFACTION LEADS TO CUSTOMER SATISFACTION

Author: Hoch, Patricia L; Wiles, Charles R; Sterrett, Jack

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Abstract: None available.

Full text:

INTRODUCTION

The ever-changing environment of health care, including attempts to keep pace with technology, coupled with a reduction in operating income and the outcry of the public, the government, and the media for answers as to why health care costs continue to increase, have forced many health care organizations to take a hard look at themselves. Webster Memorial Hospital, a small community based not-for-profit hospital located in rural Missouri, was faced with these same challenges. Like many other health care providers, it turned to the philosophy of Total Quality Management (TQM) and a dedication to continuous quality improvement (CQI) as a means of remaining viable. As part of this process, particular attention was paid to opportunities to improve systems and processes within the hospital structure. Employees were educated in the principles of TQM, were called upon to become an integral part of the process, and were assured the support of administration and upper management. Realizing TQM can provide powerful processes for solving operational problems, many tools were put into use by the hospital in the hope of an improved work environment and ultimately the increased satisfaction of the external customer - the community.

Webster Memorial knew communication was one of the keys to the success of any total quality system and found teams to be a great forum for such communication. The use of QAT (Quality Action Team) then became the vehicle through which processes and procedures were analyzed and improved. The involvement of employees from various departments and disciplines on each of these teams became an essential part of the process. One of the processes found to be in need of redesign was the procedure in place to facilitate annual employee physicals. The current process was outdated, cumbersome, and did not take advantage of the newer technology and professional resources that were now available. Many employees were also frustrated with the process that often took too long and were not feeling any noticeable benefits. The use of QAT to focus on this process provided a unique opportunity for newly empowered employees to benefit the "internal" customer and ultimately have a positive effect on the external customer as well.

One of the first steps in identifying areas of improvement in the annual physical process included flowcharting the current procedure. What was found was an extended process that involved a notification of the employee by the Outpatient department of the upcoming annual physical along with instructions to contact outpatient to schedule a day for the required diagnostic testing. On the scheduled day, a stop must first be made at the admitting office to be assigned an account number, followed by a trip to the laboratory, radiology and outpatient departments. One of the mandated tests, a PPD, required a return trip to the outpatient department 72 hours later to be checked. Physical exams were usually conducted by the physician on duty and may have been completed at the time of the employee's first visit, scheduled for a later date, or postponed indefinitely, dependent upon the patient load in the outpatient department. The results of the diagnostic testing, when completed on the same day, were usually not available for review during the actual physical examination.

As the QAT team focused on possible ways to improve this process, two different options became apparent. Only the PPD diagnostic test, which is a TB skin test, is required of all employees by outside agencies. Eliminating all other diagnostic procedures and the annual physical exam itself would lighten the workload significantly in the outpatient and ancillary departments and would reduce costs. This was the first option. The second option, suggested by employees, was streamlining the entire process, establishing a timetable for when all the elements of the process were to be completed, and setting aside specific times solely for annual employee physical examinations. A nurse practitioner, a member of the QAT team who would become the individual responsible for dedicating the time to conduct the physical exam portion of the process, took the suggested changes one step further. The consideration whether to establish an employee wellness program incorporating the revised annual employee physical process with the education and resources necessary to improve overall employee health was discussed. She cited numerous studies reporting increased productivity, reduced absenteeism, and a positive impact for the organization by reducing health care costs, sick leave, disability claims, and workers' compensation. Also suggested was a required consultation with the nurse practitioner as the final step in the process at which time the results of any diagnostic testing could be fully explained, questions answered, and the opportunity used to promote an increased awareness of a healthy lifestyle. Computer programs could even be purchased for a nominal cost that incorporate diagnostic results with individual medical histories and lifestyles for a more personalized picture of employee health.

Representatives from the outpatient department were part of the QAT team and recognized the need to make changes but feared the additional workload involved in the suggested increase in scope from a simple annual employee physical to a comprehensive wellness program.

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

Volume: 5

Issue: 2

Pages: 142-144

Number of pages: 3

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412341

Document URL: http://search.proquest.com/docview/192412341?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 42 of 100

METAMORPHOSIS: THE CHANGES OVER TIME

Author: Stamm, David L

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Abstract: None available.

Full text:

CASE DESCRIPTION

The primary subject matter of this case concerns management of change. The case has a difficulty level of four. Secondary issues examined include use of Change Agents. Internal/external Consultants, Company values, Leadership and Goals and Objectives. The case is designed to be taught in a one-class hour and is expected to require up to two hours of outside preparation by the student.

CASE SYNOPSIS

Fiscal year 1994 became the most challenging year in the corporate life of Nichols Research. After 17 years of growth a significant decline in Department of Defense (DoD) funding, a major customer, together with an increasingly competitive business environment, had contributed to a decline in revenues. Management needed to determine how best to respond to the decrease in the company's overall financial performance.

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

Volume: 5

Issue: 2

Pages: 145

Number of pages: 1

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412502

Document URL: http://search.proquest.com/docview/192412502?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 43 of 100

AN ATTEMPT TO IMPROVE EFFICIENCY AND CUSTOMER SATISFACTION BY IMPLEMENTING AN EMPLOYEE PROFIT SHARING PROGRAM

Author: Walker, Chris; Wiles, Charles R; Sterrett, Jack

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Abstract: None available.

Full text:

INTRODUCTION

Minerals Inc. had purchased a company with $400 million in annual sales as part of their strategic plans for the future. This acquisition would allow them to dominate their part of the industry and serve their customers in a very efficient manner. The company they purchased had the number one brands in their respective categories.

However, due to the price Minerals Inc. paid for the new acquisition they were now faced with a heavy debt load due to the fact that the purchase had been a leveraged buy out. The purchase included five production facilities in the United States and one production facility in Canada. Minerals Inc. knew they would be faced with a heavy debt load and had planned on incorporating employee profit sharing programs at all of the production facilities in order to help reduce debt. They felt the profit sharing program would improve efficiency customer satisfaction, and profit levels.

Minerals Inc. had inherited one production facility from the acquisition on the East Coast that had union representation. This facility had an incentive program that was based on production levels only. The company knew they did not want to incorporate a similar program at their other facilities.

Thus, a team of corporate managers was formed to develop an efficient profit sharing program. The team was composed of an Engineer, an Accountant, and the Director of Manufacturing. They drafted a profit sharing program that was composed of several key areas. These areas included safety, quality, mining, production, packaging and shipping. Each area had established scales with minimum rating levels that needed to be reached in order to generate additional profit. The higher the performance was in each area the higher the rating on the scale and the more profit there was that went into a bonus pool. If minimum levels were not attained then money could be removed from the bonus pool.

The key areas were all rated separate of one another and thus could have an impact on the final amount that was put into the bonus pool. Thus, it was important to attain high values in all areas. This was done to insure needed balance across the entire plant so that one area would not be suboptimized at the expense of another (e.g., attaining record production levels at the expense of reduced quality and a less safe environment). The employees were given the opportunity/authority to make changes in the processes. The more the processes improved, the higher the performance would be and the bonus pool would grow. Thus, it was necessary for all personnel to work together for successful accomplishment of the program.

All employees, supervisors, and office staff were a part of the profit sharing program. The only person not part of the profit sharing program was the plant manager. The rating for the profit sharing program was calculated at the end of each month. The payout for the program was made each quarter with 20 percent of the bonus pool retained until the end of the year in case of any shortfalls for any months.

After several months of work the profit sharing program was ready to be deployed. Minerals Inc. made the decision to implement the profit sharing program at their West Coast facility. The work history of this plant had been good. It had some of the highest production efficiency ratings of the company. It had not had a lost time accident in over three years. The workforce was quite diverse and consisted of several nationalities. The majority of the people consisted of Indians native to India and Hispanics. Language barriers had been a problem in the past.

The management team that has developed the program went personally to the plant to unveil the program to the employees. The plan was presented in three large shift meetings to all personnel. The program was then put into effect.

Six months after the institution of the program morale was very low, quality levels were low, and production efficiencies were low. Plant management was informed that the employees had contacted a local union for representation of them at the plant.

Minerals Inc. began investigating the cause of the problems. After days of small group meetings they discovered that the profit sharing program was being used as a hammer by the supervisors against the employees. The program had created conflicts that had not existed previously. Everyone was pointing the blame at one another. The employees did not understand how the program/incentive levels worked for their respective areas.

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

Volume: 5

Issue: 2

Pages: 146-148

Number of pages: 3

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412504

Document URL: http://search.proquest.com/docview/192412504?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 44 of 100

WIN-SUM COACH LINES: A CASE STUDY

Author: Forbes, Maggie

ProQuest document link

Abstract: None available.

Full text:

INTRODUCTION

In 1996, the Eastern Band of Cherokee Indians contracted with Harrah's Entertainment, Inc., to build a 175,000 square foot casino in a nearby town. Construction was underway and the idea to have a daily shuttle service to and from the casino from the Atlanta, Georgia, Knoxville, Tennessee, Asheville, North Carolina, and Charlotte, North Carolina, was born.

In discussions with my Professors, it was decided that a student group would spend the semester developing a feasibility study and business plan. It was understood that I was really going to open Win-$um Coach in the Fall. Immediately the team and I set out to build Win-Sum Coach, Inc. I must commend this collegiate team for putting together an impressively complete package. The business plan drew praise from all who perused it.

THE TURNING POINT

April was a turning point. I met with the Cherokee Tribe to inform them of my intentions and as long as the business was not based on tribal property they had no objections. My next meeting, in May, was with Marsha Cameron, the Director of Marketing of the Cherokee Casino and her boss, Gaye Gullo, from Memphis. This meeting lifted my entrepreneurial spirits to a new height. We discussed special amenities my company would offer, the busses I would lease, and insurance I would need. Other topics of discussion included territories I would serve, and I was happily informed that Harrah's did not get involved with territories, so the sky was the limit. I was told Harrah's would share in advertising costs and refer my company to inquiries received, as well as offering a five dollar chip credit to each customer I delivered. We spoke of my possibly taking a trip to one of their other casino's in New Jersey to see the bus operations. Bus companies in New Jersey paid a percentage of their fares to local stores who promoted the service and Gaye thought I would benefit from a trip there. We even discussed the possibility of using Win-$um Coach for local shuttle services while our customers visited Harrah's facility. Overall, the meeting was enlightening and I had a lot of work ahead of me. The casino was tentatively scheduled to open in early Fall of 1997.

As time went by, I spoke numerous times to Marsha, keeping her informed of every new detail in the development of the business. She continually exhibited a vast amount of enthusiasm over the business. In July she faxed me a sample contract. This was at my request, and was needed so my lawyer could scrutinize the conditions of the contract. I also needed it to aid in obtaining financing for the busses.

On August 14th, 1997, 1 placed a call to Marsha. I had placed several calls previously and received no response. This was very unusual. Up to this point she was prompt in returning calls. I called her boss in Memphis only to find out they were both out of town at a meeting, "somewhere in Ohio." Nevertheless, I finally received a call back from her about seven o'clock in the evening. I explained that my urgency in contacting her was because I was about to expend a large sum of money, and worried about doing so without a signed contract. I needed assurance from her that I would have a contract with Harrah's. Her final words to me in that conversation were, " Maggie, do whatever you have to do, you will have a contract with Harrah's".

RED FLAGS

In the beginning of September, I called to speak with Marsha and reached her new secretary Regina. During this call I was informed that a letter had gone out to all potential line-run operators asking for information about their companies and the vehicles they were planning to use. The problem was, I never received the letter! I was told it wasn't sent because they did not have my address. WRONG! We had corresponded on several occasions over the past few months and they had my address on file. Regina informed me the information was already past due but she would put it in the mail immediately, and I would need to get it back to her ASAP. I hand delivered the requested information on the ninth of September. This was, or should have been, the first indication that something wasn't right. I saw it as an oversight of Harrah's.

My second red flag should have been when Regina told me in the middle of September (after several calls to check on the status of my contract) that I now needed to contact another person who was working on transportation issues. I placed two long distance calls to a woman named Mary Reilly and never received a call back. Subsequently a third call placed around the end of September was transferred to yet another NEW transportation coordinator' s office. As far as I knew, we still were going to sign a contract at the end of October, as I had been assured by Marsha.

By summer's end, Win-$um Coach, Inc. had leased and renovated an office, ordered computers, as well as a specially designed reservation program. I was making final decisions on the busses, one computer system was purchased and three others ordered. Cell-phones were purchased, special telephone lines installed, and furniture and equipment was arriving, as planned. The company manual was almost complete and I was gathering my work force. I hired an office manager with 20 years experience and two office assistants. Advertising was in print and scheduled. Classified ads were ready to be placed for bus drivers, and promotional orders started arriving, My team was excited and we were truly on the entrepreneurial path. We were just waiting to turn the corner.

The scheduled date for the casino to open was November 13, 1997 Having met our objectives to this point, it was clear to my team that the office would be fully staffed and open for reservations on Monday, October 13th.

On October 7, 1997, I placed a call to Marsha at Harrah's and was told she no longer handled transportation issues. I would have to speak with the transportation coordinator. This person, Laura, informed me that I am not included in the pool of applicants for line-run operators serving Harrah's. WHAT! This is crazy! How could this be? I informed her of my months of preparation and my continued conversations with Marsha, and that advertising has already started. I told her about the contract signing date scheduled for October 26th. This has to be a mistake. She tells me she will check it out and call me back. Meanwhile, I am frantic. This can't be happening! I pick up the telephone and call Marsha myself only to get her voice mail. I leave a frantic message for her to call me.

How the ball bounces in the corporate arena. One hour passes and I receive a call back from Laura. She leaves a message on my voice mail apologizing for the mistake and assures me I will have a contract with Harrah's. Shortly thereafter, Marsha returns my call. She, too, apologizes, and tells me not to worry: the signing date is still on.

We are truly a team, everyone is putting his or her best foot forward and no one is stopping. Local advertising begins, a press release is sent to the papers which is scheduled to run on Sunday October 11th in the business section of the Asheville Citizen Times. Flyers are distributed, presence at a local business show is scheduled for the 11th through the 13th, and the team gathers to peel and stick 6,000 magnetic business cards together.

On October 13th, we opened for reservations. It was quiet a good portion of the day but we did have a few calls and we were pleased with that. The two office assistants were in Asheville handing out magnetic business cards and flyers at the business show. Interest in the service was high and we were encouraged.

THE RIDE GETS BUMPY

Hold on to your seats, the ride is about to get bumpy. On October 14th, at 10:00 AM, the phone rings at Win-$um Coach Line's office. It is a Sales Manager from Harrah's named Tina. She starts questioning me about the business. First, she asks how much insurance I will carry on the busses. I told her that we would carry the $5 million required under the terms of the contract. She informs me it will now be $10 million. Then, she asks how many busses I own. I tell her none. I am leasing them. Her response was, that I could not be a line-run operator for Harrah's unless I owned five, 48 passenger busses. Now I needed to own the buses, AND, their seating capacity had to be 48 passengers. I had intended to lease 29 passenger busses. Not only that, she tells me that even if I could have a contract with Harrah's, it would NOT be for the areas I had planned to service because they had already signed contracts with other companies for those territories. That's impossible I tell her, because I was told from day one that Harrah's does not get involved in territories. Her response gave me little satisfaction. She said "I don't know who told you that but those territories are no longer available."

I thought I was freaking out! I couldn't be hearing this! I informed her of my understanding with the Director of Marketing, Marsha. She did not seem to care much, but she told me that she would check it out and get back to me. Less than an hour passed and I received a call back from her asking me to meet with her at two o'clock, that afternoon.

Prior to the meeting I placed some calls. The first call was to Marsha, and another call was to the General Manager of Harrah's Cherokee Casino, Jerry Eglus. Neither was available, so I left messages. It was my understanding that Marsha was out of town and that the General Manager was in a meeting at the time of my call.

My meeting with Tina left a bad taste in my mouth. She informed me she was waiting for an answer from Harrah's attorney in Memphis to see if they would waive the requirements of owning the busses for me. I was surly not going to get a contract for the areas I had planned for, and the market they were offering showed no possibility for profit. The conditions of my original contract had changed and I was being told I had to compete for the territories now offered. I left the meeting with the understanding that Tina would contact me the next day with word from Harrah's legal team. In the meantime, she encouraged me to check out the areas we discussed. I informed her that I would take the weekend to travel to these areas and gather the statistics needed to see if it was a possibility.

On October 15, 1997, I heard nothing from Tina so I placed a call to her late in the day. I left a message on her voice mail with both my office and home phone numbers, so she could contact me at any hour. On October 16, 1997, I had still received no call from Tina. I left two more messages. At about 4:00 PM, she called and told me she was in training and still had not heard from the lawyers in Memphis. She took my home phone number and promised that she would call me that evening. We discussed my trip to the target areas that weekend and ended the conversation. She did not call back.

On October 17, 1997, I called Marsha and spoke with her about what was going on. The conversation was short and to the point. Marsha told me that she would check with Tina and have her call me. When I tried to discuss the particulars of what Marsha had promised me and what was now happening, she avoided it and just stated that Tina was in charge and I would have to deal with her.

Again I left a message for Tina with times and phone numbers to reach me. About three in the afternoon, my daughter answered the phone at home. It was Tina. She told Tina I was at work and waiting for her call. Tina replied by telling my daughter that she would immediately call back on that same number and leave a message for me on my voice mail. She did that, and my daughter called me at the office to inform me of what had just transpired. I checked my voice mail and her message stated that the lawyer was leaning toward having all line run operators abide by the same rules. Consequently, I did not need to waste my time in travel to the target areas over the weekend. She concluded the message by saying that she would contact me on Monday, October 20th.

On October 21st through Oct 26th, I placed several calls to Tina. There was no response and no return calls.

On October 27th, I placed calls to not only Tina but to Jerry Egelus and Marsha, as well as Laura. Laura was the first to return my call and she informed me that Tina was away on a trip. Furthermore, she knew that Tina had sent me two letters. I had received no letters. She said she would check my file and get back to me. Next, I heard from Marsha and she also told me of the letters. She said she would check with Laura to see what was going on.

In the meantime I called the post office and found out that I did have two letters from Harrah's that had just arrived. I sent my daughter to pick them up. While waiting for the mail, Laura called and I told her of the letters at the post office. She told me that when Tina checked in that day she would schedule a conference call with the three of us so we could clarify the matter.

With letters in hand, I was amazed at the contents. First, there was a statement telling me that I had no right to advertise my business in conjunction with Harrah's, and if I continued, legal action would be taken against me. Then, there was an offer for the target areas that Tina had previously told me not to bother checking. However, there was a stipulation that I must comply with the additional requirements "as outlined in the bus service agreement" in order to obtain those territories.

At 6:30 PM, the conference call came. My first question was what and where are the additional requirements as stated in the letter? Tina informed me that I would need to own (not lease) at least five busses and they could be no more than five years old. They must be 48 passenger with a bathroom (instead of the 29 passenger they knew I had planned). I needed $10 million in insurance instead of $5 million. At the end of the call, I asked them both how I would know what the requirements were if I had never received them. Laura responded with "good question". Tina responded with, "you received a sample contract and it states them in there". I responded with " the only thing it states in the contract is that I have enough seating capacity on the bus so that no one would have to stand for any portion of the trip". Her response was that there were additional requirements I obviously had not received. Based on this, Laura apologized for the mix-up and asked me to come by the casino and pick-up the information the next day. We ended the conversation with my expressing my disbelief over the fact that I was the first to approach them in April and the last to receive the information or a contract.

On October 28th, Jerry Egelus finally returned my call. I expressed my concerns. He stated that he was not receiving the same story from his people and suggested a meeting with all concerned to settle the matter. His secretary would call me back with a time and date.

I picked up the information from Laura and after reading it, I was dumbfounded. Nowhere in the entire contract (for the new target area) was there any of the "additional requirements" discussed the night before. It doesn't say I need to own my busses, nor does it state that they need to be of a certain seating capacity. I immediately placed a call to Laura and informed her of this. She would check it out and get back to me. To this day I have not heard from her.

The same day I called Tim Reid at the Asheville Citizen Times to find out why my article had not run. He informed me someone named Tina Littrella had called and told him not to run the article because the information was not accurate. What right did she have to call and cancel my press release? On the same day I checked my voice mail to make sure the voice mail message from Laura on October 7th assuring me of a contract was still saved. I checked it every day so I would not lose it. Much to my surprise, it was gone. After a conversation with GTE who was handling my voice mail, I feel confident that someone from Harrah's called and had it removed.

On October 30th, Marsha called to set up the meeting discussed with Jerry Egelus. It was agreed that we would meet on November 6th, at 1:00 PM at the new casino. I promptly called my legal counsel and he agreed to attend the meeting with me.

On November 6th, 1997, we arrived at the casino about 12:45 PM, and went to security as directed. After obtaining clearance we proceeded to the corporate offices. There, we met Tina and Marsha. They directed us to a conference room and my lawyer introduced himself and gave them his business card. After about five minutes, Marsha excused herself so she could go and hurry up Jerry Egelus. Laura would not be attending the meeting.

During their absence, Tina told us of another company that had just bought six, new, 48 passenger busses to handle runs in what they had thought was their territory. Tina said that Harrah's wasn't going to use that company because it was new and had no track record. She seemed unconcerned that those would be entrepreneurs had just spent nearly $1.5 million! You can guess how the rest of the meeting went!

WHAT NOW?

I intend to sue the company, but the burning questions that keeps going through my mind are, "What could I have done differently? Where did I go wrong?" What do you think?

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

Volume: 5

Issue: 2

Pages: 149-154

Number of pages: 6

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412354

Document URL: http://search.proquest.com/docview/192412354?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 45 of 100

LONE STAR EXPLORATION AND REFINING COMPANY

Author: Kinard, Jerry; Little, Beverly

ProQuest document link

Abstract: None available.

Full text:

THE SITUATION

Part 1

In December, 1997, Lone Star Exploration and Refining Company lost one of its senior-level executives due to an untimely death. Harvey Hillburn, Executive Vice President in charge of international operations, two company geologists, and a pilot were killed in a helicopter crash ten miles east of Houston, Texas, in the Gulf of Mexico.

Hillburn, a native Texan, had joined Lone Star in 1984, after a somewhat turbulent 15-year career with one of the nation's leading oil companies. He brought to Lone Star a wealth of valuable experience in off-shore drilling, outstanding leadership skills, and an uncanny ability to judge people accurately. Hillburn was promoted to the position of Executive Vice President in 190. Thereafter, it was rumored that he was being groomed for the position of President and CEO. Without question, his death left a considerable void in Lone Star's operations.

In an effort to fill the vacancy created by Hillburn's death, Lone Star initiated a nation-wide search. On February 1, 1998, the following announcement was placed in trade journals and in the Wall Street Journal; personal contacts were made with individuals who worked for competing firms; and persons who were employed by Lone Star were encouraged to apply.

Executive Vice President for International Operations Lone Star Exploration and Refining Company

Lone Star Exploration and Refining Co., a major oil and natural gas exploration and refining company headquartered in Houston, Texas, is seeking a dynamic, experienced individual capable of managing day-to-day global activities of a growth-oriented, billion dollar company with operations in the U.S., the North Sea, Central America, and Saudi Arabia, including joint partnerships with some of the world's largest oil and gas corporations.

The ideal applicant will have extensive experience in oil and gas exploration, refining, and transmission, and will have progressed through positions of increasing responsibility with companies that have global interests. Outstanding leadership qualities, including excellent communications skills, are essential. Fluency in foreign languages and a willingness to be active in community affairs are desirable. Extensive travel, often under adverse conditions, is required.

The total compensation package is attractive and competitive. Applications will be received through March 31, 1998. To be considered, please forward a letter of application, resume, the names and addresses of five references, and other supporting evidence of qualifications to: Mr. James Farsmith, CEO; Lone Star Exploration and Refining Company; P.O. Box 1122; Houston, Texas 77012

Lone Star Exploration and Refining Company is an EOE. Women and minorities are encouraged to apply.

In the two-month period following the announcement, Lone Star received 45 applications. Ten of the applicants appeared to meet the qualifications specified in the advertisement. Screening activities included phone calls to references, contacts with previous employers to verify each applicant's employment history, and a careful review of each finalist's data sheet. After carefully reviewing the credentials of all applicants, the President/CEO, James Farsmith, reduced the pool of applicants to three finalists - T. R. "Tommy" Dunford, an external financial executive who had worked for six different oil and gas exploration companies; Jeffrey Coats, Plant Manager of Lone Star's West Texas refinery in Lubbock; and Carmen Sanchez, a native of Mexico who had emigrated to the U.S. in the mid-1980s and became a U.S. citizen in 1993.

Dunford possessed excellent credentials. He was highly recommended by previous employers and others who had worked with and for him. Contacts with references and previous employers characterized Dunford as "a great guy to work for." He was judged to be highly intelligent, demanding but fair, and impeccably honest. His academic background included a bachelor's degree in geology, with honors, from the University of Oklahoma and a master's degree in financial management from the University of Texas.

Coats, too, had an unblemished record. He had joined Lone Star in 1981, after receiving a degree in petroleum engineering from Texas A&M University. His knowledge, hard work, and loyalty to Lone Star were rewarded when he was named plant manager in 1990. Everyone who knew Coats felt that it was just a matter of time until he was promoted to the corporate office in Houston.

Sanchez possessed a unique combination of abilities that intrigued President Farsmith. First, he spoke fluent Spanish, English, and Portuguese. In Farsmith's opinion, Sanchez's ability to communicate effectively with a growing Hispanic population in the greater Houston area would serve the company well. Neither Dunford nor Coats was fluent in a foreign language, although Coats had learned enough Spanish to communicate in a very rudimentary manner. Moreover, Sanchez's references painted him as being "a polished diplomat and a seasoned negotiator, someone who commanded the respect of his associates." Sanchez had earned his bachelor's degree from San Diego State University, with a major in petroleum engineering, and a master's degree in accounting. His work experiences included two stints with oil refining companies in the U.S. and several increasingly responsible government positions in his native Mexico, some of which provided him with opportunities to impact the operations of the oil cartel to which Mexico belonged. After becoming a citizen of the United States in 1993, Sanchez formed an import-export business headquartered in Galveston with branch operations in fourteen Central and South American countries. As ownermanager of the company, Sanchez controlled all aspects of its operations. He had never married.

Each of the finalists was invited to Houston for a formal interview. The spouses of Coats and Dunford were also invited. Because the Executive Vice President and his spouse would be expected to entertain other corporate officials occasionally, Farsmith felt that the spouse of the Executive VP should be bright and charming, qualities that would enable her to be a gracious and entertaining hostess.

Tommy and Beth Dunford arrived in Houston on April 15. Their two-day visit included indepth discussions with President Farsmith and other senior-level executives, a tour of the greater Houston area, and nightly entertainment. While Tommy was at corporate headquarters discussing job responsibilities, Beth concentrated on housing developments and educational institutions available to their two teenage children. Jeff and Mary Coats were extended similar courtesies one week later. Carmen Sanchez, who is unmarried, arrived early on April 29 and departed the next evening. Each of the candidates performed superbly during the interview process; each was knowledgeable, insightful, and pleasant; and each appeared to possess outstanding leadership qualities.

Questions for Discussion

1. Discuss the pros and cons of inviting the spouses of the two finalists. Should Sanchez's marital status place him at a disadvantage?

2. What questions should and should not be asked in the pre-employment interview?

3. Based on this limited information, which candidate would you select?

Part 2

On one hand, Farsmith wanted to promote Jeff Coats as a way of recognizing his excellent performance as plant manager and because Coats was familiar with the corporate culture. His main reservation in extending Coats the offer was attributed to Jeff's wife, Mary. Throughout the visit to Houston, Mary seemed nervous and somewhat "out of control." Farsmith did not believe her odd behavior was caused by the stress of the interview. Moreover, if Jeff Coats were promoted, this would create another vacancy, that of plant manager in Lubbock. Corporate officers who were intimately familiar with the west Texas refinery advised Farsmith that there was no one presently at the refinery who was capable of taking charge. During the interview, Farsmith considered discussing Mary's behavior with Jeff, but decided against it at the time, opting instead to broach the subject prior to extending an offer.

Tommy Dunford was the most experienced of the three finalists. Farsmith considered Dunford's background to be both a blessing and a curse. Dunford's extensive experience provided him with a grasp of every aspect of the oil and gas business, but his employment record suggested a tendency to change jobs too often. Farsmith needed stability in the position of Executive Vice President, and he feared that longevity was not Dunford's long suit. At the same time, however, Farsmith recognized the value of experience and the excellent reputation that Dunford enjoyed throughout the industry.

Carmen Sanchez's greatest attribute was charisma. Throughout the interview, Sanchez "won over" those individuals who questioned his employment background and his ability to get things done in a tough, competitive industry. Not only did he demonstrate a command of complicated financial arrangements, but he also exhibited the ability to communicate effectively with people of diverse backgrounds and interests. Without a doubt, Sanchez was a master of deal making. And, he was bright and perceptive. Following the interview, the opinion of most executives who comprised the senior- management group was that Sanchez possessed excellent technical and human skills. In short, he was perceived as the "executive type," exhibiting poise, empathy, knowledge, and humor. His appearance and communication skills reinforced the notion that he was a professional manager, not simply a bureaucrat. President Farsmith was truly impressed with Sanchez, but he wondered if Sanchez's "alternative life style" would cause problems within the company.

Questions for Discussion

1. List the personal and professional characteristics that you deem most important and least important.

2. Compare each candidate with the lists that you have developed. Rank order the candidates and give supporting arguments.

Part 3

After several sleepless nights in which he weighed the advantages and risks associated with each of the finalists, President Farsmith opted to extend the offer to Jeffrey Coats, provided that Jeff could offer assurances that his wife, Mary, enjoyed good emotional health. On May 15, Farsmith contacted Jeff by phone, explained his concern in a polite and professional manner, and then formally extended the offer. Three days later, Farsmith received the following response.

Mr. James Farsmith

President and Chief Executive Officer

Lone Star Exploration and Refining Company

Houston, Texas 77012

Dear Mr. Farsmith:

Please accept my resignation from Lone Star Exploration and Refining Company, effective immediately.

Sincerely,

Jeffrey Coats

Plant Manager

Questions for Discussion

1. Was Farsmith justified in raising the spousal considerations? Is Mary's emotional health job related?

2. Did Jeff Coats over-react to the discussion with President Farsmith? Why or why not?

3. Identify the alternatives that Farsmith now faces. What action would you recommend? Why?

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

Volume: 5

Issue: 1

Pages: 1-5

Number of pages: 5

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411780

Document URL: http://search.proquest.com/docview/192411780?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 46 of 100

GOALS OF FACULTY CONTROL ARE ACHIEVED BEFORE GOALS OF TEACHING AND LEARNING ARE CONSIDERED

Author: Muse, Frederic M

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Abstract: None available.

Full text:

INTRODUCTION

This is no ordinary school setting. The school system described herein is a correctional education setting. Mr. Smith taught for 24 years in this reform school for juvenile delinquents. Students were assigned to him as they were committed by the courts and released from him on an almost daily basis as they finished their time and completed their treatment and program goals. Students in any class represented ages 12-17 and grade placements 6-11. The superintendent of this school system is the head of a governmental agency, a political appointment. The school board is the head of a governmental department, a political appointment. Neither position requires any working knowledge of the complexities of the field of education. The normal "checks and balances" of power found in the public school setting do not exist in this school system.

TROUBLE WITH THE PRINCIPAL

The struggle between Mr. Smith and Mr. Jones is based on Mr. Jones's perception that Mr. Smith represented a threat to his authority. Mr. Smith had favored the student version of a sexual harassment accusation against a fellow teacher that Mr. Jones defended. Mr. Smith had successfully fought to delete an objectionable requirement from the policy manual which ended with direct conflict with Mr. Jones. The principal attempted twice to reinstitute the requirement as a local policy only to be stymied by Mr. Smith. With each new episode of this ongoing story, Mr. Jones's wrath toward Mr. Smith grew. None of the warning issued to Mr. Smith were ever removed from his file even when the accusations proved untrue..

Mr. Jones submitted an oral warning to Mr. Smith's personnel file regarding one of the few sick days Mr. Smith had taken, but he never administered the warning. After accidently finding the warning, Mr. Smith submitted to Mr. Jones's immediate superior the receipt from the doctor and an empty prescription bottle. Mr. Smith received signed statements from these coworkers that the words and ideas attributed to them on the warning by Mr. Jones were never spoken by them.

Mr. Smith received favorable publicity. In the spring of 1990, the local public library newsletter published an article complete with a picture of Mr. Smith regarding his long use of the system to check out books for students who were placed in isolation due to their misbehavior. Mr. Smith had also received positive remarks in the local newspaper for several years regarding the performance of his teams in a local political simulation competition against area high schools. Evidence of Mr. Smith's effectiveness failed to make Mr. Jones happy though such successes reflected positively on his school. Mr. Jones never wrote any letters of recognition.

Mr. Jones became an office recluse while doing graduate school work. He arrived at work, closed his office door, and completed his writing and reading assignments. Teachers interrupting him with concerns found themselves chastised for having problems and were seldom granted relief. Gradually, Mr. Smith became the relief valve by offering advice, finding a way to handle many discipline problems, and arranging class changes for students who needed them. Mr. Smith also initiated grade placement changes that placed many students in grade/age appropriate settings using the student's work completed at the institution and standardized test scores as justifications. Mr. Smith began to receive transcript requests from public schools. Students returning home after release did not know he was not the principal. Court counselors sought transfer of students from other schools specifically to enter Mr. Smith's classes. Through these activities, Mr. Jones became even more convinced that Mr. Smith represented a threat to his authority. Mr. Jones never realized that his own abdication from responsibility produced the perceived effect.

Mr. Jones made vague accusations against Mr. Smith alleging that he did not get along with his coworkers, engaged in unspecified unprofessional activities, spread dissent among the faculty, and failed to follow several of the orders issued to him. The Director of the institution was instructed to investigate the charges. The superintendent Mrs. Green, along with her second-in-command Mrs. Gordon, said after a meeting held specifically to address the charges that they did not like wasting time on unsubstantiated witch hunts.

Mr. Jones continued his harassment by assigning Mr. Smith 34 students in one class, knowing that only 20 student seats with room for no more occupied his small classroom. Mr. Jones came in person to view the chaos and chuckled at the obvious student and teacher discomfort. Mr. Jones declined the schedule change requests citing the need to first gain permission of another teacher, who had only six students, to accept more and declared that he would make no changes until the following Monday, the regular day for class changes.

Mr. Jones rescinded many of the reprimands issued to students by Mr. Smith for contorted reasons such as a student did not need to follow Mr. Smith's instructions if previously given instructions by someone else, students weren't required to attempt their schoolwork, and official interpretations of policy did not have to be viewed as policy. Students' excuses were routinely accepted as fact. Mr. Smith was seldom asked for his version of the story and just as seldom informed that his reprimands had been overturned. News of such actions more often came from students or other faculty. However, this tactic failed miserably as students themselves chastised those who evaded the consequences of their actions. Mr. Smith gained the respect being lost by Mr. Jones for even the students recognized the treachery of the events.

Mrs. Green and Mrs. Gordon had become upset at the persistent complaining coming from the particular school at which Mr. Smith worked. They mandated a new schedule that required all teachers to have a full complement of students from 7:55 am until 4:05 pm. To accommodate student coverage after the normal school day ended, teachers were divided into groups of three. Each group acquired responsibility for one wing of a residential hall, each hall having three wings and each wing having 16 beds. Mr. Smith and two of his professional friends were assigned an entire residential hall because they were able to handle that number.

