Category: Corporation

Essay On Fedex Corporation.
FedEx Corporation is a company that has grown from a small company to a global organization since its initiation in 1973. The company has been investing in IT systems since its inception and many changes have been seen all through. Its mission has always been based on providing superior and quality service to its customers everywhere. When Internet services were introduced in the year 1994, FedEx took this opportunity to improve its standards of service to the customers and also to improve its comparative advantage over other companies.
Installation of the Internet helped FedEx to have data access in its information systems and this was the one factor that would make FedEx an e-business. All through the years, FedEx has been investing in infrastructure and this is what has made it to be a multi-national supply-chain management company. In its efforts to stay on top of its competitors, FedEx has always tried to reorganize its groups and through this they were able to have more customers simply because they provided better services.
Porter’s Five Forces Analysis FedEx Corporation has been a company that has been able to keep up with the any new trend in technology and this is why it so much qualifies as an e-business. FedEx is a company that can be analyzed through the Porter’s Five Forces simply because it is an industry just like all the other companies and what it provides will certainly determine its market position at all time. Threat of new entrants into the market is one of the problems that FedEx might face.

Since it is an established company with a global identity and image, the threat is not considered as something that can pull down the company. This is because the services that it provides are expensive to maintain and thus small emerging company may not keep up with its pace and thus there are not threats posed by new entrants into the transportation market. Start up costs for a parcel industry are high and a new industry cannot just enter the market and start offering services that are up to the standards of FedEx and other companies that are big competitors in the market.
According to Porter’s bargaining power of suppliers force, FedEx is faced by this problem to a large extent because it has to provide superior and quality services to the customers and therefore its suppliers or channels of reaching to them is expensive. Supplies for things such as planes and computers are expensive and if the corporation does not have a good relation with the suppliers of such things, the cost may increase every now and then and FedEx would be in a bad situation.
The bargaining power of suppliers may also be a danger in the postion of the company since there might be only one supplier for a particular product and thus this makes them want more. FedEx Corporation, being a multi-national company, may conquer this force since it would be more advantageous for the suppliers to work with it because of its identity and the fact that their services will be in use for a long time to come. FedEx Corporation provides the best delivery services globally but it is also possible for other companies to provide substitutes that can be used for the same purpose.
Therefore, the threat of substitutes is one major problem that the company would face in its market position. Customers may switch from one company to another or from one product to another easily depending on how they find it convenient for their usage. These customers may also compare the relations of the companies and decide which one to use. Therefore, FedEx could continue making its services more attractive and of quality and also ensure that it sustains its good relations with the customers so that any substitutes in the market would not pose as competition for them.
Another force that could affect the transformation of the company into an e-business is the bargaining power of buyers. Customers also have a right to bargain for lower or fair prices and therefore they can choose to switch from one company to another according to their preferences and what they are being offered. FedEx Corporation should always make sure that its customers are happy with what they are offered and this should be a cost problem because the biggest problem that can happen to the company is loosing a customer rather than loosing some few coins just to keep the customers.
It is therefore very important for FedEx Corporation to know that the bargaining power of the buyer or customers should always be put into consideration if the company has to fulfill its mission. Porter’s intensity of rivalry force is also another point that should be put into consideration in FedEx’s mission. Other companies are also providing the services provided by FedEx and their competition should be based on the elements of speed, efficiency and pricing. These are the three elements that will bring rivalry into the parcel industry since they will be competing in effort to achieve the largest number of customers.
If FedEx continues providing its services in respect of the above elements, it is then possible that the company will remain on top of the market and thus it will gain the greatest market share. Rivalry is a factor that exists in every market and how you perceive it will determine how long you will survive in the market. Porter’s Value Chain Techniques The utilization of the Value chain techniques by any organization is a process that can yield great benefits in the immediate or future prosperity. Porter pointed out that value chain process is a key to “creating and sustaining superior performance” (Porter 1998).
FedEx Corporation should first identify its primary activities in all its production process. The inbound logistics at the company would include: receiving of products form suppliers, their storage and the distribution of these products within the company. The activities under operations in FedEx are: shipping of products such as parcels, the logistics involved in shipping, handling and checking of customer orders, analysis of the financial stability, and the value chain analysis of all the activities.
Another primary activity is the outbound logistics, which involve the delivery of services and product and receiving of payment. The marketing and sales activities involve the development of a good image of he company that will make people satisfied and happy. Service is also another primary activity that FedEx should put into consideration as it involves the satisfaction of the customers and this may include fast delivery of parcels or even follow up of shipping to make sure that it reaches the intended customer.
Under the value chain techniques we also have the support activities and in FedEx Corporation the activities include the procurement department that makes all the purchases of the company. Another important support activity is that of technology development whereby the company invests in systems innovation and the research and development of information technology (Lynch 2006). FedEx Corporation also has a human resource function which carries out activities such as recruitment, transfer, compensation and development of all the manpower that is used in provision of expertise services.
The other support activity that is very important in the function ability of a company is the firm’s infrastructure. FedEx Corporation incorporates this activity in functions such as planning, accounting, national rules and regulations that govern provision of products and services and the general management of the company (Porter 1998). FedEx Corporation should ensure that it uses value adding techniques and processes so that it can achieve its goals and mission. FedEx Corporation – 1973-2000: CORE COMPETENCIES
FedEx Corporation is a company that has shown tremendous growth since its inception in the year 1973. First and foremost, the success of the company was previously predicted by its vision “satisfying worldwide demand for fast, time-definite, reliable distribution” (Farhoomand 2004). William Conley, the Vice President of FedEx Logistics, is also a fundamental contributor to the success of the company through his vision “if we are all operating in a day-to-day environment, we’re thinking one to two years out.
Fred’s thinking five, ten, fifteen years out” (Farhoomand 2004). During its initiation, it only had one competitor and that is UPS. This was quite advantageous since with one competitor in the market it was easy to establish company and thus FedEx Corporation grew at a faster rate. Business started to pick up in the late 1970s as regulations that governed air cargo were revisited and thus there were deregulations that caused the rapid growth of the company. Due to these changes, FedEx was able to use large aircrafts such as the Boeing 727s (Farhoomand 2004).
FedEx Corporation was given permission to provide its services to the whole of the United States in the year 1983 and thus its maturity phase started in the 1980s when it entered into merges and acquisition of international companies. In 1984, FedEx began delivering its services to Europe and Asia, which gave way into other worldwide countries. It was after this year that the company initiated a regular flight to Europe. In the year 1988, the company started delivering direct services into Japan.
