general management
DESCRIPTION
casesTRANSCRIPT
PRAGATI EDUCATION SOCIETY
NATIONAL INSTITUTE OF RETAIL MANAGEMENT
MARKS : 80 COURSE :
MRM
SUB : GENERAL MANAGEMENT
N. B. : 1) Attempt any Four Cases 2) All questions carries equal marks.
Case: 1
TRI – STATE TELEPHONE
John Godwin, Chief executive of Tri – State Telephone, leaned back in his
chair and looked at the ceiling. How was he ever going to get out of this
mess ? At last night’s public hearing. 150 angry customers had marched
in to protest Tri – State’s latest rate request. After the rancorous shouting
was over and the acrimonious signs put away, the protesters had
presented state regulators with some sophisticated economic analyses in
support of their case. Additionally, there were a number of emotional
appeals from elderly customers who regarded phone service as their
lifeline to the outside world.
Tri – State Telephone operated in three states and had sales of over $3
billion. During the last five years, the company had experienced a
tremendous amount of change. In 1984, the AT & T divestiture sent shock
waves throughout the industry, and Tri-State Telephone had felt the
effects, as pricing for long distance telephone service changed
dramatically. The Federal Communications Commission instituted a
charge to the effect that customers should have “access” to long –
distance companies whether or not they were in the habit of making long
distance calls. Consumer groups, including the Consumer Federation of
America and the Congress of Consumer Organizations, had joined the
protest, increasing their attention on the industry and intervening in
regulatory proceedings wherever possible. The FCC was considering
deregulating as much of the industry as possible, and congress was
looking over the commissioner’s shoulder. Meanwhile, the Department of
1
Justice and Judge Harold Greene both of whom were responsible for
monitoring the AT & T divestiture) continued to argue about what
business companies like Tri – State should be engaged in.
In addition, technology was changing rapidly. Cellular telephones,
primarily used in cars, were now hand-held and could be substituted for
standard phones. Digital technology was going forward, leading to lower
casts and requiring companies like Tri – state to invest to keep up with the
state of the art. Meanwhile, rate increases negotiated during the
inflationary 1970s were keeping earnings higher than regulators would
authorize. New “Intelligent” terminals and software developments gave
rise to new uses for the phone network (such as using the phone for an a
arm system), but as long as customers paid one flat fee, the phone
company could not benefit from these new services.
Godwin’s company has recently proposed a new pricing system
whereby users of local telephone services would simply pay for what they
used rather than a monthly flat fee. All of the senior managers were
convinced that the plan was fairer, even though some groups who used
the phone with netable frequency (like real estate agents) would pay
more. It would give the company an incentive to bring new services to
their customers, and customers would be able to choose which ones to
buy. None of them had anticipated the hue and cry from the very
customers who would save money under the new plan. For instance,
Godwin’s studies showed that the elderly were very light users of local
service and could save as much as 20 percent under the new plan.
After the debacle at the hearing the previous night, Godwin was
unsure how to proceed. If he backed off the new pricing plan, he would
have to find a different way to meet the challenges of the future – may be
even different businesses to augment company income. Alternatively, the
company could not stand the negative press from a protracted battle,
even though Godwin thought that the regulators were favorably disposed
toward his plan. In fact, Godwin himself believed the company should
help its customers rather than fight with them.
Questions :
1. Who are the stakeholders in this case ?
2
2. Which stakeholders are most important ?
3. What are the critical trends in Tri – State’s environment ?
4. Why do you think Tri – State’s customers are so upset ?
5. What should John Godwin do ?
CASE NO. 2
FRESH IDEAS AT FRESH FIELDS
Fresh Fields may be a supermarket, but what it’s super at selling is its
image : “Good for you foods.”