Mr. Smith faced more serious tactics. He received a written reprimand for taking students off campus who never left their residential building. Mr. Smith proved the charges false, but administrators refused to reconsider or pull the reprimand from his file. He received a reprimand for not attending a hearing of a student who had escaped and been returned by the police. Attending the hearing would have left the school with two-thirds of the student population present and without any male supervision. It would also have left his female coworker alone with an entire residential hall of males. Dangers created by attending outweighed those created by staying. All allegations made by Mr. Jones against Mr. Smith concerning the incident except not attending the meeting were proven false, but the reprimand remained on file.

In 1992 the school administrators opted for a curriculum integration program. A workshop was held with facilitators from a public high school describing exactly how they had designed and implemented the program. Then Mr. Smith and his fellow teachers were told to copy this model program design. First, and last, came planning to implement the school-wide curriculum integration program. Academic and vocational teachers had to meet together to plan topics and strategies. Two problems were evident. First, students from all vocational teachers were dispersed to all teachers so planning could not be held with a particular vocational teacher and academic teacher as had been the case with the model school program. Mr. Jones would not change schedules of students to accomodate the model he insisted be implemented.

Second, to free the academic teachers to meet, vocational teachers were assigned all the students to supervise. When no planning took place, Mr. Jones asked why. When told the vocational teachers were not free to meet because they supervised large groups of students, Mr. Jones called for another planning session and assigned supervision of students to the academic teachers. Again, no meeting. Mr. Smith tried to explain to Mr. Jones that teachers cannot meet and plan and simultaneously supervise large groups of students who are, by definition accompanying incarceration, not always the most well-mannered individuals. Mrs. Green and Mrs. Gordon became frustrated that this school had made no progress toward implementing the model. Mr. Smith was fingered with the rationale was that he had pointed out the shortcomings of the program, thus poisoning everyone else against it and had himself refused to plan with anyone.

Mr. Smith was assigned the responsibility of producing the Christmas play. Mr. Smith already had the responsibility of getting several GED students ready to pass the examination in order to be released during the Christmas school holidays. He also had to complete the editing and publishing of the Christmas edition of the school newspaper. And, he still had the large class in the afternoon, the time designated for play practice. Mr. Smith asked for volunteers for the play and sought coverage for his class while he practiced. No one would cover his class for it was "too large." Mr. Smith declined to initiate play practices.

Mr. Jones demanded that Mr. Smith take his class and the volunteers to the practice site and supervise all the students while directing the play practice. The responsibility was too great and the risks too many for Mr. Smith to attempt alone. When Mr. Jones finally acknowledged that no play would take place, he assigned the play to another teacher with four students. These four students were reassigned and this teacher, along with an assistant also assigned to aide him, took the volunteers for the play and finished a creation that met the Christmas deadline. Mr. Jones reported to his superiors that Mr. Smith had attempted to sabotage the Christmas festivities.

THE COMMERCIAL ASPECT

On July 1, 1990, the code governing the delivery of education services to the students of this school system was revised to explicitly state that individualized instruction be used by all teachers. State law had required this teaching practice since the juvenile justice code updates of the mid-1970s. The requirement reflected the reality of the classroom environment faced by all teachers within the school system. All levels of written procedure now contained the same directives. A general statute of the State now read: "When the judge commits a juvenile to the [the school system], the Director shall prepare a plan for the care and treatment within 30 days after assuming custody of the juvenile." The revised version of bureaucratic law that guides the implementation of the law now reads: "Individualized instruction provided by the teacher shall be based on the individualized plan of action." Departmental policy, which was revised at the same time, similarly reads: "During each school period, students shall be provided with individualized learning activities in accordance with their IEPs."

This legal requirement did not advance the goals of the assistant superintendent of the system, Mrs. Gordon. She not only worked full time in this next-to-the-top position but also moonlighted for a corporation advancing an educational product. Mrs. Gordon provided training in the use of this product. Mrs. Green, the superintendent and friend of Mrs. Gordon, purchased with state funds products from this business and required teachers to use them. The stated goal was improved teaching and improved learning. Mr. Smith became concerned. Mrs. Gordon's product required group instruction identical to that provided in the public schools, thus negating the legal requirement for individualized instruction. Mr. Smith did not believe the moral or legal arrangement between Mrs. Gordon, the school system, and the corporation were appropriate. He declined to take part in the "voluntary" training sessions. Mr. Smith became a threat to their authority. In January 1991, Mr. Jones announced that the principals and chief of education had decided that teachers were to have daily lesson plans based upon design of this product. A three year struggle began between Mr. Smith and his superiors.

In February of 1993, several significant events occurred. Mr. Jones began more intensely to demand lesson plans from Mr. Smith in the design of the corporate product sold by Mrs. Gordon. On February 23, Mr. Smith received a written reprimand for not planning his students' education programs. Mr. Smith unsuccessfully contested the reprimand for not having lesson plans using the argument that individualized educational planning for instruction is education planning by definition. Next, Mrs. Gordon resigned from the school system to work full time for the corporation she had been representing for at least five years.

Mr. Jordan, the chief of education, spoke in a teachers' meeting and declared that the personalized education plans (PEPs, a new name for IEPs) for students should be more individualized. When the question arose about the inability to simultaneously provide individualized instruction as he had just described and group instruction as required by the product sold by Mrs. Gordon, Mr. Jones said that the teachers would just list PEP objectives as special goals and teach to the common group goals. Neither man would ever explained what a "common group goal" was, information the faculty asked for as this represented the first time the term had ever been heard, or how it fit into the policies teachers were supposed to follow.

Another noteworthy event was that Mr. Smith received a written notification that group lesson plans were required. It was the first statement in writing received by anyone in the entire school system on the subject, and only Mr. Smith received it. This supposedly official statement had been typed that day on a blank sheet of paper, not letterhead, and signed by Mr. Jordan.

Mr. Smith had a first period class of GED students whose schedule sent them directly to the GED teacher supplied from the local community college. Mr. Jones wished this form of group instruction similar to the design of Mrs. Gordon's product, used in this unique class of only GED students working on only English grammar, to be implemented in all of Mr. Smith's classes. Mr. Jones began assigning students to the class not of GED ability, not of GED age, and as young as 12, creating a class of students with diverse abilities, ages, and treatment and educational goals. Mr. Smith was chastised by Mr. Jones, who vehemently denied assigning to the class students unable to complete GED level work, for discontinuing the single subject group instruction. Mr. Jones declared that students of any ability, age, and maturity level were capable of GED level work and declared Mr. Smith to be unprofessional to think otherwise.

September 14, 1993 while departing for mandatory workshop at which Mrs. Gordon was the lead presenter, all teachers received a policy written by Mrs. Green demanding that they use the product of her still friend and former second-in-command. This represented the first written policy issued by the school system regarding this thre-year push for teachers to use the lesson plan design of the corporation. The policy provided a deadline for implementation of the lesson plan design and stated that training would be provided in the use of the product. Of course, only one group could provide training, the group that had a trademark and copyright protection over the product, the one in which the Mrs. Gordon now worked. During the workshop all vendors had tables outside the workshop area, a customary practice. Literature and order forms listing all available products from this corporation were handed out inside the meeting hall by school system administrators. Mr. Smith perceived the activity as illegal and unprofessional. Upon returning home he wrote the Governor's office and stated as much. A week later Mr. Smith had his second final written warning for refusing to do lesson plans.

THE ORDEAL'S CONCLUSION

During February of 1994, the ordeal ended. Almost on the same day, Mr. Smith was named the Teacher of the Year for the state in correctional education and was dismissed as a teacher. The final insult came with the banning of Mr. Smith from campus. The letter announcing the ban accused him of taking materials purchased for the school with grants obtained by him to purchase school materials. Mr. Jones demanded that Mr. Smith produce receipts for the materials. Any administrator knows that a teacher cannot acquire personal grants without the signatures of a series of other responsible parties and that approved financial agents receive the items acquired by the grant and collect the receipts for those items. Teachers do not receive and administer grant money by themselves. Mr. Smith had no recourse against the charge of theft except through costly legal channels he was financially unable to pursue.

EPILOGUE

Mr. Smith did proceed through the legal channels with his case. Stage One ruled only on the case of insubordination without taking any evidence. Stage Two accepted school system policy but did not accept any higher legal authority and ruled on the same question as Stage One. Stage Three did not accept any new evidence and ruled on the same question as Stage One.

Stage Four represents the first stage of the appeals process accepting any evidence of stronger authority than policy. The Court ruled that the statutes did not mean what they said, though the Court never said what they do mean. The Court accepted the changed wording of the law advanced by the administrators ["individualized" became "individual" and the presence of the individual programs such as a drug counseling program, a sex-offender program, and vocational counseling program was defined as having an individualized education program] and its subsequent interpretation by the administrators. The Court also accepted the administrators' application of the rules involving the case to a public school classroom rather than to the correctional setting for which they were written. The Court further ruled the bureaucratic law that interprets statutory law and represents guidelines for state government operation to be "vernacular" without any further comment.

Mr. Smith has had several job interviews based upon his résumé but no offers of employment. Prospective employers, as a part of their administrative procedures, call the former principal, Mr. Jones, for a recommendation. One may surmise that the recommendation alludes to Mr. Smith's being insubordinate and dishonest. The assumption from outside the system is that the boss is right, an assumption that generally stands without question.

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

Volume: 5

Issue: 1

Pages: 6-11

Number of pages: 6

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411930

Document URL: http://search.proquest.com/docview/192411930?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 47 of 100

EXPLOITING BUSINESS OPPORTUNITIES

Author: Wright, Newell D; Foucar-Szocki, Reginald F; Daly, Paula; Wood, Tom; Jerome, Robert

ProQuest document link

Abstract: None available.

Full text:

Note: This case examines one of the eleven scenarios, scenario 4.

SEGMENT 4: BAG THE BAGGING JOB

Terry took the plunge and decided to quit his job bagging groceries. Through word-of-mouth, he is now up to cutting 18 lawns per week, bringing in a weekly gross of $290. He quickly paid back the $172 he had withdrawn from his savings account. After paying about $8 a week for gas, his only other expense was transportation to and from job sites. This was taking up every spare moment of his two days off, and he was making more money cutting lawns than bagging groceries. The opportunity costs of keeping his bagging job were starting to mount, and he decided to quit his bagging job. The net effect of this decision was to increase his spare time. In effect, he went from working seven days a week to three days a week.

Just for the heck of it, Terry decided to bid for a contract cutting the lawn at one of the apartment complexes in town. He was somewhat concerned about this, as he did not have any of the tools that would be necessary to allow him to cut this much grass. For example, he would probably need a bigger lawn mower, as well as a weed whacker, roller, herbicide dispenser, etc., not to mention something to transport all of that equipment in. But he decided to submit a proposal anyway. He estimates that the lawns he is already mowing have the combined size of seven or eight football fields, generating an income of $1,200 per month. He figures that the apartment complex will take him three hours per week to mow, including all trim work. The actual lawn size at the apartment complex is about 1 1/2 acres.

1. When Terry was bagging groceries, he was paying taxes. Now his entire income is not taxed. What should he do about his tax responsibility?

2. What should Terry include in his bid?

3. How much should he bid for the job?

4. If he gets the job, what other opportunities and threats will he face?

INSTRUCTOR'S NOTES FOR BAG THE BAGGIN JOB

1. When Terry was bagging groceries, he was paying taxes. Now his entire income is not taxed. What should he do about his tax responsibility?

Terry should at least estimate the income tax and social security obligations and set aside the money in an escrow account. If he is more cautious, he might hire an accountant to set up the accounts and ensure that the tax payments are made correctly and on time.

2. What should Terry include in his bid?

In his bid, Terry should include at least all of the relevant costs, including:

1. his labor (opportunity cost of working other lawns)

2. depreciation on the equipment (lost market value or legally allowed tax rate)

3. supplies (e.g., gasoline)

4. maintenance on the equipment

5. profit (return on risk)

6. additional taxes

3. How much should he bid for the job?

If information is available on what Terry's competition generally charges on jobs such as this, Terry might want to consider those amounts. If this is the case, Terry would want to underbid the competition, but to cover the estimated costs. If Terry cannot competitively cover the costs estimated in question #2, the bid should still cover the costs and Terry should expect to lose the job. The question of whether Terry should take the job at a loss in order to break into the market might arise, but Terry is not committed to this industry, and this type of pricing strategy is probably not appropriate. (Terry certainly does not have the capital to engage in a long price war with more established firms.)

4. If he gets the bid, what other opportunities and threats will he face?

If Terry gets the job, opportunities will include:

1. The ability to advertise using the side of the truck while on the job

2. The opportunity to expand the range of services offered to the residential customers

Threats (additional mandated considerations) will include:

1. Increased liability to employees (insurance expense)

2. Increased liability to customers (bonding expense)

3. License and permit requirements

4. Overextending his commitments (lowered standards for new and old customers)

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

Volume: 5

Issue: 1

Pages: 12-14

Number of pages: 3

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411840

Document URL: http://search.proquest.com/docview/192411840?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 48 of 100

BMW OF NORTH AMERICA, INC. v. GORE: ETHICS GO FOR A RIDE

Author: Falchek, Joseph S; Alexander, Christopher S

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Abstract: None available.

Full text:

CASE DESCRIPTION

On the 20th day of May, 1996, the Supreme Court of the United States dealt a blow to the professors who teach ethics as an integral part of their Business Law courses. By a five (5) to four (4) vote, the Supreme Court curtailed jury awards aimed at punishing or deterring misconduct when it struck down as 'grossly excessive' a two million dollar punitive damage award to an Alabama oncologist. Dr. Gore's suit was based upon undisclosed pre-delivery damage and repair to his BMW sports sedan (BMW of North America, Inc. v. Gore, 1996). At first blush, what seems to be a punitive damage case can be used in the classroom as a case study for ethical considerations in business. The primary subject matter of this case concerns business ethics and business law. Secondary issues examined include marketing. The case has a difficulty level of three, appropriate for junior level courses; or four, appropriate for senior level courses. The case is designed to be taught in one class hour and is expected to require three hours of outside preparation by students.

CASE SYNOPSIS

This paper will discuss the majority opinion of the Supreme Court as well as the individual concurring and dissenting opinions. Irrespective of the reported decision, there exist numerous facts and issues that were presented and went unanswered in the record, briefs and oral argument before the Court. By sensationalizing this case, the popular press reported the case with 'sound bite' headlines. These headlines may have been read/heard by today's college students, thus flavoring and/or desensitizing the ethical issues that should be addressed by all college students prior to entering the business world of tomorrow. The case of BMW of North America, Inc. v. Gore case may be used as a means to highlight the overlapping legal/ethical considerations in a framework that is understandable, realistic and relevant to the class. This case can promote an interactive exchange of ideas on many of the unreported facts and issues that are supported by legal and ethical considerations. These discussions will prompt the class to form its own opinion on the legal and ethical issues, and to decide whether or not they are in agreement with the decision of the Supreme Court.

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

Volume: 5

Issue: 1

Pages: 15

Number of pages: 1

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411803

Document URL: http://search.proquest.com/docview/192411803?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 49 of 100

STEPHENS INC.

Author: Akin, Ramona; Shetty, Shekar

ProQuest document link

Abstract: None available.

Full text:

INTRODUCTION

Stephens Inc. is a full-service investment banking firm headquartered in Little Rock, Arkansas. It is a business with an interesting history that includes political intrigue as well as legal and ethical questions.

The Stephens story began many years ago with two brothers, Witt and Jack, who were reared in poverty in a rural Arkansas town with population of about 250 people. Their father, A.J. Stephens, was a farmer, amateur geologist, politician, Bible scholar, legislator, and deacon in a Baptist Church. His philosophy about poverty was rather simple. It was nothing to be ashamed of and nothing to brag about. It was, on the other hand, something to get rid of, just as soon as one conveniently could.

Success, according to the elder Stephens, was not a destination to be reached. Rather, success was to be measured by the quality of one's journey there.

WITT STEPHENS

Witt, the older Stephens brother, struck out on his journey first. He began by selling belt buckles on military posts at a handsome dollar profit per buckle in 1927. Interestingly enough, one purchaser of those belt buckles was a young Orval Faubus. Perhaps the Stephens' ties to politics began with this transaction between Witt and the man who was to become one of Arkansas' best known politicians.

The company which eventually became Stephens Inc. was founded as W.R. Stephens Investment Company in 1933 by Witt Stephens for the purpose of trading Arkansas Highway bonds. By the time the bonds paid off at par, Stephens had gained a reputation for municipal bond expertise and sound financial counseling.

In 1957, Witt left the company to run ArkLa Gas. Witt had bought Fort Smith Gas Co. in 1945, an investment he parlayed into ArkLa Gas, a major utility with reserves valued in excess of $1 billion.

JACK STEPHENS

Jack Stephens graduated as a United States Naval Academy midshipman, but he never received a Navy commission because of eye problems. Jack never was accused of lacking vision, however, when it came to business.

He joined the firm in 1946. The 50-50 partnership between Witt and Jack Stephens began on a handshake, and the two Stephenses began patiently building their empire. Jack's 50-year journey has resulted in his becoming a billionaire investment banker and chairman of the family-owned investment firm.

The "Jack Years," as they are called by an Arkansas DemocratGazette writer, began in 1957 when Witt left the company to run ArkLa Gas. When Jack Stephens took control of the family business, the brothers' net worth was nearly $7.5 million. Within 30 years, that figure had grown to well beyond $1 billion. Stephens interests supplied the money to help Sam Walton go public with Wal-Mart Stores Inc. stock and financed Don Tyson's 'chicken wars' in a hostile takeover of rival Holly Farms.

By 1989, Jack's business acumen had allowed him to buy a $2.3 million home on exclusive property in Miami. He lost the home, however, in a divorce settlement in 1991, the same year that Witt Stephens died. By that time, the combined Stephens' net worth was $1.7 billion, 34th among U.S. fortunes and in Arkansas second only to the Walton family. Each brother's personal fortune was estimated at $380 million, or roughly equivalent, according to Time magazine, to that of Donald Trump.

STEPHENS AND POLITICS

Jack Stephens' journey to success included an association with politics and politicians that began when he was a teenage statehouse page. Although a Republican, Jack aided his former Naval Academy classmate, Jimmy Carter, by raising funds for his presidential campaign in the 1970s. He was a major GOP contributor during the Bush administration, and he helped bankroll the Clinton-for-President Democratic campaign in 1992. He was a leading stockholder in a bank that gave Clinton a $3.5 million credit line.

In fact, the Stephens brothers have a history in Arkansas as political kingmakers. Their clout has led some political observers, tongue in cheek, to label the combined influence of Jack and Witt Stephens by the acronym, JAWS.

Despite the observations of political pundits, however, Jack Stephens received the 1989 J. William Fulbright Award for international trade development in recognition of his efforts to attract foreign investment capital to the Mid-South. Along with Witt in 1991, he won the William F. Rector Memorial Award for Distinguished Civic Achievement from 50 for the Future, a business group.

Various honors notwithstanding, Jack prefers to keep a low profile and he abhors interviews. In 1991, he was named to head the Augusta National Golf Club and the Masters Golf Tournament. Golf Digest magazine, in seeking to feature him, asked a fellow golf club member about the financier's identity. The golfer replied simply, "He owns Arkansas."

THE STEPHENS EMPIRE

The Stephens Group has included such diverse operations as a nursing home, a sunglasses distributor, a maker of needlework patterns, a Hong Kong brokerage, a Hilton Head plantation, and manufacturers of everything from water heaters to motor boats. In the early 90s, the Group acquired controlling interest in the Donrey Media Group, a major chain of businesses based in Las Vegas. This acquisition was viewed by some as being analogous to the collision of two financial worlds-each created from the grass roots up by entrepreneurs much in the spirit of Horatio Alger.

Stephens Inc., Arkansas' largest securities firm and one of the largest brokerages off Wall Street, shed $132.2 million in assets for the year in 1991, down from $529.2 million. At the same time, the company showed increased net worth, up $13.9 million, to $129 million. As of June 27, 1997, Stephens had total assets of $745.3 million and a net worth of $141.2 million respectively.

According to a company marketing brochure, the Stephens philosophy encompasses a belief that strong relationships based on mutual understanding and integrity are, without exception, more important than individual transactions. The integrity of the firm, however, has been called into question.

PROBLEMS

Jack Stephens' political activism may have been instrumental in winning him some critics. For instance, a writer for the Wall Street Journal reported in 1991 that Jack played a central role in bringing the Pakistan-based Bank of Credit and Commerce International (BCCI) to the United States. Six individuals were indicted in 1992 and charged with criminal activity arising from the operation of BCCI, which the government called 'a criminal enterprise.'

Although Stephens denied any BCCI association, the Journal reported that he helped link BCCI-related individuals with an energy company associated with George W. Bush, the president's son.

Stephens branded the Journal article as reckless, irresponsible journalism which was riddled with numerous inaccuracies and misstatements. He said, "I am driven to the conclusion that the Journal is engaged in a vendetta to discredit me and my family as part of some separate and hidden agenda which has nothing directly to do with us."

According to the Journal, however, Stephens ignored a 60-year-old doctrine that is supposed to keep banking and securities as separate as church and state. In response, Stephens suggested that someone call that doctrine to the attention of financial firms such as Citibank, Chase Manhattan, Bank of America, and dozens of others which Stephens said were engaged in the securities business-with the blessing of the Federal Reserve Board. In 1992, BCCI officials pleaded guilty to state and federal criminal charges and agreed to pay $550 million in restitution.

Also in 1992, a 7-year-old bankruptcy case of an industrial supply company that Stephens Inc. once owned was settled when the Stephens firm paid a $1.25 million settlement. The original suit alleged that Stephens was guilty of fraud in a 1984 leveraged buyout when the Little Rock investment firm sold Hollis & Co. The 1987 suit charged that Stephens, which owned Hollis & Co. at the time of the buyout, caused the company to go bankrupt because of the transaction.

Officials at Stephens denied the claim, saying instead that mismanagement of Hollis & Co. after the sale led to the bankruptcy filing. The settlement agreement noted that Stephens produced various audits that supported its claims that the buyout had nothing to do with the bankruptcy.

The Stephens business empire was reported in 1993 to be under investigation by the Federal Reserve with regard to the extent of the family's control and ownership of two banks, Worthen Banking Corp., Arkansas' largest bank company, and the First National Bank in Stuttgart, and whether the relationships violated laws limiting concentrations of financial power.

The New York Times focused on the First National Bank of Stuttgart, which showed considerable ownership by the Stephens family and stated that the Fed found the Stephens holdings violated The Glass-Steagall Act. This act prohibits people who control securities firms from owning more than 50% of a bank. Further, the Times alleged that the Fed went easy on the Stuttgart institution and, instead of levying a fine or bringing a formal enforcement action, suggested that it change to avoid future Fed scrutiny. The article quoted sources as saying that the late Witt Stephens had exerted considerable control in the operations of the bank.

According to documents and interviews, representatives of Stephens Inc. and the Stuttgart bank failed to disclose to the government the full extent of the family's ownership and control of the Stuttgart bank. These incomplete disclosures helped persuade regulators that the family's holdings were permissible, and they allowed the family to exercise control over the Stuttgart bank for more than a decade. One of the incomplete disclosure documents was filed by associate White House counsel William H. Kennedy, III. Kennedy was formerly a Little Rock lawyer who headed the Rose Law Firm where Hillary Rodham Clinton worked.

A Stephens attorney said the family did not agree with the Fed's findings that it had more than 50% ownership in the Stuttgart bank, arguing that some of the family's trusts were independent and should not be counted. He stated that the omission of some of the Stephens bank holdings on the 1984 document stemmed from a legal 'misunderstanding' of disclosure requirements.

Differences were reported within the Fed on whether it was too quick to resolve one violation in the mildest way possible, as well as to how vigorously the questions that remained should be pursued. Instead of levying a fine or bringing a formal enforcement action, the Fed suggested that the bank become a state-chartered bank which would allow it to avoid future federal scrutiny. At a closed meeting three months prior, two members of the Fed's board of governors favored tougher enforcement, but Greenspan and four other members backed the milder course.

Worthen and Stephens took it on the chin in newspaper reports about their relationship. The New York Times published an article on the Federal Reserve Board's investigation of Worthen ownership, along with its approval of Worthen's merger with Union.

As a result of new stock issued in Worthen Banking Corp.'s merger with Union of Arkansas Corp., the Stephens family interest in Worthen decreased to the point that the McAdams family which owned Union replaced the Stephens as the company's major stockholder. Stephens ownership of Worthen dropped from 36.6% to 26.6% while the McAdams family, which took Worthen stock for their Union stock, became the major stockholder with 27.2%.

Along with the New York Times, the Wall Street Journal also lambasted the Stephenses, with both newspapers noting Stephens' close connections with President Clinton. It might be mentioned that while the Stephens business empire had close links to the Clinton White House, none of the Fed's top officials had been appointed by the Clinton administration.

In 1996, Stephens Inc. was fined $225,000 by the National Association of Securities Dealers regulatory arm because of a lack of supervisory control over some of its employees. The firm was also censured, and two Stephens brokers were sanctioned. The sanctions were related to the sale of the proprietary mutual funds of NationsSecurities Inc., a subsidiary of NationsBank Corp.

As part of its settlement, Stephens was required to hire an independent auditor to review the firm's supervisory policies and procedures and to implement changes recommended by the auditor. The consultant was also to conduct mandatory training for senior personnel and supervisors.

Stephens neither admitted nor denied the association's findings. General counsel for Stephens said he didn't think securities dealers' sanctions would hurt the firm's reputation or its business.

One of those sanctioned, a Stephens analyst, however, called the findings 'ludicrous' and filed an appeal. The analyst had been fired from Stephens in 1994 after poor annual reviews. He claims Stephens tried to blame him for losses incurred by Stephens customers who bought TPI stock. He said, "I refused to be the scapegoat for the ineptitude of nonrevenue-producing senior vice presidents at Stephens Inc."

In 1997, this former Stephens Inc. securities analyst was cleared by an appellate committee of the National Association of Securities Dealers of making misrepresentations to Stephens customers in 1993. This decision reversed an earlier district committee's finding that the analyst misled customers regarding the stock of TPI Enterprises Inc., which led to censure and a $40,000 fine.

The Stephens company had no comment on the reversal.

In the fall of 1997, it was reported that the Federal Securities and Exchange Commission had issued a cease-and-desist order against Stephens Inc., requiring the company to change its disclosure practices when selling stock owned by the company to its customers. In an order filed September 16, the federal agency said it had accepted Stephens' settlement offer, which the company made in anticipation of administrative proceedings by the SEC. As part of its settlement, Stephens consented to the order and its findings.

The company neither admitted nor denied any wrongdoing.

PRESENT AND FUTURE FOR STEPHENS INC.

Stephens Inc. finished the year 1997 as the leading underwriter of new municipal bond issues in Arkansas, a market that was up 36% in volume over 1996. The company served as managing underwriter on 36 municipal bond issues that raised a total of $357.3 million, or 28.2 percent of the market in the state.

Stephens also finished the year as the state's top municipal financial adviser, with 10.7% of the market.

The question one might pose at this point in time is whether the problems Stephens has experienced over the years will have a negative impact on its reputation and, as a result, affect its credibility. Another point of interest might be an assessment of the adequacy of the penalties Stephens has received as compared to those of other large investment banking firms in the United States.

Although the reputation of Stephens Inc. appears to have survived unscathed thus far, one might wonder what would happen if competitors chose to exploit the negative publicity Stephens has received. If that should occur, how might Stephens counter such an attack?

What measures might the company take to prevent legal and ethical questions about its operation in the future?

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

Volume: 5

Issue: 1

Pages: 16-22

Number of pages: 7

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411855

Document URL: http://search.proquest.com/docview/192411855?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 50 of 100

ACME HEALTHSOURCE, INC.

Author: Clark, Stanley J; Jordan, Charles E; Smith, W Robert

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Abstract: None available.

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INTRODUCTION

Acme HealthSource, Inc. (AHS) is a holding company that operates, on a for-profit basis, several hospitals and clinics throughout the southern United States. AHS has been very successful in all of its healthcare ventures. As a result, AHS expanded its operations this period by opening two continuing care retirement centers (CCRCs). These CCRCs provide an upscale living environment along with first class medical care for retirees.

AHS plans to open CCRCs throughout the south. Their marketing plan is to open CCRCs only in communities that are successfully marketing themselves as retirement communities. AHS believes there is tremendous potential for growth in providing this type of service, and AHS feels that it is well positioned to take advantage of this opportunity.

The two CCRCs that are now open provide first-class living arrangements to the retirees. AHS provides different levels of living arrangements based on a retiree's (patient's) needs. The three levels of living arrangements currently offered are retirement housing, assisted living, and nursing home. AHS plans to add another level for Alzheimer's patients.

Retirement housing is appropriate for individuals who need little or no assistance with daily life. Such an individual's monthly rent is primarily based on apartment size and style. Assisted living exists for individuals who require some assistance (medical or other) with daily living. Monthly rent is still based in part on the size and style of the apartment but also includes an increased cost of care. Finally, nursing home care is provided for individuals that require extensive amounts of daily assistance. This level is very akin to a hospital environment with a nicer living area; it also has the highest monthly rent to offset the increased level of care required.

Individuals can enter the CCRC at any level. Those entering at the retirement housing or assisted living levels will typically progress through the upper levels over the remaining course of their lives. This progression results in the patient's monthly fees increasing as they move up to the next level of care. AHS provides a means by which patients can pay a deposit upon entering the CCRC to lock in a fairly stable monthly rent for their remaining life or stay at the facility. This deposit eliminates the increases in monthly rent due to the progression through the levels of the living arrangements. Individuals entering at the nursing home level would obviously pay no deposit since there is no higher level in which to progress. Rent at all levels may still be increased due to cost of living adjustments or changes in the cost of care.

THE ACCOUNTING PROBLEM

AHS has set up two types of deposits that individuals may pay upon entering the CCRC. The basics of each of these deposits are as follows:

1) Option 1 - 15% of the deposit is non-refundable; 85% is refundable on a pro rata basis if the individual moves out of the CCRC in the first 60 months.

2) Option 2 - 10% of the deposit is non-refundable; 90% is refundable when the individual moves out or dies.

The amounts of each of these deposits are based on many factors, including level of living arrangement upon entrance to the CCRC, size and style of apartment, and age of person or persons. Option 2 deposits are significantly higher than Option 1 because of the large percentage that will eventually be refunded to the individual or his/her heirs. Option 1 deposits generally range between $150,000 and $250,000 while Option 2 deposits range between $350,000 and $500,000. Most individuals entering at the retirement housing level pay one of the deposits, and a significant percentage of those entering at the assisted living level also pay a deposit.

John Mashburn, Controller for AHS, and Deron Farmer, Controller for the CCRC subsidiary, have been discussing the proper revenue recognition procedure for these deposits. This is the first year of operations for the CCRCs, so neither has dealt with this issue before and they have not been able to find definitive guidance in any FASB statements. They have both agreed that the refundable portion of Option 2 deposits should be shown as a liability and never shown as revenue. Therefore, their two prime areas of concern are the non-refundable portions of each type of deposit and the refundable portion of the Option 1 deposits.

Deron believes that the non-refundable portions can be recognized as revenue since they are non-refundable. She further believes that the refundable portion of Option 1 should be amortized to revenue over 60 months. This amortization is consistent with the provisions of the deposit. John does not have a real problem with the amortization of the refundable portion but is concerned about the immediate revenue recognition of the non-refundable amounts.

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

Volume: 5

Issue: 1

Pages: 23-24

Number of pages: 2

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412317

Document URL: http://search.proquest.com/docview/192412317?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 51 of 100

THE EFFECT OF TAXES ON CAPITAL BUDGETING DECISIONS IN THE COMPETITIVE ELECTRIC GENERATION MARKET

Author: Williamson, James E

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Abstract: None available.

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MESA COMPANY BUILDS A NEW ELECTRIC GENERATION PLANT

Mesa International, a producer of electric energy in the deregulated global market, has decided to build a new generation facility, with the capacity to produce 10 megawatts of electric energy. Mesa has historically generated electric energy in plant facilities fueled with oil, gas and coal. However, because of the international focus on the effects of fossil fuels on C02 emissions and global warming, Mesa's managers are contemplating changing technologies by building a 10-megawatt Solar Power Tower in the California desert. The plant would use more than 1,800 sun-tracking mirrors known as heliostats to heat water in a receiver atop a 300-foot tower. This modern technology plant would be outfitted with molten-salt energy storage to enable it to produce power day or night.

However, before Mesa makes a final decision whether to go with the new environmentally friendly technology, management wants to look at a total cost comparison for the project's estimated 30 year life. Julie Kenyon is in charge of capital budgeting analysis for new generation projects. Julie's job requires both an engineering degree and an MBA degree. In addition, she has considerable practical experience gained from working in various line and support functions for Mesa. This duality of education and experience is necessary because she needs to aid management in solving construction technology decisions, in using management accounting information, and in using techniques to control plant construction and subsequent electric energy generation production costs. One of Ms. Kenyon's subordinates, Frank Christianson, has developed an estimate of construction costs and production operating costs comparing the two types of generation technology, on a beforetax basis.

Noting that the basis difference between the two technologies is a trade off between either $9 billion in additional construction costs at the outset or $955 million in annual fuel costs, Frank decided to do an incremental present value analysis, utilizing the company's cost of capital discount rate of 10 percent.

Subsequently, Frank concluded there was no real total project cost difference between the two technologies, on a before-tax basis. However, when Frank did an after-tax comparison, utilizing the corporate tax rate of 35 percent and the 5 year MACRS Depreciation Schedule, he got the following results.

Now, Frank discovered there is a real after-tax cost difference between the two technologies. When discussing this difference with Ms. Kenyon, Frank pointed out that a much more thorough evaluation of the effect of current tax laws would be needed before an informed decision could be made. Julie Kenyon added that it would be desirable if environmental issues could also be brought into the capital budgeting model in some purposeful way.

QUESTIONS/EXERCISES

1. First, verify Frank Christianson's before-tax present value incremental cost analysis (use a 10 percent discount rate and a 30 year project life).

2. Second, verify Frank Christianson's after-tax present value incremental cost analysis (use the 5 year MACRS depreciation schedule).

3. Suppose that you are Julie Kenyon and you have to explain to Mesa's Board of Directors why electric generation by either technology is comparable, on a present value basis, before-tax considerations but that the traditional fossil fueled method is less costly on an after-tax basis.

4. Find some current proposed tax policy changes and analyze their potential affect on these two different technologies that are currently cost neutral on a before-tax basis but are not on an after-tax basis.

5. Formulate some of your own ideas into tax policy changes and analyze their potential affect on these two different technologies, in terms of improving tax neutrality.

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

Volume: 5

Issue: 1

Pages: 25-28

Number of pages: 4

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411823

Document URL: http://search.proquest.com/docview/192411823?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 52 of 100

CLASH OF TITANS: A CASE STUDY OF THE EARTH MOVING INDUSTRY

Author: Tucci, Jack E; Barbara, Fran; Cappel, Samuel D; Wyld, David

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Abstract: None available.

Full text:

CLASH OF TITANS

The construction machinery industry is a compilation of a number of segments. All organizations do not compete in each of the segments. In the aggregate, market structure parameters define the industry as an oligopoly: the industry is dominated by a few large organizations.