With the initiation of the flight services to these countries, FedEx’s image continued growing and improving and thus its growth increased rapidly in the 1980s (Farhoomand 2004). FedEx’s first acquisition was of the Tiger International, Inc in the year 1989. The company acquired the Flying Tigers Network and the “expertise in international airfreight” of Tiger Inc and thus FedEx became the “world’s largest full-service, all-cargo airline” (Farhoomand 2004). With this acquisition, the company also gained access to 21 countries and a fleet of Boeing 747 and 727 aircraft (Farhoomand 2004).
In 1994, FedEx’s evolution was through the change of its previous name, which was Federal Express to FedEx. Customers easily recognized this name, as it was a short form of the previous one. The name later changed in the year 2000 to the current name FedEx Express. In 1995, FedEx acquired authority to operate in China through the Evergreen International Airlines. After being given this authority, FedEx became United States largest and sole transportation and an all-cargo company with access to many places in the world (Farhoomand 2004). Advantages and Disadvantages of International Trade to FedEx Corporation
Every company that undertakes international trade is always faced by some advantages and disadvantages, and FedEx is not an exception. To FedEx Corporation, international trade enhances its competitiveness in the country as it deals foreign countries apart from its mother country. The company also benefits from foreign trade because it always receives higher profits because of increased sales. FedEx has gained its global market share because it is a superior company all over the world. The company is able to extend its market and therefore it does not depend on the existing markets.
The company can acquire new technology from other countries and this means that FedEx has greater chances of development and expansion. Being a multi-national company, FedEx is able to stabilize the market fluctuations and therefore it ensures that there are stable prices all through out the world. There are also disadvantages that FedEx Corporation may face during its activities in the foreign trade. Being a parcel and transportation industry, there should always be a strategy of modifying their products and services, and thus they have to be ahead of all other competitive companies so that it can stay on top of the market for a long period.
Sometimes FedEx Corporation may not be able to have good relations with its customers due to the long distance involved between the suppliers and the buyers. As an international company, there is need for staff to be fluent in international companies so that they can communicate efficiently with the customers. Many documents are supposed to be processed before any international shipment is done and therefore this is a difficulty that FedEx may encounter in its activities. FedEx Corporation is always faced by certain risks and therefore this is covered through insurance, which in turn increases the cost of production.
There might be restrictions imposed by the government on what goods to import or export and therefore this might make FedEx loose some of its anticipated profits at a certain period. Approaches to Strategy Many people have had different approaches of strategic management and how you perceive it is how you understand it. According to Whittington (2001), he categorized strategic into four approaches, classical, evolutionary, processual and systematic (Whittington 2001). The classical approach involves the “deliberate calculation and analysis designed to maximize long term advantage” (Whittington 2001).
This strategy offered an insight into FedEx’s vision that Fred Smith (the founder of FedEx) believed that the company would stay in the market for as long as possible. It is through this vision, “satisfying worldwide demand for fast, time-definite, reliable distribution” that FedEx Corporation has grown strategically up to where it is now (Farhoomand 2004). Fred’s vision of the company was a “wish-driven strategy” that has borne fruits since the initiation of FedEx. The company’s mission also gives an insight into the type of strategy it uses:
“FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards. ” (http://about.
fedex. designcdt. com/our_company/) In the evolutionary approach to strategy, Whittington suggests that the customers or the market it what decides the position or the strategic transformation of the company (Whittington 2001). This approach entails the struggle for survival by all organizations and not any type of analysis of the position of the firm. In FedEx’s case, its mission is very clear on what it does to survive in the market. It gives an insight of how they handle their customers by ensuring that there is good relationship while delivering their services.
The company also ensures that its employees are satisfied in their work and thus eliminates the staffing problems other companies may encounter. The company also considers safety precaution as a method of survival since all its operations are guarded with at most care and precaution. The values at the company also offer an insight of the evolutionary approach as it endeavors to do all the things that it can to stay on top of the global market. The company values its customers, service delivery, innovation, integrity, responsibility and loyalty.
Through these values, the market judges whether to operate with the company and thus the market makes the important choices rather than the managers of the company (Whittington 2001). Therefore, FedEx Corporation has employed the two approaches (evolutionary and classical) in its activities so that it can gain the anticipated strategic transformation over years and years. The evolutionary theory seems more appropriate to me since FedEx is an multi-national company that should ensure that the market is satisfied with its services.
All its plans and evaluation methods should be based on its image, which will eventually bear benefits. A high standard of the services provided to the customers will surely attract more and more customers and thus raise the market demand. The company should have value for its employees since these are the people that make its plan happen and therefore there efforts should be rewarded accordingly to serve as a motivational factor. With an organized and good relating workforce, the market will definitely choose FedEx over other companies and thus the company will acquire comparative advantage.
In the processual school of thought, is strategy that incorporates the elements of learning and adaptation (Whittington 2001). This approach is similar to the evolutionary approach in that it does not put value into long-term benefits but the only difference is that this approach does not leave the market to make choices since it implies that the market is always in a mess and confusion (Whittington 2001). According to Stacey (1996), any decision-making and control process always has four loops which are; the rational, the overt politics, the covert politics and the culture and cognition.
Stacey believes that any organization should have over-rational thinking in its decision-making process. The four loops have implications according to the processual school of thought. In the overt and covert politics, strategy is believed to be the product of political compromise and not profit-maximization calculation (Stacey 1996). In the culture and cognition loop, processual school of thought has put into belief that any choices made are governed by norms and routines of the company and also of its customers.
Therefore in the case of FedEx Corporation, the choices that the managers may make should always be governed by the existing norms and routines. In the rational loop, Stacey (1996) believes that companies should use rational thinking and in FedEx, all its decisions may be over rationalized so that the company can fulfill its mission. All the strategies can be used even if they are wrong as they give confidence to all companies. Therefore, FedEx Corporation could employ any strategies in its activities as long as every event is monitored.
When implementing strategies, the best steps to take are small ones so that mistakes are avoided in every event. FedEx Corporation should use its core competencies in acquiring competitive and comparative advantages in the market and therefore, all its strategies should be carried out based on the internal situation rather than the market. Being an international company, all that FedEx can do to prosper is follow a strategy that fits its profile. References Aichlmayr, M. , 2001, Boosting Business with Air Cargo: Transportation & Distribution, New Jersey: Cleveland Center for Asian Business Cases, 2000, FedEx Corp.
: Structural Transformation Through E-Business, viewed 29 April 2010, http://www. biztech. stevens-tech. edu/jkeating/BT414/Cases/FedEx%20Corp%20BT414%20Ch%208%20HKU098. pdf De Wit, B. and Meyer, R. , 2004, – Strategy Process, Content, and Context: An International Perspective, 3rd Edition, London: Thomson Learning FedEx Corporation, Company information viewed 29 April 2010, http://about. fedex. designcdt. com/our_company/ Johnson, G. , Scholes, K. and Whittington, R. , 2005, Exploring Corporate Strategy: Text and Cases, New Jersey: Financial Times, Prentice Hall.
Lynch, R. , 2006, Corporate Strategy, Fourth Edition, New Jersey: Financial Times, Prentice Hall. Mintzberg, H. , Ahlstrand, B. and Lampel, J. , 1998, Strategy Safari, New Jersey: Financial Times, Prentice Hall Porter, Michael E, 1998, Competitive Advantage – Creating and Sustaining Superior Performance, New York: The Free Press. Stacey, R. D. , 2007, Strategic management and organizational dynamics: the challenge of complexity to ways of thinking about organizations, 5th Edition, New Jersey: Financial Times, Prentice Hall