A New Age grocery store, Fresh Fields falls somewhere between a
health food store and a traditional supermarket. It is not merely a health
food store, because it carries a wider variety of foods including fresh
pasta, baked goods, seafood and deli selections. What distinguishes
Fresh Fields from supermarkets lies in what is absent from the shelves,
rather than what is present, for Fresh Fields shoppers will not find foods
containing lots of preservatives and artificial flavourings, such as Jell – O
and Oreos, that they can purchase at other supermarkets. What Fresh
Fields offers is “ organic and conventional produce, meats, seafood, dairy
products, baked goods from an in – store bakery, deli items gourmet and
vegetarian prepared foods, a wide array of cheese, a full grocery
department, an extensive selection of supplements, skin enriching
cosmetics and natural health care products and environmentally friendly
household goods.”
3
The arrival of Fresh Fields coincides with that of the New Age, health
– conscious trend of the 1990s, and the company has not hesitated in
taking advantage of consumers’ new whopping preferences resulting from
the trend. According to a 1992 survey by Health Focus, a Pennsylvania –
based research firm, 90 percent of shoppers say that health has become a
factor in determining the food they buy. This perhaps accounts for why
many Americans are willing to pay up to 20 percent more for natural
foods. Actually, the Fresh Fields premium tends to hover closer to 5
percent, and when in season, Fresh Field’s locally grown organic produce
can even cost less than produce sold at other supermarkets.
A team of entrepreneurs began Fresh Fields in 1991. The team
included 33 year old Mark Ordan, former Goldman Sachs investment
banker as CEO and President, 75 years Old Leo Kahn, founder of Staples,
the prosperous office – supply sores, as chairman and 44 year old Jack
Murphy, former manager of the Heartland supermarket chain in New
England, as Chief operating officer.
Within the first 19 months, five Fresh Fields locations opened in
Maryland and Virginia. Expanding into Pennsylvania and Illinois, by mid –
1994 Fresh Fields had opened a total of 14 stores in the four states, with
more in the planning stages.
Much of Fresh Field’s success can be attributed to the fact that the
company offers only the freshest produce, often from local growers. The
company screens growers to find those who use natural methods of pest
management and apply the least amount of agricultural chemicals. In
addition, Fresh Fields seeks meat and poultry from farms, not factories, to
avoid the growth – promoting drugs often used. Fresh Fields also makes
an effort to get to know the people who catch the seafood, and seeks out
fish caught in deep, clean waters, not from coastal waters threatened by
pollution.
According to Kahn, though, the key to Fresh Field’s success lies in
pleasing the customer. “ Everybody says the same things please the
customer – but while everybody says it, not too many practice it. The
customer is smarter than all of us. Here we’re building an organization
that zeroes in and keeps customer satisfaction in mind.”
4
Instilled in Fresh Fields is a warm, friendly caring culture that begins
with Kahn and travels through to all stakeholders: employees, suppliers,
customers, community members. Whereas at other stores, such as Wal –
Mart, there is a single, symbolic greeter by the door, every employee at
Fresh Field is a sort of “ greeter”, and he or she looks up, smiles and says
“hello” to shoppers as they pass by. Within the company, there are no
employees, there are only “associates” many of whom Kahn knows by
name.
Much of what Fresh Fields is about is relationship building. The
warm relationship between the company and associates lies at the heart.
From there, associates build relationship with suppliers to add the
personal touch that is integral to the Fresh Fields quality image.
As shoppers walk through the stores, numerous samples are
offered.
“ Originally, I bought organic produce and spent $25 to $30 every week or
two.” Says Merri Mukai, a homemaker in Annandale, Virginia. “Then I
tried the baked goods and upped my spending by $60. Now I’m buying
meats and eyeing the fish. They’ve definitely got me hooked.”
Says Fresh Fields, “We guarantee your satisfaction unconditionally.
You can consider our guarantee as an opportunity to be adventurous and
to try new products, without risk. If for any reason you are less than
completely satisfied with something you purchase at Fresh Fields, we will
cheerfully offer you a full refund.”
Questions :
1. What economic and social factors should Fresh Fields
managers watch ?
2. Suppose you manage a local supermarket and Fresh Fields
comes to town. How would you reinvent your
organization to meet the challenges posed by Fresh
Fields ?