There are two primary reasons why organizational size and concentration are significant in the competitive process. First, the industry enjoys substantial economies of scale (in production distribution, service, and research and development) which have a major impact on cost structure, and hence price, a basis of competition. Second, there are significant barriers to entry and exit. The manufacture of construction machinery entails large capital outlays which tend to dissuade new market entrants, and the experiential elements of large scale production result in average cost reductions. Additionally, market exit barriers are significant, particularly during periods of overcapacity as in the early 1980s.

As a result of the oligopolistic structure within the industry, mutual interdependence is germane to the definition of organizational strategies. Given a company's relative size, strategic decisions have meaningful effects on competitors. Therefore, efficacious response by competitors is mandated. These responses can be expected primarily in the areas of price, product differentiation and mix, production, distribution, and markets served. Strategic changes in any of these areas will tend to evoke competitor response.

INDUSTRY MARKETS AND PRODUCTS

Four primary market segments comprise the overall industry: earth-moving machinery, cranes, forestry equipment, and special function machinery. Of these segments, earth-moving machinery and cranes are the most significant since they represent the vast portion of worldwide sales. In order to provide a more thorough understanding of the aggregate industry, its segments may be identified by the markets which are served. The earthmoving segment of the industry primarily serves the building construction market: mainly residential, commercial, industrial, and governmental. Buyers include construction companies, contractors, state and local governments, mining and industrial companies, logging companies, and farmers. The construction machinery business, as it relates to Caterpillar and its chief competitors, is highly dependent upon large governmental infrastructure projects, many of which have been delayed, particularly in less developed countries, drying up a once strong source of demand. This situation is compounded by a global switch to rigorous maintenance and repair in lieu of replacing such expensive equipment.

The remainder of the analysis will be devoted to providing a synopsis of current industry conditions, and analyses of both Caterpillar and Komatsu. Consideration is devoted to prognosis for the future given the scenario that managerial actions are successful, and given the situation where actions are ineffectual and conditions deteriorate.

CONDITIONS IN THE INDUSTRY

The industry has experienced three significant periods of growth within the past 50 years which are attributed to: the rebuilding following World War II, the interstate highway program in the U.S., and the rise of developing nations as new sources of demand. Recently, however, sales growth has been arduous, and companies have reexamined bold growth strategies. The precipitous changes have been both domestic and international in origin and scope.

DOMESTIC CONDITIONS

American competitors have greatly reduced their product lines in order to help reduce the large inventory costs associated with a broad array of equipment offerings. For example, Terex, a leading manufacturer of mining ore trucks (Lectra Haul) and construction cranes (Koehring) competes only in the mining ore truck segment of Caterpillar (Siegal, 1992). John Deere has concentrated a majority of its efforts on farming equipment, however they do compete in the track hoe segment (Siegal, 1992). Case industries (a division of Tenneco) completely downsized their construction division, saving the backhoe segment which today is the market leader in backhoe sales.

The industry is susceptible to economic cycles. Many companies such as Manitowoc (Crane and Excavators) diversified to help assuage the effects of the business cycle (Rho, 1992). For instance, Manitowoc owns and operates one of the largest manufacturers of ice machine companies. The ice machine business is a cash cow (31% sales, 70% profit) and has allowed Manitowoc to survive the latest economic downturn in demand for mining equipment.

INTERNATIONAL CONDITIONS

The decline in the world economy has provided new challenges for this industry. The current world recession affects the ability of firms to compete on the large scale construction projects used in development around the world (Leach, 1992). Therefore, several competitors have dropped portions of their product lines in favor of a niche strategy where market domination of a particular segment is preferable to competing against full line suppliers such as Caterpillar and Komatsu. Historically, Caterpillar has been an aggressive merger and acquisition giant that has defended their claim of being the principal competitor in the track driven machinery manufacturer.

Many American firms have changed their production strategies from total integration to overseas, third party suppliers and subcontractors. The move towards forming international strategic alliances has greatly enhanced many of their opportunities to expand markets in their chosen niches. Clark corporation exemplifies the benefits of strategic alliances.

During worldwide economic downturns, corporations have turned to bartering in an effort to counterbalance cyclical business. In 1985, Caterpillar was willing to use barter exchange through Universal Trading Company (Univex) to trade Caterpillar equipment for caskets made by a Latin American sawmill operator (Zinman, 1986). International competition in the industry is intense. The justifying argument for letting Caterpillar sell pipeline-laying equipment to the former Soviet Union was that if they were not allowed to, the Japanese (Komatsu) would (Zinman, 1986).

Exposure to foreign regulations has threatened many multinational corporations. Several countries, primarily those with lesser developed economies, fear the financial clout of the multinationals. This concern is manifested in regulation and threats of nationalization of assets. The result is heightened political risk associated with multinational operations. Foreign exchange rates are critical to a competitor analysis within the industry (See Table 2). A relatively high value of the home currency tends to inflate the price of an exported product. Caterpillar lobbied congress in the latter 1980s to lower the value of the dollar in order to help their competitiveness in the export segment of the world economy. Moreover, exchange rates also impact international financing decisions. The ability to service debt in the foreign country without fear of changes in the exchange rate was affected when laws were eased, allowing subsidiaries to borrow money independently of the parent company. This isolation of the parent company also allows the national company the advantage of competing on equal footing with other foreign companies.

CATERPILLAR

Following World War II, Caterpillar made the decision to become the dominant global firm in the heavy equipment industry. Caterpillar's global strategy has caused the firm to function differently from competitors limiting themselves to domestic strategies.

Sensitivity to host-country issues is important for multinational firms, and Caterpillar is no exception. When Caterpillar began selling in Brazil, the company was confronted with tight credit problems. Before the Brazilian venture, Caterpillar had been doing business exclusively with one bank. Tight credit in Brazil caused Caterpillar to open several bank accounts, which gave the firm access to additional credit markets. Currently, Caterpillar operates using local banks in host-countries. In an effort to promote its image as a good citizen in host-countries, Caterpillar has made a film to support its positive impact on host-country societies (Daniels and Radebaugh 1989, 303).

Global firms in some industries are faced with worldwide logistics problems. Caterpillar, though, has addressed those problems by maintaining a worldwide distribution and service organization, considered to be one of the industry's best. In addition to serving customers, Caterpillar's distribution and service structure also acts as a barrier to entry from new competition, as does its worldwide production scale. Another advantage of this system is foreign assembly and manufacturing plants because they reduce manufacturing and transportation costs. In particular, heavy equipment manufacturing costs are capital intensive and sensitive to economies of scale.

Companies doing business globally may find that their products require alteration for acceptance in different markets. Caterpillar has found that acceptance of its products is influenced by host-country factors. Some of these factors include specific regulations, environmental differences, and local preferences. Caterpillar has addressed these problems by establishing assembly plants in each of its major markets where local product features are added to the equipment (Hout, Porter, and Rudden, 1982).

U.S. multinational companies having a high percentage of their sales resulting from export activities are concerned about the value of the dollar in relation to the value of their competitors' currencies. A high relative value of the dollar creates problems in price competition for U.S. exporters. Caterpillar experienced this problem in the early 1980s when the U.S. dollar strengthened against the yen. As the dollar strengthened, Caterpillar found it more difficult to compete with Komatsu and lost U.S. market share to the Japanese firm (Daniels and Radebaugh, 1989).

Firms doing business internationally are affected by protectionist policies. Importing or exporting companies are affected by quotas, tariffs and nontariff barriers. In his 1991 letter to stockholders, Caterpillar CEO Donald Fites expresses management's position when he says, "We are concerned about the U.S.- Japan bilateral trade relationship. But protectionism isn't the answer. We stand behind efforts to restore balance by lowering - rather than raising - trade barriers. We also support completion of the General Agreement on Tariffs and Trade (GATT) and expansion of the North American Free Trade Agreement (NAFTA) to include Mexico" (Caterpillar Annual Report 1991).

CURRENT ACTIVITIES

Starting in 1982, Caterpillar experienced significant changes in its previous business success; Komatsu, Caterpillar's major competitor, gained significant market share and Caterpillar's earnings turned negative for the first time in 50 years. Caterpillar's management had enjoyed many years of successful expansion and failed to react quickly to the increasing competition of Komatsu. Labor disputes erupted at Caterpillar, the company had excess capacity, and sales declined. The average number of Caterpillar employees has been reduced by 27,500 (32.9%). Caterpillar is committed to remaining the worldwide leader in construction equipment, and has invested for long-term growth.

In 1985, Caterpillar launched a worldwide factory modernization program and is now undertaking a program to revamp every plant in the company. The new modernized factories have instituted a Flexible Management System (FMS). The FMS is designed to respond to shifts in demand or technology. Caterpillar refers to the modernization program as, "The Plant with a Future", or PWAF. The PWAF program was a six-year, $1.2 billion plan for modernization (Eckley 1989; Henkoff 1988).

In 1990, the company launched a complete company-wide reorganization. A decentralized product and geographic matrix organization comprised of 17 divisions has replaced the former highly centralized, functional structure. Decision making is being delegated to lower levels, and divisions are now being held responsible for their actions. A union dispute between Caterpillar and the United Auto Workers (UAW) began in November 1991. The UAW had signed a "pattern" agreement with Deere & Co., and expected the contract to be accepted by Caterpillar. However, Caterpillar did not accept the "pattern" contract. Caterpillar was seeking ways to keep pace with Komatsu, to reduce wages and health care costs, and to decentralize the organization effectively. Caterpillar made a bold move and confronted the powerful UAW. The strike ended in mid-April after a company threat to replace workers. The terms of the new agreement were mostly dictated by the company (Kelly, 1991; Slutsker, 1992).

PROGNOSIS FOR THE FUTURE

If management actions undertaken by Caterpillar are successful, the company can expect a continued worldwide leadership position. Caterpillar has invested heavily in the modernization of its plants. The organization has positioned itself on the leading edge of industry technology. Caterpillar has demonstrated the fact that current management is willing to commit financial resources to future growth. Not only has the company committed resources for capital improvements, the company has also maintained a commitment to research and development. In 1991, the company spent over $441 million on R & D, the highest amount spent in the last five years. Since 1982, the company has also invested in an effort to maintain market share by reducing some of its prices in selected markets.

Although it appears recent labor negotiations went in favor of Caterpillar, there is a risk that employee moral has been damaged. Caterpillar management held the line on concessions and the union membership backed down. Management's decision to oppose the UAW may have generated an underlying situation of employee discontent and a lack of loyalty. If the company is unsuccessful at overcoming this potential problem, future productivity and quality may suffer.

Caterpillar has tried and succeeded in positioning itself at the forefront of technology, resulting in placing a large financial burden on the company. If the worldwide recession continues or if demand for heavy duty equipment falls, Caterpillar may find itself faced with excess capacity and burdened with high overhead costs.

The functional, highly centralized organization structure served Caterpillar successfully, in the global market, for 50 years. Management was developed around this type of organizational structure. The new structural design has been implemented to focus on specific customer groups. It is anticipated that the new design will allow the company to respond more quickly to change and to customer needs. Each of these profit centers is being measured against performance criteria. The most critical performance criterion for each profit center is a return on assets. If Caterpillar is unsuccessful at developing responsible decision-making managers in a decentralized organization, productivity and quality may suffer. Also at risk will be the newly instituted Just-In-Time (JIT) inventory system. Two of Caterpillar's main competitive advantages have been its highly regarded worldwide distribution system and its customer service reputation. If Caterpillar's management has underestimated its ability to manage a decentralized matrix organization and is ineffective at controlling the JIT inventory system, Caterpillar's two main competitive advantages may be lost.

KOMATSU

The effects of international trade and Komatsu's responses to them are made clear in the cases provided. In its early development Komatsu used competitive advantages, such as Japan's low cost capital and the high quality culture of its workforce, to garner international market share. Later reversals in some of those competitive advantages sent Komatsu scrambling.

Komatsu management chose a low cost strategy as a way to rebuild after World War II. That strategy did not lead to the development of internationally competitive products so the firm relied on heavy tariffs to protect it from larger international firms. In 1964 Japan substantially lowered tariffs on machinery markets, since MLTI did not consider heavy machinery to be a priority. The change put Komatsu at substantial risk. Komatsu responded by putting forward a major effort to redesign its products, and eventually, its manufacturing processes. The company responded to Japan's cheap capital and labor shortages by implementing strict productivity enhancement policies. In the process, it developed production costs that were by far the lowest cost in the world. Combined with what at the time was a very cheap yen, Komatsu had up to a 40% price advantage over international competitors.

Komatsu used that advantage to push aggressively into international markets. It began by providing a very limited set of low cost products. It eventually expanded to a far wider range of machinery. Komatsu had limited international marketing skills so it relied heavily on joint ventures and trading partners for sales. Komatsu's strategy worked extremely well into the mid-1980s. By that time, Komatsu had captured up to 40% of the world's major heavy machinery markets, making it the world's second largest producer of such equipment. As the 1980s progressed, however, many of the competitive advantages on which Komatsu depended began to disappear.

In the latter half of the 1980s, Japan's low cost advantages began to disappear. The yen appreciated almost 100% against the dollar, making it very difficult for Komatsu to compete on price. Even though Komatsu still had significant advantages in productivity, its high currency exchange rate cost it much of its savings. Profits shrank between 1985 and 1986. Sales dropped only slightly, but for a company which was accustomed to double digit growth, the loss had a significant emotional impact.

Komatsu management responded with substantial strategy changes. First, a significant portion of production was moved abroad, thus eliminating the exchange rate problem. Second, a diversification program away from heavy machinery was initiated. Finally, the company began selling many of the technologies they had developed to give themselves such high productivity.

CURRENT ACTIVITIES

Since 1987, Komatsu has continued to grow in profits and in sales. Komatsu has continued to move production to other countries, and has further come to rely on sales of goods other than heavy machinery. Japan's loss of capital cost advantages is now almost complete. In response, Komatsu has moved much of its heavy machinery manufacturing abroad (Shinohara, 1989). For example, in the U.S., the company created a joint production venture with Dresser Industries. The joint venture has shown many of the strains that have become common in U.S.-Japan joint ventures (Kelly, 1991), but has helped Komatsu capture a large share of many American markets (Green, 1990). Although, as discussed below, the heavy machinery business is becoming less important to Komatsu, it has continued to keep extreme pressure on Caterpillar, the market leader.

Since the factors that gave Komatsu an international competitive advantage in heavy machinery disappeared in Japan, Komatsu has moved to eliminate most of its reliance on producing heavy machinery for export. Komatsu still benefits from a large and growing market within Japan, but has moved to avoid relying on exports. This has been accomplished by diversifying into a broad range of other products that the company felt could benefit from its productivity-enhancing technologies and from selling those technologies themselves.

Komatsu has moved so far in the diversification effort that heavy machinery is hardly mentioned in the 1991 annual report, and none of the 20 pictures showing its products are pictures of heavy machinery. Komatsu now depends on sales of such high tech items as micro-chips and robotics for most of its exports from Japan. Komatsu does not report results by divisions, so it is impossible to tell how much it earned from each product line, but the annual report makes it very clear that heavy machinery is no longer the core concern at Komatsu.

Komatsu's move from heavy machinery production in Japan is a logical development considering the shift in the factors that make up Japan's competitive advantages. It should be expected that we will see more of the same in the future.

PROGNOSIS FOR THE FUTURE

This case analysis began as a discussion of Komatsu as a Japanese heavy equipment manufacturer. Even though Komatsu has a significant lead in many world markets and in automated equipment types (Schwind, 1992), it is not appropriate to consider Komatsu as a Japanese heavy equipment manufacturer any longer. Much, if not most, of Komatsu's heavy equipment manufacturing is now done in countries other than Japan. Most of Komatsu's activities in Japan are in areas other than heavy equipment.

Komatsu has made strong moves to keep its manufacturing in line with the competitive advantages of the country in which the manufacturing is done. If Komatsu is able to maintain this nimble approach, it is likely to remain successful for many years to come. Komatsu will probably never again make significant amounts of heavy equipment for export in Japan, but it is not likely that it will lose much of its technological advantage in the countries to which it moves production operations.

Komatsu has been praised by many for its strong strategic vision in keeping up with a changing landscape. For instance, it was used by Michael Porter (1990) as an example of an excellent global competitor. Its current diversification path, however, runs a significant risk of costing the company its focus. Komatsu's high quality reputation, heavy research and development, and facilities investments should keep it a strong competitor in the heavy equipment arena for some time to come. Its lack of focus, however, may provide Caterpillar the opportunity it needs.

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

Volume: 5

Issue: 1

Pages: 29-38

Number of pages: 10

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411782

Document URL: http://search.proquest.com/docview/192411782?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 53 of 100

STRATEGIC MANAGEMENT IN THE COMPUTER INDUSTRY: DELL COMPUTER CORPORATION

Author: Box, Thomas M; Mall, Christina; Rogers, Stephanie; Thakor, Anurag

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Abstract: None available.

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INTRODUCTION

The history of the personal computer (PC) industry has been dynamic and fraught with much uncertainty. Technological advancements and innovation change the industry drastically from one day to the next. Product life cycles tend to be less than eighteen months. In the midst of uncertainty and change, one company has managed to show continuous growth and promise from conception - Dell Computer Corporation (Dell). The volatile industry coupled with the "beating-the-odds" history of the company makes Dell Computer Corporation a firm to watch.

While attending the University of Texas as a pre-med student, Michael S. Dell began rebuilding and selling PCs. In order to earn extra money, Dell sold disk-drive kits and random access memory (RAM) chips at computer conferences in Austin, Texas. In 1983, Dell made enough money to purchase IBM computers from dealers who were having problems meeting their quotas. Dell modified these computers and sold them to local companies. By April 1984, he was grossing $80,000 per month and revenues were $6 million for the first year. Dell dropped out of school and sales reached $257 million by 1988. In the early years, Dell sold his computers as "PC's Limited," but changed the name to Dell in 1988. Dell expanded sales internationally to Canada, France, Italy, Germany, Finland, and the Netherlands between 1988 and 1991. In 1993, Dell entered the Japanese market. Moving into these international markets has allowed Dell to consistently reach record revenues every quarter. By 1993, sales had reached $2.8 billion and for the last fifteen quarters (through November 2, 1997), Dell has reported record revenues. Revenues for the quarter ended November 2, 1997 were $3.2 billion and increased 58% over the third quarter of 1996. As of 1997, European sales accounted for 23% of total revenue, while Asia Pacific and Japanese sales accounted for 7% of revenue.

Dell is headquartered in Austin, Texas, with over 11,000 employees throughout the world. The financial statements for Dell Computer Corporation are presented in table 1.

Dell's commitment to its corporate culture of responsiveness, customer focus and satisfaction, and high intensity levels is consistent at all locations. Dells' commitment to customer satisfaction and service is exemplified by it's "no questions asked" thirty-day money back guarantee. Secondly, Dell's commitment is seen through their twelve hour a day, toll-free technical support line. When it comes to customers service, a definite chain of command is followed, with the end of the chain landing on the desk of Michael Dell himself. He openly invites customers to call or write with questions and comments about the quality of Dell's products. This commitment to the customer has made Dell number one when it comes to customer satisfaction according to J. D. Power and Associates. It has also made Dell the world's leading direct sales computer systems company.

Dell's product lines are divided into four categories - Desktops, Enterprise, Portables, and Peripherals. Desktops accounted for 73% of System sales in 1997, while Portables accounted for 19% and Enterprise accounted for 8%. Peripherals accounted for the balance of sales. Dell offers a very competitive and broad product line, from inexpensive models to state-of-the-art technological advancements. Dell's entire product line is sold through telephone representatives and, recently, the Internet. Sales are made by these representatives and orders are immediately downloaded to assembly facilities several times a day. Through Dell's wholly owned subsidiaries, Dell has access to over 70% of the available worldwide PC market. Dell has sold through middlemen such as Electronic Data Systems and Anderson Consulting, and has contracted with superstores in the past. However, superstores are not brand loyal, and in 1994 Dell abandoned any efforts to sell through discount stores.

COMPANY OPERATIONS

Dell designs, develops, assembles, markets, services and supports a wide range of computer systems, including; desktops, notebooks, and network servers, and also markets software, peripherals and service and support programs. The company markets its computer products and services under the Dell brand name directly to its customers. These customers include major corporate, government, medical and education accounts, as well as small-to-medium businesses and individuals. The company conducts operations worldwide through wholly owned subsidiaries; such operations are primarily concentrated in the United States and Europe (http://www.dell.com). Dell accomplishes this through their commitment to customer satisfaction and customer service. Their aim is to be number one in the world in this area and they are succeeding, according to J. D. Power and Associates. Other accolades include "Product of the Year" and "Most Valuable Product" by PC/Computing magazine at the Fall COMDEX computer tradeshow in Las Vegas, November 21, 1997 (http://www.dell.com/dell/media/97). These honors were for their Dell Dimension desktop PC's. In all, Dell collected nine awards at the latest tradeshow, recognizing the company product line for its performance, reliability, service, and low prices. On top of all the awards, Dell landed two "Editor's Choice" awards. Other awards came from Computer Shopper, Home Office Computing, C/Net, and Home PC magazine. For the entire year, Dell Dimension desktop PCs have been recognized with more than 120 product awards from industry leading, high tech publications. Their Dell Dimension XPS D300 has also been selected as "Product of the Year" and "Most Valuable Product" by PC enthusiasts.

Dell is particularly aware of the "Year 2000" problem. That is a technical problem arising because programmers historically defined date fields with a two digit year when writing programs. This will work fine until the year 2000, when programs will not be able to differentiate between the years 2000 and 1900. This problem affects all areas of life. From turning on a computer, to using a credit card; computers will think credit cards with an expiration date of January 3, 2000, are actually expired on January 3, 1900; therefore, making it impossible for some computer systems to function after 1999. Dell established a team in February of 1997 to address this problem (http://www.Dell.com/year2000/ exec. /y2kprob.ht). This team is focused on finding software and hardware answers to the "Year 2000" problem. In an effort to eliminate the problem, Dell is also focused on driving their business partners into the project. Through the efforts of Dell Computer and their commitment to service, performance, and satisfaction; solutions can be found that will make life better for Dell and for their customers.

MARKET ENTRY

Entry into the PC market is fairly easy for several reasons (Pitts & Lei, 1996). First, capital requirements for PC assembly are modest. Second, customers face few switching costs when changing suppliers and probably would not hesitate to buy any kind of an IBM-compatible PC from a new supplier if the price/performance was right. Third, product differentiation and economies of scale become more and more elusive as the PCs become more and more like a commodity.

Numerous firms can quickly enter this business through subassembly and subcontracting their manufacturing activities (Porter, 1980; 1985; 1991). For example CompuAdd and Micron, have entered the computer market as value added resellers who assemble PCs to sell through direct sales and retail outlets. These firms compete with Dell using one of Dell's strategies-direct relationship marketing, or selling directly to customers (Middlebrook, Keafe, & Ross, 1998). A new threat that Dell currently faces, is from its rival Compaq Computer Corporation because of Compaq's decision to slash desktop prices by as much as 22 % and moving to a cost-saving, build-to-order manufacturing system (Jacobs, 1997). Thus, Dell faces threats of new distribution methods and operations employed by new entrants and its current competitors, which might eventually depress Dell's long-term profitability.

BUYERS

The PC industry has knowledgeable and powerful buyers (Savvy consumers, 1992). With hundreds of suppliers to choose from, customers are ruthless in their search for higher value and better quality (Savvy consumers, 1992). Dell's Customer Service Representatives efficiently assist their customers by matching the users to market segment specialists. Dell's market segments are divided into Corporate/ Business users; Government, Education, or Healthcare users; and Home/Homeoffice users.

Business users in the PC industry want high performance, reliability, and value in a system for their computing needs. State-of-the-art technology, the ability to network and communicate with other systems, customer service and support, and cost are primary purchase determinants for the business user (Middlebrook et al., 1998). Dell gets 90 % of its orders from business-to-business customers. Many of them are Fortune 500 Companies and have worldwide operations (Blankenborn, 1997).

The Government, Education and Healthcare user segment represents a large, important part of the market, yet they typically yield lower margins than either the business or home/home office markets. Typical purchase decisions in these segments are based on a bidding system, with the contract going to the lowest qualified bidder. The education market was considered important for its proposed ability to generate long-term brand loyalty among early users (students). It is questionable, however, whether or not the long-term benefits of brand loyalty by early users are actually realizable. This segment, like the business segment, is interested in integrated systems designed to meet the buyers' specific needs. There has been increased competition in this market.

Most home/homeoffice users are price conscious and plan to spend less than $1,200 for a system. Also, they value ease of operation and service, as well as support from the manufacturer.

SUPPLIERS

Some of the most important suppliers to the PC industry are the manufacturers of microprocessors, memory chips, and circuit boards. Dell handles only the assembly and testing of the PCs, leaving the manufacture of all components to its suppliers (Boudette, 1989). The company purchases a significant number of components from single sources. For example, the company often establishes a working relationship with a single source when it is advantageous to do so when considering performance, quality, support, delivery, capacity, and price, even when multiple suppliers are available (Annual Report, 1996).

In terms of the PC industry as a whole, suppliers of memory chips, microprocessors, integrated circuits, and other key components are comparatively few and highly concentrated. Since PCs require specific types of microprocessors and other specialized chips to function, the chip suppliers often pass on price increases to PC makers (Pitts & Lei, 1996). Therefore, the dynamics of pricing on the supplier side significantly impact the product pricing on Dell's side.

COMPETITION

Major competitors of Dell include the other traditional PC manufacturers like IBM, Compaq, Apple, Zenith, Gateway, Digital, Micron, Tandy and Packard Bell as well as many new upstarts (Middlebrook et al., 1998). By the end of 1993, the top five PC makers (IBM, Apple, Compaq, AST, and Dell) commanded just 48 % of the U.S. market. Thus competition in the PC industry is unrelenting (Pitts & Lei, 1996). The rivalry is intense between some firms such as that between Dell and Compaq, who have aggressively tried to hire one another's managers and key technical people. Both companies also have attempted to undercut the other in getting new products to the market faster (Pitts & Lei, 1996).

As previously mentioned, Dell uses a direct sales model meaning it sells computers directly to customers on a made-to-order basis (Kirkpatrick, 1997). On the other hand, industry leaders like IBM, Compaq, HP, send PCs on lengthy Odysseys that make it impossible for them to price the machines as low as Dell. Having watched as more and more customers started buying directly from Dell, and having watched Dell's stock price soar considerably above industry average in a short period of time, IBM, Compaq, and HP are changing the way they do business by trying to mimic Dell without alienating the resellers they depend on. As a result, this cut-throat industry is about to get a lot more competitive; therefore, Dell will have to work harder than ever to maintain its extraordinary growth (Kirkpatrick, 1997).

IDC reported that in terms of shipments to large and medium U.S. businesses, Dell commanded the top position among all desktop PC suppliers with an 18.4 % share during the April-June 1997 quarter, pushing Compaq into the No. 2 spot with a 16.5 % share, followed by HewlettPackard (13.8 %), IBM (9.3 %), and Gateway 2000 (6.6 %). Also, Dell ranked No. 1 in desktop unit sales to federal, state and local government agencies in the U.S., with a 14 % share of shipments, according to IDC's Worldwide Quarterly PC Tracker Report for the second quarter of 1997. On the worldwide front, Dell moved to No. 2 from No. 3 in shipments of desktop PCs to large and mediumsized businesses.

SUBSTITUTES

The main substitute for PCs in the early 1980s was timesharing computer systems (arrangements through which remote terminals were tied to a central mainframe). Although timesharing arrangements were lower in cost than PCs at the time, these arrangements were far less convenient, and convenience was a high priority for PC users. Therefore, manufacturers feel little profit pressure from timesharing arrangements. Furthermore, this pressure would decline over time, since the cost of PCs relative to timesharing systems continues to fall rapidly (Savvy consumers, 1992).

There are several reasons that explain why the PC industry could experience high demands in the coming years, instead of experiencing a threat of substitutes (Middlebrook et al., 1998). First, the Gartner Group, a market research firm, estimates that the number of customers replacing their outdated systems is expected to outnumber first-time purchasers by 1995 (Middlebrook et al., 1998). This means that former PC users are expected to update their systems or buy systems with higher performance rather than look for substitutes for their personal computer.

Second, an investment report on the PC distribution industry shows that PC saturation rates are relatively low. Only about 33 percent of white-collar workers use PCs on the job, and only 17 percent of all domestic households have a PC. This becomes more important when one considers that the largest growth opportunities are in small-to-medium-sized accounts (businesses with fewer than 500 employees) that employ more than 70 percent of white-collar workers. This evidence substantiates the fact that demand for personal computers is going to grow more in years to come (Middlebrook et al., 1998).

Third, the ratio of price to performance for equivalent functions continues to improve approximately 20 to 25 percent per year, which makes the purchase of state-of-the-art PCs attractive to many user segments (Middlebrook et al., 1998). However, the personal computer industry may be threatened by the rise of new hand-held personal computers that can recognize handwriting and even voice commands (Savvy consumers, 1992).

INBOUND LOGISTICS

Dell purchases a significant number of components from single sources. In some cases, alternative sources of supply are not available. In other cases Dell may establish a working relationship with a single source, even when multiple suppliers are available, if the company believes it is advantageous to do so when considering performance, quality, support, delivery, capacity and price (Annual Report, 1996). Key components currently obtained from single sources include the company's displays, applications, specific integrated circuits, and other custom chips, microprocessors, unconfigured base notebook computers and lithium ion batteries used in some of the company's notebook computers (Annual Report, 1996). Additionally, Dell often initially uses custom components obtained from a single source in its new products until it has determined whether there is a need for additional suppliers. If the supply of a critical single-sourced material or component were delayed or curtailed, Dell's ability to ship the related product in desired quantities and in a timely manner could be adversely affected. Even where alternative sources of supply are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible loss of sales, which could affect operating results adversely (Annual Report, 1996). Dell has implemented JIT practices on its manufacturing floor, as well as with its inventory strategy. It sees suppliers as key to JIT (Minahan, 1997).

OPERATIONS

Dell's product strategy is to provide products that customers want to buy, rather than new technology that is interesting and exciting but not particularly applicable to customer needs (Dell, 1993). Dell's computers for the domestic market are assembled in facilities located in Austin, Texas. The purchase of a 126,000-square-foot manufacturing facility in 1989 doubled Dell's manufacturing capability. Also, the 135,000-square-foot facility in Limerick, Ireland, is expected to satisfy the growing European demand for Dell systems (Middlebrook et al., 1998).

Dell designs and builds computers with the most advanced and flexible technologies available (Why Dell - The Direct Business Model - Fast Time to Market). Dell also maintains close relationships with key technology leaders like Intel, Microsoft, Novell, 3Com and others in order to engage in cooperative research and development (Why Dell - The Direct Business Model). The manufacturing strategy utilized at Dell is one of building each computer system to the buyer's specifications. Buyers can add options to customize their systems for their own needs. The order is then assembled and shipped with peripherals and upgrades requested by the customer. Manufacturing at Dell actually consists of the assembly and testing of vendor-procured parts, assemblies, and subassemblies. In addition, Dell utilizes a total quality approach where enthusiastic workers compete in product-quality competitions for bonuses and recognition (Middlebrook et al., 1998).

Dell has implemented JIT practices on its manufacturing floor, as well as with its inventory strategy (Minahan, 1997). All production activities are sequenced in such a way that in-process material continually moves toward the completed product. At Dell's new Metric 12 facility in Austin, this process, known as flow manufacturing, is complemented by a high-level of automation. Dell also reduces the need for rework and the chances for faulty parts through its stringent quality control process (Minahan, 1997).

OUTBOUND LOGISTICS

Dell is probably most known for establishing a direct distribution system. According to Dell Computer Corporation's CEO Michael Dell, Dell has essentially built an enormous electronic superstore to maintain efficient distribution (Dell, 1993). The company has replaced traditional retailers with telephone lines, the Internet, and a network of trucks supplied by shippers, such as the United Parcel Service (Pitta, 1992). System support at Dell is such, that even before a computer reaches a customer, the customer can track its order status on-line (Why Dell - The Direct Business Model). Each PC is made to order, yet the whole process from phone call to loading onto a delivery truck takes just 36 hours (Serwer, 1997). Thus, faster turnaround is a significant advantage; Dell typically delivers its PCs within five working days (Boudette, 1989). The company provides its products and services through a virtual warehouse (internally known as, "Stealth Warehouse"), as described by the company's chairman and CEO, Michael Dell. Thus, Dell sells a number of productssoftware, peripherals and accessories-that do not reside on its shelves, but are delivered to customers within the next business day using a variety of distribution partners who are more capable of rapidly packaging and providing those products. In Michael Dell's opinion, his company is more of a vertically connected organization rather than a vertically integrated one (Dell, 1993).

MARKETING & SALES

Dell's sales force is channeled according to the market it serves: small/medium business and home users, corporate buyers, and government/education/medical users. Each of these sales channels is supported by its own marketing, customer service, and technical support organization. This organizational structure ensures high accountability for the satisfaction of each customer. PC makers dealing through the retail channel do not have this advantage and are not able to respond as quickly to market and service demands as the direct channel. Additional face-to-face exposure occurs at industry shows (Middlebrook et al., 1998).

Dell's entire product line is sold by telephone sales representatives who answer more than 25,000 incoming calls on a busy day. In addition to answering customer-initiated calls, the Austinbased sales force responds to sales leads and supports the efforts of its team members in the field (Middlebrook et al., 1998; Dell, 1993). Sales orders are downloaded to the manufacturing facility several times each day, and all systems are custom-configured according to the customer's specifications. Trucks load at Dell's manufacturing facility throughout the day, and overnight services are utilized for expedited orders. Lead times on most systems vary from three to seven days (Middlebrook, et al., 1998). Internationally, Dell is similar in marketing approach and culture to its domestic operation. Dell's wholly owned subsidiaries give it access to over 70 percent of the available worldwide market for PCs (Middlebrook et al., 1998).

Dell sells to major buyers through a small (twenty-five person) sales force located in major metropolitan areas throughout the United States and services those accounts with management teams consisting of sales, customer service, and technical support representatives. Dell believes that the small-to medium-sized business represents the greatest growth potential for PC-based systems (Middlebrook et al., 1998).

Dell has also used the capabilities of the Internet to its advantage (Green, 1997). According to a recent news article, Dell is selling more than $2 million in computers and related products daily over the Internet. On its Web site, Dell sells computers and hardware for consumers and small and midsize businesses. Customers can look up information about Dell's products and can order merchandise over the Internet or by phone (Green, 1997). For its corporate customers, Dell has what it calls Premier Pages, small password-protected subsites with addresses known only to its corporate client. Dell has also tried to build more international sites, in order to boost to its Web business (Blankenborn, 1997).

SERVICE

Dell provides its customers with various amenities, such as unlimited calls to a toll-free technical support line and a 30-day money-back guarantee (Middlebrook et al., 1998). The technical support representatives over the phone solve 95 % of their customer problems in less than six minutes. Dell has special account teams made up of employees with sales and technical backgrounds, who give personalized service to its corporate customers (Middlebrook et al., 1998). According to Michael Dell, the company receives around 25,000 service and support calls a day. Dell views his company as a consumer advocate rather than a technology advocate (Dell, 1993). J. D. Power and Associates, known for its automobile rankings, again in 1994 rated Dell number one in customer service and satisfaction in its third annual end-user survey for the computer industry (Middlebrook et al., 1998).