Essay On Fedex Corporation

Costco Wholesale Corporation.
Costco Wholesale Corporation, which was established in 1983 as a single store in Seattle, became the biggest membership warehouse club chain the world, employing the so-called “less-is-more” concept. With such concept, Costco Wholesale Corporation also looks upon themselves as the membership warehouse club that has the capability to sell top-quality food, hardlines, softlines, and other goods usually in a large number or bulk quantity at the lowest possible price. Costco now has over 457 stores which are situated in most parts of the United States and is still growing.

Their success was mainly attributed to their sales volume, good consumer acceptance, generally good services and customer care, and the lowest possible price offered. Furthermore, Costco sells, provides or displays items or products from limited suppliers or from a small number of suppliers. Variety of items is also reduced and this is done to reduce the risk of purchase decision and encourages a consumer to buy such product or service. Another benefit of this is that loyalty on a certain product or service is created or improved.

The corporation’s goal is to provide more discounts and cheaper prices to the customers, focusing more on the customers, rather than to the competition. It is able to provide lower cost and greater discounts because the corporation’s marketing style is to reduce overhead cost by reducing fancy outlet designs, taking almost everything to simplicity. Costco also pays to its workers and employees, giving them good salaries and benefits, resulting to the tremendous low rates of theft and turnovers by its employees.
Since Costco is known for its cheap prices and sales in large or bulk quantities, it had created policies, just like other competing membership warehouse clubs, regarding merchandise returns and exchanges. Costco had been formulating and had been modifying its product guarantees in order for their goal and or concept to be followed. These guarantees, in order to improve a business’ quality or to be used as stepping stones for a corporation’s growth, such as the Costco, must be effective.
Costco Wholesale Corporation provides information regarding the guarantees that they offer on products and memberships, but it seems that their guarantees vary from one Costco branch to the other. In Costco found or established Japan, “What is Costco? ” their guarantee states that: “COSTCO’S UNCONDITIONAL DOUBLE GUARANTEE on merchandise: We guarantee your satisfaction on every product we sell with a full refund. On membership: We will refund your membership fee in full at any time if you are dissatisfied. ” With regards to the corporation’s guarantee, a policy regarding computer returns was created.
This is in relation to Costco (Japan) unconditional double guarantee. Costco’s return policy, “What is Costco? ”, states: “COSTCO’S COMPUTER RETURN POLICY Costco Wholesale’s return policy for all desktop and notebook computers is six months from the date of purchase. After six-months from the date of purchase, all services and technical support will be subject to the applicable remaining manufacturer’s warranty. While on the other hand, the guarantee of Costco Wholesale Corporation in their online store, “Costco Returns”, states that: “Costco.
com Costco guarantees your satisfaction with the merchandise you purchase from us. Costco. com products may be returned to any of our hundreds of Costco warehouses worldwide. Or, if you wish to return or exchange merchandise directly to costco. com, contact us at customer service. Effective November 4th, 2002, Costco Wholesale’s desktop and notebook computer return policy is six-months from the date of purchase. After six-months from the date of purchase, all service and technical support will be subject to the applicable remaining manufacturers’ warranty. ” According to Christopher W. L.
Hart, “effective guarantees must be unconditional, meaningful, easy to understand, easy to invoke, and easy to collect” (72). A guarantee is said to be easy to understand and communicate if the guarantee that is created is written in a simple manner, using concise language and directly state what the guarantee is about or what it offers. This is done in order for customers and employees to know or learn what to expect and what is expected of them, respectively. Evaluating the guarantee stated by Costco in Japan, it can be observed that it is indeed easy to understand, and is easily communicated.
It clearly states in its guarantee on the merchandise, that they can provide satisfaction to the customers for every product that they sell and directly states a promise to give a full refund, in cases that the former statement is not fulfilled. Also, with regards to their membership, it was also directly stated that if a customer was disappointed or frustrated, they (Costco), would give a full refund. Furthermore, with regards to some items or products they sell under the exemption of a full refund, the policy regarding these products is also clearly stated.
Evaluating the guarantee given by Costco in their online store, though understandable, it is not easily understood as compared to the previous guarantee. It does not state the company’s promise, or what the company would do or give in return if a customer becomes dissatisfied with their goods and services. “Subject to the applicable remaining manufacturers’ warranty” seems vague and that customer’s would already think twice when it comes to invoking refunds. The guarantee stated at Costco’s online store (costco.
com) should be stated in fewer words, pinpointing more on the necessary information, terms, and policies. With regards to a meaningful guarantee, two considerations or concerns are raised by Hart. A guarantee is said to be meaningful, first, if the guarantee provided by the company or corporation addresses the service that is of most importance to the customers. Second, a guarantee is said to be meaningful or of good quality, if it is meaningful financially or that a guarantee should focus on what a customer would enjoy more.
The guarantee stated by Costco in Japan, is indeed meaningful, as it noticeably indicates that it would provide full refund for both products and membership fees. In this guarantee, price, which is considered by Hart as the most important element for a meaningful guarantee, is evident. Costco’s guarantee is meaningful relative to the price of the product or service. Costco would return the price which the customer paid, in full, if the customers are not satisfied with their products or services.
On the other hand, the online store of Costco only states or offers a return or exchange of a product bought by an unsatisfied consumer. One meaningful thing is that in the statement of their guarantee, the customers are informed that they have several outlets or that stores where the customer could return or exchange the merchandise. This helps the customers by immediately identifying where customers could go or convey their problems. Again, better promise or customer return should be created, or if such promise or payback exists, it should be clearly declared in their guarantee or policy.
In the further evaluation of a good guarantee, a guarantee is said to be easily invoked by customers if the process that a customer has to take is simple, trouble-free and undemanding. The process of invoking a full return of a good or service should be straightforward and uncomplicated or understandable. This will help customers who are already displeased, to favor or buy again such goods or services by the business establishment. In addition to an easily-invoked guarantee, Hart states that “customers should not be made to feel guilty about invoking the guarantee — no questioning, no raised eyebrows, or “Why me.
Lord? ” looks. A company should encourage unhappy customers to invoke its guarantee, not put up roadblocks to keep them from speaking up” (5). Looking on Costco’s guarantee on this aspect, complains, letters and calls conveyed to the customer service of Costco can be used. How Costco responds to these complaints and the measures they take to help the customers and the process of invoking a refund can also looked into. The process of invoking a refund is easy. There are no forms to be filled or series of questions to be answered.
A customer just needs to bring the product to the Costco warehouse. From the statement of the guarantee in Costco’s online store, it was stated that there are a lot of Costco warehouses where the customer can return or exchange the product, though a list of these warehouses were not given. Some reported complaints were about growing membership bills even if a customer had already left the list of Costco’s members. Also, there were some complains regarding Costco’s customer service or how Costco deals with complains or requests from customers.
With regards to these complaints, Costco creates ways of helping these customers in other ways or that, in most cases, the managers send letters of apologies to unsatisfied customers. There was an incident that a customer was asking for the tires he bought to be installed in the front of his minivan (“Consumer complaints about Costco – tires”). Costco did not respond to this request and kept a firm stand that these new set of tires should be installed in the rears. Costco states that it is best for the tires to be installed in the rears, even if the vehicle was a front wheel drive.
They offered a video and articles stating or defending their claim regarding the installation of tires on the rears. Major sales representative Chris Biggers, sent a letter in response to the complaint regarding the installation of tires on the rears and stated that Costco aims or looks on the safety of both its employees and members (the consumers). With regards to the treatment of Costco employees and managers to the discontented customers, I think that Costco tries their best in addressing the complaints and that they still maintain a good relationship with the consumers.
Other wholesale corporations such as the Wal-Mart experience the same complaints, worst, they have more. Wal-Mart had been continuously complained because of their “unfriendly” treatment with customers. Their customer service and care was insufficient and sometimes, there are incidents of discrimination. Costco on the other hand have strong principles that they apply for the benefit of consumers and that they humble themselves to maintain the good relationship that they have with the customers.
It is just that customer’s are already irritated that they fail to see the efforts of Costco in helping them. Further personnel training and teambuilding should also be exercised by the company in order to nicely and properly address disgruntled customers, most especially those with tempers. There were complains filed against Costco, stating that their refunds or certain products were not being received by the customers or that Costco is unable to give the necessary benefit or compensation for a poor service or low-quality product.
If a refund was promised, the problem was that no certain dates of such reimbursement were given by the customer service, oftentimes resulting to unclaimed refunds. In terms of the refunds, Costco is at the losing end. Costco provides the cheapest price as much as possible, by keeping a mark up that is not higher than 14 percent for unbranded products or items and mark up not higher than 15 percent for non-private-labeled items, unlike its competitors who has mark ups up to 25 percent, or even 50 percent.
Suppliers also exert pressure on Costco regarding product returns. I recommend improved customer service hotlines or more customer service centers that are accessible to the consumers for easier management of complaints and quick response to customer needs. Also, the policy regarding the guarantee they provide should be further developed, but taking importance not to render the guarantee impractical for both the company and its consumers. Works Cited
“Consumer Complaints About Costco – Tires”. 2004. ConsumerAffairs. Com Inc. August 31, 2007. <http://www. consumeraffairs. com/tires/costco. html>. “What Is Costco? ” Japan, 2005. Costco Wholesale Japan, Inc. and Costco Wholesale Corporation. August 31, 2007. <http://www. costco. co. jp/eng/costco. htm>. Greenhouse, Steven. “How Costco Became the Anti-Wal-Mart. ” The New York Times, 2005. Hart, Christopher W. L. “The Power of Unconditional Service Guarantees. ” The McKinsey Quarterly, 1989.