5
Case: 3
RESPONDING TO ALLEGATIONS OF RACISM :
FLAGSTAR AND THE PLEDG
The 1990 s have witnessed an increased emphasis on valuing diversity.
With both the marketplace and the workforce becoming more and more
diverse, many managers have redesigned their companies cultures to
reflect and encourage multiculturalism. Changing a company’s culture,
however, is often more difficult than managers might first believe. At
Denny”s for example, promoting multiculturalism required a reworking of
its corporate culture from top to bottom.
In the early 1990s, Denny’s found itself the target of numerous
allegations of racism, by both customers and employees. Black customers
asserted that they were not receiving the same treatment at Denny’s as
white customers. Some complained that they were either forced to wait
for their food longer than white customers or denied service entirely,
others said that they were forced to pre-pay for their meals while white
customers in the restaurant were not. There were also allegations that
Denny’s restaurants would close if there were too many black customers.
In addition, Denny’s was accused of discriminatory hiring practices as well
as preventing blacks and other minorities from reaching management and
franchise positions. None of this garnered much attention, however, until
a suit was filed on March 24, 1993, by a group of minority customers in
San Jose, California, who made the all – too – familiar allegation that
Denny’s had required cover charges and pre-payment of meals from
minority customers, but not from white customers.
In response to these charges, Denny’s parent company, Flagstar,
formally apologized to the customers, and Flagstar CEO Jerry Richardson
dropped the cover charge and pre-payment policies and explained that
they had been intended to prevent late night “ dine – and – dash” theft
and that any discriminatory implementation of them was in direct
violation of corporate policies. Richardson admitted, however, that he had
been unaware that the cover charge and pre-payment policies even
existed within the company. Furthermore, Richardson began talks with
civil rights groups such as the NAACP. Flagstar also signed a consent
6
decree issued by the Justice Department that required spot testing of
Denny’s restaurants for discriminatory practices as well as an anti-
discrimination training program for all Denny’s staffers. “ Our company
does not tolerate discrimination of any kind,” Richardson assured all, and
his actions seemed to support his words.
Then, on May 24, 1993, six black Secret Service agents filed suit
against Denny’s for allegedly having denied them service at a Denny’s in
Annapolis, Maryland. The six men claimed that while they received
deliberately slow service, their white counter parts were served in a timely
fashion. “Hearing the allegations made yesterday by Six African –
American Secret Service agents on national television that they were not
treated fairly at Denny’s was a painful experience for our company,”
Richardson admitted.
The highly publicized suit served as a catalyst that set off a
whirlwind of changes throughout Flagstar. In a late May Richardson
issued an internal memo that marked the beginning of Richardson’s
pledge to change. “ I am distressed that some people in our company
haven’t gotten the message that we will not tolerate unfair treatment of
customers,” he wrote. “ The past year has been a trying experience,
particularly for many of our African – American employees who are
embarrassed by what happened. This is my personal pledge to them to
restore their pride in Denny’s.
Richardson stopped promising change and started creating it. On
July 1, 1993, Flagstar reached an historic agreement with the NAACP. The
agreement, which was the most far-reaching arrangement the civil –
rights organization had ever signed, represented a breakthrough in
relations between minorities and businesses. The plan targeted several
specific problem areas within Flagstar. For example, of Flagstar’s more
than 120,000 workers, 20 percent were black, but only 4.4. percent of its
managers were black. Under the agreement, at least 12 percent of
Flagstar’s managers will be black by the 2000. The company also wanted
to increase the number of black-owned franchises; only one of Denny’s
405 franchises was owned by a black person as of 1993, but Flagstar
planned to have at least 53 black-owned franchise by 1997. Flagstar also
7
agreed to direct more marketing funds toward minority advertising and to
begin purchasing more goods and services from minority – owned
businesses. In addition, Flagstar promised to appoint at least one
minority to its board of directors. In all the plan will direct more than one
billion dollars in jobs and economic benefits to minority workers and
companies by the year 2000.