In addition to its traditional methods of providing support and service to customers, Dell has also recently employed a new way of providing service-through the Internet (Dell Enhances, 1997). According to a recent news article in Round Rock, Texas on November 20, 1997, Dell has introduced new Internet service and support features that help customers diagnose problems with their PCs and track orders from the factory floor to their homes or offices. Also, available now on www.dell.com are service features that provide customers with on-line access to much of the same technical reference materials used by Dell telephone support personnel. The new features are the latest advancements in Dell's strategy to extend its direct sales and service via the Internet (Dell Enhances, 1997).

Today, Dell sells systems and services over the Internet in excess of $3 million a day (Dell Enhances, 1997). Approximately 80,000 Dell customers visit the technical support pages every week and download an average of 30,000 files including system BIOS and drivers. The new Dell Internet self-diagnostic tools include more than 100 system-and symptom-specific trouble-shooting modules that interactively walk customers through common system problems (Dell Enhances, 1997). In addition to order tracking and trouble-shooting diagnostic tools, Dell has introduced services such as an on-line communications center for sending comments and questions to Dell service representatives and an up-to-date file library with the latest system drivers, files and utilities (Dell Enhances, 1997). Many of the services and features offered to consumers and small businesses are currently available on customized, secured Internet sites that Dell created for its corporate and publicsector customers (Dell Enhances, 1997). Such Premier Pages provide one-stop access to service and support information customized to the customer's products, flexible reporting tools, manufacturing status for systems, and listings of approved configurations. Dell has created more than 500 Premier Pages worldwide (Dell Enhances, 1997).

ISSUES AND CONCERNS

Dell is presently changing its customer base to include the second and third time home computer buyers. This is a market that needs to be entered by Dell to remain competitive because there are so many households that have a home computer. Dell is entering the market through on-line Internet sales instead of the traditional retail sales. The new techniques for selling made-to-order PCs on the Internet is setting Dell apart from other PC manufacturers, but concerns of whether or not this technique will generate market share face Dell within the new target market of small business and home PC users.

Another concern for Dell is that many other PC manufacturers are trying to mimic Dell by moving toward the direct selling of PCs. The direct sales model used by Dell is its major competitive advantage and this may no longer be the case. Due to the deterioration of the competitive advantage, Dell may need to find a way to adapt their competitive advantage in order to regain their edge on the competition.

Dell competes on price as well as on service, performance, and satisfaction. However, price is no longer a large advantage to Dell over its competitors because the competition is cutting prices to meet Dell.

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

Volume: 5

Issue: 1

Pages: 39-49

Number of pages: 11

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411875

Document URL: http://search.proquest.com/docview/192411875?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 54 of 100

CREDITED CLASS WORK AND STUDY ABROAD PROGRAMS: MAKING ORDER OUT OF CHAOS

Author: Fox, Jeremy B; Kirkpatrick, Rickey C

ProQuest document link

Abstract: None available.

Full text:

INTRODUCTION

Increasingly, university business schools are stressing the importance of an "international" focus to undergraduate business education. Concurrently, business schools are focusing on providing students with theory derived practical skills which facilitate job search processes and future career progression.

These mutually interactive goals have manifested themselves in numerous business school activities including internships, campus recruiting "job skills" seminars, class guest speakers, executive in residence programs, international events, and, the focus of this case, study abroad programs. Typically, study abroad programs provide for a student to either: 1) enroll in a foreign university for courses taught for credit toward degree completion; or, 2) traveling overseas, often during the summer, with classes taught by the student's university-supplied instructor.

Appalachian State University has offered both types of study abroad programs. A small number of Appalachian business students have participated either in a semester- or year-long study abroad program in England through ISEP or in Sweden through our own agreement with Göteborg School of Economics and Commercial Law. These programs have had a mixed response from students because they have been rife with difficulties in transferring credit back to Appalachian in order for students to graduate on schedule. Therefore, students who have participated in these programs have done so by delaying their graduation date. On a positive note, these programs, together with programs based on other university agreements, have brought approximately 40 students from 24 countries to study in our college in 1997, expanding the international experience for on campus students.

In contrast, the summer semester study abroad programs have been widely accepted and endorsed by students who, each summer sign up in large numbers for one of several trips sponsored by the College of Business. In fact, Appalachian State University ranks fourth in the nation (of masters' institutions) in the number of students that study abroad. In 1994-95, three hundred and twenty-five students participated in a study abroad experience (See The Chronicle of Higher Education, December 6, 1996, page A67). Of this total, more than 100 students were from the College of Business. The Walker College offers study abroad programs in China, Denmark, Scandinavia, England, France, Mexico, Australia, and Italy/Switzerland. These summer programs carry with them six hours of course credit provided by two three-hour courses taught by the accompanying Appalachian faculty.

Over the years, College of Business study abroad programs have offered catalog classes, usually those with "international" in their title. Alternatively, faculty have offered independent studies specifically designed for the trip. Professors leading these trips would generally decide on the course(s) offered with the understanding that course offerings on all trips would be balanced across disciplines.

During the assessment of our study abroad programs in the self-study year for reaffirmation of our accreditation, the faculty expressed their desire to change the ad hoc nature of this process, and to review the relevant course offerings recognizing that certain courses were more appropriate during study abroad programs. This process was designed to ensure their high quality of delivery and their integration into the total study abroad experience. In essence, the faculty wanted to make sure that the course delivery would be equivalent to that on campus while adding the richness of the global experience.

An examination of the course structure and teaching processes determined that these were highly variable depending on the faculty member and the country. Several models employed were: 1) all class work was essentially completed before the trip departed by conducting weekly meetings with the trip representing the experiential component of the course; 2) all class work was completed during the trip with in-class meeting times allocated each day to cover required material; 3) class work split between pre-trip and during the trip; and, 4) in the case of some independent studies, students were required to complete assignments with no actual formal class meeting required at all. These class structures and teaching processes were possible for any of the classes offered on these trips, whether the course was required for the major or an elective. One additional problem associated with this method of course offerings was the enforcement of prerequisites.

Another concern of the trip was the ability of the professor to grade the student for their participation in the many scheduled activities (especially attendance at art galleries, museums, plays, historical sites) of the trip, their cultural awareness and sensitivities and their general ambassadorial responsibilities as a member of the university community and a citizen of the U.S. A student code of conduct was developed, consistent with the Student Handbook, but far more reaching in its scope. Professors wanted a meaningful way to incorporate this code within the overall scope and grade of the course (See Appendix 1).

A traditional SWOT analysis was conducted, having in mind the College of Business mission statement (See Appendix 2). Focusing this statement on our undergraduate teaching, it was apparent that our programs provided students with a wide variety of international opportunities, but that it was necessary to reevaluate, and in some cases, standardize the structure and teaching processes.

Strengths: The College of Business has an outstanding faculty that is well-published and dedicated to high quality teaching. The administration and faculty are committed to the study abroad program and are willing to modify teaching processes to work with the program. Further, the program itself supplies students with the opportunity to learn about international aspects of business simply by being in foreign cultures, seeing foreign businesses in operation, and living daily surrounded by customs and traditions different from those of the U.S. Most students on these trips have not traveled extensively so these initial impressions of international culture and business are, for them, powerful. Upon returning from these trips, participants speak glowingly of the experience and sell the trip to others who may, in turn, participate the following year.

Weaknesses: The Study Abroad program was variable in carrying out the details of the teaching mission of the College of Business. While study abroad courses often displayed the same syllabus content as its on campus equivalent, faculty, particularly those teaching in a study abroad program for the first time, found it difficult to provide the same delivery as they were accustomed to on campus. This led to faculty frustration because of teaching facilities, the inability to complete all of the syllabus material and other teaching-related problems. Further, extra curricular activity engaged in by students was too often not associated with academic learning. On a related note, the College of Business had a continuing concern with safety issues heightened by several well-publicized study-abroad disasters involving other University students in foreign lands (See USA Today, "The Perils of Studying Abroad," September 12-14, 1997). A troublesome student conduct problem for trip leaders has generally been associated with excessive alcohol consumption. Nonetheless, it was recognized that this problem created by a very small minority of participants, presented substantial risk to all trip participants and consequently to the University itself.

Opportunities: With the increased awareness of risks faced by the University and growing concern from faculty trip leaders over their responsibilities in supervising students, along with our desire for continuous improvement of these programs, it seemed the time was appropriate for a restructuring of many aspects of these trips. The opportunity was further enhanced by the Assistant Dean's presence on several of these trips. His intention was to strengthen the weak areas and make the strong areas great. With the support of the administration, the faculty was eager to help create a more carefully delineated learning experience, and one which more fully addressed student conduct within this environment.

Threats: A universal concern was that the strengths of the study abroad programs could be jeopardized by any program weakness, especially academic concerns of course delivery and safety issues while abroad. First, without adequately monitoring and addressing academic content of the courses within the context of delivery in an international setting and without administrative enforcement of prerequisites, the College of Business would face a deterioration of the academic component of the study abroad program and its subsequent consequences. Second, without consistency of academic rigor across all courses in study abroad programs, students would not take the course work seriously and this attitude would color the entire trip experience as a "holiday" rather than "learning" atmosphere. Third, student conduct was putting the students themselves at risk and had the potentially damaging effect on our reputation with our hotels, restaurants, and bus lines. Each of these threats represented a realistic risk to the program and required immediate pro active attention.

DEVELOPMENT OF THE ACTION PLAN

One of the first actions required was a self-study of study abroad programs within the context of the mission of the College of Business. Careful review of our recently reformulated mission statement served to emphasize the importance of high quality undergraduate teaching and hence this served to provide us direction in our recreation of the classes supplied with our study abroad program.

Concurrently, it was recognized that, in general, two classes, for a total of six semester hours was expected by students attending the study abroad program. Further, it was recognized that years of experience in carrying out study abroad programs has indicated that faculty could not be expected to carry out appropriately a class load of more than six hours. Therefore, one of the first considerations was the limitation on faculty's prior tendency to offer a wide range of "individual study" classes to study abroad program students in order to get the needed enrollment for a trip. It was determined that if all trips were so limited then no one trip could make course promises that another trip would then be forced to duplicate. In total, therefore, each trip would be held to offering a very limited number of courses.

Recognizing further that study abroad programs, in general, were expected to supply somewhat similar learning experiences to students, a general course entitled "Cultural Aspects of International Business" was developed and presented to the trip leaders for those trips commencing in the summer of 1998.

This class, which was to be required of all trip attendees, would cover the specific cultural aspects of the countries visited by each trip in conjunction with traditional business abroad considerations. In such a way students would learn about areas to be visited and the interface of these specifics with the more general considerations of establishing, maintaining and doing international business. Students would study four country specific topics: history; government; culture (art, music, literature) and geography. In addition, students would also learn about comparative economics and business practices. These country topics would then be applied to understanding business considerations applicable to those companies/businesses that were to be visited while on the trip. Site visits would be an integral part of the learning process and were to be part of the written assignments each student would submit. (A syllabus for a prototypical Cultural Aspects of International Business can be seen in Appendix 3).

Several other considerations were implemented to align more closely study abroad program class work with the College of Business mission statement. First, specific required classes for graduation (such as "International Business") would no longer be offered on a study abroad program and the focus would be on electives. College of Business administrators and faculty were concerned about the ability of these classes to be taught on equivalent terms with on campus delivery. Further, recognizing that a finite pool of students is interested in study abroad trips, every effort would be made to provide consistency in course offerings, to provide realistic expectations in evaluation of student performance across trips and to enhance before, during and after components of courses. Gone are the programs designed simply to attract sufficient number of students to justify the program-programs which offered a cafeteria menu of classes and programs in which students had expectations of 'As' simply for participating. Consistency of class work and evaluation across trips is now a paramount consideration. Finally, students are now made aware that their trip conduct and overall cultural experience will be a part of the class work and that grades can be raised or lowered by a student's conduct during the trip.

These changes are being implemented for the summer of 1998. Faculty and students seem to have responded positively and appropriately to these changes. We hope to be able to update the results of these changes at future meetings.

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

Volume: 5

Issue: 1

Pages: 50-54

Number of pages: 5

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411821

Document URL: http://search.proquest.com/docview/192411821?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 55 of 100

PRODUCT LIABILITY AND TOTAL QUALITY MANAGEMENT: A CASE STUDY

Author: Abraham, Steven E; Spencer, Michael S; Ostby, Melissa M

ProQuest document link

Abstract: None available.

Full text:

INTRODUCTION

The judicial system has long recognized the devastation that defective products could have on the life of ordinary consumers. Judicial decisions since 1970 began to reflect a growing concern for the rights of the consumer over the rights of the seller. Public sentiment led to court decisions designed to assist the consumer in seeking redress from negligent manufacturers. Disgruntled consumers demanded compensation from firms that had previously taken a somewhat irresponsible approach to selling a defective product. Product liability lawsuits, almost unheard of prior to the 1950's, skyrocketed. Punitive damage awards climbed into the hundreds of thousands of dollars as juries demanded accountability on the part of the manufacturer. In a report released in 1995 by the U.S. Department of Justice, the median award in a product liability lawsuit in the nation's 75 largest counties was reported at $727,000, with 15.4% of plaintiffs winning judgments of $1 million or more. The five largest jury awards in 1990 ranged from $26.3 million to $55.7 million (Smith: 1991). These figures represent only the amount awarded the plaintiff, and do not include the resources expended in the actual litigation of the lawsuit. Product liability cases can continue for years, with numerous appeals filed on behalf of the plaintiff or the defendant. In addition, the company often has to have legal counsel on retainer at all times to protect against the threat of a product liability lawsuit.

PRODUCTS LIABILITY THEORY

In order to understand how the use or non-use of TQM methods can be applied to product liability, it is important to understand the legal issues relevant to a product liability lawsuit. Negligence, strict liability, and breach of warranties are three theories of recovery available to a plaintiff in a product liability lawsuit. At the onset of a product liability lawsuit, a plaintiff will typically maintain that a defendant is liable under all three theories.

Negligence requires the breach of a duty toward someone-the omission to do something that a reasonable person, guided by those ordinary considerations which ordinarily regulate human affairs, would do, or the doing of something that a reasonably prudent person would not do. A manufacturer of a defective product will be found liable if it is determined that it did not exercise "reasonable care" in the design or manufacture of a product. That is, did the manufacturer violate the "duty of due care" that it owed to the consumer.

The manufacturer can be held liable for injuries caused by a either a manufacturing or design defect in its product, as long as the product is being used in a foreseeable way. A product is defective in design "if it fails to perform as safely as an ordinary consumer would expect when used in an intended or reasonable foreseeable manner or if there is a risk of danger inherent in the design which outweighs the benefit of the design." (Soule v. General Motors Corporation, 8 Cal. 4th 548; 882 P .2d 298; Cal 1994.)

In a negligence claim, the burden of proof rests with the plaintiff. The plaintiff must prove that there existed a duty to the plaintiff on the part of the defendant, that the duty was in some way breached, and that the breach of this duty was the cause of the plaintiffs injuries.

In addition, a plaintiff may claim that injuries were a result of a breach of warranty. A warranty is a promise that arises out of a contract. Violation of this contract would permit the injured party to recover actual damages. Unlike negligence, the plaintiff does not have the burden of proof in a warranty claim.

There are several different types of warranties that may arise in connection with the sale of goods. The one most applicable to TQM is the implied warranty of merchantability. The Uniform Commercial Code, Section 2-314 sets forth the description of an implied warranty of merchantability:

(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.

In simple terms, an implied warranty of merchantability exists by operation of law any time a sale of goods is made, unless the warranty is disclaimed. Basically, the goods are guaranteed to be salable.

The legal theory of strict liability is quite different from the theory of negligence and breach of warranty-the concept of strict liability is derived from the idea that whoever unleashes something "unreasonably dangerous" is strictly liable for any damage that occurs as a result-liability for virtually any defect. Under strict liability, an injured party need not prove negligence; he or she need only show that the product was "defective," i.e., not fit for its intended use or reasonable misuse; that injury or damage was a result of the defect; and that the defect originated while the product was under the manufacturer's control. The plaintiff or injured party is more likely to recover under the theory of strict liability because he or she does not have the burden of proving that the defendant/manufacturer was negligent.

TOTAL QUALITY MANAGEMENT

The costs of poor quality can be divided into three categories (Stevenson: 1996):

1 Appraisal Costs-related to inspection, testing and other activities that serve the purpose of uncovering defective products or services, or to guarantee that there are no defects.

2. Prevention Costs-costs incurred to prevent the defect from occurring. Usually include planning costs, working with vendors, training, quality control procedures, and added attention in both the design and production phase.

3. Failure Costs-costs caused by defective parts or products.

Internal failure costs are discovered during the production process; whereas external failure costs are not recognized until after delivery to the customer. The results of external failure costs can include warranty work, handling of complaints, replacements, product liability, and loss of customer goodwill.

In traditional systems, most quality costs are expended in the failure and appraisal categories. It is in the category of external failure costs where manufacturers experience the highest losses. External failure costs include those associated with defending a product liability lawsuit, which can become quite high for small to medium-range manufacturers.

The TQM philosophy rests on a redefinition of the nature and function of a business and its constituent parts, as well as its relationships with customers and suppliers. TQM includes four components for the successful operation of a business: work force empowerment, process improvement, customer obsession, and strategic planning (Anschutz: 1995). The TQM approach assures the consumer of quality products at a competitive price. TQM can also be used to guarantee that product safety is part of product quality. By implementing TQM techniques throughout every function of the business organization, Japanese manufacturers were able to produce products that were unrivaled in superior quality.

At this point, it is important to take an in-depth look at the role of continuous quality improvement, statistical process control and the philosophy of Total Quality Management in the American manufacturing process. In a continuous quality system, the focus is on prevention-it is more economical in the long run to produce a defect-free product than to have to rework and repair the product. The problem with traditional quality control procedures is that firms are using inspection to find defective products-the company is therefore paying workers to make mistakes and then find and correct them. Quality experts claim that 80% of defects are caused by design problems or from purchasing supplies based on lowest price instead of on highest quality; the defect is already present before the production process even begins (Ryan: 1996). The key to quality is to prevent the error from occurring in the first place-this is the goal of TQM. It has been reported that for most businesses, every dollar invested in prevention costs could save $10 in internal failure costs and $100 in external failure costs (Ryan: 1996).

At the heart of the Total Quality Management philosophy, is an increased awareness of the need for process improvement. It is in this area that companies can have the greatest impact on the quality of the product, thereby reducing product defects to almost zero. To illustrate how the manufacturing process can be improved requires an understanding of Statistical Process Control (SPC) and the use of control charts. The use of Statistical Process Control is a focal point for ensuring that products are made in conformance with design criteria and specifications.

Statistical Process Control begins with a control chart, used to plot the output from a production process over time. If a component part for an automobile is being produced, for example, it must fall within a specified tolerance level set by the engineering design. Engineering designs always have a specified tolerance level, otherwise known as upper and lower specification limits. A production process is determined to be capable or "in control" through an engineering study. Measurements are then taken periodically during the production process from the product being produced, a bolt that must be 2 inches long for example. The first bolt might have a measurement of 2.002 inches, second bolt 1.99 inches, etc. These measurements are then posted on the control chart, and any variation in the process is highlighted.

Measurements of process output will always display some random variation-processes are rarely perfect. Random variation is referred to as "common variation" and is considered inherent in the process. By taking a sample mean, this randomness effect is removed from the observation. When the sample mean falls within the upper and lower control limits, the process is considered to be in control. It is "special" or non-random variation that is the enemy of quality. "Special cause" variation occurs when something cause the process to become out of control, or outside the control limits. Special cause variation provides an opportunity to improve the process. Every time the control chart exhibits a special cause event, the process conditions that prevailed at the time can be examined, and improvements made to the process, making it increasingly stable and less likely to produce an abnormal or special cause outcome again.

The traditional approach to quality control involved producing a product that would consistently fall within approximately 99.7% of the design specifications for the product. For example, if a component part had to be 3 inches long, then each piece produced would have an upper and lower control limit based on the design specifications for the part. Each piece might fall within a range of 2.99 inches (lower control limit) to 3.01 inches (upper control limit) 99.7% of the time. A quality control operator would generally measure a random sample during each production run and plot these measurements on the control chart to ensure that the majority of the parts were falling within the specified range and that the process was in control. If the measurement fell outside the control limits at any time during the process, then product would be stopped and the cause of the variation would be investigated. The problem with this approach is inconsistency-at least .3% of the time the pipe was falling outside of the necessary guidelines. This may seem acceptable, but if a production line is producing one million component parts per month and .3% fall outside of the standards, then you have 3000 parts that are defective. If this defect is caught before the product is shipped, only the cost of scrap and/or possibly rework is lost. However, because of the prohibitive cost of inspecting every piece, it is impossible to guarantee that some of this defective product won't reach the consumer. If the defective product, in the hands of the consumer, causes personal injury or property damage then there is the potential for a costly product liability claim. These costs multiply when one considers lost goodwill, lost sales, and negative public image.

Applying Total Quality Management techniques to the manufacturing process ensures that virtually every pipe produced will fall within the specified range. The idea is to set an upper control limit lower than the necessary upper specification. This is done by finding three standard deviations about the mean within the specification limits through process capability improvements. For example, the upper control limit might be 3.005. A lower control limit is also set that is higher than the lower specification, possibly 2.995. The worker at the machine takes a periodic sample at different intervals throughout the production process. Anytime the sample mean is above or below the control limits, the worker makes necessary adjustments. Because the upper and lower control limits are set within the range of the limits required by the design specifications, the process should consistently be "in control". Under most circumstances, this guarantees that the product never falls outside the required design specifications. The manufacturer, in effect, is producing a product that is free of defects.

The benefits derived from the use of TQM techniques are substantial: increased productivity, decreased scrap and rework costs, and a higher degree of quality. But can the use of TQM have an impact on a company's product liability costs? As knowledge of TQM and statistically-based manufacturing spread, they will become validated and ever more widely accepted. With an increasing focus on quality, the way in which Total Quality Management is used as a defense against product liability lawsuits may well become a revolutionary idea for reducing product liability. TQM could be used by the defendant to show proof that a defect was not possible; therefore, the injury had to occur for another reason, outside the control of the defendant. Conversely, a plaintiff in a lawsuit may argue that the nonuse of TQM constitutes evidence of negligence on the part of the manufacturer.

MCKENZIE V. SK HAND TOOL CORP. CASE

Ronnie McKenzie (plaintiff), was injured on September 10, 1987, while working on a truck at his place of employment. He was using a 3/4 inch ratchet wrench manufactured by SK Hand Tools Co. (defendant) while performing an engine overhaul on a large truck. When he experienced difficulty in removing one of the bolts, the plaintiff placed an extension on the wrench and, in a second attempt to remove the bolt, the wrench came apart and plaintiff fell off the truck backwards hitting his right side and shoulder on the concrete floor. The plaintiff sustained injuries to his neck and shoulder. All pieces of the wrench were recovered by the plaintiff and saved for later testing. The plaintiff subsequently commenced a products liability lawsuit against the defendant in the circuit court of Williamson County. Illinois.

Following a court trial, the jury returned a verdict in favor of the defendant and the plaintiff appealed to the Appellate Court of Illinois, 5th Division. The plaintiff's appeal rested on two contentions, the one which is of interest here was that Judge Paul Murphy had erred in striking all evidence regarding the defendant's wrench specifications, measurements of the component parts of the wrench in question, and plaintiff's expert witness's testimony with respect to those measurements and specifications at the trial. (Plaintiffs other contention, that the trial court had erred in admitting evidence of an absence of prior accidents or incidents because defendant failed to establish the proper foundation for such testimony, is not relevant to the issues in this case.) On appeal, the Appellate Court of Illinois reversed and remanded for new trial on the grounds that the evidence just discussed should have been admitted by the trial court judge. To reach this conclusion, the appellate court examined the evidence and proceedings from the original trial court.

At trial, a manager from SK Hand Tools Co testified that the wrench in question was a 3/4inch-drive ratchet wrench manufactured by the company. Some components of the inner body of the wrench were manufactured by other companies and purchased by the defendant, but the drive body, the pawl, the handle, and the reversing stem were manufactured by SK Hand Tools.

The defendant produced blueprints that contained the design specifications relating to the size of each component of the wrench. The components had to comply with these specifications in order to be considered acceptable. Each measurement had a tolerance level, or upper and lower specification limit (e.g., 1"+ or -.1"long). A part was acceptable if its actual measurement fell within the tolerance limits. If the measurement of the part did not fall between the upper and lower limits, the machinist knew the part was not acceptable for use.

Component parts of the wrench in question were measured by four individuals, two testifying for defendant and two for the plaintiff, using a Rockwell C Scale. (The Rockwell C scale is the standard by which all other gauges are measured. It is an absolute precise measuring device that will guarantee an exact measurement.) The measurements were compared to those required by the design specifications. The plaintiffs experts measured the hardness of the snap ring several times on a Rockwell C scale and the results were several different hardness ranging from 45-51. The design specifications required a hardness range of 48-52. The conclusion of the plaintiffs expert was that the ring did not meet the hardness required in the specifications (48-52) and that this failure to comply with the specifications could have affected the snug fit of the ring in the grooves of the driver and thus its ability to properly hold the driver and the handle together. It was also stated that the variance in hardness was the result of manufacturing and not use.

Plaintiff's expert found the measurement of the outside diameter of the snap ring groove in the handle to be 2.3130-2.3125 inches. Defendant's expert's measurement for the same part was 2.315 inches. The manufacturer's specifications required 2.290 inches with a tolerance of .005 inches so a measurement between 2.285 and 2.295 inches would have been acceptable. However, the measurements obtained by both plaintiff's and defendant's experts exceeded defendant's specifications.

Plaintiff's experts also noticed a tapering in the radius of both the inside and outside edges of the snap ring groove in the handle that should not have been present. They also stated that it was common knowledge in the industry that the dimensions of a groove which retains a snap ring must be perpendicular and parallel and that the edges must remain sharp. A taper is like a ramp which allows the snap ring to be ejected. It was the expert's opinion that the tapering was done during manufacturing and did not result from use.

When asked for his theory on the possible cause of the accident, the plaintiff's expert stated that the failure of the parts to comply with the defendant's specifications would have created a manufacturing defect which could have contributed to an incident of the sort involved here. Plaintiffs expert testified that, in his opinion, the wrench in question was defective and unreasonably dangerous because the snap ring groove did not comply with the defendant's specifications.

At the close of all evidence, the plaintiff moved for a directed verdict. At this point, the trial court instructed the jury to disregard all evidence concerning the measurements and specifications of the wrench due to the fact that the expert's opinion regarding the relationship of the accident to the defect was speculation. On appeal, the plaintiff contended that the trial court had struck this evidence erroneously. The Appeals court agreed and remanded the case for a new trial.

In its decision, the appeals court determined that the design specification and measurement evidence was a crucial component of the plaintiff's case. By allowing this information to be introduced as evidence, the court in effect, recognized the importance of the quality control techniques used in the manufacturing process. It is important to examine the language of the appeal court's decision to ascertain how a relationship may exist between TQM and product liability defense. According to the Court:

"Strict liability applies if the product is found to be unreasonably dangerous when it fails to perform in the manner reasonably expected in light of its nature and function. A product may be found to be unreasonably dangerous by virtue of a design or manufacture defect ....... Furthermore, the issue of whether a product is defective is a question for the jury. Thus, the issue of whether a defendant's failure to meet its own design specifications constitutes a defective condition that was unreasonably dangerous to a plaintiff is a question of fact and is properly presented to the jury. In the present case, the evidence is sufficient to establish the presence of a defect in the wrench....(272 111. App, 3d at 616).

The court decision goes to discuss the relevance of the product defect to the nonconformance of the product design specifications. Considerable emphasis is given to the fact that the component parts of the wrench failed to fall within the acceptable control limits. Attention is given to the fact that the defect occurred as a result of the manufacturing process.

If a manufacturer is doing everything possible to produce a defect-free product, under the definition of negligence, no duty has been breached. The first duty is that of the supplier to the manufacturer and/or the public to produce a "reasonably" safe product; the second duty is that of the manufacturer to the public to produce a safe product. With statistical process control guidelines in place, no duty will have been violated since the manufacturer did the best that is possible, which is all that negligence theory would require.

DISCUSSION QUESTIONS

1. Q) After examining the details of the preceding case, the first question one might ask is what impact might the use of TQM have had on the defendant's position in the case?

2. Q) Consider the theory of negligence. Ultimately, given the legal definition of negligence, is a manufacturer that is not employing quality control techniques breaching the "duty of due care" owed to the consumer?

3. Does the manufacturer have a "duty" to the consumer to use all available resources to produce a product that will not cause harm?

EPILOGUE

As mentioned in the body of the case, the Appellate Court of Illinois, 5th Division reversed the trial court's decision to suppress the plaintiff's attempt to introduce evidence regarding the defendant's wrench specifications, measurements of the component parts of the wrench in question, and plaintiff's expert witness's testimony with respect to those measurements and specifications at the trial. Thus, the case was remanded for a new trial at which the plaintiff's evidence would have been admissible. Before the new trial could take place, however, the parties settled the case. Frequently, a defendant will settle as case like this only when it expects to lose at trial. With the admission of the plaintiff's evidence showing the failure of the wrench to conform to the specifications, the defendant would have had difficulty preventing the plaintiff from recovering.

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

Volume: 5

Issue: 1

Pages: 55-62

Number of pages: 8

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411938

Document URL: http://search.proquest.com/docview/192411938?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 56 of 100

MORE OLDER STUDENTS ON CAMPUS: THE MIXED-AGE COLLEGE CLASSROOM

Author: Yang, Nini

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Abstract: None available.

Full text:

CASE BACKGROUND

As the median age of the U.S. population continues to rise, so does the average learning age of the students in higher education. Prior to the 1980's, college students were primarily recent high school graduates who were studying full time to obtain higher degrees. This traditional student population is shrinking dramatically. On average, today's students are older, with about 57% of all students enrolled in American colleges and universities being 25 years of age or older. Many of these students are non-traditional. They tend to be married, working, and have household costs or child care responsibilities (see American Council of Higher Education, 1993; Moore & Diamond, 1995; Rice, Solis, Roger & Dalton, 1996; Yang, 1997; 1998). As one example, at Clayton College & State University in Morrow, Georgia, female students increased by 4% in the first quarter of 1996. Meanwhile, students of 31-40 and 41-60 years of age increased by 4% and 5% respectively, making up almost one-third of the total enrollment. By the spring of 1998, the average age of the students is 28. Minorities and female students compose about 30% and 67% respectively. Nearly 60% of the students hold full-time jobs.

Clayton College & State University is a four-year college with over 5,000 students, as well as a large continuing education constituency. Many of its full-time students are also permanent employees who work for companies such as Coca-Cola Co., Ford Motor Co., Delta Airlines, Home Deport, Wachovia Bank, and Nations Bank. Looking at those non-traditional students and sometimes evaluating them as future employees and managers, who work 40 hours a week and take 10 to 15 hours of college courses, one really have to admire what they are accomplishing.

A DREAM COMES TRUE: A SENIOR CITIZEN'S PERSPECTIVE ON THE MIXED-AGE COLLEGE CLASSROOM

"I enjoyed it. It was fun to work on," said L.C. Thomas when asked to describe how he felt about pursuing a college degree after retirement. Anyone who knows L.C. Thomas understands what it is meant by the word "fun" here. He is a retired manager of the Nabisco, Inc.. Many people call him simply by L.C..

L.C. Thomas started the college in 1953 but was unable to complete the degree as his job responsibility increased quickly. He spent 35 years in Nabisco, Inc. and retired as a regional sales manager for the division at Atlanta, Georgia. Although very successful and experienced in the field of business, L.C. always wanted to complete the college, a dream that he and his wife Wynelle talked about during those years of working. "Some day, I will do it," he told himself many times. So after being retired for a year or so from Nabisco, L.C. talked about his dream with a business professor at the Clayton College & State University, and was advised to start with one course first, a critical thinking class, "because that will help you clue what's going on in the world today at the college level," said the business professor. It was not an easy start, however. Many of the subjects being taught today were not even created 40 years ago. The first time in the class, a question about one's sexual life was raised for answers. "It was a real shock," said L.C., "but nothing would surprise me anymore after that one."

L.C. had a lot of support from his wife Wynelle and their three children. There was also encouragement from his friends: "If you want to do it, do it." That did not, however, call off the concern about whether the college would accept someone of his age until he became an actual part of the college. "I found in the first class that they will (accept older people). We had one thing in common, that course we were undertaking in that one class. So you can have that in common all the way through, and they will accept," said L.C.. "I felt that was very pleasant."

"I also felt I'd better do my homework, especially to stay up. If you had a lot of reading, you'd better read. If in accounting, you'd better do all that work, to stay up. It might be hard to compete against those young folks first," said L.C.. "I think one of the most front things of those young people is they did not enjoy as much as I did for the group study, the group projects, because in group projects, you really have to learn the personalities of other people regardless of the age background. It could be cultural barriers, it could be racial variables, because of being born in a foreign country. But if you fall into groups of your class, study groups, I think it is the most fun part of the college. I think it is the most learning part."

L.C. followed the foot steps of his daughter and a stepped grandson. One by one, they completed Clayton College & State University, having the same teachers sometimes. His experience was not unusual. Oftentimes, you see in upper level courses, several students are following the foot steps of their children. "It is kind of the issue, sharing your needs with your children, but you are not the first one to go. You are the last one to go. That's the humor side of this education," said L.C.. "I knew they would want to see my report card. They wanted to see my grades."

L.C. completed his "biggest report" in August, 1995. With a college degree in hand, he is planning to go international. He applied to join a Study Aboard Program in London through the University System of Georgia. "I really want to continue on international studies. I became interested in international through my teachers," said L.C.. "It was just a dream that I worked completely to get a degree, but what I really want to do with all of this, the change that occurred? I would like to teach at the college level, that would require something else."

"I think of the changes of the American country. The education facilities and the means of communication like PCs are great things to get involved with, not too old to learn at my age," said L.C., "because our children are involved, and our grandchildren, and we just need to learn."

L.C. Thomas took an active part in the college education and was creative in group projects. Both the students and the School of Business faculty enjoyed having him as a team member, a colleague, a student and a friend. Off the campus, L.C. is active in the community and is a member of the local Kiwanis Club. As today's colleges and universities are getting more diversified in terms of gender, age, and ethnicity, students like L.C. Thomas are real valuable assets to the quality of education. They bring with them rich experiences, high motivation, and creative ideas. They are making today's education both a challenge and a fun activity to work on.

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

Volume: 5

Issue: 1

Pages: 63-66

Number of pages: 4

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411791

Document URL: http://search.proquest.com/docview/192411791?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 57 of 100

HORIZONTAL GROWTH AT RENTALS, INC.

Author: Anderson, Mark; Michael, Craig; Gulbro, Robert D

ProQuest document link

Abstract: None available.

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THE COMPANY

Rentals, Inc. is a small and relatively new firm. It initially was located in the eastern U.S., and was incorporated over ten years ago with more than one hundred retail rental stores. These stores appealed to the desire of consumers lacking cash or credit to rent products for a short time period. The firm struggled along, fighting problems that come from small size and inadequate cash flow. Being small meant paying high interest rates for a line of credit, and lacking clout when buying additional supplies and equipment for its stores. After nine years of slow growth, Rentals, Inc. decided to change strategies. The time appeared to be ripe for faster horizontal growth.