Costco Wholesale Corporation

Purity Steel Corporation.

Purity Steel Corporation, 1995 “I’m no expert in high finance,” said Larry Hoffman, manager of the Denver branch for the Warehouse Sales Division of Purity Steel Corporation, to Harold Higgins, general manager of the division, “so it didn’t occur to me that I might be better off by leasing my new warehouse instead of owning it. But I was talking to Jack Dorenbush over in Omaha the other day and he said that he’s getting a lot better return on the investment in his district because he’s in a leased building.
I’m sure that the incentive compensation plan you put in last year is fair, but I didn’t know whether it adjusted automatically for the difference between owning and leasing and I just thought I’d raise the question. There’s still time to try to find someone to take over my construction contract and then lease the building to me when it’s finished if you think that’s what I ought to do. ” Purity Steel Corporation was an integrated steel producer with annual sales of about $4. 5 billion in 1995. The Warehouse Sales Division was an autonomous unit that operated 21 field warehouses throughout the United States. Total sales of the division were approximately $225 million in 1995, of which roughly half represented steel products (rod, bar, wire, tube, sheet, and plate) purchased from Purity’s Mill Products Division. The balance of the Warehouse Sales Division volume was copper, brass, and aluminum products purchased from large producers of those metals. The Warehouse Sales Division competed with other producer-affiliated and independent steel warehousing companies and purchased its steel requirements from the Mill Products Division at the same prices paid by outside purchasers.
Harold Higgins was appointed general manager of the Warehouse Sales Division in mid1994, after spending 12 years in the sales function with the Mill Products Division. Subject only to the approval of his annual profit plan and proposed capital expenditures by corporate headquarters, Higgins was given full authority for his division’s operations and was charged with the responsibility to “make the division grow, both in sales volume and in the rate of return on its investment. ” Prior to his arrival at division headquarters in St. Louis, the Warehouse Sales Division had been operated in a centralized manner; all purchase orders had been issued by division headquarters, and most other operating decisions at any particular warehouse had required prior divisional approval. Higgins decided to decentralize the management of his division by making each branch (warehouse) manager responsible for the division’s activities in his or her geographic area. In Higgins’s opinion, one of the key features of his decentralization policy was an incentive compensation plan announced in late 1994 to become effective January 1, 1995.