Richardson also undertook efforts to restore Denny”s reputation as
well as his own. At the forefront of his efforts was “The Pledge”. “The
Pledge” was the name given to a 60 – second TV spot, which aired in 41
television markets and on the Black Entertainment Television network
during a two-week period in June 1993. In it, Jerry Richardson and a
representative sample of Flagstar’s 46,000 employees endorsed a solemn
pledge to treat customers with “respect, diginity, and fairness.” “The
whole idea for the ‘pledge’ started with our desire to express support for
our own employees.” Explained David Hurwitt, Flagstar’s senior vice
president of marketing. “ These people have been very much under the
gun. We chose television for this special campaign because we felt it was
important to show people exactly who the Denny’s employees are”.
Overall, response to “ The Pledge” was favourable. “ Our phone has been
ringing off the hook since Denny’s aired this ad,” said W. Gregory Wims,
president of the NAACP in Rockville, Maryland, the largest branch in the
Washington, D.C.area. “About 90 percent of our members approve of the
commercials and the steps Denny’s has been taking to improve relations
with people of color.
Experience, however, had taught Flagstar that mere policy
statements do little good in the absence of training and monitoring. With
this in mind, Flagstar reaffirmed its commitment to its agreement with the
Department of Justice by steping up its multicultural training programs
and agreeing to allow the NAACP to conduct its own inspection of Denny’s
restaurants. Denny’s also set up a hot line for employees to use to report
possible instances of discrimination. In addition, Flagstar made significant
management changes during the summer of 1993 by installing three
executives considered particularly sensitive to diversity in the workplace:
Norman Hill, Joe Russell, and Ron Petty. Russell was appointed head of
8
the diversity training program, and Hill came on board to oversee field
hiring. “ There are companies that bury their heads in the sand and say,
I’m going to conduct my business the same way I’ve always conducted my
business,” said Petty. “ And then there are enlightened companies that
say, “There are opportunities outside of the way we’ve normally done
business.”
The steps taken by Flagstar have been significant, not only because
of the model the company has set for other companies, but also because
of Flagstar’s own holdings, including 530 Hardee’s fast food units, 1,400
Denny’s family restaurants, 200 Quincy’s steak houses, 120 El Pollo Loco
outlets and more than 2,000 Canteen Corp. Food and Recreation Service
accounts. The community’s response to the allegations against Denny’s
confirm that multiculturalism can no longer be ignored.
Questions :
1. How would you describe the organizational culture at
Flagstar ?
2. How does Flagstar deal with diversity ?
3. What challenges could Flagstar face in its near future ?
Case: 4
DISNEY’S DESIGN
The Walt Disney Company is heralded as the world’s largest
entertainment company. It has earned this astounding reputation through
tight control over the entire operation : control over the open – ended
brainstorming that takes place 24 hours a day ; control over the engineers
who construct the fabulous theme – park rides; control over the animators
9
who create and design beloved characters and adventurous scenarios ;
and control over the talent that brings the many concepts and characters
to life. Although control pervades the company, it is not too strong a grip.
Employees in each department are well aware of their objectives and the
parameters established to meet those objectives. But in conjunction with
the pre-determined responsibilities, managers at Disney encourage
independent and innovative thinking.
People at the company have adopted the phrase “Dream as a
Team” as a reminder that whimsical thoughts, adventurous ideas, and all
– out dreaming are at the core of the company philosophy. The over all
control over each department is tempered by this concept. Disney
managers strive to empower their employees by leaving room for their
creative juices to flow. In fact, managers at Disney do more than
encourage innovation. They demand it. Projects assigned to the staff “
imaginers” seem impossible at first glance. At Disney, doing the
seemingly impossible is part of what innovation means. Teams of
imaginers gather together in a brainstorming session known as the “Blue
Sky” phase. Under the “Blue Sky”, an uninhibited exchange of wild,
ludicrous, outrageous ideas, both “ good” and “ bad”, continues until
solutions are found and the impossible is done. By demanding so much of
their employees, Disney managers effectively drive their employees to be
creative.