Rentals, Inc., using financing from a friendly bank, bought out a similar-sized competitor located in its competitive area for $ 20 million in cash. In addition, it purchased 51 percent of the stock of a larger rental firm in the southeastern U.S. for $ 18 million. These actions meant that in one year it had more than tripled in size and in the market it served.

It then organized itself geographically, with three layers of management below the president. Store managers reported to 55 regional managers, who in turn reported to 11 regional vicepresidents. Compensation for both regional and store managers was tied to store performance. Corporate headquarters has centralized purchasing, financial planning, personnel, training, individual store evaluations, and site selection.

THE INTERNAL ENVIRONMENT

STRENGTHS

The firm has an excellent MIS system that each unit of merchandise and each rental agreement. The computer at each store is connected to the main computer at corporate headquarters. Each day's activity is compiled for stores by region. Management has access to daily, weekly and monthly data in order to make precise decisions about personnel, about merchandise, about stores, and about regions. Since all merchandise goes directly from vendors to stores, no warehouse or storage costs are incurred. Various vendors are used to help keep merchandise prices competitive. Growth rates in revenues per store have been increasing at 18 percent a year.

WEAKNESSES

The biggest weakness facing Rentals, Inc. is the inefficiencies associated with absorbing the two chains it purchased. Regional managers and store managers must learn new methods and new information-gathering guidelines. Organizational cultures are slow to change.

THE EXTERNAL ENVIRONMENT

OPPORTUNITIES

The rent-to-own industry has been consolidating for several years. The biggest problem facing the independent store or the small chain is a lack of adequate financing. Rentals, Inc. was fortunate that it found a bank to provide the cash needed for expansion. Current and future trends indicate that industry consolidation will continue. Rentals, Inc. should aggressively continue to seek acquisitions or merger partners to avoid being left out of the industry changes. If smaller firms will be squeezed out of the industry, Rentals, Inc. must pursue growth to insure survival.

Current social trends appear to be growing. The U.S. continues to be an itinerant society. People move more, so they need to own less. People want to do more, but lack storage for ownership of things. Many people lack both cash and credit, so the purchase of furniture and appliances is difficult. Rentals and rent-to-own activities will continue to be a growth industry. Rentals, Inc. must take advantage of this trend to enhance per store sales and increase cash flow for repayment of bank loans.

THREATS

The rent-to-own industry is highly competitive. In 1994, the ten largest firms accounted for 37 percent of the total industry sales. The rental industry must also compete with discount and department stores for customers.

Another serious threat is the growth of the credit industry. Credit cards are available to almost anyone, giving people more choices when considering a major purchase. Rent-to-own stores may lose potential customers to big discount and department stores that offer easy credit or access to their credit cards.

The rent-to-own industry is heavily regulated and further legislation at the national level is being considered. Restrictions on interest rates and fees, on contract language and disclosure, and on lending in general would increase costs and further limit the profit potential of the industry.

Other near term costs that are expected to increase are shipping rates, taxes, fuel/energy, and paper costs. Investors will shy away from an industry where profits are falling and firms are consolidating.

DISCUSSION

1. What strategies are available to this firm?

1) More horizontal growth as the industry consolidates

2) Increase store sizes/activities/products to generate more cash

3) Diversification

4) Closer ties to and agreements with suppliers

5) Improved target marketing

2. What are the problems and benefits associated with each strategy?

1) Although growth is painful, it appears to be necessary in order to be competitive. Growth could also lead to economies of scale. Rentals, Inc. could attempt to buy out smaller chains located in the western U.S. to allow it to compete nationally.

2) More cash is needed for debt service. Larger stores could lead to more sales and more profits.

3) Diversifying, while it is a way to reduce risk, may not be an option. Rentals, Inc. must focus now on what it knows best. After consolidation it may be a future consideration.

4) Avoiding supplier agreements is currently keeping merchandise costs down. Agreements should be entered into carefully, and then only if they will provide lower prices and more dependable deliveries.

5) To increase single-store performance, each store must increase traffic of potential customers without incurring excess costs. A variety of promotional activities could include newspaper flyers, billboards, newspaper ads, or on-site radio broadcasts.

3. What would be the best choice of action?

The best course of action appears to be to continue to grow through horizontal acquisition and merger. As long as bank funding is available, the use of leverage should provide positive returns. When a track record has been established Rentals, Inc. may want to consider an IPO.

4. Given that this choice was implemented, what might the future hold for Rentals, Inc.?

As long as Rentals, Inc. can manage the larger size, it needs to continue growing to stay competitive. Eventually, it may become large enough to require a more professional management team. Future concerns include new federal and state regulations limiting rental activities, territory encroachment by larger competitors, and logistical problems associated with size.

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

Volume: 5

Issue: 1

Pages: 67-70

Number of pages: 4

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411825

Document URL: http://search.proquest.com/docview/192411825?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 58 of 100

FROM GRITS TO SOUTHERN APPEAL

Author: Shonesy, Linda B; Gulbro, Robert D; Hemingway, Linda

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Abstract: None available.

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INTRODUCTION

GRITS, Inc., opened its doors in July, 1996 in Birmingham, Alabama, selling t-shirts with southern sayings embroidered on them. All of the sayings were centered around the word "grits," which stands for "Girls Raised In the South." It all began in the garage of the founders, Deborah and Jim Ford, and outgrew two warehouses and doubled the company's initial projections within the first year.

Deborah started with the creation of a slogan for her high school girls team, for which she was a coach and liked to give them t-shirts to wear. The idea was appealing, but was one of many ideas. Deborah had always been creative, using her ideas to create what she termed "memory-wear." She liked to work with clothing that brought a kind of nostalgia to mind. She had always searched for previously owned materials, such as chenille bedspreads and quilts, and used them to make clothing; for example, jackets, dresses, and hats. Her line of shirts using the GRITS slogans began as a part of her southern heritage that reminded her that certain southern behaviors, like them or not, were part of the tradition of growing up for southern "girls" (Taylor, 1995).

GRLTS, which began in a garage, then moved to a 1000 square-foot warehouse, and finally to an 8000+ square-foot warehouse within a year, now has more than 1250 accounts. These primarily are speciality shops, but are beginning to include large retail chains, such as Mercantile, which owns Gayfers, Maison Blanche, J.B. White, Bacons, McAlpines and Castner Knotts stores in the Southeast. They have also struck a deal with Hallmark stores and Cracker Barrel stores throughout the country. This was possible by expanding the slogans to include ones such as "Girls Raised in the Snow," "Girls Raised in Texas," an ethnic line "Brown Sugar Girls," and others for different regions of the country. They have expanded their line well beyond t-shirts and sweatshirts to include hats, mugs, beach bags, visors, aprons, nightshirts, and sundresses to name a few (Tomberlin, 1997).

THE ENTREPRENEURS

It was due to the marketing expertise of entrepreneur Jim Ford that GRITS began to expand beyond the hallways of a high school. He recognized the potential for this company because of his previous industry experience. Jim owned the rights to an exclusive line of golf apparel based upon the fictional Bushwood Country Club from the movie "Caddyshack." He is also a founder-owner in a company that produces golf accessories under the Carrera label. He took one look at the t-shirts and decided that this was an opportunity not to be missed in marketing these products. So instead of giving away shirts, a new business was created (Tomberlin, 1996).

Because of the success of their first venture, the Fords have now started a second company, known as Southern Appeal. This company has products made from chenille fabrics, such as dresses, hats, pillows, and a doll. However, they not only sell products created internally, but also assist others who are developing a product that is "southern-made," and don't know how to get that product to market. They have done this by producing a vehicle to assist with the sales and marketing of these products. This vehicle is a catalog that will allow home-based manufacturers with limited resources the capability of growing their own business. An alliance or partnership can be created depending upon whether Southern Appeal will manufacture the product or simply market it through the catalog. The items are carefully chosen to ensure that they will be an asset to the products of Southern Appeal. The catalog concept is to introduce people in other areas to southern traditions, as well as provide Southerners with items that bring back nostalgia (Business Plan, 1997).

MISSION

"Southern Appeal sells products created internally, as well as assisting others from the concept stage through the development process. The company will assist in all phases of product development from designing to outsourcing. Customers can always expect innovation, practicality, and comfort with a southern flair. We recognize the importance of our customers and offer a commitment to quality and innovation in the industry. We recognize the importance of integrity and ethical standards, as we value our reputation in the marketplace." (Southern Appeal Business Plan, 1997, p. 2)

MARKET ANALYSIS

The market for women's apparel in the United States is very diverse. There are low barriers to entry, but many competitors both large and small. Women want their products to be on the cutting edge. The Southern Appeal line has been selected to be very specific using catalog sales to bolster sales efforts. A three-year test market study has been conducted with this line of products to determine which items will sell. The intent is to attract a special clientele that want unique products, but would not want to see them at a "flea market." In addition, the convenience of shopping through catalogs is evident.

(Southern Appeal Business Plan, 1997)

In order to define the potential market, a student (or the entrepreneur) should answer the following questions:

4. Evaluate the cottage industry of home-based manufacturing and the catalog sales industry. How successful is each considered to be? What are the problems in each area?

5. How did the owner go about getting information to potential users of the catalog, as a vehicle for the sales of their products?

6. Define types of unique products acceptable in a specialty catalog.

7. Identify the target market(s) for these products.

8. How could Southern Appeal insure a strong customer base with loyal customers and repeat purchases?

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

Volume: 5

Issue: 1

Pages: 71-73

Number of pages: 3

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411952

Document URL: http://search.proquest.com/docview/192411952?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 59 of 100

AN INSTRUCTIONAL CASE IN PARTNERSHIP ETHICS: ADVENTURE TRAILS, INC.

Author: Henry, Eleanor G; Jennings, James P

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Abstract: None available.

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BACKGROUND OF CASE

Adventure Trails, Inc. was established in 1988 by Jennifer Collins and Patricia Johnson for the purpose of developing and promoting motor coach tours that would be of special interest to retired persons. The two women were personal friends and each had several years of experience as travel agents. In July 1987, Collins proposed the tour concept to Johnson over lunch. Several months later, they formed a corporation, Adventure Trails, Inc., to design and conduct motor coach tours.

Based on personal knowledge and contacts with hotels, restaurants, a motor coach charter company, and tourist attractions, they developed a Fall Color Tour package for a nearby mountain area. Their marketing efforts focused on suburban, church-sponsored, senior-citizens organizations. Individuals in these groups had the time, interest, and financial ability to support touring. Church group meetings provided a venue for selling tours to a good prospect group. The initial tour was a notable, immediate success. Thus, both Collins and Johnson terminated their employment as travel agents to devote full time to their own tour business.

At the time of incorporation, each party invested $20,000 in cash from personal savings. Since Collins initially conceived the concept of selling tours to senior citizen church groups, she proposed that she should own 55 percent of the corporation stock. Johnson would own 45 percent of the common stock of Adventure Trails. Further, it was mutually agreed that Collins would be designated Chairperson of the two-person board of directors and President of the corporation. In exchange for $20,000, Collins was issued 55 shares of common stock. For her $20,000 investment, Johnson received 45 shares and was designated Vice-President and Secretary-Treasurer. Thus, 100 shares were issued and outstanding. In recognition that each party, in fact, contributed the same amount of investment capital and provided personal services of equal value, each received the same annual salary and fringe benefits.

Over the next five years, the business revenues and profitability increased. The success of the business was due, in large part, to Collins and Johnson who served personally as tour guides. From this experience, they gained a better understanding of the special interests of their clients. Adventure Trails, Inc. attracted a high degree of customer loyalty and repeat business. The loyal client base encouraged them to create new tour packages. The corporation compiled a customer profile database that facilitated direct-mailings of well-targeted, high-response-rate tour announcements. Expanded tour offerings led to the selective hiring and training of additional tour guides.

After five years of active life on the road, sales presentations to prospective church groups, and office work, Adventure Trails had become a major time commitment for both parties. The business was a great success. Each earned annual salaries and bonuses in excess of $100,000. The company provided each shareholder-manager with a leased luxury automobile, medical benefits, and contributions to a 401K retirement plan.

THE DISAGREEMENT

In late 1993, Johnson indicated to Collins her desire to "quit the road" and no longer act as a tour guide for 1994 and future years. Johnson wished to limit her activities to 40 hours per week devoted to office work and making sales presentations. Collins responded quite negatively to this proposal. For the first time in their business relationship, Collins began to refer to Adventure Trails as "my company." She pointedly noted to Johnson that the Adventure Trails concept was hers and that she was the majority shareholder, Chairperson, and President.

The preceding conversation took placed several days before Christmas week closing. Christmas was a slack time for business and all of the employees took a holiday during the week between Christmas and New Year's Day. On December 30, 1993, Johnson decided to go to the office to catch up on some paper work. She attempted to unlock the door to the store front office. However, her key did not fit the lock. Upon returning home, she noted a letter from an attorney. The letter informed her that she had been terminated as an Adventure Trails employee. Furthermore, she was prohibited from entering the business, contacting customers, or in any way interfering with the operations of Adventure Trails, Inc. Her personal property would be delivered to her and arrangements would be made to retrieve the corporation's automobile. No mention was made of her ownership in the company.

In response to the attorney's letter, Johnson immediately telephoned Collins to discuss the situation. In reply, Collins reiterated the contents of the letter and briskly terminated the conversation. Soon thereafter, Johnson contacted her attorney and filed a dissenting shareholder suit in civil court.

A dissenting shareholder's appraisal and buy-out right entitles the dissenting stockholder to sell his/her shares to the corporation at fair market value. The purpose of this right is to effect a compromise between the majority shareholders and the dissenter who refuses to accept a position different from that bargained for when the stock was purchased (Dunfee et al. 1984, 751). The suit in this case was based on an unwarranted lock-out by Collins and claimed fair market value for Johnson's 45 percent of the common stock of Adventure Trails, Inc.

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

Volume: 5

Issue: 1

Pages: 74-77

Number of pages: 4

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411835

Document URL: http://search.proquest.com/docview/192411835?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 60 of 100

PERFORMANCE PIPING GOES TO ASIA

Author: Pearce, Jim; Poteat, J Todd

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Abstract: None available.

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INTRODUCTION

It is a hot and humid evening just like every other evening in Singapore. Mike Bliss is sitting all alone in Singapore's oldest and most famous hotel and bar, Raffles.

"My name is Vanitha, may I serve you a drink sir?" the waitress said in a thick Singaporian accent.

"Give me a double, double anything," Mike responded.

"Yes sir," responded Vanitha.

As Mike slowly took his first drink he could not help but wonder how did he get himself in this situation.

Mike brought his glass to his lips for the second time, he began to survey this historic location. He wondered to himself if this was the right place for this meeting to occur. He could see so many potential weapons. Would Jack break a bottle and use it to cut Frank? What kind of hospital care would he get? "Excuse me, I am going to need another drink," Mike blurted out to the Vanitha.

"Right away sir," Vanitha said as she made her way back to the bar. Mike began his second drink. His brain continued to spin, should I hide the silverware, that could be a weapon too. This could get bloody.

Mike's apprehension and hysteria were being driven by the meeting he was about to referee. Mike's boss Frank Cowan was on his way from the United States to meet with Jack Jacobsen. Jack also works for Frank as general manager of Asian operations. Mike now knows the time has come, he sees Frank and Jack approaching his corner table from across the room.

BACKGROUND

Hello, I am Mike Bliss. I am the one telling this little story about our company. I guess you are wondering who I am. Well, Mike is a young engineering manager from Performance Piping in the United States. Mike is responsible for the capital spending for all of the Performance Piping divisions. Before we can finish this story, here is some background that you need.

Performance Piping is a United States based company that produces corrosion resistant pipe, valves and fittings. Performance Piping is one of thirty divisions that belong to a financial holding company. The corporate parent is involved in businesses ranging from aerospace to home plumbing. Performance Piping's products are used in the chemical process industry and petrochemical industry to convey corrosive chemicals. These chemicals are processed through pipes, valves and fittings manufactured by Performance Piping. These chemicals transferred by the piping components can be used in the processing of products or they may be the finished product. Typical chemicals that require lined pipe are sulfuric acid, hydrochloric acid and phosgene(mustard gas). The piping components consist of a chemical resistant fluoropolymer lining inside of a metal housing. This liner is most often made of Teflon®. This liner protects the metal housing from being consumed by the fluid that it is carrying. Performance Piping has been manufacturing these products for thirty plus years in the domestic market.

Performance Piping invented lined piping in the 1950's. The market has evolved since that time and now Performance Piping has two major competitors in the United States market. However, Performance Piping controls the major market share in this market. The target of this industry, up until the last ten years, has been to convert the chemical manufacturers away from using exotic alloy metal piping in their chemical processes to convey these corrosive chemicals. Rare metals such as Hastelloy or Zirconium are often used in these corrosive services because of their chemical resistance properties. These exotic alloys have been replaced by the more cost effective plastic lined steel piping.

Over the last five years, most of the conversion from exotic alloys has been completed. The domestic Chemical Process Industry has stopped the past practice of building chemical capacity ahead of demand which led to over-capacity and depressed chemical prices. The cautious capital spending of the last two years will continue to be the norm and will limit Performance Piping's potential for overall pipe and fitting sales growth.

With this cautious course has come the practice of cost reduction and continued shifting of special requirements, such as painting; (heretofore, subcontracted) back to the piping vendors. Additionally, the static demand for lined pipe and fittings is being, for the most part, competed for by three suppliers each with sufficient capacity to supply 50% of the total market. Thus, Performance Piping is competing in a "buyers" market where the past manufacturing practice of "make to stock" has changed to one of a "mass customization" where price is still the primary buying influence.

In the past 2-3 years, Performance Piping's top competitors have attempted to align themselves with commodity type distribution to take advantage of the industries trend to "integrated suppliers," which is a move to lower their cost by reducing their vendor base.

For Performance Piping, new growth must develop from either new markets or new products. Recent new product introductions have been reasonably successful, but in this mature market, new products can not produce the kind of increases to revenue that are needed to sustain growth.

Performance Piping has recognized that its growth must occur through new markets. In order to make this happen, Performance Piping president Frank Cowan has pursued a presence in Asia. The Asian market, at this time, is equivalent of the United States market thirty years ago. It is an emerging market that is being influenced by multinational firms locating plants in the region.

Heretofore, most of the investment in the region was Petroleum based Petrochemical with relatively little use for lined piping. Additionally, local tariffs promoting inside the country development of manufacturing caused importing of lined piping to be costly. Thus, cheaper and lower quality corrosion resistant piping was and is being utilized, i.e.; rubber coating, spray on linings and solid plastic piping, all of which are available locally.

The investment by the Chemical Process Industry is now shifting to pharmeucitical grade chemicals and plastics production, especially in the Singapore and Malay Peninsula. This type of investment will continue to grow throughout the region with Indonesia and the Indochina area being the next big growth opportunities. These types of chemicals require the qualities of lined pipe.

European (mostly German) companies are leading the way in the investment with American and Japanese firms following. Currently, the majority of lined pipe is being imported from those three countries, but due to the complexity of piping systems and short lead-time requirements, the need for local support and fabrication is essential to continue any growth.

While new plant construction business will be the bulk of the volume for the next 2-3 years in the Asian region, the emerging conversion market (converting to fiuoropolymer lined piping from previously discussed corrosion resistant materials) is the real plum and can only be served by local facilities.

Based upon the above, Performance Piping president Frank Cowan has proceeded with the acquisition of a Singaporian company that will allow Performance Piping access to these markets. This method was chosen over starting a business from the ground up. Cultural issues and differences, along with the much quicker access this purchase gives Performance Piping to these markets, makes this approach more attractive to Frank Cowan.

As part of the purchase, Performance Piping retained the services of the previous owner Jack Jacobsen as the managing director. Also, Performance Piping Asia (PPA). has part ownership in a Thailand company that is in the same markets.

Jack Jacobsen is a true entrepreneur. He traveled to Singapore with some knowledge of lined piping that he had gained through a distributorship in Australia and contacts in Holland and very little else. Jack took residence in a government owned flat along with six other people and began building a much needed business. All that he had to lead him were his dreams and not much else.

Jack had built a business that was based very much upon his self. His personal knowledge of the different cultures and markets made him a crucial part of Performance Piping's purchase. Jack's language capabilities include; English, Dutch, German, Thai and Mandarin Chinese. Jack's first factory location was in an old furniture factory located in a rain forest on the Singapore peninsula. His office consisted of a construction trailer parked along side the factory. As darkness would fall upon the factory, the lights of the office trailer would draw in hundreds of locusts through the holes in the trailer. The locusts would have to be battled away before any further work could be done.

Many times production would have to be halted in the factory because of some unwanted guests. As a male monkey gets older, they are pushed out by the rest of their family and are left to defend for themselves. One of these monkeys that had been pushed out of the family stumbled upon the factory in the rain forest one day. This monkey discovered that food was easy to come buy if you stole the workers lunch. After a couple days of this, the monkey decided to go back and invite his whole family to feast at this new found factory. Hoping that this wealth of food would bring him back into favor with his family. Needless to say, this created very hazardous working conditions. This monkey's entire family would hang from the I-beams of the factory waiting to steal the worker's lunch.

One of Jack's favorite stories to explain the cultural diversity of the region involves the capture of a Tarantula. During work one afternoon, one of the workers discovered a huge Tarantula spider located in the corner. There soon was a major conference to decide the faith of this creature. The Malaysian workers wanted to set the spider free because they felt its large size showed its wisdom. To kill the spider would bring bad luck. The Chinese and Indonesians wanted to cook the spider. The disagreement between these two groups was that the Chinese wanted to cook the spider with the head still on while the Indonesians do not like to cook anything with the head still on it. Well, it was the spider's lucky day, the Malaysian workers won the discussion and the spider was on its way.

CURRENT SITUATION

PPA had a very respectable first year. All of the projects came in that were targeted at the beginning of the year. Half way through their second year of operation, business is no where near last year. PPA is functioning at a loss. The new construction projects that were targeted have not come about. Recent declines in the Thai and Malay financial markets have forced the cancellation or postponement of many projects. PPA is completely reliant on project based work and they are currently staffed to handle more business than the previous year. Therefore, their overhead is causing them to function at a loss. Performance Piping Asia does not have any maintenance and replacement business to fall back on. Maintenance and replacement business refers to that part of the business that services existing customers. In an emerging market, there are very few established customers. The nature of the business is that it will be new construction driven, but they need maintenance and replacement business to cover their expenses when new construction is scarce.

Being the dreamer that he is, Jack Jacobsen has not concerned himself with the operational side of the business. A good example of this is how Jack arrived in Singapore, with a little money and no where to stay. Jack sold his business in Australia and left his wife and two daughters there while he flew 10 hours to Singapore to start his own business. Jack still believes that sales will rebound during the second half. His focus is on growth into other Asian markets. Jack's core philosophy is that details will be handled at the time they arise. This philosophy has been painfully apparent in the surprises that have been sprung upon Frank Cowan this year. Jack's swashbuckling style and loose truths have severely strained Frank's patience and understanding.

Frank Cowan's main concern at this point is how to grow the business. Frank comes from a twenty year sales background. He is a visionary with an expressive's personality. Frank has loads of energy and his personality style leads him to work with people. He understands the need for confidence and a few loose truths, but he knows when to draw the line. Performance Piping has spent substantial capital in their Asian location during the first two years. This capital equipment has been targeted at lowering their manufacturing costs and bringing their products up to Performance Piping's quality standards. The person who has been responsible for this capital strategy is Mike Bliss. Mike's strategy for capital spending thus far has been centered around bringing PPA's product up to Performance Piping production standards. PPA's products must represent PP's good name. Mike believes product quality standards can not be lessened just because PPA is selling into lesser developed countries.

Jack Jacobsen's plan for growth is to move towards a regional manufacturing approach as compared to their current centralized approach. Currently, Jack is pushing Frank very hard to move towards the regional manufacturing approach. Jack's targets are to have fabrication facilities in Thailand, Malaysia, Indonesia and China.

On Mike's last trip to Singapore he was accompanied by Frank Cowan. Mike's goal was to install two more pieces of capital equipment that he had recently shipped over. Frank was not scheduled to make this trip originally but decided a discussion was needed with Jack when Jack decided to sign a lease for manufacturing space in Malaysia without Frank's knowledge. Frank discovered that Jack had signed a lease through discussions with the accounting department in the US.

Needless to say, Frank was very concerned when he learned this. His expressive personality soon turned to that of an irate driver. No more management by consensus, it was now his way or no way. Frank Cowan agrees with Jack that these are valid markets to be in, but they disagree on how this should take place.

The day Frank discovered that the lease had been signed he called Mike Bliss into his large front office on that Wednesday. Frank's office has few furnishings and is very neat. Mike has always wondered how he keeps his desk so clean. Frank is a midwest educated accountant. He was brought into this business quite by accident. It seems that someone decided to mentor Frank, but not in accounting. This mentoring took place in the fine art of selling.

Frank asked Mike to sit down. Then Frank said to Mike, "Are you flying to Singapore this weekend?" Mike answered yes.

"Well I am going with you, you will not believe what that flaky Jack is trying to do," Frank said with an angry voice.

"What is it?" says Mike.

"He is trying to move the factory to Malaysia without my permission. I have a meeting set up with Jack at the Raffles Hotel in Singapore for Monday evening, I need you there. I am afraid that I may fire him on the spot without someone to help calm both of us down," Frank said as he fell back into his chair.

"I will be there Frank," says Mike.

It was an even longer than normal flight for Mike to Singapore because he knew what was waiting for him once he got there.

Everyone is very cordial in their greetings to each other even though they sense what could happen. As everyone begins to sit down, Mike makes sure he is sitting between Jack and Frank. The waitress approached their table and asked if they would like to order a drink. Mike thought to himself that he should pass on another drink and that they sure did not teach this at North Carolina State University in the engineering program.

"No thanks, I have had enough," said Mike.

"Give me a gin and tonic," Jack declares.

Frank says, "I will have a beer." Frank only drank when it was required socially. As they take their first drinks, it is obvious that Jack has been tipped off that Frank knows about his lease agreement because Jack is being much more congenial than normal.

"Can I start this meeting?" Jack says after a couple of drinks of his gin and tonic. Mike cringes as Frank nods his head as if to say go ahead if you are that brave.

Jack states, "I believe that costs are too high in Singapore and these costs are handicapping my ability to sell product and make a profit."

Frank agrees, "Labor costs and operating costs are higher in Singapore, but that all of Asia can be accessed from there because of its open trade laws." Frank's main argument to Jack is, "Jack if we cut our labor costs by 79% by moving to other countries, we would only save $80,000 because labor is such a small part of the overall cost. Therefore, labor cost is not an issue."

"Jack I agree that these are valid markets to be in, but I disagree with you on how this should take place," Frank said as he drank the last of his beer.

At this point Mike starts to see Jack squirm in his chair.

"Jack I believe that all of Asia can be accessed from Singapore. Singapore is the technical center of Asia," Frank preached to Jack.

"But Frank, costs are extremely high in Singapore. Much higher than those of surrounding countries," Jack exulted.

Frank continues to bash Jack's idea of regionalism by making the following statements. "Jack, all of the countries, that you want to put fabrication facilities in, have trade and business issues as well as local law concerns. These countries have laws concerning foreign enterprise ownership. These laws all center around minimum export requirements. A wholly owned company in Malaysia must export 80% of what it manufacturers. China requires that a wholly owned company export 70% of its production." Jack continues to underestimate Frank's knowledge of local laws and customs. Jack makes another attempt at convincing Frank that moving to Malaysia is the best thing to do.

"Frank, you are under estimating the fact that our customers want to buy from local manufacturers not from other countries."

Frank's question of Jack is, as he slams his glass on the table, "how can we be in all these countries and export these high percentages."

Jack usually responds with some futuristic view of how he envisions it will work. Today Jack was smart and thought better of that approach. Jack just became silent. Frank knew that Jack still felt his views were correct, he was just out gunned.

Frank continues his lecture of Jack. To this point in the conversation Mike has not been needed. Frank has done an excellent job of maintaining his composure. "Jack you know the purpose of these countries export laws is to help these developing countries to develop their own technology. More often what happens is that these countries end up taking the technology and pushing out the western firm," as Frank continues his assault. This is one of the main reasons that Frank likes to stay in Singapore. Jack turns and looks at Mike as if he is asking for help. Mike's brow began to gather a heavy sweat. Technology ownership is the wrong subject to ask for help on. Mike Bliss is determined to keep Performance Piping's core technology in the U.S. Mike will never let it out of his sight. Without their core technology, a company has lost its competitive advantage. If these countries develop this technology through our help, then Performance Piping has no sales advantage.

At this time in the company's infancy, Frank would like to see Jack and his sales force focus on selling the maintenance and replacement (MRO) items.

"Furthermore Jack, this potential MRO business would provide a constant baseline of activity when new construction projects are scarce. Also, this MRO business is typically taken at higher margins than new construction business," Frank says as if pleading with Jack.

Frank's vision is that if the MRO business can cover expenses, then new construction work becomes incremental business and the money will flow to the bottom line.

Under Jack's leadership and swashbuckling style, he has trained the sales force to focus on new construction work. "Frank, new construction work is higher profile work than is MRO business, there is higher sales dollar potential," Jack demands. "However, there is a great amount of risk with new construction work, Jack. If you loose the order, there is nothing to fall back on. Seeking out MRO business is the grunt work. The recognition is small, but the margins on selling the product are attractive. This baseline MRO business is required in order to cover the operating overhead," Frank slumps back into his chair.

At present Jack obviously has not bought into the above philosophy. Frank feels he needs to influence more closely how Jack runs the business. Asia is a huge area, distance and communication barriers are significant problems. Most flights that the salesman take are at least 8-10 hours in length. These flights take the salesmen into different countries with completely different languages and cultures. The customers that they are serving are not located in a big city with all the amenities that we are accustomed to in the United States. Many times they are traveling deep into the jungles of Indonesia to a pulp and paper mill. Survival is the first rule of the game, not selling lined pipe. The salesmen must pack enough bottled water to last them the entire trip. Earlier this year, one salesmen was rushed back form the jungles of Indonesia and spent two weeks in a Singapore hospital recovering from food poisoning. Each country has such different cultures and eating styles that a person can not adjust to all of them.

Performance Piping (Asia) is 13 hours ahead of Performance Piping in the U.S. management, and communication from the U.S. is very difficult because of these differences. Frank is grappling with how Performance Piping provides the resources to administer the growth that Jack and Frank are striving for. In providing the resources, Frank has considered sending an expatriate to go and live in Singapore. Another option he is weighing is whether to rotate the Asian employees through the U.S. plant for training. At this time, Frank sees no apparent successors to Jack within the current organization. There are no other leaders within the organization.

Because of Mike Bliss's recent trips to Singapore, Frank has asked Mike to do some research and make recommendations on the direction Performance Piping should take. Mike is very conscious of the importance of his recommendations. There are great opportunities for growth if the right decisions are made. Performance Piping's main growth must be through their Asian operations. Building of US chemical plants is almost unheard of these days. Mike feels that Performance Piping must follow its customers. Failure is certain if control is lost over the operations. Frank's corporate bosses are observing this situation very closely. Performance Piping is out in front in these markets and many times is setting corporate policy.

"Mike, you have traveled to the jungles with me to visit customers and we share many stories, do you not see my side of this argument? You know how these countries show favoritism to incountry manufacturers. We have to be located in these countries. It is obvious that Frank does not place any stock in my vision. You can help sway him Mike," Jack says in his most convincing way.

Mike swallows real hard and thinks to himself that the third drink would be helpful right now. Mike looks over at Frank, Frank's jaw has dropped in disbelief.

Frank takes another drink and says, "All right Mike, what would you recommend"?

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

Volume: 5

Issue: 1

Pages: 78-85

Number of pages: 8

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411811

Document URL: http://search.proquest.com/docview/192411811?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 61 of 100

PAMELA SMITH VS KATV CHANNEL 7: A CHARGE OF DISCRIMINATION

Author: Rodgers, Sandra; Akin, Ramona

ProQuest document link

Abstract: None available.

Full text:

INTRODUCTION

Dale Nicholson was concerned. The recent and steady turnover of news anchors at his television station was being noticed and questioned by loyal viewers. In addition, the only black news anchor had filed a racial discrimination lawsuit against the station for failing to promote her to one of the emerging plum positions.

BACKGROUND

Little Rock is the home for three television stations. Despite changes in news directors, sets, and program formats by the other stations to try to increase their viewer ratings, KATV Channel 7 has consistently maintained its Number 1 ratings for its newscasts.

Jim Pitcock, news director for the popular station, explains it this way: "The key to our success is personnel selection. Our newscasters are confident and comfortable with their positions. They are relaxed and relate well to each other on camera. This is reassuring to the viewer who in turn feels at ease and accepts the reporters as family members.

"Sure, we have lost key people over the years. To our credit, they've all gone on to larger markets, and we've been successful in filling the void they have left with qualified, likable personalities."

The departure of KATV's news anchors began in 1993 when Andy Pearson moved to Nashville; a second departure was by Betsy Pilgrim, the 5 p.m. anchor, who left the station in the spring of 1994 to become press secretary for an Arkansas gubernatorial campaign. Andy's co-anchor and station veteran of six years, Gina Kurre, soloed the 6 and 10 p.m. newscasts for a year before leaving for a similar position in St. Louis. At that time, Karen Fuller, who had been at the station for only nine months, was tapped to be anchor for the 5, 6, and 10 p.m. newscasts. (Rengers, 1994, August 12)

Turnover at KATV was also experienced in the reporter positions and supporting station positions at this time. In the one-year time span from August 1993 through August 1994, at least 15 of about 40 newsroom employees left their jobs for one reason or another.

The one constant on-air talent has been Pamela Smith, who serves as weekend anchor and weekday reporter for KATV. In July 1994, Smith sued KATV for the job of weekday anchor, saying that since she was hired in 1990 she had been passed over twice for an anchor position because of her race. (Rengers, 1994, August 12)

KATV AND THE TELEVISION NEWS INDUSTRY

KATV Television, Inc. is a Delaware corporation authorized to do business in the State of Arkansas by virtue of a license from the Federal Communications Commission. The station has a general coverage area which extends over 80% of the State of Arkansas and into portions of Oklahoma, Mississippi, Louisiana, and Texas. (Smith, 1994, July 7) KATV operates news bureaus in Pine Bluff and Hot Springs and is the only station in Arkansas with a live hook-up to Fort Smith and Fayetteville in northwest Arkansas.

KATV employs 49 persons in its newsroom-40 or 81.7% are white, 8 or 16.3% are black, and 1 or 2.0% is Asian-American. (Smith, 1995, November 14)

Television is the main news source for 70% of the U. S. public. (TV Industry Page, 1998) In addition, local newscasts represent from 45 percent to 50 percent of a station's advertising revenue, according to Pat Baldwin, the general advertising manager at KATV. One national media broker, R. A. "Pat" Walsh, believes that advertisers go to local news because it provides more eyes and more ears for their commercials and generally reaches an older and higher-income adult audience. Advertisers also choose newscasts for subliminal reasons-most notably, the credibility a news or weather environment gives to its product. (Donald, 1997, July 27)

Every television station needs advertisers to help offset the costs of producing its news program. The exact rates stations charge for advertising is a closely guarded secret, but based on the standard rate cards distributed to local media buyers on June 1, 1997, KATV charges more for its 30second spots than do its two competitors, KARK-TV and KTHV-TV. One reason KATV is able to do this is that it is Number 1 in the ratings in the Little Rock area.