The description of the plan, as presented to the branch managers, is reproduced in Exhibits 1, 2, and 3. Monthly operating statements had been prepared for each warehouse for many years; implementing the new plan Do Doctoral Candidate Antonio Davila and Professor Robert Simons prepared this updated case based on an earlier version. The case material of the Harvard Graduate School of Business Administration is prepared as a basis for class discussion and not to illustrate either effective or ineffective handling of administrative problems.
Two major asset categories, inventories, and fixed assets (buildings and equipment), we’re easy to attribute to specific locations. Accounts receivable were collected directly at Purity’s central accounting department, but an investment in receivables equal to 35 days’ sales (the average for the Warehouse Sales Division) was charged to each warehouse. Finally, a small cash fund deposited in a local bank was recorded as an asset of each branch. No current or long-term liabilities were recognized in the balance sheets at the division or branch level. At the meeting in December 1994, when the new incentive compensation plan was presented to the branch managers, Higgins had said: tC op yo Howard Percy [division sales manager] and I have spent a lot of time during the last few months working out the details of this plan. Our objective was to devise a fair way to compensate those branch managers who do a superior job of improving the performance in their areas.
First, we reviewed our salary structure and made a few adjustments so that branch managers do not have to apologize to their families for the regular paycheck they bring home. Next, we worked out a simple growth incentive to recognize that one part of our job is simply to sell steel, although we didn’t restrict it to steel alone. But more importantly, we’ve got to improve the profit performance of this division. We established 5% as the return-on-investment floor representing minimum performance eligible for a bonus. As you know, we don’t even do that well for 1994, but our budget for next year anticipates 5% before taxes. Thus, in 1995 we expect about a third of the branches to be below 5%? and earn no ROI bonus? while the other two-thirds will be the ones who really carry the weight. This plan will pay a bonus to all managers who help the division increase its average rate of return. We also decided on a sliding scale arrangement for those above 5%, trying to recognize that the manager who makes a 5% return on a $10 million investment is doing as good a job as one who makes a 10% return on only a half-million dollars.
Finally, we put a $50,000 limit on the ROI bonus because we felt that the bonus shouldn’t exceed 50% of salary, but we can always make salary adjustments in those cases where the bonus plan doesn’t seem to adequately compensate a branch manager for his or her performance. No After the telephone call from Larry Hoffman in May 1996, quoted in the opening paragraph, Harold Higgins called Howard Percy into his office and told him the question that Hoffman had raised. “We knew that we probably had some bugs to iron out of this system,” Percy responded. Let me review the Denver situation and we’ll discuss it this afternoon. ” At a meeting later that day, Percy summarized the problem for Higgins: Do As you know, Larry Hoffman is planning a big expansion at Denver. He’s been limping along in an old multi-story building with an inadequate variety of inventory, and his sales actually declined last year. About a year ago he worked up an RFE [request for expenditure] for a new warehouse which we approved here and sent forward. It was approved at corporate headquarters last fall, the contract was let, and it’s to be completed by the end of this year.
I pulled out one page of the RFE which summarizes the financial story. Larry forecasts nearly a triple in his sales volume over the next eight years, and the project will pay out in about seven and a half years. Here is a summary of the incentive compensation calculations for Denver that I worked up after I talked to you this morning. Larry had a very high ROI last year and received one of the biggest bonuses we paid. Against that background, I next worked up a projection of what his bonus will be in 1997 assuming that he moves into his new facility at the end of the year. Our lease there is a so-called operating lease, which means that we pay the insurance, taxes, and maintenance just as if we owned it. The lease runs for 20 years with renewal options at reduced rates for two additional 10-year periods. Assuming that we could get a similar deal for Denver, and adjusting for the difference in the cost of the land and building at the two locations, our lease payments at Denver during the first 20 years would be just under $250,000 per year. Pushing that through the bonus formula for Denver’s projected 1997 operations shows an ROI of 7. %, but Larry’s bonus would be about 15% less than if he was in an owned building. op yo “On balance, therefore,” Percy concluded, “there’s not a very big difference in the bonus payment as between owning and leasing, but in either event, Larry will be taking a substantial cut in his incentive compensation. ” As the discussion continued, Larry Hoffman and Howard Percy revisited the formula for ROI: Net Income Return-on-investment = Investment in Operating Assets Net Income Sales x Sales Investment in Operating Assets = ( Return on Sales) x (Asset Turnover) No TC = Do
Exhibit 1
The Warehouse Sales Division has three major objectives:

A. To operate the Division and its branches at a profit.
B. To utilize efficiently the assets of the Division.
C. To grow.

This compensation plan is a combination of base salary and incentive earnings. Incentive earnings will be paid to those managers who contribute to the achievement of these objectives and in proportion to their individual performance. op yo
II. Compensation Plan Components
There are three components to this plan:

A. Base Salary Base salary ranges are determined for the most part on dollar sales volume of the district(s) in the prior year. The higher the sales volume, the higher range to which the manager becomes eligible. The profitability of dollar sales or increases in dollar sales is an important consideration. Actual salaries will be established by the General Manager, Warehouse Sales Division, and the salary ranges will be reviewed periodically in order to keep this Division competitive with companies similar to ours.
B. Growth Incentive If the district earns a net profit before the federal income tax for the calendar year, the manager will earn $1,750 for every $500,000 of increased sales over the prior year. Proportionate amounts will be paid for greater or lesser growth.
C. Return-on-Investment Incentive No In this feature of the plan, the incentive will be paid in relation to the size of the investment and the return-on-investment. The manager will be paid in direct proportion to his effective use of assets placed at his disposal. The main emphasis of this portion of the plan is on increasing the return at any level of investment, high or low.

Do III. Limitations on Return-on-Investment Incentive

A. No incentive will be paid to a manager whose branch earns less than 5% return-on-investment before federal taxes.
B. No increase in incentive payment will be made for performance in excess of 20% return-on-investment before federal taxes.
C. No payment will be made in excess of $50,000 regardless of performance.

However, a rough estimate can be made by:

A. Finding the approximate level of investment on the horizontal scale.
B. Drawing a line vertically from that point to the approximate return-on-investment percent.
C. Drawing a line horizontally from that point to the vertical scale which indicates the approximate incentive payment.