Current Disney leader Michael Eisner has established the “Dream as
a Team” concept. Eisner realized that managers at Disney needed to let
their employees brainstorm and create with support. As Disney president
Frank Weds says, “If a good idea is there, you know it, you feel it, you do
it, no matter where it comes from.”
Questions :
1. What environmental factors influenced management style at
Disney ?
2. What kind(s) of organizational structure seem to be
consistent with “Dream as a Team” ?
10
3. How and where might the informal organization be a real
asset at
Disney ?
Case: 5
“ THAT’S NOT MY JOB” – LEARNING DELEGATION
AT CIN-MADE
When Robert Frey purchased Cin – Made in 1984, the company was near
ruin. The Cincinnati, Ohi-based manufacturer of paper packaging had not
altered its product line in 20 years. Labor costs had hit the ceiling, while
profits were falling through the floor. A solid quarter of the company’s
shipments were late and absenteeism was high. Management and
workers were at each other’s throats.
Ten years later, Cin – Made is producing a new assortment of highly
differentiated composite cans, and pre-tax profits have increased more
than five times. The Cin – Made workforce is both flexible and deeply
committed to the success of the company. On-time delivery of products
has reached 98 percent, and absenteeism has virtually disappeared.
There are even plans to form two spin – off companies to be owned and
operated by Cin-Made employees. In fact, at the one day “Future of the
American Workforce” conference held in July 1993, Cin-Made was
recognized by President Clinton as one of the best – run companies in the
United States.
“ How did we achieve this startling turnaround ?” mused Frey.
“Employee empowerment is one part of the answer. Profit sharing is
another.”
In the late spring of 1986, relations between management and labor
had reached rock bottom. Having recently suffered a pay cut, employees
at Cin- Made came to work each day, performed the duties required of
their particular positions, and returned home-nothing more. Frey could
see that his company was suffering. “To survive we needed to stop being
worthy adversaries and start being worthy partners,” he realized. Toward
this end, Frey decided to call a meeting with the union. He offered to
11
restore worker pay to its previous level by the end of the year. On top of
that, he offered something no one expected : a 15 percent share of Cin-
Made’s pre-tax profits. “ I do not choose to own a company that has an
adversarial relationship with its employees.” Frey proclaimed at the
meeting. He therefore proposed a new arrangement that would
encourage a collaborative employee-management relationship
“Employee participation will play an essential role in management.”
Managers within the company were among the first people to
oppose Frey’s new idea of employee involvement. “My three managers
felt they were paid to be worthy adversaries of the unions.” Frey recalled.
It’s what they’d been trained for. It’s what made them good managers.
Moreover, they were not used to participation in any form, certainly not in
decision making.” The workers also resisted the idea of extending
themselves beyond the written requirements of their jobs. “ (Employees)
wanted generous wages and benefits, of course, but they did not want to
take responsibility for anything more than doing their own jobs the way
they had always done them,” Frey noted. Employees were therefore
skeptical of Frey’s overtures toward “employee participation.” “We
thought he was trying to rip us off and shaft us,” explained Ocelia
Williams, one of many Cin-Made employees who distrusted Frey’s plans.
Frey, however, did not give up, and he eventually convinced the
union to agree to his terms. “ I wouldn’t take no for an answer,” he
asserted. “Once I had made my two grand pronouncements, I was
determined to press ahead and make them come true.” But still ahead
lay the considerable challenge of convincing employees to take charge :
I made people meet with me, then instead
Of telling them what to do, I asked them.
They resisted.
“ How can we cut the waste on his run ?” I’d
say, or “How are we going to allocate the
overtime on this order ?”
“That’s not my job,” they’d say.
12
“But I need your input,” I’d say. “How in the
world can we have participative management
if you won’t participate ?
“ I don’t know,” they’d say. “ Because that’s
not my job either. That’ s your job. ?”
Gradually, Frey made progress. Managers began sharing more
information with employees. Frey was able slowly to expand the
responsibilities workers would carry. Managers who were unable to work
with employees left, and union relations began to improve.