According to the general manager of one of KATV's competitors, keeping up with the latest technology is the most expensive part of producing a newscast. (Donald, 1997, July 27) In the Little Rock market, only a couple of on-air personalities earn $100,000 or more, with the majority of the anchors receiving $50,000 to $75,000 as an annual salary. The salaries account for very little of the expense of airing a news program.

Each television station strives to present the news, weather, and sports in a manner that will establish a unique identity with the public. In the Little Rock industry, 40 to 50 people are directly involved in producing the news, with only a handful being anchors and on-air personalities. However, the on-air personalities are the ones the public sees and hears, and, therefore, they play a key role. The way an anchorman smiles or a weatherman conveys information about a possible storm can contribute to the popularity of that station's newscast. (Donald, 1997, July 27)

Television journalists may or may not be hired for their educational training in television news. They may be chosen because they possess expertise in a certain field (economics, law, medicine, business, or sports, for example), may be good writers, may have name recognition (Blohowiak, 1987), or may have good rapport with the camera. According to Neal Ardman, the chief operating officer at KKYK (a low-power television station in Little Rock), what works over time is a credible, comfortable news report. (Brummett, 1998, March 5)

PAMELA SMITH'S COMPLAINT

Pamela Smith filed a formal complaint with the United States District Court, Eastern District of Arkansas, Western Division, on July 7, 1994. Named as defendants were KATV Channel 7 Television, Inc., Jim Pitcock, News Director for KATV, and Dale Nicholson, Station Manager of KATV. In her suit, Smith asked to be placed into the position of weekday anchor at KATV and to receive monetary compensation due to the violation of her civil rights. She charged KATV with maintaining a racially discriminatory work environment including ". . . word-of-mouth recruitment, failing to post notice of vacancies, placement of people into positions on the basis of friendship and nepotism, placement of people into positions such as anchor and upper management positions . . . without predetermined objective and subjective job related criteria and placement of people into positions on the basis of race or color." (Smith, 1994, July 7)

The suit further stated that KATV had a history of placing only persons of European ancestry into weekday anchor positions and management positions. Black employees were limited to the lowest paying jobs within the station. At the time the complaint was filed, Smith contended she was the only non-white person in the news department staff which consisted of more than 20 nonphotographer news staff.

Even though Smith had received favorable work reviews, the complaint says that she was not considered for two weekday news anchor vacancies (created when Betsy Pilgrim and Gina Kurre resigned), was not given notice of the vacancies, and was not given the opportunity to fill the vacancies while KATV conducted an overall search for the positions. She also claimed that the person who eventually filled the position, Karen Fuller, had less experience.

QUALIFICATIONS: SMITH AND FULLER

Some similarities exist between the backgrounds of Smith and Fuller, one of which is that they were both hired by KATV as general assignment reporters. Some differences also exist. Pamela Smith is a graduate of Oral Roberts University, Tulsa, Oklahoma, with a Bachelor of Science degree in telecommunications, specializing in broadcast journalism. Before joining the KATV news team, she worked as a free-lance producer and on-air announcer for a religious program and as a Public Relations Assistant for the City of Little Rock.

After being hired by KATV in 1990 as a general assignment reporter, Smith was promoted to the weekend anchor position along with her weekday general reporting duties by 1992. KATV's WEB page recognizes her as the "Weekend Anchor for the award-winning Channel 7 News Weekend Report." It also states that she took first-place honors in the Associated Press' Best Documentary Category of 1994 for her three-part series, "From Arkansas to Africa." (KATV News Team, 1998, March 11)

Karen Fuller earned a Bachelor of Arts degree in Radio/Television from Drake University in Des Moines, Iowa. She began her broadcasting career as a weekend anchor in Mason City, Iowa, at KTMT-TV. After seven months, KIMT promoted her to weekday morning and noon anchor. She also worked as an intern for another Little Rock television station where she remains the only intern in station history to have a story reach the air.

In November, 1993, KATV hired Fuller as a general assignment reporter. She was promoted to the 5 p.m. anchor position in March, 1994, and then promoted to the 5, 6 and 10 p.m. anchor in August, 1994.

Fuller is part of the Channel 7 News Team that received first place awards at the 1995 Arkansas Associated Press Broadcasters Association Annual Awards Presentation in the category of Newscast, as well as others. The Channel 7 News Team was also named the Television Class A Overall Winner. (KATV News Team, 1998, March 11)

KATV'S ANSWER

On July 18, 1994, KATV Channel 7 Television, Inc., Jim Pitcock, and Dale Nicholson filed an answer to Pamela Smith's complaint in the same court in which it had been filed.

The defendants asserted in their answer that all actions taken with respect to Pamela Smith's employment with KATV had been made ". . . without regard to her race, based upon defendants' best judgment of her abilities as a reporter and anchor as compared with other available candidates for the news assignments in question." (Smith, 1994, July 18)

In the Plaintiff's Pre-Trial Conference Information Sheet, filed in court on November 14, 1995, the defendants conceded that during her tenure with KATV Smith had received evaluation ratings of "good," "very good," and "outstanding." Smith had never received a rating of "unsatisfactory" or "fair."

The information sheet also pointed out that KATV does not generally post vacant positions for news anchor.

THE TRIAL

Pamela Smith's case went to trial in April of 1996 before an all-woman jury. Three of the jury members were black. While Smith's attorneys argued that race was the determining factor in Smith's being denied promotion, KATV's attorneys contended that Smith's lack of anchoring skills was the determining factor.

The testimony in the trial centered around Smith's qualifications vs. Fuller's qualifications to be promoted to weekday anchor at KATV. Spencer F. Robinson, attorney for KATV, said a November 1993 evaluation of Smith's work stated that she needed to continue improving her anchoring skills. This evaluation had been signed by Smith. (Caillouet, 1996, April 13)

Both Smith and Fuller had visited Audience Research and Development, a Dallas firm that evaluates and coaches broadcast journalists. According to Robinson, while Fuller had received high marks from the Dallas firm, Smith's evaluation ". . . centered on the inflection in her voice, her delivery of the news, the way she ad-libbed, pitched a story to a reporter or got it back from the reporter. It said that she appeared to struggle at times." (Caillouet, 1996, April 13)

The trial revealed that Fuller's salary was $77,500 a year plus a $4,000 annual clothing allowance, a $1,500 annual hair allowance and a $1,176 annual health club membership. (Caillouet, 1996, April 13) At that time, she anchored 15 newscasts a week. Smith's annual salary was about $30,000 for anchoring four weekend newscasts and working as a reporter another three days a week. (Caillouet, 1996, April 18)

Near the end of the trial, video tapes were played of both Smith's and Fuller's on-air performances in August of 1994. Robinson asked Dale Nicholson to evaluate those performances. "I felt Ms. Smith's delivery was wooden. I didn't feel like she was as comfortable. And she didn't have consistency in her pace and her voice was sing-song," Nicholson replied.

However, Nicholson thought Fuller had "terrific eye contact, read with an extremely good pace and put emphasis on the words that get your attention. She is very confident in herself."

John Walker, an attorney for Smith, countered that if Fuller were better than Smith, it was due to Fuller receiving advantages Smith did not receive, such as greater hair and clothing allowances and a larger crew with which to work. "If you give one person fewer tools to work with than another, who will succeed?" Walker asked Nicholson.

Nicholson's response: "The one who has the most abilities." (Caillouet, 1996, April 18)

THE DISPOSITION

After hearing testimony for three days, the jury started deliberations at 4:30 p.m. on Tuesday, April 16, 1996. They were sent home at 9:00 p.m. after failing to reach a verdict. The next day the jurors continued deliberations until just before 5:00 p.m. when the jury foreman sent a note to U.S. Magistrate Judge Jerry W. Cavaneau, who was sitting in for Chief U.S. District Judge Stephen M. Reasoner. The note said, "We are deadlocked-exclamation point." (Caillouet, 1996, April 18) Although eight of the twelve jurors sided with Pamela Smith, a unanimous verdict was required. Judge Cavaneau declared a mistrial.

On Thursday, April 18, KATV's attorneys asked Judge Reasoner to rule on the case himself rather than go through the time and expense of another trial. Judge Reasoner denied Robinson's request and ruled that a second jury trial would be held. (Caillouet, 1996, April 27)

The second trial was to begin on Monday, July 14, 1997. On Thursday, July 10, John W. Walker, an attorney for Smith, confirmed that her federal discrimination lawsuit with KATV had been settled. In his statement Walker said, "It has been resolved. The terms are private and between the parties." (Newscaster in LR settles bias lawsuit, 1997, July 11)

CURRENT STATE OF AFFAIRS

Pamela Smith continues to work at KATV as weekend anchor and weekday general assignment reporter. Karen Fuller also remains in her position as news anchor for the weekday newscasts. KATV Channel 7's news programs are still rated Number 1 of the three television stations in Little Rock.

THE FUTURE

The out-of-court settlement has reduced or eliminated much of the publicity that the case generated from the time the suit was filed until it was settled, and the station weathered the negative publicity to retain its standing. But the question that remains in the minds of some viewers is, "Did KATV discriminate against one of its employees on the basis of race?"

The visibility of the primary players serves as a reminder of Pamela Smith vs KATV. A current concern in the station's human resource department might well be the development of a strategy for the purpose not only of avoiding discrimination charges in the future but also of allaying any concerns viewers might have about the motives and intentions of KATV.

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

Volume: 5

Issue: 1

Pages: 86-91

Number of pages: 6

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411801

Document URL: http://search.proquest.com/docview/192411801?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 62 of 100

ZULU BUILDING SOCIETY, LTD.

Author: Smith, D K (Skip)

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Abstract: None available.

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THE CHALLENGE

June 1987. John Gosmos, Planning Manager for Zulu Building Society Ltd. (hence, ZBS) did a last minute check on his materials before leaving his office for the brainstorming session with senior ZBS executives. The purpose of this meeting with his superiors was to review with them the draft mission/vision statement he had prepared for the new Corporate Division of ZBS, approved the week before by the ZBS Board of Directors.

BUILDING SOCIETIES AND THE FINANCIAL SERVICES ENVIRONMENT IN SOUTH AFRICA

Building societies are institutions formed with the objective of helping their members build or buy houses. The first was Keightley Building Society of Birmingham, England, which was formed in 1775. These societies build their financial resources by collecting a weekly or monthly contribution from each member. A lottery or bidding process will then held, to see which member will be the first to be loaned the money to build or buy a house. Because members of these early building societies tended to be artisans or tradesmen, members often assisted in the building of the houses. Early societies were "terminating building societies," which means that after every founding member of the society had built or bought a house, the society would be terminated. Later, however, after the objectives of building societies expanded to include savings and other financial services not related directly to houses, building societies became permanent and did not terminate when all founding members had acquired houses.

The building society movement in South Africa began in Durban in 1856. The Durban Building and Investment Society was formed in August of that year. Over the next year, several additional building societies were formed in Durban. In 1858, Natal's Legislative Council passed a law (Law 12) based on British practice to regulate the activities and conduct of building societies in the province. In 1934, a law governing both the building societies in Natal Province and 75 other building societies elsewhere in the Union of South Africa (the Building Societies Act) was passed. The primary impact of these laws was to restrict the operations of building societies to the financing of residences for individuals.

THE COMPANY

Zulu Building Society (hence, ZBS) was founded in Durban, South Africa in 1880. The organizers were Allison James and Paul Williams. James had been secretary to the company constructing the Panama Canal, until he contracted yellow fever and was forced by health problems to leave Panama. Williams had grown up on a farm outside of Durban, and had started out in business owning and operating a shipping and commission business. Subsequently, Williams became a town councillor, Mayor of Durban, and then a member of the Natal Legislative Council. Williams was also engaged in public accountancy and in the provision of home and personal insurance.

The founders of ZBS set three objectives for ZBS: (1) to provide a simple and convenient way for members to save; (2) to enable borrowing members to purchase or build their own homes; and (3) to provide saving members with a way to earn interest and/or dividends on their savings. By the end of the first year, initial installments of funds had been collected and fifteen loans to enable members to build or purchase houses had been granted. Over the next several years, the society experienced ups and downs, as indicated below:

1. When gold was discovered near Johannesburg in 1886, several ZBS members quit Durban (and their obligations to ZBS) to seek their fortunes in mining.

2. At the turn of the century, the society suffered from the Boer War, because ZBS members fled their homes and obligations when Boer commandoes invaded Natal from the Johannesburg area.

3. By the decade of 1910, the society had achieved such success that contributions from members had to be limited because the amount of funds offered exceeded the cost of the ongoing projects approved by ZBS management.

4. After the First World War, demand for housing in Natal, and ZBS's efforts to provide that housing, increased enormously.

5. During the depression of the 1930s, many ZBS members were not able to meet their obligations to the society. Most were allowed to defer payments, and nearly all ultimately resumed payments and paid off their loans.

In the mid to late 1930s, with new enabling legislation plus the problems associated with the Great Depression behind it, ZBS began to broaden its scope of operations. After opening its first branch outside of Natal in Johannesburg in 1939, ZBS continued its geographical expansion across all of South Africa. In 1957, ZBS set up an all-Indian sub-branch in the center of Durban, to better serve Indian members of society. Around the same time, ZBS branch managers began making sales calls on executives of major companies, in hopes of generating substantial volumes of new customers for the ZBS product line which now included savings schemes not only for houses but also for cars, holidays (vacations), and other major expenditures made by individual consumers. The late 1950s also saw ZBS mounting its first nationwide advertising campaign.

ZBS continued to grow and evolve in the 1960s, when computers and cash machines were introduced. In the 1970s, the society began to partner-up with private investors, to develop entire housing estates, blocks of flats, and/or townships. Initially, these efforts involved developments targeted at whites only. By the late 1970s, however, ZBS had involved itself in township and estates development targeting colored and Indian consumers as well. In 1978, in Soweto, ZBS opened its first facility in a black township, even though the business of making housing loans to Black South Africans was complicated by the fact that Blacks were not allowed to hold title to land. In 1979, when Blacks were allowed to acquire 99 year land leases against which ZBS could file a mortgage, this problem was solved as well. Given the huge number of black South Africans, ZBS and other building societies seemed well-positioned, as they entered the 1980s, for a period of prolonged growth and profitability.

THE CHANGING ENVIRONMENT BRINGS NEW CHALLENGES & OPPORTUNITIES

Even before the opportunity to provide mortgages for black South Africans opened up, many of the building societies in South Africa had over the years experienced considerable success. Thus, it was no surprise that in the 1980s, when the very large local commercial banks began looking for additional opportunities in South Africa, they attacked the lucrative residential market. By the mid1980s, all the large commercial banks including Amalgamated Banks of South Africa, Standard Bank, 1st National Bank, and the Nedcor Group were vigorously pursuing residential mortgage opportunities.

Unfortunately for ZBS and other building societies in South Africa, while the government was willing to allow commercial banks to offer mortgage products and services competing directly with the mortgage-related financial services offered to individuals by ZBS, it was not at first willing to change the Building Society Act of 1934. That act restricted building societies to the offering of home purchase and/or construction and/or related loans for individuals. For these reasons, and in this situation, both the revenues and profits of building societies in South Africa declined dramatically in the mid-1980s.

Early in 1987, the Government of the Republic of South Africa finally revised the Building Society Act of 1934. Suddenly, building societies were allowed to apply for banking licenses allowing them to offer a full range of financial services not only to individuals but to corporations and institutions as well. June of that same year, Zulu Building Society applied to change its name to ZBS Bank, Ltd. While the change has not yet been approved, no problems are anticipated. In any case, the rules had changed so rapidly that ZBS really hadn't yet had time to sort out how it would take advantage of the new opportunities now available to it.

While ZBS branches now covered the country, a substantial portion of the bank's business as well as corporate headquarters continued to be in Durban. Based on past experience, Gosmos expected that a good way to win support from the bank's directors for his suggestion would be to come up with a mission/vision statement which would be particularly appropriate to the local situation. For this reason, Gosmos conducted an intensive review of Durban's industrial base, so as to remind himself one of the business and commercial characteristics of the local economy. As source documents for this study, Gosmos used two documents prepared by the Durban Regional Chamber of Business: "Catalogue of Manufacturers and Exporters," and "Trade and Services Directory." Tables 1 and 2 summarize the information in those reports.

As he considered the attached data, Gosmos knew he would have to keep in mind certain other characteristics of the Durban area not yet captured by his analysis, together with characteristics of ZBS bank and the attitudes of its management team. Considerations which appeared especially relevant to him included the following:

1. Durban is the most active harbor in all of Africa. There is a huge amount of transportation activity and equipment (port equipment, trucks, etc.) in the Durban area.

2. Given the huge volume of harbor and port activity, one might suspect that providing import/export finance to this group would be high on the list of potential services which ZBS might offer. Because of its status as the largest port in Africa, however, the extremely specialized business of import/export finance is a specialized area which, at least in Durban, is already served extremely well by existing banks.

For this reason, Gosmos thought it unlikely that ZBS senior management would support a mission/vision statement which focused on international trade financing.

3. Construction lending is a very risky business, requiring intense day-by-day monitoring of job sites by the financial institutions providing the financing. Gosmos knew that while senior bank management were very interested in providing mortgage financing for industrial and commercial projects which had been completed (the mortgage loan pays off the lender who has provided the funds to construct the project), they were not interested at this time in entering the construction lending market. Thus, Gosmos also thought it unlikely that ZBS senior management would be interested in targeting working capital lines of credit to construction companies and contractors.

4. Sugar cane production is an activity which is very unique and very important to the Durban area. Small numbers of very large vertically integrated plantations are involved in this activity. This activity is also important because three members of the ZBS Board of Directors own and operate huge sugar plantations. In any case, large sugar cane producers require lots of machinery, including equipment for preparing, planting, tending, and harvesting the fields; trucks and other transportation equipment; and sugar cane processing equipment.

PRODUCT/SERVICE OPTIONS AND RELATED CONSIDERATIONS

As he considered specific products and services which ZBS Corporate might wish to highlight in its mission/vision, statement, Gosmos identified the following possibilities:

1. Accounts. Like individuals, corporations use a variety of demand deposits (that is, checking) and time (savings) accounts. Positives for ZBS of offering these sorts of products and services include the fact that since every organization has multiple accounts, the market potential is very large. Negatives include the fact that ZBS has no special skills or competitive advantage in this area. In fact, relative to other providers of such services, ZBS is disadvantaged by the fact that it has relatively few branches and thus relatively few locations where customers needing these services could come.

2. Corporate finance. Many corporate activities require some sort of finance. For example, when a corporation needs a new machine or a new truck or some other piece of new equipment, that equipment will typically be acquired using funds borrowed from a financial institution. Alternative approaches used by corporations to acquire equipment in South Africa include those listed in Exhibit 1. Positive aspects of this opportunity from ZBS' point of view include the fact that there is lots of this business available and it is quite profitable. Negatives include the fact that, at the moment, ZBS has very few staff who are knowledgeable in this area.

3. Professionals and other high net worth individuals. Like corporations, it is not unusual for these individuals to have needs for various sorts of expensive equipment (for example, dental equipment including chairs, x-ray plus drilling equipment, and so on). Positive aspects of this opportunity from ZBS' point of view include the fact that ZBS already knows many of the people in this market, having worked with them in the past to finance homes, vehicles, etc. Negatives include the fact that the number of people in this target market may be relatively small, and the amount of business ZBS could reasonably expect to generate in the short run might be small as well.

4. Trust facilities. Like wealthy individuals, many organizations own securities of various sorts. One example of such a security and the reason for holding it would be purchase by an organization of short-term certificates of deposit, so as to earn interest on monies it will be holding for a relatively short period of time. Another example would be purchase of stocks and bonds as an investment by a employee retirement fund. As in the case of accounts, one advantage of this service area is that nearly every organization is engaged in these sorts of activity, so market potential is high. The offsetting disadvantage is that ZBS has no special skills in this area.

5. Working Capital facilities. Like individuals, corporations and institutions have day-to-day needs for cash. Because the amount of cash available on a particular day may not be sufficient to meet cash demands, corporations typically arrange large short-term Unes of credit available from banks to cover day-to-day shortfalls. Loans under these working capital facilities are often unsecured. In the case of companies which are less credit-worthy and/or involve high levels of risk, however, the companies providing the working capital loans may require the corporation to pledge accounts receivable and/or inventory as collateral for the working capital facility. Companies which secure their working capital loans by filing a security interest in accounts receivable are known as factors.

As he mulled over the product/service alternatives and the characteristics of his service area, Gosmos made a few additional mental notes to himself:

1. Table 2 indicates that six factoring firms are already well established in the Durban market. This suggests that the area of secured working capital loans is already well served, and that it may be difficult for ZBS to offer superior value to its customers in this product/service area.

2. Several of the big banks already have bricks and mortar (that is, offices) throughout the city of Durban and the province of Natal. ZBS has a small number of offices in a small number of locations. The implication is that it may be difficult for ZBS to offer superior value to large numbers of relatively small and relatively dispersed business customers. Gosmos' assumption is that identifying target markets characterized by relatively small numbers of relatively large and geographically-concentrated customers is likely to be a more effective and efficient approach for ZBS.

YOUR ASSIGNMENT

Assume you are John Gosmos. Show the draft mission/vision statement you have prepared for the new corporate division, and indicate the supporting arguments you will use when presenting it to senior executives.

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

Volume: 5

Issue: 1

Pages: 92-108

Number of pages: 17

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411820

Document URL: http://search.proquest.com/docview/192411820?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 63 of 100

BABYLOVE BRAND BABY PRODUCTS

Author: Smith, D K (Skip)

ProQuest document link

Abstract: None available.

Full text:

THE CHALLENGE

Mrs. S.A. Omoshule, Group Product Manager for the PPvET Division of Auriel Nigeria, Ltd., locked herself into her office and began organizing her request to the Board of Directors for the maximum promotional budget allowable under current corporate guidelines (approximately 10 million naira). Her plan was to use these funds to re-launch her "Babylove Brand Baby Products" line. Mrs. Omoshule knew that the details of the proposed re-launch, including the copy strategy (that is, target consumers, benefits promoted, reasons for buying, character of the brand, and focus of sale), plus executional details (including timing and expense of the various initiatives she expected to make on behalf of the brand) would be closely scrutinized. Also, Mrs. Omoshule knew that the Directors would be very interested in hearing arguments explaining why it made sense to invest large sums of money to re-launch a consumer product line in an environment as problematic (both politically and economically) as Nigeria's.

THE COMPANY

Auriel Nigeria, Ltd. (hence, ANL) was incorporated as Auriel Limited in 1959. ANL is the successor company to Auriel Plc (Manchester), which has been doing business in Nigeria since 1890. The company adopted its present name in 1990, in response to the Companies and Allied Matters decree of 1990.

Forty percent of ANL's equity is held by Auriel Group (Manchester) Limited, a subsidiary of MNC Plc. Because the remaining shares are held by more than 50,000 Nigerians, however, Auriel Group Ltd. is the largest single shareholder and thus enjoys considerable control over the management of the company.

ANL's widely diversified businesses are divided into five strategic business units. In several of the businesses in these units, ANL companies are the market leaders in Nigeria. ANL business units and their activities are as indicated below:

Marine Group: manufactures fiberglass boats and markets a well-known brand of outboard motors. Holds more than 50% of the boat and outboard engine market in Nigeria.

Leasing Group: leases motor vehicles, electronics (including air conditioners), and boats and outboard engines. The group is one of the largest lessors in Nigeria.

Auriel Limited Investments: holds investment in property plus investments in other businesses and subsidiaries including PRET.

Technical Group: assembly, marketing, and support for well-known brands of petrol-powered products in Nigeria including motorcycles and mopeds, generators, and heavy-duty gen sets. Also, manufactures plastic crates and crown caps for the Nigerian beer and soft drink industries, and provides sales and service for motor vehicles.

Trading and Services Group: One of the largest distributors of pharmaceuticals in Nigeria (includes pharmaceuticals produced locally plus those sourced from overseas); sea- and air-freighting, including clearing, warehousing, and forwarding of goods; and the manufacturing, distribution, and sales of ploughs and other farming equipment. This group is also involved in the manufacturing, distribution, and sales of personal care products, fragrances, and the Babylove Brand line of baby care products. PPvET is one of the firms and businesses in this group.

Revenues, profits, and other quantitative and qualitative assessments of ANL's presence in Nigeria are presented in Exhibit 1. As indicated, with revenues exceeding three billion naira, nearly 3000 employees, and market leadership positions in several businesses, ANL is a major player in the Nigerian economy.

THE PRET DIVISION: PRODUCTS AND PERFORMANCE

As indicated above, PRET and its Babylove Baby Products line are part of ANL's Trade and Services Group. PRET's product line includes several personal care products, including the following:

Texide: A scented and colored petroleum jelly used in Northern Nigeria and neighboring countries on skin and hair.

Mobilene: Petroleum jelly to be applied to the skin. This product is known by U.S. readers as vaseline.

Shelene: A hot balm for colds (applied to the chest). A "cure-all" product.

Promea: A skin creme, manufactured under license.

Talc: talcum powder.

MFI: an Afro range of hair products, licensed from the U.S. At some point, PRET hopes to make the product in Nigeria. The manufacturer is not able to control export of the product from Europe, so substantial amounts of product from Europe enter Nigeria informally (illegally, through smuggling). This reduces the value of this franchise to PRET, because these parallel importers avoid import duty on products they bring into Nigeria and thus enjoy substantial cost advantages over products PRET imports legally.

Babylove Baby Products:

baby lotion (a lightly-medicated cream)

baby oil

baby powder (talcum powder)

nappy rash cream

perfumed jelly (to keep baby's skin moist)

PRET's performance with these products over the last three years (turnover and profits), plus the number of tons of each of the products it sold each of those years, are as indicated in Exhibit 2. Elaborative comments on PRET's performance during these years are as indicated below:

1. The 17 million naira loss in 1991 was a function of several factors. First among them was a nearly total lack of planning by PRET management as regards the amounts of various stocks (raw materials and other inputs such as packaging, for US readers) needed at any point in time so that PRET would be able to supply its customers with the amount of PRET products wanted at the times customers want them. For example, while many of PRET's products were then and continue to be packed in glass jars, in 1991 PRET management had no ongoing relationship or regular position in the production schedule of the one company in Nigeria which manufactured glass packaging.

Because needed stocks were procured in random amounts at random times, in 1991 PRET manufactured products infrequently, and only when all needed inputs were actually available. This led to a total lack of continuity of supply and no ongoing relationship between PRET and its customers. In addition, because the high temperatures and humidity common in Nigeria led certain stocks (for U.S. readers, raw materials) to deteriorate fairly rapidly, this lack of planning led to large stock write-offs as well.

2. A second contributing factor to the large loss in 1991 was the total lack of control on expenses. For a time, expenses including daily fresh flowers for the office were running at 60% of turnover.

3. A third factor contributing to the 1991 loss was a lack of sales training and sales systems. While each of the 40 salespeople had a job description, a price discount structure, and the requirement that they file journey plans (sales plans and reports), the sales area lacked strong leadership.

4. A fourth contributor to the 1991 loss was PRET's pricing system. At that time, PRET based its selling prices on costs. Because PRET was an efficient processor of inputs, costs tended to be low. As a consequence, PRET's prices in the marketplace tended to be very low compared to the prices of competing products.

5. A fifth contributor to the 1991 loss were PRET's distribution policies. While many of PRET's products sold best in Northern Nigeria during the Harmattan season, almost all of PRET's finished goods inventory was held in the South, near the factory. Also, Northern buyers accounting for substantial cross border trade were compelled to come to Lagos if they wanted to negotiate with PRET over prices, terms, and/or conditions.

6. A sixth contributor to the 1991 loss was product proliferation. At this time, the PRET product assortment included 84 products. Having decided that turning the business around required focusing on strong brands (plus elimination of losers), PRET management conducted during 1992 an in-depth analysis of the strengths and weaknesses of most of these lines. Ultimately, the number of products was reduced to 16.

During the course of the 1991 post-mortem conducted by ANL's Board of Directors, most of the above issues were corrected. Intense training in stock planning was initiated, and initial steps were taken to construct ongoing relationships and commitments not only between PRET and its suppliers but also between PRET and its customers. Meanwhile, the managing director took control of expenses by requiring that all expenditures require his signature and by implementing a total ban on advertising until stock planning and other revisions to PRET's operating policies had been implemented. Intensive training for sales personnel was initiated, and a new national sales manager was hired. As one of his first actions, the new national sales manager reduced the number of salespeople from 40 to 15. Pricing was converted to a market-based (as opposed to cost based) system, which resulted in substantial price increases for all PRET products. In addition, a distribution planning manager was hired and given the mandate to review PRET's distribution policies and to set up a system which ensured that finished stocks (finished goods inventory) would be held at the times and areas where it was most likely to be needed.

As exhibit 2 indicates, the immediate results of the above steps were very positive. From its 17 million naira loss in 1991, PRET moved to a small profit in 1992. Unfortunately, however, and as indicated in Exhibit 2, PRET's 1992 profits turned to losses in 1993 and 1994 (12 million and six million naira, respectively).

The factors causing the losses in 1993 and 1994 were different. The 1993 loss of 12 million naira reflects and was caused by final resolution (stock charge-offs, etc.) of some of the problems from 1991 which now, finally, disappeared forever. However, PRET's six million naira loss in 1994 was caused primarily by external factors. The primary issues included:

1. Workers' general strikes (that is, lost production) and the shortage of petroleum products not only as raw materials and energy for PRET's factories but also as fuel for trucks shipping finished products from PRET's factory to customers. These strikes and petroleum shortages in 1994 reflect political turmoil associated with the second anniversary of the military government's refusal to allow the winner of the June 12 1993 Presidential elections (Chief Moshood Abiola) to assume the office of President. On that anniversary, Abiola unilaterally proclaimed himself President of Nigeria. When Nigeria's military government responded by throwing him in jail, most unionized workers in Nigeria including members of various petroleum and transportation unions went on strike. The ensuing shortages of fuels including diesel and petrol (gasoline) made it very difficult for workers wanting to work to get to their factories.

2. During this time, most manufacturers in Nigeria including PRET were hurt by shortages of raw materials and supplies plus an inability to ship finished products to their customers.

3. The CFA franc (the currency for francophone West Africa) was devalued by 50% during the later half of 1994. This devaluation was important because a considerable percentage of PRET's sales are purchased by traders near Nigeria's borders who resell these products in neighboring countries. The 50% devaluation had a very negative impact on this cross-border trade, and on PRET's revenues.

While the last four years had been difficult for PRET, reasons to be optimistic about PRET and particularly the Babylove Baby Products line did exist. PRET management had all seen a recent analysis conducted by Research International LTD. of London, indicating that Nigeria's population was expected to continue growing at 2.9% per year for the foreseeable future. Given its population of nearly 100 million people, and given the fact that 20% of babies born in Nigeria die before their fifth birthday, it is clear that the annual "new baby" market in Nigeria exceeds more than three million newborns per year. In short, while growth markets are difficult to find in Nigeria, "newborns" clearly is such a market.

COMPETITORS

While having a growth market is an important plus, the magnitude of the business opportunity associated with that market is also impacted substantially by the quantity and character of competitors. As a first step toward a systematic analysis of Babylove's competitors, Mrs. Omoshule had early on conducted a SWOT analysis of PRET and of each of her major competitors. The results of this analysis are set forth in Exhibit 3. Primary findings from the analysis, together with additional elaborative comments, are as indicated below:

1. PEARS. This is the market leader in baby products in Nigeria, with about 70% of the market. The products are manufactured and marketed by a company called A. J. Seward (hence, AJS). While AJS had been a subsidiary of the United Africa Company of Nigeria (UAC-N), it became in 1994 an affiliate of Lever Brothers Nigeria, the huge (and over the years, very successful) Nigeria subsidiary of the British-Dutch multinational, Unilever. At the same time, Unilever restructured its involvements in Nigeria and dramatically reduced the scope of its Nigerian operations. This restructuring included Unilever's sale of its equity in United Africa Company of Nigeria, the holding company under which AJS had been operating.

Pears Baby Products line remained strong in 1994. However, Mrs. Omoshule's perception was that turmoil over UAC-N's restructuring and the shifting of the company and its line to Lever Brothers Nigeria had distracted AJS leadership and weakened their focus on the baby products market and the needs of that marketplace. Mrs. Omoshule's contention was that while AJS's leadership was distracted, share could be gained from them relatively easily and quickly. Specifically, her own observations plus the observations of PRET's salespersons over time led Mrs. Omoshule to believe that AJS's packaging is dated and vulnerable to shelf wear (labels easily scuffed, for example). In addition, as she had often told her team, Babylove Brand products (lotions, oils, powders, and creams) tested out as being at least as effective technically as any of the competing AJS products, even though same-sized Pears products were 50% more expensive.

2. VASELINE. This brand, with about 15% of the baby products market, is marketed in Nigeria by Lever Brothers Nigeria (LBN). As indicated above, AJS has now become part of Lever Brothers Nigeria. Thus, the LBN/AJS organization has 80-85% of the baby care market in Nigeria. Like PEARS, same-sized Vaseline products are priced approximately 50% higher than the "Babylove Brand" perfumed baby jelly manufactured and marketed by PRET.

3. Johnson & Johnson. In Nigeria, J&J is manufactured and marketed by a company called HCP. While the brand has good name recognition, HCP is not financially strong. For this reason, J&J products do not receive the high ongoing levels of promotional support needed to fully exploit the power of the international brand name and image.

4. Patterson Zechonis (PZ). This firm, a major trading company in Nigeria, imports a baby products line. The major weakness of the PZ line is that much of it is imported. Because the value of the naira is low, the cost of imported consumer packaged goods products like these is often more than twice as high as the price of products produced locally by PRET or by Nigeria competitors such as Lever Brothers Nigeria.

There is one other major source of baby care products in Nigeria besides PRET, Lever Brothers, and PZ. That source is the informal market, or cross-border trade. It consists of products smuggled into Nigeria by market ladies and others. These products are often purchased by Nigerians traveling overseas, and then brought by them back into Nigeria as "personal effects." Materials brought into Nigeria like this often pay little or no duty; when this happens, prestigious overseas brands can be priced quite reasonably.

The downside or risk for consumers of purchasing consumer products in the informal market (street vendors, etc.) is that some of the people trading in the informal market are very unscrupulous. Such individuals may use the overseas products themselves, refill the empty overseas packages with untested materials produced in Nigeria, and then claim that these local products in overseas packages are actually the original imported products. In short, consumers buying in the informal market are never completely sure of the quality of the product they are buying. Some mothers of new babies will not be willing to run the risk of inadvertently using untested counterfeit products on their babies' skin.

FORECASTS AND UNDERLYING MACRO-CONSIDERATIONS

Based on the SWOT analysis and prior to her presentation to the board, Mrs. Omoshule decided to quantify the magnitude of the business opportunity which Babylove Brand Baby Products represented for PRET. Her analysis depended on a number of assumptions not only as regards the intensity of PRET's marketing activities but also those of PRET's competitors plus the characteristics in the future of the overall business environment in Nigeria. In any case, Mrs. Omoshule reached the following conclusions:

1. The baby products market in Nigeria is growing at least 10% per year.

2. Assuming reasonably stable economic, political, and social conditions, PRET should by 1997 be able to sell 300 tons (approximately 13% share of that year's total market) of baby products, up from 49 tons (approximately 3% of this year's total market) of Babylove Brand products in the 1994 year. This means that PRET's volumes of Babylove Brand Baby Products in 1997 would be six times its 1994 volumes (380 tons to 66 tons, respectively) and the 1997 turnovers (revenues for U.S. readers) generated by Babylove Brand Baby Products would be ten times the comparable 1994 revenues (153 million naira versus 16 million naira, respectively). Given the positive consumer perceptions of PRET products shown in Exhibit 4 and the very low level of in-house presence, Ms. Omoshule felt it was reasonable to assume that vigorous promotion of the Babylove Brand Product Line could lead to the levels of turnover and market penetration shown in Exhibit 5.