Annual return of funds $ 7. 3 years 4,072,150 5,534,549 96 (177) Less 35% tax Net income $ (220) (53) (273) Less depreciation Total return over 8 years (in dollars) Capital expenditures required (in dollars): Land Building Equipment Relocation expense
Forecast Additional Sales, Expenses, and After-Tax Profits Due to New Facility (dollars in thousands)

Gross profit dollars
Service income
Total income
Less expenses excluding depreciation
Sales dollars
Exhibit 4

Assumptions used for 1997 projections at Denver: Old facility and equipment sold at the end of 1996, proceeds remitted to corporate headquarters. Depreciation on new facilities in 1997 is $43,540 (60 years, straight line) and $49,225 on equipment (various lives, straight line). Year-end investment in receivables and inventory will approximate 1995 relationship: receivables at 10% of annual sales, inventories at 25% of annual sales. Average total investment assumes that new fixed assets are acquired on December 31, 1996, and that other assets at that date are the same as at the end of 1995. Profit taken from RFE as $995,000 less $185,000 first-year decline, less $100,000 relocation expense. Additional mill profit of $65,000 does not reflect on divisional books and was used only at corporate headquarters for capital expenditures evaluation purposes.

Purity Steel Corporation

American Barrick Resources Corporation.
The gold market is risky as it is impossible to predict the direction of price fluctuations. The greater the range or dispersion of the price changes, the greater the risk involved (market or price risk). When building a risk-management strategy, the firm will start by looking at its operational management to see if it can find ways of reducing the risks it is taking. It will try to ensure that the inflows and outflows are balanced in nature, by currency, and interest-rate sensitivity and so forth, thus creating internal hedges matching by costs and revenues.
Operational hedging involves the firm changing sources of supply, the location of manufacturing, adjustment of production etc. in order to reduce the impact of economic factors. Unfortunately, there are many problems associated with operational hedging. Changing suppliers disturbs existing business relationships, may lead to production and/or quality control problems and is slow to implement.
ABX might consider operational business decisions which involve considerable long-term investment which, probably have significant `exit cost elements. ABX could face considerable costs in altering operational procedures as a risk management tool and would hence not use strategic risk management as their primary means of controlling their macroeconomic exposures. arrick-Cullaton Gold Trust, marketed in Canada and Europe. Figure 1 shows the payout diagram for the investor (right hand scale) and the costs to ABX (left hand scale). The gold trust paid investors 3% of the mine’s output when the price of gold was at or below $399 per ounce, rising to 10% of production when gold was at $1’000 per ounce. ABX totally raised $17 million trough this trust.

The trust represents indirect equity comparable to preferred stock. Trust holder have a right on interest payments (can be seen as dividends) but no voting rights. The payoff for ABX was that it limited the cost of this equity to 3% (of the firms output) when the gold price was at or below $399 and at the same time offering its investors a substantial upside potential of 10% of the mines output when the gold price would reach $1,000 per ounce. This limited potential cost of debts to 10% for ABX.
In addition, ABX had the possibility to buy the trust back if gold prices and production rose significantly in their favour. By doing so, they could protect themselves from paying large amounts of interests. The characteristic that the payout was tied to the mines output helped further to reduce cost of debt when the gold price was at an unfavourable level and thus stabilized the net income. This instrument does not hedge ABX gold price risk on the sales side but on the cost side.
Bullion Loans
ABX entered a bullion loan contract with Toronto Dominion Bank in which it received 77,000 ounces of gold that ABX sold immediately on the sport market for $25 million ($324.68/ounce). Over the next 4 years ABX had to repay in monthly gold ounce instalments incl. 2% annual interest. The assets of the mine (value $54.2 million) and a guarantee issued by ABX collaterized the loan. Additionally, ABX was required to make accelerated deliveries equal to 50% of the cash flow from the mine after deducting capital expenditures and mandatory deliveries.
Figure 2 shows the ABX firm value diagram for the bullion loans. ABX locked the price when it sold the gold on the spot market for $325 over the next 4 1/2 years. ABX would suffer from forgone profits if the gold price rose above $325 because they could sell it on the spot market for a higher price. On the other hand, if the price would fall, ABX is better off at a price of $325. Additionally, ABX was contractually committed to make accelerated deliveries equal to 50% of the mines cash flow. That means, with high cash flows ABX was in a position to quicker pay back its debt in ounces of gold. This resulted in lower forgone profits (slope decreased as depicted.
The characteristic of the repayment and especially accelerated repayment is shown in figure 3. The dotted lines indicate accelerated repayment of gold that can vary depending on the level of cash flows that the mine produced. Characteristics of the repayment of gold with possible scenarios of accelerated repayments (dotted line) ABX raised $ 50 million in 2% gold-indexed notes. Investor paid $1’308 per note and received $26.16 annual interest payments (2%) and the right to redeem the note between February 88 and February 92 with an linearly increasing amount of gold as depicted in figure 5. At expiration the note had to be redeemed. At a prior redemption date, earliest February 88, the investor could chose whether to receive cash or gold bullion whose value equalled 3.2150 ounces at the first redemption date and 3.3804 ounces of gold at expiry. There was no collateration.
;
Figure 4 shows the payoff for ABX for the first redemption date. The payoff for ABX was limited at the cost of the index-note of 2% plus the premium of the call option at the redemption date. The major payoff for ABX was the low debt financing costs of only 2%. On the other hand, the note holder was attracted by the fact they could participate in the raising gold price. ABX had to deliver a specified quantity of gold at specific date for a price fixed at the beginning of the contract. The parties were free to close out their positions through a negotiated settlement. Forward sellers receive a premium above the current gold price called contango. The contango rate was set according to the difference between the interest rate of $ (7%) and the lease rate of gold (2%). This resulted in a contango premium of 7% – 2% = 5%.
ABX logged the gold prices for the future production and therefore insured the risk of price fluctuation between now and the specified delivery date of the contract. This allowed ABX to exactly predict their revenues, and with its stable production costs, its cash flows.  Options and Warrants (collar strategy) ABX sells and buys simultaneously a call (sell) and a put (buy) option on gold. The exercise price of the put is below that of the call. No cash outflow occurs as the premium received form the sale of the call is used to purchase the put.
The collar with an put and a call option with different exercise prices x1 and x2 By setting the exercise price of put and call ABX can determine the degree of gold price risk they want to take. ABX can adjust the exercise of new puts / calls according to new market prices. By following this strategy ABX is able to stabilize its revenues without the cost for financial instruments.