Empowerment began to happen. By 1993, Cin Made employees were
taking responsibility for numerous tasks. Williams, for example, used to
operate a tin-slitting machine on the company’s factory floor. She still
runs that same machine, but now is also responsible for ordering almost $
100,000 in supplies.
Williams is just one example of how job roles and duties have been
redefined throughout Cin-Made. Joyce Bell, president of the local union,
still runs the punch press she always has, but now also serves as Cin-
Made’s corporate safety director. The company’s scheduling team,
composed of one manager and five lead workers from various plant areas,
is charged with setting hours, designating layoffs, and deciding when
temporary help is needed. The hiring review team, staffed by three hourly
employees and two managers, is responsible for interviewing applicants
and deciding whom to hire. An employee committee performs both short
– and long – term planning of labor, materials, equipment, production
runs, packing, and delivery. Employees even meet daily in order to set
their own production schedules. “We empower employees to make
decisions, not just have input,” Frey remarked. “I just coach.”
Under Frey’s new management regime, company secrets have
virtually disappeared. All Cin-Made employees, from entry-level
employees all the way to the top, take part in running the company. In
fact, Frey has delegated so much of the company’s operations to its
13
workers that he now feels little in the dark. “ I now know very little about
what’s going on, on a day-to-day basis,” he confessed.
At Cin-Made, empowerment and delegation are more than mere
buzzwords; they are the way of doing business – good business. “ We, as
workers, have a lot of opportunities,” said Williams. “ If we want to take
leadership, it’s offered to us.”
Questions :
1. How were principles of delegation and decentralization
incorporated into Cine – Made operations ?
2. What are the sources and uses of power at Cin – Made ?
3. What were some of the barriers to delegation and
empowerment at Cin –Made ?
4. What lessons about management in a rapidly changing
marketplace can be learned from the experience of
Cin – Made ?
CASE NO. 6
HIGH-TECH ANSWERS TO DISTRIBUTION
PROBLEMS AT ROLLERBLADE
When a manger finds that demand exceeds inventory, the answer lies in
making more goods. When a manager finds that inventory exceeds
demand, the answer lies in making fewer goods. But what if a company
management finds that they just do not know which situation applies ?
14
This is the situation that recently confronted management at
Rollerblade, the popular skate manufacturer based in Minnetonka,
Minnesota. Rollerblade has been one of the leading firms in the fast
growing high performance roller skate marketplace, it matters a great
deal for Rollerblade managers whether demand and inventory are in
balance, or not.
Rollerblade was in a bind. The product literally could not be
shipped out the door. The managers found that workers were not able to
ship products because, as a result of poor storage structures, they could
not find the products. Once they were found, overcrowded aisles, in
addition to other space constraints, still prevented efficient shipping
because the workers could barely manage to get the products out the
door. “ We were out of control because we didn’t know how to use space
and didn’t have enough of it,” said Ian Ellis, director for facilities and
safety. “Basically, there was no more useable space left in the
warehouse, a severe backlog of customer orders, and picking errors were
clearly in the unacceptable range,” added Ram Krishnan, Principal of NRM
Systems, based in St. Paul, Minnesota.
The answer for Rollerblade was found in technology. High-tech
companies have introduced a collection of computer simulations, ranging
in cost roughly from $10,000 to $30,000, that assist managers in
generating effective facility designs. With the help of layout Master IV
simulation software, developed by NRM, Rollerblade Management was
able to implement a new distribution design. As a result of the
distribution improvement, Rollerblade was able to increase the number of
customer orders processed daily from140 to 410 and eliminate order
backlog. “Now we have a different business,” says Ellis. “ The new layout
has taken us from being in a crunch, to being able to plan.
Questions : 1. With retailers as their primary customers, what customer
competitive imperatives could be affected by Rollerblade’s inventory problems ?
2. How appropriate might a just – in – time inventory system be for a product such as roller skates ?”
3. What opportunities are there fore Rollerblade managers to see themselves as selling services, instead of simply roller skates ?
15
16