The primary imponderable and risk in the above forecast is the macros (that is, economic, political and social conditions) in Nigeria. While the country has a large population and earns billions of dollars each year selling petroleum, the assumption of stable economic, political, and social conditions which underlies the forecast is problematic. Specific factors contributing to Nigeria's difficulties include:

ECONOMIC: GDP per capital has fallen from $1000 per capita in 1960 to slightly more than $300 per capita today. Many professionals who had viewed themselves as "middle class" are struggling to avoid falling back into poverty. Also, income inequality is very high. In other words, most people earn very little but a fortunate few receive enormous amounts of money. Finally, the 1970s-vintage infrastructure built to support a modern industrial economy (generation & distribution of electricity, creation & maintenance of roads and rail systems, creation and maintenance of communications systems, etc.) has not been maintained, and is now falling apart. As Nigerian firms attempt to re-create infrastructure themselves (private boreholes or wells, stand-by generators, etc.), costs skyrocket. As a result, Nigerian producers find themselves priced out of the regional markets and/or cross-border trade which would have provided opportunities for Nigerian firms and jobs for Nigerian workers.

POLITICAL: Political problems created when the Presidential election of 1993 was annulled have not yet been resolved.

SOCIAL: Historically, the country has been plagued by several divisive issues including (1) tensions between major ethnic groups (Yoruba in the West, Igbo in the East, and Hausa in the North); (2) tensions between major religious groups (Christians in the South, Muslims in the North); and 3) tensions related to the fact that although levels of education tend to be higher in the South, Northerners have dominated the government. Also, while the Nigerian civil service had an extremely good reputation in the early days of independence, levels of service have fallen and levels of corruption have increased.

MANAGEMENT OF BRANDED CONSUMER PRODUCTS IN NIGERIA

Even with the problematic macros, Ms. Omoshule was convinced that the forecasted levels of turnovers and profits for PRET set forth in her forecast would be achievable, given an aggressive re-launch. She also knew, however, that the Board of Directors would want to hear supporting arguments for her recommendations on the promotional mix plus timing and other details of her promotional initiative. For this reason, she talked with her agency and several professional colleagues, to cross-check one more time the accuracy of her information on the size of Nigeria's major markets plus the promotional tools available in those markets. Exhibit 6 indicates the location and population of each state in the federation. Exhibit 7 identifies many of the major promotional tools available in Nigeria (print, radio, and television), plus the costs of each of these tools.

As she talked with her agency and professional colleagues, Mrs. Omoshule was reminded of several heuristics (that is, rules of thumb) regarding the use of mass media in Nigeria. Examples include the following:

1. Media specialists recommend that advertisers wishing to get maximum benefit from a radio media buy should purchase between 6-8 spots per day, for 3 or 4 days a week, for somewhere between 6 and 12 weeks.

2. Media specialists recommend that advertisers wishing to get maximum benefit from a TV media buy should purchase between 2-3 spots per day, for 3 or 4 days a week, for somewhere between 6 and 12 weeks.

3. Media specialists recommend that advertisers wishing to maximize the awareness created by a media buy in the North will probably buy radio and use the Hausa language. Advertisers wishing to get maximum benefit from a radio buy in the South will probably want to use "Pidgin" English.

4. Media specialists recommend that advertisers wishing to get maximum awareness from a media buy in the South will probably buy TV and use "Pidgin" or standard English.

5. Professional colleagues (that is, other brand and/or product managers) believe that "events" are a very effective way to win high levels of product awareness and interest from direct customers (that is, distributors, major retailers, etc.). In the case of new products, it is very common for manufacturers to stage a series of "new product launches" all across the country. Typically, this will involve a buffet luncheon or dinner at a fancy hotel, followed by speeches from senior executives. The event may conclude with short responses from senior executives at major customers. The cost of one such launch in one major metropolitan area in Nigeria ranges from 100,000200,000 naira.

As she began to organize her thoughts, Mrs. Omoshule found herself thinking about two additional issues:

1. She knew the directors would expect her to operate within the broad parameters of a model ANL had recently adopted to guide thinking regarding the management of branded consumer products in Nigeria. The model's key concepts, together with elaborative information on those concepts, are as indicated in Exhibit 8.

2. She knew it would be important to ensure that her promotional initiatives were based on and in tune with key characteristics of mothers and babies in Nigeria, including:

a. 20% of infants born live in Nigeria die before they are five years old.

b. 49% of adults in Nigeria are illiterate.

c. By the time they are 20 years old, 50% of Nigerian girls have had a child.

d. 87% of married women in Nigeria want more than 4 children.

e. 1% of Nigerian newborns are breast-fed only (that is, receive all their nourishment in this way) for 4 months.

YOUR ASSIGNMENT

Assume you are Mrs. Omoshule. Prepare your request to the Board of Directors for N 10,000,000 to re-launch the Babylove Brand Baby Products line. Make sure to be very specific and detailed regarding the promotional mix you recommend and why, plus the executional details of the re-launch. Remember that your total budget is limited to 10 million naira.

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

Volume: 5

Issue: 1

Pages: 109-128

Number of pages: 20

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411873

Document URL: http://search.proquest.com/docview/192411873?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 64 of 100

STP PHARMA, LIMITED

Author: Smith, D K (Skip)

ProQuest document link

Abstract: None available.

Full text:

THE CHALLENGE

January 15, 1995. Ernest Adefope shook hands with the bankers and the Vice President of CPG Ltd.'s International Division, and then left his former office at the Nigerian soap plant for the last time. Nine months later than planned, NICONGLO Ltd.'s sale of this factory to CPG had finally been consummated. Now, Adefope, newly-appointed Managing Director for STP, Ltd. (formerly, Huckstone Nigeria, Ltd.) would be able to focus his full attention and energy on developing and executing a strategy for STP, a business NICONGLO had acquired 5 July, 1994 from the Huckstone Foundation, Ltd. in England. Smiling to himself as walked to his vehicle, Adefope contemplated the luxury of focusing his time and energy on one single strategic challenge, that is, the question of which of Porter's generic strategies (differentiation, niche, or low-cost producer) maximizes the potentials/minimizes the risks to STP as it pursues opportunities in the Nigerian pharmaceuticals industry.

COMPANY HISTORY (NICONGLO, LTD.)

Established in 1951 by BRITCONGLO Limited (a British holding company), NICONGLO is a Nigerian holding company. NICONGLO's subsidiaries are engaged in three major types of activities, specifically:

1. Sole authorized importer and distributor in Nigeria for the branded consumer products of several major European manufacturers. Examples include Cow and Gate Babyfood, Coast Evaporated and Coast Powdered Milk, and a wide range of distilled spirits (that is, alcoholic beverages) for various clients including Guiness plc, Campari, Martini and Rossi, and Sogrape Vinhos SA of Portugal.

2. Local manufacturing (under license from European and/or North American owners of major international brands), plus distribution and sale in Nigeria of a wide assortment of these products including vitamins and pharmaceuticals (several companies, including Roche and Wyeth International, and until very recently, the Huckstone Foundation), glucose (Nutricia Export B.V.), dried yeast (Quest/Distillers Yeast), custard powder (Kraft Jacobs Suchard), toilet soap (Colgate-Palmolive), and toilet rolls (Scott Paper).

3. Manufacturing, distribution, and sale of private brand/ private label products developed for the Nigerian market.

Examples of private label products which NICONGLO and/or its sister companies manufacture, distribute, and sell include PCB Vegetable Oil, ATB Soap, MKO Detergent, ABS Detergent, plus two brands of paper tissues.

The importation of pharmaceuticals is an area in which NICONGLO has longstanding activities and involvements. Furthermore, starting in 1985, a NICONGLO subsidiary began manufacturing a variety of Over-the-Counter (OTC) products (for example, "Anacin" products) under license from overseas pharmaceutical firms. Subsequently, the same subsidiary began manufacturing a line of generic pharmaceutical products marketed under the NICONGLO name. While the perceived quality of most pharmaceuticals manufactured in Nigeria is very low, NICONGLO's branded generic products have been so successful that the company was not able to produce enough to satisfy demand. For this reason, NICONGLO was interested in acquiring addition pharmaceutical manufacturing facilities in Nigeria. Thus, when the Huckstone Foundation decided to try to sell Huckstone Nigeria, Ltd., NICONGLO stepped forward to indicate its interest.

In support of its product-related activities, NICONGLO is deeply involved in transportation, distribution, and sales. The company has branches/depots in major markets across Nigeria, including Lagos, Ibadan, Oregun, Aba, Onitsha, Kaduna, and Kanu. Exhibit 1 indicates the location of these depots, and the population of each of the 30 states in Nigeria plus Abuja, the Federal Capital Territory. To move products (imports from the port, locally manufactured goods from its factories to its warehouses), NICONGLO has over the years developed a series of solid arrangements with haulage (for U.S. readers, trucking) firms all across Nigeria. To handle movement of these products from warehouses to local distributors, NICONGLO built up over the years a sizable fleet of sales and delivery vans. In addition, several of NICONGLO's sister companies have salesforces responsible for selling NICONGLO's imported, licensed, and private brand products into major markets all across Nigeria. NICONGLO's distribution and sales capabilities are in sharp contrast to other consumer products companies in Nigeria, many of whom lack nationwide distribution and/or rely on third parties to provide the distribution and sales functions. In the pharmaceutical industry, for example, only the market leader (Smith/Kline Beecham) has a nationwide distribution and sales capability similar to that of NICONGLO.

In running its consumer goods businesses, NICONGLO has developed a system which focuses attention on five key areas. The five key elements of NICONGLO's approach to building and maintaining consumer goods franchises, plus elaborative information on each of those variables, are as indicated below:

1. Build brand awareness. NICONGLO's objective is to have the name of their brand recognized as the leader in the category, both by direct customers (in the pharmaceuticals industry, this would include pharmacists, doctors, clinic and hospital personnel, etc.) and by indirect consumers (that is, final and/or individual consumers or patients). They work toward this objective by striving for communications which are different and memorable, creating jingles, slogans, and/or symbols for brands to which indirect customers will be able to relate. NICONGLO also takes all possible advantage of publicity, sponsoring events, brand extensions as appropriate, using packaging as cues, and maintaining high levels of advertising voice (both to direct and indirect customers), relative to other brands in the category.

2. Strive for high perceived quality. To learn what perceived quality means, NICONGLO systematically conducts research on the perceptions of direct and indirect customers as to the relative quality offered by competing brands in a product category. Within the pharmaceutical context, NICONGLO's experience is that factors such as efficacy, manufacturing processes in conformance with specifications, availability, safety, recognized brand name, tamper-proof packaging, and price are often important to direct and/or indirect customers.

3. Build brand loyalty. NICONGLO attempts to develop habitual buyers. The idea (and ideal) is that when direct and/or indirect consumers make a purchase in a product category where a NICONGLO brand is available, they will nearly always purchase that brand. NICONGLO'S experience is that the five key factors involved in building brand loyalty are: 1) treat customers right; 2) stay close to the customer; 3) measure and manage customer satisfaction; 4) create costs which customers who switch to another brand will have to pay; and 5) provide extras.

4. Manage brand associations. NICONGLO's objective is to position its brands in such a way that they are perceived by consumers as superior to competing products. To accomplish this objective, NICONGLO employs a three-step process: 1) analyze the strengths and weaknesses of our own products; 2) review the positioning and associations of leading competitors; and 3) make sure to understand reasons target market members make purchases in our product categories.

5. Build and maintain competitive advantage, relative to competing brands and products.

COMPANY HISTORY (THE HUCKSTONE FOUNDATION, LTD.)

Huckstone, Ltd. was established in London in 1901, when a deed of partnership was established between two American pharmacists, John Huck and Alex Stone. Huck died in 1906, but Stone lived on to lead the company until his death in 1937.

Early on, Stone recognized the importance of and need for research. He established the Stone Physiological Research Laboratory in 1910, and the Stone Chemical Research Laboratories in 1912. He was also an internationalist, establishing a Publication Trust Fund in China in 1908 to publish medical texts for Chinese students; a Medical Hospital Dispensary in Uganda in 1905, and the Lady Stanley Maternity Hospital in Uganda in 1927.

In 1924, all of Stone's commercial business, research laboratories, and his museum were brought under the umbrella of The Huckstone Foundation Ltd. When he died in 1937, the Huckstone Trustees became the sole shareholders of the Huckstone Foundation Ltd. Their obligation, as set forth in Stone's will, was to devote all income of the foundation to specified charitable purposes including research in medicine and allied sciences and the maintenance of research museums dedicated to those sciences. The Huckstone Foundation continues today to pursue those objectives.

In the early 1980s, the Huckstone Foundation in the UK decided to invest heavily in the area of antivirals. As it happens, antiviral medicines are likely to be quite expensive on a "per dose" basis (US$400.00 per dose is not unusual). Given the Huckstone Foundation's decision to invest in antivirals, it is not surprising that UK home office management decided that low income markets like Nigeria were no longer attractive to the foundation.

Because developing expertise and later new products in the antiviral market turned out to be very expensive, and based on the conclusion that Nigeria was no longer an attractive market, the Huckstone Foundation decide to see whether its business interests in Nigeria could be converted to cash. As indicated earlier, on 5 July, 1994, NICONGLO agreed to purchase HNL from the Huckstone Foundation. Through this purchase, NICONGLO's STP subsidiary was granted the right to manufacture and/or import and then sell Huckstone products in Nigeria. Both OTC and prescription medicines were covered by the purchase agreement.

COMPANY HISTORY (STP PHARMA, LTD.)

The company was founded in the 1950s by a group of Italian investors. At that time, it was called "Blondet." While its charter indicated that the company intended to sell pharmaceutical products in Nigeria, Blondet targeted primarily the Lagos area. At that time, the company's product line consisted primarily of antibiotics. It did well, and in 1962, the Huckstone Foundation bought a portion of Blondet. At that time, the company changed its name to "Huckstone Blondet Nigeria, Ltd." Shortly thereafter, the company built a new factory 25 kilometers north of Lagos (one of the first pharmaceutical factories in Nigeria), and expanded distribution of its products to cover major markets all across Nigeria.

In 1974, the Huckstone Foundation bought out the Italian shareholders, and the company's name was changed again, this time to Huckstone Nigeria, Ltd. (hence, HNL). Also during 1974, the Nigerian Government enacted a decree whereby foreign owned companies were required to divest themselves of a minimum of 40% of their shareholdings to Nigerian citizens. As 7% of the shares in Huckstone Nigeria were already owned by Nigerians, the Huckstone Foundation donated one third of its shares in HNL to "The Huckstone Nigeria Fund."

After the purchase by the Huckstone Foundation, HNL expanded again, this time into a broad range of ethical (that is, sold to and through pharmacists) pharmaceuticals. Important products included blood tonics named "Prakel" and "Ladies First," which were designed to provide iron to individuals needing iron supplements. Other products marketed across Nigeria by HNL at this time included de-worming products. Later, after a four million pounds sterling expansion of the manufacturing and administrative facilities in 1976 and an additional expansion of manufacturing, filling, and packaging facilities in 1985, HNL broadened its product line by adding antibiotic suspensions and tablets for chest, urinary, and sexually-transmitted diseases (Tripsin), plus syrups and tablets for colds, congestion, and drying-up runny noses (Tifaci). Over time, the various sizes and formulations of Tripsin and Tifaci replaced the blood tonics and de-worming products as HNL's key products. By the end of the 1980s and on into the 1990s, the various Tripsin and Tifaci formulations accounted for a very substantial portion of HNL's total volumes.

While turnover for both the Tripsin and Tifaci product lines were very strong, profitability of the two lines differed dramatically. Because the generic ingredients for the Tifact-based products could be acquired at reasonable cost from any one of a large number of competing suppliers, margins on the various sizes and formulations of these products were very high. In the case of Tripsin-based products, however, HNL was required to import Tripsin's active ingredients from its parent company in the United Kingdom, at more than twice the price of the generic equivalents. For this reason, margins on the Tripsin-based formulations were far lower than the margins for other HNL products.

Information on key HNL products and the primary products of major competitors is shown in Appendix 1. HNL's product line includes both pharmaceutical products imported in finished form from the UK and pharmaceuticals where HNL imports the active ingredients from overseas and then manufacturers and packages the pharmaceuticals locally. It also includes both OTC preparations as well as the ethical pharmaceuticals which are sold only by registered pharmacists. While approximately 70% of HNL's revenues are currently generated by ethicals (OTC accounts for most of the rest), it appears that growth is far more likely to occur in the OTC category. In any case, promotional activity for the two categories of products differs considerably. For OTC products, HNL has found both print (newspapers and magazines) and radio to be highly effective. For the ethical products, however, the primary vehicle for advertising is trade journals targeting chemists (for U.S. readers, pharmacists) and other medical professionals. Other elements of HNL's promotion mix to chemists include twelve pharmacists (specialized pharmaceutical training, on salary, provided with company car, etc.) and a large number of sales representatives (college graduates, no company car, bulk of compensation is commission, etc.).

Over the years, HNL experienced substantial success and established a good reputation for itself in Nigeria. Within the industry, HNL was known and respected for insisting on especially high quality and taking an especially aggressive approach to the maintenance of Good Manufacturing Practices (GMP). Industry perceptions as to the GMP practices of several competitors are indicated in Appendix 2. In any case, Huckstone products were known nationwide, and had a reputation of being extremely high quality and efficacious.

1993 results for HNL and several competitors are as indicated in Appendix 3. However, starting in the 1980s, changes in the economic and social environment of Nigeria and changes in the pharmaceutical industry in Nigeria impacted powerfully on HNL and its performance. Some of these changes (for example, the fact that many government hospitals and clinics which had been HNL's biggest customers in the 1970s were in dire financial straits and that private clinics plus hospitals had become much more important to HNL's success) simply changed the nature of the business. Other developments, however, impacted very negatively on HNL's performance. We turn now to those issues.

THE NIGERIAN ENVIRONMENT AND CHANGES G? THAT ENVIRONMENT

With a population of approximately 90 million people, Nigeria is Africa's most populous country. Nigeria's gross national product (GNP) of approximately 32.9 billion dollars makes it the third largest economy in Africa. In sub-Saharan Africa only South Africa, with a GNP of 106 billion dollars, is larger.

At the time it became independent from Britain in 1960, Nigeria's economy was primarily agricultural. At that time, the largest export was groundnuts (peanuts, for US readers), which were grown in the northern part of the country. In those days, the annual groundnut harvests were bagged and then gathered at rail depots throughout Northern Nigeria and stacked there in huge piles or pyramids until they could be shipped to ports in Southern Nigeria for export. Other important agricultural exports at the time of independence included cocoa beans from Western Nigeria and palm products (palm kernels and the results of pressing them, palm oil and palm by-products) from Eastern Nigeria. At this time, Nigeria's millions of small farmers grew both the export products listed above and enough food (maize, rice, and yams are staple food items in Nigeria) to feed the entire country.

In the early 1950s, oil was discovered in Nigeria. By the late 1970s, when oil was selling for $40.00 per barrel, the oil and the huge amounts of money generated by its sale had dramatically altered the Nigerian economy. Over this period, the Federal Government of Nigeria made massive investments in roads, bridges, and buildings for public sector (administrative buildings, housing estates and apartments, etc.) purposes. The government also invested huge amounts of money in a large number of "showcase" projects including steel mills, paper plants, expensive hotels, and a new Federal Capital City called Abuja.

Unfortunately, very few of the projects described above generated any financial returns on the huge sums which had been invested. Regardless, during these years, huge numbers of people left the countryside and moved to the oil areas, the project areas, and/or the large cities, especially Lagos. Their hope and objective was to find better-paying and higher-status jobs in the oil and/or oil-related sectors, or working on private and public projects financed by the steady inflow of petrodollars.

As a consequence of the massive cash inflows and the changing opportunities available in Nigeria, agriculture and agricultural production were badly neglected. By the early 1980s, agricultural exports had nearly disappeared, and Nigeria and Nigerians no longer produced enough food to feed themselves. The shortfall in food production was made up by importing numerous food products, including both traditional staples and alternative foodstuffs such as wheat.

In the early 1980's, the price of oil collapsed. Over the next ten years, the price varied considerably but was often in the range of slightly less than $10.00/barrel to slightly more than $20.00/barrel. The annual impact of this price collapse depended on the level of production, which varied somewhat from year to year. However, it is probably correct to say that in an average year, each decrease of $1.00 in the price of a barrel of oil reduced Nigeria's export earnings by at least $250,000,000 dollars. Thus, the total reduction in revenues to Nigeria of the oil price decrease over the decade of the 1980s undoubtedly exceeded 60 billion U.S. dollars.

It took several years for the impact on the Nigerian economy of the drying up of the oil revenues to fully manifest itself. The first economic consequences, caused by the shortage of foreign exchange, were the scaling back of the importation of big-ticket consumer items. Subsequently, manufacturing activities which relied exclusively on imported equipment, raw materials, and supplies began to suffer. For companies in these industries, the cost of imported equipment, spares, raw materials, and supplies escalated sharply, as large amounts of local currency chased an ever-shrinking pool of hard currencies including dollars. Between 1985 and 1995, the value of one naira (Nigeria's unit of currency) fell from $1.00 to less than $0.02. The resulting increases in the costs of overseas inputs led many industries to substitute local materials for imported ones (for example, brewers substituted sorghum for malt). Companies not able to find local substitutes increased prices, downsized their operations, or dropped out of business entirely.

Over time, the drying up of oil revenues had several additional negative effects on the quality of life and economic activity in Nigeria. Among these was the fact that proper functioning of the massive infrastructure investments in roads, bridges, communications, and buildings constructed during the oil boom required on-going maintenance and up-grading. Unfortunately, the huge decrease in Nigeria's overseas earnings meant that it was not possible to provide maintenance and upgrading in an ongoing fashion. Over time, therefore, basic services like roads, electricity, water supply, and telecommunications began to deteriorate and/or fail. By the late 1980s, neither industrial nor residential customers relied exclusively on public service providers for electricity or water. Instead, both groups had invested vast amounts of money in back-up generating equipment for electricity and private boreholes (wells, for U.S. readers) and/or water trucking for water. In addition, because Nigeria's "hard-wire" phone equipment barely functioned due to service overloads and lack of maintenance, numerous businesspersons invested large amounts of money first in dedicated radio/microwave links and later, cellular telephone equipment. Of course, the need to make such investments increased very substantially the cost of doing business in Nigeria, and reduced dramatically the international competitiveness of Nigerian products and industry.

Another very debilitating effect of the tremendous decrease in oil revenues was a very substantial increase in corruption. Due to the revenue decreases, federal, state, and local governments in Nigeria were not able to continue paying the same levels of salaries and benefits as had been available to public sector employees in the past. As prices of goods and services containing imported materials increased (most goods did include some overseas parts or components), and as public sector salaries did not keep up with inflation, many civil service and public sector employees searched for alternative sources of funds so as to be able to maintain their standards of living. Ultimately, many public sector employees started accepting and then demanding bribes before they would act on requests for service and/or assistance by individual and/or corporate customers. By the late 1980s, Nigeria and especially its international airport in Lagos, Murtala Muhammed Airport, had a very ugly reputation as a den for thieves and crooks.

As the economic pressure on individuals increased, signs of the intense nature of their struggle to survive began to manifest themselves in the private sector as well. A small number of well-organized Nigerians became involved in a series of scams known as "419". In a typical "419" scam, a wealthy individual in a developed world nation receives a letter on the letterhead of a major Nigerian para-statal like the Nigerian National Petroleum Corporation (NNPC) indicating that a rich Nigerian businessperson needs access to an offshore account so as to be able to "park" some petrodollars for a few weeks or months. The letter invites the wealthy overseas individual to provide such an account, and promises that at the end of the "parking period," this individual will be reimbursed for their assistance by being allowed to keep a percentage of the parked funds. The hope of the perpetrators of the scheme is that the overseas "target" will provide them names and numbers for an existing bank account in the target's own country which has real money in it. Immediately on receipt of the names and numbers for real accounts, the Nigerian perpetrators utilize electronic funds transfer mechanisms to steal the target's funds and move them into their own accounts.

The above problems (that is, the scams, the infrastructure deterioration and the attendant increase in the costs of doing business, the inability of private sector firms to procure the foreign exchange needed to fund their ongoing operations and maintenance, the huge decrease both in the value of the naira and therefore the hard-currency equivalents of any profits earned in Nigeria, the corruption, and so on) led numerous multinational investors and companies to stay away from Nigeria. Furthermore, many of the multinational investors and/or corporations which had come to Nigeria in the 1960s and 70s decided to withdraw.

THE PHARMACEUTICAL INDUSTRY IN NIGERIA & CHANGES IN THAT INDUSTRY

The pharmaceutical industry in Nigeria, like the national economy as a whole, has gone from boom to bust. During the oil boom (basically, the decade of the 1970s), the Nigerian pharmaceutical market was dominated by multinational companies. Due to the over-valued naira and the seemingly ever-expanding economy, a large number of multinational pharmaceutical firms including Glaxo, Hoechst, Pfizer, Sterling-Winthrop, Wellcome, and Huckstsone made substantial investments in Nigeria during this period.

Unfortunately for these multinational investors, Nigeria's oil boom was short-lived. Over the decade of the 1980s, the lower prices Nigeria received for its oil (as compared to the prices it hoped to receive, based on the experience of the 1970s) reduced Nigeria's earnings from oil by approximately 60 billion dollars. As indicated earlier, this magnitude of revenue reduction did impact negatively on the plans and budgets of nearly all private and public sector entities including hospitals and clinics.

A second change in the environment which over time impacted heavily on many sectors of the Nigerian economy including the pharmaceutical industry was the Nigerian Enterprise Promotion Decree of 1977. This decree required that foreign ownership of all firms operating in Nigeria be reduced to 40% or less. Due to this requirement, and the lack of control on technology which it implied, very few multinationals had any interest in inserting their latest and most current technology into the marketplace. Thus, rather than siting plants capable of manufacturing from intermediate products, as is done in many other developing countries, most multinationals limited the amount of technology transferred to Nigeria.

A third change in the environment, which directly impacted the pharmaceutical industry, was the passage in 1989 by the Federal Military Government (FMG) of a decree called the Essential Drug List (EDL). The purpose of the EDL was to signal to all interested parties which pharmaceutical products could be sold in Nigeria. To be sold in Nigeria, pharmaceuticals not only had to be on the EDL but also had to show in large letters on the packaging of the product the generic family of the drug. Clearly, this legislation helped generic and/or private brand manufacturers, at the expense of firms such as HNL which imported expensive active materials from overseas and maintained very strict (and expensive) controls on GMP and on quality.

In addition to the main effect described above, the EDL generated some important side effects. For example, the EDL did not permit the sale of preparations which were mixtures of different drugs. Thus, products such as blood tonics which had in fact been mixtures of various products were suddenly not saleable as currently formulated. Interestingly, during the mandated reformulation process, several of these products became less efficacious. In any case, both the primary and secondary effects of the EDL impacted negatively on HNL's business.

As the decade of the 1990s began, the serious economic problems over the previous decade plus the effects of the NEPD (and, for pharmaceutical firms, the EDL as well) led many multinationals to rethink their commitment to Nigeria. Ultimately, many of them decided to leave. As the multinationals left, however, the resulting shortages of pharmaceutical products plus low barriers to entry in the pharmaceutical industry led local trading firms and/or manufacturing companies to begin importing low cost pharmaceutical preparations and/or ingredients of uncertain quality and efficacy (that is, effectiveness) from India and various locations in East Asia. In January 1995, 166 manufacturers of pharmaceuticals were registered to do business in Nigeria.

By and large, the remaining multinationals continued to monitor very carefully the materials going into their products, their production processes, and the characteristics and efficacy of the products coming off their production lines. However, many of the new pharmaceutical companies were not so careful. In a recent incident, one local manufacturer of pharmaceuticals had used the wrong alcohol in one of its children's cough syrups, and several children had died. Industry leaders had expressed the fear that low quality, low-priced products would drive out the highly efficacious but more expensive products which STP and other serious manufacturers were producing in Nigeria for Nigerians. Another concern was that the reputation of Nigerian pharmaceutical manufacturers and their products would sink so low that few direct or indirect consumers would be willing to buy any pharmaceutical product produced in Nigeria.

PRESCRIBING HABITS IN NIGERIA/CHARACTERISTICS OF THE MARKET

The prescribing habits of health practitioners in Nigeria are shaped by both professional and "other than professional" factors. These factors include:

1. Disease pattern. The incidence of particular diseases in a particular area impacts very directly on the prescribing habits of health professionals in that area. Thus, if a particular area has a high incidence of malaria and respiratory diseases, the bulk of the prescriptions prepared by health professionals are likely to be for malarial and respiratory treatments.

2. Efficaciousness of drugs. If a health professional has a long history of success using a particular drug to treat a particular illness, that individual is very likely to continue prescribing that highly efficacious drug. In such a situation, persuading a health professional to try some other drug may be quite difficult.

3. Scarcity of drugs. As the financial squeeze on hospitals and clinics (that is, direct customers) intensifies, health professionals find that certain drugs are no longer available. Health professionals in Nigeria are likely to keep lists of what drugs are available, so as to avoid being caught in a situation where they prescribe something that is no longer available.

4. Cost. As the financial squeeze on individuals (that is, indirect customers) intensifies and the standard of living continues to fall, the cost of drugs has become an important consideration. Publication of the Essential Drug List (EDL) in 1986 required all manufacturers in Nigeria to indicate the generic names of their pharmaceutical preparations. Recognizing the financial hardships of their clients, many health practitioners have moved to prescribing generic (as opposed to branded) products. Of the top nine pharmaceuticals prescribed in 1994 by the pediatric out-patient services unit of the University of Nigeria Teaching Hospital, only one is a branded product. At the far end of this generic continuum is the importation into Nigeria of cheap generic preparations from all over the world. The quality and efficacy of these cheap generics is unknown.

5. Quackery. There are a number of untrained individuals practicing at different levels of the health care system in Nigeria. Due to a number of factors including the high cost of professional health services and the growing inadequacy of many hospitals and clinics, a substantial percentage of the population patronizes these individuals. Also, self-medication is on the increase.

YOUR ASSIGNMENT

Assume you are Ernest Adefope, M.D. of STP. Please indicate which of Porter's generic strategies (product differentiation, niche, or low-cost producer) you will recommend to your Directors, and why.

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

Volume: 5

Issue: 1

Pages: 129-143

Number of pages: 15

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411819

Document URL: http://search.proquest.com/docview/192411819?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 65 of 100

TEACO, INC.

Author: Vozikis, George S

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Abstract: None available.

Full text:

INTRODUCTION

Madeline Teague, President of TEACO, Inc. was wondering whether her life, her family and her fiber optics and cable business were at crossroads. She had just given an interview on how she started her business, and where she is going with it, and that interview started some soul searching for her. As she was driving away from downtown Tulsa in her native Oklahoma, her life almost flashed in front of her eyes. She had just been elected Vice Chairman of the Board for Tulsa's Chamber of Commerce. She considered herself honored for that appointment and more importantly, she realized that a lot of good visibility and recognition for her company could materialize as a result of this, especially now that what she considered a very important transformation was taking place in TEACO's headquarters.

She had never really given much thought about the firm's development and future, but rather had taken things in stride and going from day to day. All of sudden, out of the blue it seemed, a new division had to be created to take advantage of an opportunity to service the communication systems of midsize airports, such as Tulsa's or Little Rock's, which were due for a major updating and upgrading. TEACO was poised in becoming a major player in this field, but she knew deep down that they could not really take advantage of this enormous window of opportunity, unless they ceased to be a mere subcontractor and make the transformation into a general contractor that could actually bid on the contracts on their own. Until now, they have been subcontractors for SITA (Societe Internationale des Telecommunications Aeronautiques) headquartered in Paris and employing 10,000 employees. SITA is a network connector of airports worldwide for air traffic, weather, and communications, second only to AT&T, and owned jointly by all the world's airlines. They also subcontracted for AR, Inc. (Air Radio, Inc.) the pioneer in air to ground communications. TEACO took care of the local needs of SITA and AR, Inc. by designing a computer core room inside the airport and installing the computer racks, equipment, cable terminals, and their proprietary software systems. The plan was now for TEACO to duplicate SITA's setup for the smaller mid-size airports across the nation.

Risk taking was never an issue with her or her husband Patrick, TEACO's Executive Vice President. However this time things were different because the decision to become a general contractor really constituted a major shift in direction for the company, and a serious financial commitment. Once the decision was made, she knew deep down that there was no way back. But "why go back?" she said to herself, "we are good at what we are doing, we always plan well, and we have developed strong relationships with our vendors, our bank, and our customers. These factors by themselves would take care of any amount of risk involved."

She started thinking about how she and her husband started the business from scratch. Her husband worked for the oil industry and when, during the mid-eighties that industry was experiencing a slump, they started thinking about the "what if..." of his being laid off. They decided together, like they always had, not to wait for what seemed to be the inevitable, and started thinking about a business of their own. They figured that their life experience, their strong family values, and their desire to become independent and succeed were enough prerequisites.

They had no idea what to look for, and tried to figure what the "right" opportunity was for their humble journey toward independence. After much deliberation, they decided to try to buy an existing business that would already have its own clientele, and most importantly, somehow would have survived the initial critical stages of potential failure. But what kind of business? They figured that this issue was not important, as long as it was a good deal."

That opportunity soon presented itself in the form of a wire and cable distribution company with $350,000 of sales. The Teagues not only knew nothing about the wire and cable business, they did not even know the difference between a wire and cable. Regardless of these shortcomings, they decided to risk everything they had and buy the business. After looking at the mirror, they figured that nothing worthwhile happens without taking some risk, working hard, and willing to sacrifice. And sacrificed they did, during the early years when work always came first, before family needs, before entertainment, before realizing any fruits from their labor. Everything was going back into the business.

Their timing and luck must have been good because after the first year they made just under a million dollars in sales by selling door to door. They also got extremely lucky in finding a banker that was out of the ordinary by being entrepreneurial himself, and by not only securing for them the funds necessary to get started, but also by becoming a true advisor providing them with direction and guidance. They looked upon the bank as their "planner" who would set goals for them, especially since they were "extinguishing fires" all day, and did not have time to plan themselves. Their thinking was that, as long as the bank was happy, they must be moving in the right direction, otherwise the bank would surely let them know. This relationship with the bank became very close-knit over the years, and to this day they see them as partners rather than just a source of funding. This strategy seemed to be working fine so far, and their sales for 1997 were close to six and a half million dollars. Exhibits 1 and 2 show TEACO's balance sheet and income statement for 1997, compared with comparable industry data of computer integrated systems design firms (SIC# 7373) with 1996 sales between 5 and 10 million dollars (Sources: TEACO, Inc. and Robert Morris Associates. 1996.)

Slowly they started looking at the business as a "concept" rather than a wire and cable distribution firm, and began to actually redefine and reinvent themselves from phone answerers, to salespeople, to finally "total communication specialists." This new concept which in itself broadened the scope of their business, is reflected in everything they do. Even their business cards convey this message. Additionally, the technological developments in the fiber optic cable business proved them right, and they found themselves constantly recreating and reinventing the limited range of opportunities that their original wire and cable business offered them. It seems that they were really the right people, at the right place, at the right time. They realized that time is money for any firm, and that seconds saved in transferring data saves a lot of money to companies that are information intensive and base their competitive advantage on a reliable fiber optics communication system (Exhibit 3).