American Barrick Resources Corporation

Corporation Responsibility and Ethics.
Corporation can be explained as an association of individuals, created by law or under authority of law, having a continuous existence independent of the existences of its members, and powers and liabilities distinct form those of its members. The corporation may exist for the purpose of profit or non profit oriented. By the early 18 century, corporations are owned and control by government authorities. At the late 18 century, the old economic policies and theories are eliminated with the work of Adam Smith and other economists.
And the corporations are transformed from being government affiliated entities to public and private economic entities. The main two ideas behind this transformation was that a business corporation should not be directly tied to any public policies, and the corporation is a by-product of the people’s right of association, not a gift from the state. However, with the given freedoms, they still exist within the legal system and considered as legal person, who has morally responsible for their actions. These morale responsibilities are classified as narrow and broader view.
Narrow view primarily concerns for the interest of shareholders, obligation to other stakeholders are evaluated within the range of satisfied demand implied by shareholders. Whereas, broader view mainly concern for the stakeholders with all those affected by the corporation’s action, shareholders represent only one set of multiple responsibilities that are weighed in decisions. Though, the specified statements in a question “corporation’s obligation to their stakeholders comes before its obligations to the rest of society” were construed narrowly to cover only the shareholders interest.

The main economist who supports the narrow view of corporative responsibilities was Milton Friedman. The Milton Friedman (1970) in an influential article argued that when corporate manager are consideration was given for social responsibilities to influence their decisions, they are violating the obligations to the corporation’s owners. He believes that only employees of the corporations have a responsibility to meet desired requirements of its owners.
The desired requirements are in most case to maximizing the wealth of the organization. He argues by saying “if we wish we can refer to some of these responsibilities as ‘social responsibilities. ’ But in these respects he is acting as a principal not an agent; he is spending his own money or time or energy, not the money of his employers or the time and energy he has contracted to devote to their purposes. If these are ‘social responsibilities,’ they are the social responsibilities of the individual, not the business.”
Further Friedman’s added “the situation of the individual proprietor is somewhat different. If he acts to reduce the returns of his enterprise in order to exercise his ‘social responsibility,’ he is spending his own money, not someone else’s. If he wishes to spend his money on such purposes that is his right and I cannot see that there is any objection for doing so. ” Friedman’s interpretation towards corporative responsibilities are seems too narrow to accept and adopt in today’s business environment.
Business Corporation’s who stick with those narrow view become a challenge to sustain in a competitive market economy. In today’s business environment, public expectations towards the business organizations are high and it becomes a basic requirement for the organization to fulfill those expectations to building positive corporative images and sustainable relation to achieving economic results. To justify my argument I have used narrow and broader view of corporative responsibility theories and some success stories.
2. THE NARROW VIEW OF CORPORATIVE RESPONSIBILITY
The narrow view theorist believes that honoring commitments to shareholders is more valuable than responding to the demands of other stakeholders. Such theories includes; pure marketplace ethics, libertarian marketplace or shareholder theory, and social marketplace ethics. The theories and examples are explained as follow;
2.1 PURE MARKETPLACE ETHICS
Pure marketplace ethics theory believes that there is no such way to generate money. If it is good in economically than it is good in ethically. When it comes to money there is no right and wrong, everything is ethical. The theory is egoist approach to produce profit, not considered social and environmental initiatives.
2.2 LIBERTARIAN MARKETPLACE / SHAREHOLDER THEORY
Adam Smith, Milton Fridman, and Friedrich Hayek, are the main economists who follow Libertarian marketplace theory or shareholders ethical theory. The theory suggests what’s good ethically is doing well economically within the law. The theory stands that organization made up for the motive of profit, social responsibilities can be handled by non-profit organizations in the area of concern or respective government authorities. Many economists have been criticizing Adam Smith and Milton Fridman argument on social responsibility.
2.2 SOCIAL MARKETPLACE ETHICS
Shareholder theory and social marketplace ethics theory is very much similar. Unlike shareholder theory, it highlighted the social responsibility in some extent. However, their view in social responsibility as economic wealth that employee get, since the organization is effective to generate profit. They believe that individual employees work hard to get maximum profit for the organization than employees do affect their social welfare. This theory also criticized many economists by questioning what extent does society as a whole benefit when improving employee’s welfare. There is one interesting case “Coca-Cola and Water Use in India” as the implication of this narrow view.
In March 2004, Coca-Cola company in Karala state in India was shut down because of farmers and community claim that high utilization of water by Coca-Cola crates sever water shortages and polluting the groundwater and soil, this could destroying farms by draining them out completely. There are many allegations against the Coca-Cola Company. Such as health effects, poor environmental consideration, monopolistic business practices, and questionable labour practices.
3. THE BROADER VIEW OF CORPORATIVE RESPONSIBILITY
The broader view theories suggest that aggregated demands of stakeholders are more valuable than honoring commitments to shareholders. Such theories include; shared value theory, stakeholder theory, progressive corporate social responsibility, and sustainability theories. These theories are explained in detail as follow;
3.1 SHARED VALUE THEORY
Michael Porter and Mark Kramer (2011) proposed Shared value theory, in his theory of corporative responsibility states that the purpose of any business entity is to pursue profits, to do that organization also requires to value social and environmental welfare. When organization pursues wealth it’s necessary to engage with the social and environmental. The core vales of this theory is respect for laws, regulations and commonly accepted codes for operation, social and environmental welfare hold autonomous value independent of bottom line concern, but are pursued only within the profit making operation, only insofar as they create profit.
Such example of shared values includes Nestle, Nespresso combines a sophisticated espresso machine with single-cup aluminum capsules containing ground coffees from around the world. The product offers quality, convenience and the environmental blight of mountains of spent aluminum pods. To get reliable supply of specialized coffees is extremely challenging for the Nestle. The coffees are grown by small farmers in poor rural areas of Africa and Latin America, who are trapped in a cycle of low productivity, poor quality, and environmental degradation that limits production volume.
To address these issues, Nestle redesigned procurement. It worked intensively with its growers, providing advice on faming practices, guaranteeing bank loans, and helping secure inputs such as plant stock, pesticides, and fertilizers. Nestle established local facilities to measure the quality of the coffee at the point of purchase, which allowed it to pay a premium for better beans directly to the growers and thus improve their incentives. Greater yield per hectare and higher production quality increased growers’ incomes, and the environmental impact of farms shrank.
Meanwhile, Nestle’s reliable supply of good coffee grew significantly. Shared value was created. Nestle’ found a societal need-poverty in rural coffee producing areas and developed a two sided initiative, anti-poverty and improve coffee supply. This theory has some negative and positive point of views, such as the theory accepts that the organization main intention should be increasing profit, and social responsibility implies when organization are profitable.
3.2 SUSTAINABLE THEORY
John Elkington (1997) in his book of Cannibals with Forks: Triple Bottom line of 21st Century Business. He described that corporative responsibility lies with the stakeholders rather than shareholders. This theory suggests businesses hold three principle obligations to produce sustainable results, which are social, environmental and economic fields. Each of the three values is pursued autonomously and businesses should tabulate and present results for each of the tree categories individually. Economic Sustainability: the traditional accounting concept of profit was eliminated
in sustainability theory. In a sustainable framework, the “profit” is considered as the maximum benefit enjoyed by the society as whole.
Social sustainability: Corporative responsibility lies to the fair and beneficial practice towards the labour and the community. The theory highlighted that no individual within the community will be neglected. Economics in a metropolitan area, a reality where all executives are hauling down millions a year ultimately becomes unsustainable when other workers can no longer afford to live near the city and so aren’t available to do the supporting work necessary to keep the executives going.
Humanity: political unrest and violence may erupt in regions or entire countries where a society’s health concentrates in a narrow demographic. (The fair trade movement may be understood as expression or sustainability in both economic and human senses.) Environmental sustainability: Environmental sustainability requires stewardship of our natural surroundings; use balanced by preservation to enable continued use. A brewery dripping industrial waste into the soil fails the test of sustainability when the toxins infiltrate the water table and poison the groundwater the brewery needs to make its beer.
3.3 CORPORATE SOCIAL RESPONSIBILITY
Archie B. Carroll theory of Corporate Social Responsibility (CSR) highlighted four kinds of social responsibilities. Which are economic viability, compliance, doing right be fair and support community welfare. These corporative responsibilities are considered as values. These four categories are explained as follow. Economic Responsibilities: A narrow view theory suggests that business entities are created primarily for profit motives. CSR suggest business is considered as basic economic unit in the society where its role was to produce goods and services that consumer desired with the acceptable profit.
The old idea of profit motive was changed into a notion of maximum profits. Legal Responsibility: Corporative Social Responsibility theory suggests the business should operate under the legal framework. Ethical Responsibility: Ethical Responsibilities represents ethical norms fairness and justice, ethical responsibilities embrace those activities and practices that are prohibited by societal members even though they are not codified into law. It also includes those standards, norms, or expectations that reflect a concern for what consumers, employees, shareholders, and the community regard as fair, justice or keeping with the respect or protection of stakeholder’s moral rights. Imperial Sugar Company can be a good example of CSR, the entire company was burn to ground, but the John Sheptor, CEO decided to maintained employees payroll through the reconstruction process.
3.4 STAKEHOLDERS THEORY
The most vital contribution for the broader view of corporation obligation and their ethical responsibilities was highlighted in the Stakeholders theory. The theory suggests businesses are fundamentally obligated to respect the rights and welfare of all those affected by its operations. The obligations are identical in kind, though they may very in degree. The key values of this theory are the welfare of all those individual and organizations affected by the business. (Cardinal stakeholders typically include: shareholders, workers, customers, suppliers and community taken to incorporate broader humanistic and environmental concerns).
The main responsibilities are stakeholders’ interests are acknowledged and respected when making decisions: the interests are weighed alongside and according to the same logic as obligations traditionally associated with shareholders (profit) interests. As opposed to the idea that a business is first an economic entity that operates in society and so acquires broader responsibilities, the idea here is that a business is fundamentally a social and ethical operation, and economic activity is only one facet of its existence. The theory starts with a business and looking out into the world to see what obligations the organization exist, stakeholder theory starts in the world. it recognizes those individuals and groups who will be affected by or affect the company’s actions and ask; what are their legitimate claims on the business?
What rights do they have with respect to the company’s actions? What kind of responsibilities and obligations can they justifiably impose on the business? One of the most important and well known examples of stakeholder’s theory is embedded in the Mexican Constitution. When the indigenous people overthrew the Spaniards and claimed independence in the early 19th century, what they especially detested were the absentee landlords. The Spanish owned the farm lands, but lived in the cities, leaving locals to do the work.
As a response to the indignation, the new constitution stipulated that those who work the land own it. Ownership and control over land, in other words, is not guaranteed through time. Instead, it depends on the extent of ou personal interaction with the soil. Legal ownership would be like that: essentially owned by those who are affected by it. (Note: Contemporary reality has faced modification of the Mexican constitution. Still, in the provinces people are reluctant to rent properties for long terms because courts away from the capital occasionally recognize the original, institutional stipulation.)
4. CONCLUSION
My argument is totally against the statement of “Corporation’s obligation to their stakeholders comes before its obligations to the rest of society”. I don’t believe corporation obligation comes prior to their stakeholders, because the corporation is exists because of their stakeholders. Without stakeholders support it is difficult to keep up the business. Such example can be Indian Coca-Cola Company.