As the years went by, TEACO was growing into all these areas, and these new divisions were reflected in their organizational chart. Salespeople were added to two other locations, in Springdale, AK, and in Dallas, while Tulsa, OK still served as the headquarters for the firm. Madeline was in charge of Administration, Sales, Public Relations, and Marketing, while her husband Pat was in charge of Operations. She had a Sales Manager reporting to her, while the many staff technicians reported to her husband. Accounting was done in house, with a former family friend and former small business owner CPA handling the TEACO finances, scrutinizing Accounts Payable, and providing valuable financial advice in direct cooperation with their bank, on the working capital requirements of the various contracts that TEACO was planning on submitting a bid. Progress payment schedules were also prepared, and specific cash flow requirements were laid out after consulting their vendors and suppliers, as well as their prospective customers, in order to "grease the skids". Their solid relationships with both past customers and vendors, always paid off for TEACO in managing the crucial issue of working capital, a critical factor for small business survival. Madeline realized that only this "team approach" could manage the growing business, and she could not possibly be everything and everywhere in meeting customers' needs, the TEACO way. This need for a "team approach" is also the reason that technical expertise is not the only thing TEACO looks when hiring new employees. "We want employees who are willing to make the commitment to customer satisfaction that we live by" she kept reminding herself.

Over the past 14 years, the Teague's company has evolved from a small electric wire and cable distribution company into a digital technology powerhouse, and the company has just begun to really reach its potential. TEACO's first customer was American Airlines, which hired the company to design and provide a fiber-optic system that would network its reservation system at Tulsa International Airport. It was the first large-scale data application for fiber optics in the Southwest. Since that first installation, TEACO has designed and installed integrated systems in 30 airports, including seven outside the U.S. Today, TEACO has five divisions:

1. InfoTel Services headquartered in Dallas, a supplier of aviation and airport communication products and services

2. TEACO/Texas, which specializes in designing and installing structured premise distribution cabling systems

3. Teaco Micro Tech, Inc., a company of advanced systems integrators who install and maintain Local and Wide Area Networks throughout the United States, develop software for the Internet, software for secure access to bank databases for the bank's customers, and WebTV systems in 20 major markets around the country

4. New Document Technologies, Inc. (NDTI) which designs and delivers intelligent information management systems, and specializes in document imaging and management, combining taxes, phone messages, scanning and e-mail into one electronic processing package, eliminating paper documents. NDTI also designs and provides disaster recovery and data storage plans for businesses and governmental agencies, to prevent loss of vital information in a major disaster, and

5. WireMasters of Oklahoma that sells stocks and electrical and electronic wire, cable, tubing, and connectors.

The Teagues also realized that having a good product was not enough, as long as people did not know that they really needed it. They therefore embarked on an major campaign of educating their existing and potential customers about the benefits of switching to technologically advanced fiber optics communication systems. They decided that being "product driven" was not enough but they needed to become "market driven", in other words, it was not enough that they had a good product, but they had to create the demand for it by making their customers realize that they really needed their product. To that end, they reformulated their mission statement and publicized it widely among their customers and the community (Exhibit 4.)

They also hired on a half-time basis Marketing Manager, Mike Dishman, a former Director of Tulsa's Airport Authority, and notified all their customers to that effect with a personal letter. In the meantime, the Teague family was also becoming larger and prosperous, thanks to the Teagues' hard work, business acumen, and perfect timing. Their four children were still quite young, and only Patrick Jr. who is 15 years old and the only boy, has exhibited interest in the business, even though only on the "doing" side of computer applications, rather than the managing side of the firm. He often came along with his father on weekends to TEACO's labs to apply some brilliant solutions to complex computer problems that even experienced technicians could not solve.

The business had become the central element in their existence and allowed their family to enjoy the material things in life, without ever losing sight of what is really important: family and community. This is why she viewed her position as Board Vice Chairman of Tulsa's Chamber of Commerce as giving something back to the community, and maybe help somebody like herself start a business and prosper.

TEACO, Inc. also had recently decided to invest in the effort of certification as an 8A contractor, a tedious process that could open doors for the company in the very lucrative business of government procurement. Being part Cherokee native American Indian, Madeline Teague, as TEACO's president, qualified for participating in the 8A program which provides access to the huge government contract programs which are set aside for minority contractors. Selling to the government is never easy, and despite the enormous time and money investment in the 8A certification process, no additional government business had materialized so far.

With this diversity, TEACO is firmly positioned on the leading edge of digital technology, with a customer base that includes businesses as small as five employees, and as large as the U.S. Department of Energy, and is actively involved in developing Internet and intranet communications. However, Madeline knew very well that her husband Pat was convinced that TEACO should constantly be expanding to serve customers in healthcare, manufacturing, utilities, and education, in addition to its current expertise in aviation, banking, government, and the petroleum industry. As always however, Madeline was convinced that "you've got to spend money, to make money," and she wanted to be ready to capitalize on any advantage and opportunity she could find, since risks an opportunities go hand in hand. "The only way to manage risks is by exploiting opportunities", she kept telling herself "It is quite obvious that our customers are satisfied with the work we perform and that in itself leads to additional work or services being requested. We have to constantly make changes and additions in services and products to meet customer requirements, and we will continue to do so."

As she was getting ready to turn into her driveway at home after a hectic day, she thought about the new division that they were getting ready to create from scratch. TEACO's Airport Service Support Division would hopefully capitalize on the need for midsize airports to develop, update, and upgrade their communication systems. But was it a real opportunity or a downright risk? Was their decision to become a general contractor instead of remaining a subcontractor as they have always been, the right decision, especially given the major financial commitments and the change in strategic direction that such a decision entails. She thought about the "edge" that TEACO has had all along by entering the fiber optics and computer networking industries early, by pioneering their technology and expertise development and even by training companies and individuals who were their competition now. "We will never make that mistake ever again," she chastised herself. Was it time to maybe retire and sell the company in order to enjoy and spend more time with their children and grandchildren? How about taking the company public and transform it from a "personal" business to an "impersonal" corporation with more funding and improved structural configuration to face the new challenges?

As she pulled the keys to open the front door, she thought out loud: "We are going to have some interesting conversation over dinner tonight!..."

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

Volume: 5

Issue: 1

Pages: 144-153

Number of pages: 10

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411827

Document URL: http://search.proquest.com/docview/192411827?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 66 of 100

FIELDCREST CANNON/PILLOWTEX

Author: Calvasina, Gerald E

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Abstract: None available.

Full text:

FIELD CREST CANNON/PILLOWTEX

On December 4, 1997, Fieldcrest Cannon's Board of Directors met in New York for the last time. Pillowtex, headquartered in Dallas, Texas, would complete its $700 million acquisition of Kannapolis, North Carolina based Fieldcrest Cannon on December 19, 1997. The deal was expected to create a "new giant in the Big Three of home furnishings" and enhance Pillowtex's product line by adding some of the strongest brand names in the industry.

The acquisition would enable Pillowtex to save an estimated $21.6 million annually. The savings would be generated from elimination of administrative and corporate jobs at Fieldcrest Cannon's headquarters in Kannapolis. Another $8.4 million was expected to be saved in the first year of combined operation by eliminating redundant operations, exploiting economies of scale in purchasing, and reducing trade advertising and the number of outside consultants. Speculation in the community and the local press put the number of corporate jobs to be lost at more than 300.

Another very interested party to the December 19th completion of the Pillowtex acquisition of Fieldcrest Cannon, was the ten member contingent of the Union of Needletrades, Industrial and Textile Employees (UNITE). UNITE, formed by a 1995 merger of the Amalgamated Clothing and Textile Workers Union (ACTWU) and the International Ladies' Garment Union (ILGWU) and backed by committed leadership and a healthy treasury, was committed to organizing new members. UNITE was especially committed to organizing women, immigrants, minorities, and low-wage workers. Utilizing a variety of traditional and innovative organizing methods, UNITE was poised to take advantage of what looked like a golden opportunity to finally organize Fieldcrest Cannon. Working from offices located in Kannapolis, UNITE employees and volunteers were managing an authorization card drive as part of its long running effort to organize Fieldcrest's 5,500 North Carolina workers, an effort that dated back to 1974. Coming off a defeat in August 1997 of a hard fought for rerun of their 1991 defeat at Fieldcrest Cannon, UNITE seemed undaunted in its efforts to secure union representation for the employees of the remnants of the Cannon Mills empire.

Cannon Mills, the forerunner of Fieldcrest Cannon, was a world leader in the manufacture of household textiles for the bedroom, bathroom, and kitchen; it was known at one time as the world's largest producer of towels. The company at one time employed approximately 24,000 people in 21 plants in 13 communities in North Carolina, South Carolina, and Georgia. Cannon's corporate sales subsidiary, Cannon Mills Inc. had offices in major markets though out the world. The company utilized a strategy based on strong identification with the customer that helped make the Cannon name one of the single most recognized in the entire textile industry.

Cannon Mills was founded in 1887 by James William Cannon. He built the mill and the community in 1907. The fortunes of the town of Kannapolis, Greek for "city of Looms", have been interwoven with those of the mill ever since. Over the years, the company supported the community, donating land and money for churches, schools, hospitals and, providing jobs for nearly a third of the town's residents. Following the death of James Cannon in 1921, his son Charles Albert Cannon continued to expand and develop the company. In 1928, the nine mills known as the Cannon group were consolidated into Cannon Mills Company. Charles Cannon, known fondly as Mr. Charlie during his fifty year reign, built a company whose products reached 90% of US households. Over the years, further expansion and product diversification occurred and the company gained a reputation as an industry leader in design, styling, manufacturing and marketing of textile products for the home. Cannon entered the sheet business in the early 1930's and expanded towel production to include a wide range of kitchen products. Bedspreads and coordinated draperies were added to the line in 1949. Later acquisitions included blankets and rugs manufactured at Cannon Rug Company, a consolidated subsidiary.

After Charles Cannon's death in 1971, Cannon Mills went through 3 chief executive officers in less than a dozen years before the company was purchased for $413 million by David Murdock in March of 1982. It was the first time the Los Angeles entrepreneur had actually taken operational control at a large manufacturing company. When Murdock purchased Cannon Mills, he announced that his major goals would be to provide better job security and improve the quality of life for Cannon employees, their families and the plant communities and, he invested over $200 million to that end. The total included $73 million for pay increases and new job benefits; $123 million for capital improvements; $10 million for community improvements and contributions and $5 million spent on the acquisition of Cannon Rug Company.

In 1984, many of Murdock's plans for Cannon Mills began to unravel. The company's international sales fell from $55 million in 1981 to $24 million. Faced with increasing imports and weak consumer sales, the company was forced to layoff 3,000 employees, reduce pay scales, and rescind many of the perks that the mill hands had enjoyed under more than 90 years of Cannon family rule. Employees were asked to purchase the 1600 company houses instead of renting them. Many of these changes drew worker protests and created a good deal of tension between workers and management.

The first of four union organizing campaigns that Cannon Mills would experience occurred in 1974. Fresh on the heels of a successful organizing effort by the Amalgamated Clothing and Textile Workers Union (ACTWU) at a J.P. Stevens Plant in Roanoke Rapids, North Carolina, union organizers set their sights on the 16,000 employees of Cannon Mills. Over the years, Cannon's benevolent paternalism helped it enjoy a reputation as a steady job provider in an unstable industry. The company provided low cost housing to its workers and treated workers like family members. Many believe that the company's generosity to its employees and the town of Kannapolis helped to defeat the union organizing drive by a vote of 8,473 to 6,801. The rejection of the union by Cannon Mills' workers was a bitter defeat for organized labor in the south. The 1974 J.P. Stevens vote was to many observers to be a stimulus to labor growth in the traditionally anti-union south. The bitter resistance of J.P. Stevens to the unionization effort and subsequent contract negations lasted until October of 1980 when Stevens management and the ACTWU finally signed their first contract covering the Roanoke Rapids workers. While few observers predicted the 1974 union effort at Cannon Mills would be successful, coming on the heels of the J.P. Stevens success, the defeat of the union at Cannon Mills was certainly a severe blow to union organizing efforts in the south.

Ten years later, the Amalgamated Clothing and Textile Workers Union (ACTWU) was back in Kannapolis, armed and ready for an organizing effort that would divert the attention of Cannon Mills management for sixteen long and tense months. While many employers learn of union organizing efforts by their employees only after the National Labor Relations Board (NLRB) informs them, the ACTWU efforts to organize Cannon Mills' 10,500 employees was clearly out in the open a full sixteen months before the election would eventually take place. With a union office in downtown Kannapolis and, armed with a healthy budget, the ACTWU led by Bruce Raynor engaged in one of the most sophisticated union organizing efforts ever seen. Using computerized directmailing to stay in touch with workers and, extensive radio and television advertising, the union effort at Cannon Mills attracted national attention.

The issues utilized by the union in their campaign for the most part were predictable. Job security was brought to the front early and was easily introduced in the wake of over 3,000 layoffs and selective plant closing by Cannon management. The union also attacked Cannon management's efforts to increase work loads and reduce wage rates in the face of the increased competition from imports. In addition, the union also repeatedly accused Cannon Mills owner David Murdock of threatening to sell or close the company if the union were to win bargaining rights for Cannon workers. As the campaign progressed, Murdock became the focal point of union rhetoric. Characterized repeatedly in the press as a wealthy Los Angeles financier, the union attempted to portray Murdock as a greedy and ruthless corporate raider not interested in the long term survival of Cannon Mills or its employees.

While Murdock became the focal point of union rhetoric as the campaign wore on, his role in management's response to the organizing effort was critical throughout the sixteen months preceding the election. With company president Doug Kingsmore leading management's campaign, backed by a sophisticated strategy developed by a law firm specializing in anti-union campaigns, Cannon Mills management was able to respond quickly to every union issue.

The Cannon strategy to defeat the union effort was composed of some very traditional elements utilized by firms in fending off union organizing efforts. It included extensive meetings with community, business, and religious leaders and groups in the community in an attempt to put pressure on workers from outside the work environment. In addition, Murdock donated extensively to help renovate downtown Kannapolis, providing a new library, YWCA, and senior citizen's center. Extensive use of anti-union films were required viewing for workers on company time. Letters home to workers with President Kingsmore and Murdock referring to workers as "associates" were utilized to develop the theme of team spirit to not only keep the union out but overcome the threat created by textile imports. Murdock and Kingsmore made repeated visits to plants to shake hands and listen to workers' concerns. The weekly Cannon Mills news letter was filled with anti-union letters from workers and community leaders. One of the most controversial elements of the campaign was a videotape produced late in the campaign which featured Murdock explaining in what press reports called a "sentimental-and often angry-appeal" to Cannon workers to vote against the union. In the tape Murdock appeals to workers, "let's be a happy family again. Let's all be able to see some smiles again." Later in the tape, Murdock describes the ACTWU as "outsiders", "carpetbaggers" and "an insidious cancer". In response to the union claims that Murdock was attempting to sell the company, Murdock tells the 10,500 workers who view the tape that "Cannon has not been and is not being sold."

In October of 1984, Cannon Mills' employees rejected the ACTWU organizing effort by a 5,983 to 3,530 vote. The large margin of defeat for the union was a surprise to most independent observers. By January of the following year, David Murdock completed a deal to sell 80% of Cannon Mills Co. operations to Fieldcrest Mills Inc. for $250 million. The ACTWU office in downtown Kannapolis remained open.

Fieldcrest Mills Inc., manufactured linen at both union and non-union plants throughout the southeastern United States. The 1985 purchase of Cannon Mills, a major competitor with approximately 11,000 non-union employees, created enhanced optimism in ACTWU ranks.

The 1991 effort by the ACTWU was characterized by many independent observers as organized labor's best chance to finally organize Cannon employees. Even though he had been gone for six years, David Murdock became a key figure in 1991. Murdock's sale of the company barely two months after employees voted by a wide margin not to unionize, severely damaged labor management relations at Cannon. In addition, Murdock's manipulation of "surplus" pension money that eventually reduced pensions for nearly 8,000 retirees by 30 percent was utilized extensively by the union. The representation election was held in August of 1991 and Fieldcrest Cannon prevailed by a vote of 3,443 to 3,053.

The ACTWU upon losing the election, filed unfair labor practice charges alleging over 100 violations of the NLRA including unlawful discrimination against 20 employees. After 36 days of hearings, involving 83 witnesses presented by the NLRB general council, 154 by Fieldcrest, and 19 by the union, filling up more than 7,800 transcript pages, the Administrative Law Judge's decision later upheld by the full board in Washington, sided with the ACTWU on virtually all counts.

The election campaign was described in the 1996 Fourth Circuit Court of Appeals decision addressing the National Labor Relations Board (NLRB) enforcement order as "hotly contested." The court went on to describe Fieldcrest's approach to opposing unionization of its workforce as "a scorched earth, take-no-prisoners approach to stop unionization without regard to statutory limitations." Campaign literature utilized by Fieldcrest included a flier depicting a mushroom cloud and the words: "There's more than one way to destroy a community. VOTE NO." Another, in Spanish, warned: "If you sign the [union card] and the government finds out about it you will be deported or sent to prison." Unlawful interrogation by supervisors and threats of reprisal if employees voted for the union by supervisors were documented. One supervisor was quoted as stating that "Fieldcrest would move to Mexico if the union prevailed." Numerous other incidents of hostility toward union supporters was documented in the more than 100 unfair labor practice charges upheld by the NLRB and the court. The NLRB affirmed the Administrative Law Judge's conclusions and the Fourth Circuit enforced the board's order detailed in Table 1. The court order set the stage for the next round in the attempt to organize the Fieldcrest Cannon associates. The voting, finally scheduled for August 13, 1997, was again expected to be preceded by another intense campaign by both sides.

The 1997 campaign to organize the 5,500 Fieldcrest employees in the seven former Cannon plants in Rowan and Cabarrus counties was described by many observers as very different from the previous three attempts. UNITE, armed with a powerful set of marching orders from the NLRB decision and subsequent Fourth Circuit Court of Appeals order, gained unprecedented access to workers at the plants (see Table I). Organizers were allowed to go inside the plants to talk with workers during breaks. Union organizers were to be given advance notice when management was to address employees on the unionization effort and, were to be given equal time to respond. Organizers also claimed that workers were more "savvy" this time around to the anti-union tactics of Fieldcrest Cannon.

Union organizers were also able to generate some support from community, support that was scarce in the past. Despite the cuts to Cannon retirees' pensions in 1991, only days before the vote local ministers encouraged workers to vote against the union. In 1997, UNITE boasted of over 50 local clergy endorsements of the union efforts to improve the lot Fieldcrest Cannon employees. The union also utilized a two-hour live television show produced at a local cable-access station to present its message to workers.

The company claimed that workers at its plants that were already unionized received the same wages and benefits as those at the non union plants. Dick Reece, vice-president for human resources was "confident the associates of Fieldcrest Cannon would see through the false promises of the union and conclude that the union is not in their best interest, the company's best interest, or the community's best interest." While Fieldcrest Cannon had lost money in 1995 and 1996, shortly before the election management took Wall Street by surprise by announcing that earnings were well above analysts expectations.

In spite of all the perceived advantages that UNITE brought to the election, the employees voted 2,563 to 2,194 not to unionize. While the outcome of the vote was immediately challenged by the union, once again organized labor had suffered a bitter defeat at "Mr. Charlie's" company. While the defeat was a bitter one, union organizers remained determined. The ten person staff at UNITE's headquarters in Kannapolis remained open and active. Bruce Raynor, UNITE's southern regional director vowed "We won't let this outlaw company get away with stealing workers' rights", and that "Cannon workers will have their day of victory. We're in this fight to win." On September 11, 1997, less than a month after the election, it was announced that Dallas-based Pillowtex had agreed to acquire Fieldcrest Cannon factories for $700 million.

The Pillowtex acquisition of Fieldcrest Cannon created the "nation's largest home furnishings company". In an interview shortly after the deal was announced, Pillowtex's CEO Chuck Hansen revealed some of the plans he had for Fieldcrest Cannon. Describing Fieldcrest as the "weak sister" of the big home-furnishings companies, Hansen revealed plans to spend $300 million to upgrade Fieldcrest factories. According to published reports, Fieldcrest, which had twice the annual sales of Pillowtex, will operate as a subsidiary. Pillowtex sales in 1996 were $491 million.

Hansen's plans included modernizing Fieldcrest's older factories and a lean approach to corporate staffing. 300 jobs were cut after the acquisition was complete, mostly from the headquarters staff and not production workers. Severance packages included two weeks' pay for every year of service with a minimum of six weeks' pay and a maximum of one year. Also announced were more specific capital spending plans for 1998 which included $12 million for Pillowtex facilities and $68 million for Fieldcrest operations, primarily in North Carolina. New looms were to be installed in the Kannapolis terry operations. Hansen planed to keep the Fieldcrest headquarters building in Kannapolis open and will maintain an office there. The headquarters building will also get a fresh coat of paint and matching carpet throughout. Hansen does not expect to reopen any of the yarn mills Fieldcrest closed in 1995 when it outsourced much of its yarn production.

We need to start developing a sense of pride about what we're about... this is absolutely a great company. (Chuck Hansen, Pillowtex CEO, December 1997)

On December 17, 1997, UNITE announced its supporters had collected signatures of 2,924 of the 5,331 eligible Fieldcrest employees supporting the union. They called on Pillowtex to agree to a card-check recognition or another representation election early in 1998. The results of the August 1997 election were still in the process of being contested by UNITE at the NLRB. Union supporters were optimistic.

I expect to see Pillowtex across the table from me negotiating. (Bill Douglas, 20 year Fieldcrest/Cannon veteran of Plant 6 in Concord, December, 1997)

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

Volume: 5

Issue: 1

Pages: 154-159

Number of pages: 6

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411846

Document URL: http://search.proquest.com/docview/192411846?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 67 of 100

A FAMILY "UNFRIENDLY" POLICY?

Author: Owens, Stephen D

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Abstract: None available.

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CASE DESCRIPTION

The primary subject of this case concerns the effect the Family and Medical Leave Act (FMLA) can have on labor-management relations and personnel decisions. Secondary issues include the relationship of the FMLA to other employment laws, supervisory skills, discipline policies, and interpersonal communication skills. The case has a difficulty of four and is appropriate for senior-level courses and can be taught in one and one-half hours. About three hours of outside preparation by students is expected.

CASE SYNOPSIS

In a workplace with a collective bargaining agreement, it is the supervisor who bears responsibility for the day-to-day implementation of the terms of the labor agreement. In this case the responsibility is made more difficult when federal law impacts the ability of a supervisor to deal with absenteeism problems. In this case an employee is disciplined for irregular attendance; he files a grievance protesting management's action contending that the absences qualified as FMLA leave. The student is required to take the role of the arbitrator to extract the relevant facts and decide whether or not the discipline was justified. The case examines how the parties' collective bargaining relationship can be affected by a specific statutory regulation, the FMLA.

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

Volume: 5

Issue: 1

Pages: 160

Number of pages: 1

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192412331

Document URL: http://search.proquest.com/docview/192412331?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 68 of 100

HARVEST ORGANIC GARDENS (A)

Author: Young, Marilyn; Toombs, Leslie; Moser, Amy; Lopez, Araeli

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Abstract: None available.

Full text:

CASE OVERVIEW

This case would be appropriate in the undergraduate classes of Principles of Marketing, Marketing Management or Entrepreneurship. The case is intended to shown the difficulty in marketing a new product. Students will identify important factors in selecting an appropriate marketing strategy for a new product.

CASE SYNOPSIS

Ashley Grant is interested in starting a nursery/greenhouse business that deals exclusively in organic gardening products, services, and methods. She also plans to have gardening reference materials available for sale or loan and a Web page. This business would allow her to utilize her business management skills while pursuing an avid interest in gardening.

Ashley plans to seek financial assistance in the form of a Small Business Administration loan. As she finalizes her business plan and through an informal conversation with her banker, she realizes that she needs to formulate a well developed marketing plan to complete the package.

In order to gather market relevant data, Ashley designs and administers a competitor survey. Results are given and discussed.

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

Volume: 5

Issue: 1

Pages: 161

Number of pages: 1

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411890

Document URL: http://search.proquest.com/docview/192411890?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 69 of 100

TO SELL OR NOT TO SELL: PERSONAL/CORPORATE SOCIAL RESPONSIBILITY IN THE RECORDING INDUSTRY

Author: Gilchrist, Neil; Larsen, Val

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Abstract: None available.

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TO SELL OR NOT TO SELL: PERSONAL/CORPORATE SOCIAL RESPONSIBILITY IN THE RECORDING INDUSTRY

Time Warner executives have gathered in a conference room at their Rockefeller Center headquarters in New York to plot a strategy for dealing with an on-going public relations problem. Top executives of the company, particularly company chairman Gerald Levin, have faced strong criticism from politicians and from conservative, liberal, and feminist activists who believe that music marketed by some of the company's subsidiaries is socially destructive. The company first faced an explosive nationwide controversy in 1993 when it distributed rapper Ice-T's song "Cop Killer." Levin himself became involved in that controversy, writing an opinion piece in the Wall Street Journal defending the company's involvement with Ice-T. However, the company eventually felt compelled to pull the record and to end its relationship with Ice-T. Now it again faces pressure to discontinue profitable relationships with controversial artists such as Dr. Dre and Snoop Doggy Dog, Of Dirty Bastard, Lords of Acid, and Junior M.A.F.I.A., among others. The pressures have created dissension among Time Warner's directors, some wanting the company to shed the controversial groups while others want to continue current business practices. A decision is being forced because Time Warner managers have agreed to meet with a prominent conservative, William Bennett, former Secretary of Education in the Reagan Administration, and a prominent liberal, C. DeLores Tucker, chair of the National Political Congress of Black Women, who have joined together to focus press attention and public criticism on Time Warner. The executives are trying to decide how to deal with the immediate crisis and with the longer term problem of whether they should continue to court public criticism by marketing music that many of the company's current and potential customers find repugnant.

Time Warner's situation is complicated by the fact that it is involved in many lines of business besides music. The world's largest entertainment and information company, it was born though the 1989 merger of Time Inc. and Warner Communications. Its publishing subsidiary, Time Inc., includes a magazine unit that produces more than 25 magazines, e.g., Time, People, and Sports Illustrated, and a book publishing unit that includes Warner Books, Little Brown, and Time Life, a direct marketer of books, music, and videos. The entertainment portion of the company includes Warner Bros. (movies and television programming), HBO, CNN, TBS, WB, a television network, and various cable systems that, taken together, make it the second largest cable operator in the United States. The entertainment unit also runs a theme park, the Atlanta Braves, and Atlanta Hawks. Between them, these operating units had 1996 revenues of $23.7 billion.

The focus of Time Warner's current difficulties is the Warner Music Group, a division of the entertainment unit that is the number one music company in the United States. The Warner Music Group is associated (either through ownership or distribution) with more than 25 record labels. The music it markets ranges from rap, rock, and pop, to blues, country, classical, and Christian. While much of this music is uncontroversial, the music produced by Interscope Records, a remarkably successful new subsidiary of the Warner Music Group, has been widely criticized. This new startup, half owned by Time Warner, half by Jimmy Iovine and Ted Field and now valued at $400 million, had $111 million in domestic revenues last year and has seized in only a couple of years 2% of the domestic music market, a market share that puts it ahead of such long-established labels as EMI Records and Motown. However, because it has marketed the music of its own controversial artists, Tupak Shakur, Nine Inch Nails, Junior M.A.F.I.A., and Marilyn Manson, and has distributed the music of Death Row Record's still more controversial artists, Interscope has also brought to Time Warner a disproportionate amount of public criticism. The public relations problem faced by the Time Warner executives gathered in New York derives largely, though not exclusively, from the activities of Interscope Records.

As the Time Warner executives conclude their heated discussion on what course the company might follow, Bennett and Tucker enter the conference room to make their argument. They emphasize that they are not calling for censorship-government action to block the distribution and sale of the controversial music. They are calling for personal and corporate social responsibility. Bennett and Tucker suggest that the First Amendment to the Constitution may give Tupak Shakur, Junior M.A.F.I.A., and Marilyn Manson a right to make their abhorrent music, but it doesn't guarantee them the right to have their music marketed by Time Warner or other major music distributors. If Time Warner and the other majors-Sony, Polygram, Thorn EMI, and the Bertlesmann Music Group-decline to market this music, its influence on American Life will be dramatically diminished. Bennett and Tucker declare their intention to join with Senators Joseph Lieberman and Sam Nunn to put similar pressure on Time Warner's major competitors. Before leaving, in an effort to drive home their message, Bennett and Tucker give the Time Warner executives a sheet full of gangsta lyrics and ask that one of the executives read the lyrics aloud. The executives decline to do so. Bennett and Tucker leave for a press conference where Bennett tells the press who have assembled to hear an account of the meeting, "We are asking the chief executives of these major international conglomerates to confront the horrible messages these songs are sending and to consider whether they want to make their livelihood in this way. We are going to continue to put the heat and light on these guys. We're in it for the duration." Bennett's words are borne out in subsequent weeks as his organization, Empower America, launches a radio and petition campaign against gansta music and as C. DeLores Tucker joins with feminists Gloria Steinern, Eleanor Smeal, Anita Perez, and singer Melba Moore to protest the release of "Smack My Bitch Up," a new Time Warner song by the British rock group Prodigy. To the music of "Santa Clause is Coming to Town," the feminist protesters sing, "You have a right to publish, as Klan and Nazis do, but you would never publish what endangers men like you."

Meanwhile, the top leadership of Time Warner are pondering their options. If profitability were the only question, their choice would be quite clear: continue to operate as at present, taking care to watch for any negative effects bad publicity might have on business activities in and outside the music area. But even if it turns out that the controversy won't reduce profitability, is profit the only issue? Is there any merit to the claim that the music Time Warner is marketing has a negative effect on society? If it does have a negative effect, does Time Warner have any obligation to be concerned about that effect? Is it possible, on the other hand, that the music may have some positive social value that might offset its bad effects? Does it lead to a degradation of social relationships and to increased violence against women, children, and others as critics have charged? Does it corrupt children? Assuming that it does, does Time Warner share with the children's parents any moral responsibility to protect the children? Does it corrupt adults? One executive points out that great art has often been controversial when it was first created but later became well accepted and respected. Another suggests, on the other hand, that Time Warner spends millions of dollars on advertising each year, an expenditure that earns a good return and seems to suggest that music and images can have a significant effect on people's behavior. The executives ultimately decide to take a close look at the sheet of lyrics Bennett and Tucker have left behind, a sheet that contains songs marketed by Time Warner music subsidiaries and by competitors.

Nine Inch Nails

The Downward Spiral (Nothing/TVT/Interscope) "Big Man with a Gun"

"I am a big man ... and I have a big gun, got me a big old d**k and I, I like to have fun. Held against your forehead, I'll make you suck it. Maybe I'll put a hole in your head ... just for the f**k of it. I can reduce you if I want...."

Dove Shack

The Dove Shack (Rush) "Slap a Hoe"

"...if your gal is giving you problems (and I know she is)... run out and get the amazing Slap-a-Hoe device... All you do is, uh, post up against that b**ches tilt for a bit, smack her around with the Slap-a-Hoe and I guarantee in less than 20 minutes that b**ch will be back in line... Hey, how you keep them hoes in check? Well goddamn, I had more problems than O.J. But now, I reach back with 9.6 velocity and slap the snot out of the b**ch..."

2Pac Shakur

All Eyez on Me (Death Row) "No More Pain"

"... Now fire when ready, stay watchin' out figure. Increase speed, make you motherf**kas bleed. From your mouth quicker... Line up my adversaries, blast on sight... I dare you niggas to open fire. I'll murder that *ss. And disappear before the cops come runnin'. My glocks spittin' rounds, niggas fallin' down, clutchin' their stomach."

Lords of Acid

Voodoo U (American Recordings) "Young Boys"

"Young Boys) Ooh... dressed up in leather legs I wanna make them shine. (Come now) Do my specialty... Number 69. (My boys) Shock me and thrill me you know what I desire. (You're hot) Nasty and spicy enough to quench my fire... (Young boys) Soft and so kissable I wanna feel their touch. Youthful and healthy love that never stops. (Take all) Its unbelievable squeeze you till you drop."

Cannibal Corpse

The Bleeding (Metal Blade) "F**ked With A Knife"

"Tied tight to the bed, legs spread apart. Bruised flesh, laceration, skin stained with blood. I'm the only one you love, I feel her heart beating. My knife stuck deep inside, her crotch is bleeding. She liked the way it felt inside her, f**king her, harder, harder. Stick it in, rip the skin, carve and twist, torn flesh. From behind, I cut her crotch. In her *ss, I stuck my c**ck. Killing as I c*m."

Tomb of the Mutilated (Metal Blade) "Necroedphile"

"I was a man before I transformed into this molester, freshly deceased children. You have been torn by rape. The dead are not safe, the lifeless child corpse I will violate. Pleasure from the dead, complete satisfaction. I open the coffin sick thoughts run through my head as I stare at the dead... I begin the dead sex, licking the rotted orifice. I c*m in her cold c**t, shivering with ecstasy. For nine days straight I do the same... I masturbate with her severed head. My lubrication, her decomposition. Spending my life molesting dead children."

Put yourselves in the position of executives at Time Warner and at Sony, Polygram, Thorn EMI, and the Bertlesmann Music Group. Do you think music such as this might foster violence or otherwise lead to a degradation of social relationships? Try to answer the questions the executives are struggling with in the last paragraph above. Would you be willing to devote your career to selling this kind of material?

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

Volume: 5

Issue: 1

Pages: 162-166

Number of pages: 5

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411892

Document URL: http://search.proquest.com/docview/192411892?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete

Document 70 of 100

MANAGING HUMAN RESOURCES IN A TRANSITIONAL ECONOMY: WILL A HUNGARIAN TOBACCO VENTURE GO UP IN SMOKE? AN INTERNATIONAL FIELD STUDY CASE IN HRM

Author: Elbert, Norbert F; Hatfield, Robert D

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Abstract: None available.

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ABSTRACT

This case is a disguised but factual Human Resource Management case documented during a prolonged visit to Hungary in 1992. Eastern European countries, including Russia and the Ukraine, are at the same stage today that Hungary was at the time of the case. This case examines a controversial HRM decision to terminate a key "old guard" manager and highlights the broader cultural, national, and paradigm conflicts which are occurring as Western business moves into Central and Eastern Europe. In this case Hungary serves as an example of a transitional economy which is moving from a socialist to a market economy. The organizational and personal level repercussions which occur in response to this national change are dramatized. The related problems are made vivid in this perspective on the HRM and strategic problems of a U.S. firm buying and attempting to change one of the former state-run tobacco factories. The case includes Instructors Notes which contain additional background information on Hungary along with Discussion Questions and suggested answers for each section.

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

Volume: 5

Issue: 1

Pages: 167

Number of pages: 1

Publication year: 1998

Publication date: 1998

Year: 1998

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: Feature, Business Case

ProQuest document ID: 192411913

Document URL: http://search.proquest.com/docview/192411913?accountid=38610

Copyright: Copyright The DreamCatchers Group, LLC 1998

Last updated: 2013-09-20

Database: ABI/INFORM Complete