Corporation Responsibility and Ethics

Total amount of holdings News Corporation.
Daily Mirror, New York Post, Sun, Times, XX Century Fox Films, HarperCollins… – is there anybody, who doesn’t know these names nowadays? But not everybody knows that all of them are the names of great Empire News Corporation, which belongs to Rupert Murdoch.

Total amount of holdings News Corporation for June 2001 was 43 milliard dollars, and annual income of the company was 14 milliard dollars. More then 30.000 employees work in 720 firms, which belong to the company in 52 countries all over the world. Isn’t it impressive? And at the head of all those companies is one person – Rupert Murdoch. How he managed to do it? Cannot we use his “know-how”? Stuart Crainer tries to answer with changing success all these questions.

When I read this book, the first thing I noticed that I didn’t regret reading it. I found a lot of interesting information, which was written in good literary language. You read the book with bated breath, trying to understand secrets of a giant of media industry. All those things will help you in your future life – not only in business. They explain approach to life – these facts can change you life, they can make an earthquake in the system of your values.
By Crainer’s opinion, although Rupert Murdoch is the head of one of the most successful and influential companies in the world, his style of management was examined rarely. This book is determined to fill this gap to some extent. Not accidentally you can see already in the header promise to show 10 main secrets how to create successful business.
It is biography by genre, and the author seems to claim to the role of “business-biographer” of the mighty of this world. Curious reader certainly will find out details from early life of media giant. You can find in the book chronology of important bargains and business deals, which resulted creation of that which is called now “the Empire of News Corporation”.
But the story about a person by name Rupert Murdoch is not the main for the author. The main milestones of Murdoch’s life are presented in the role of necessary “frame” for business phenomena called “Rupert Murdoch”.
In capacity of background, where the figure of main hero of narration is boldly demonstrated, Crainer skillfully uses different theoretical conceptions, results of examinations, investigations, management models of such recognizable authorities in the field of management as Henry Minzberg, Warren Bernis, Fill Hodgeson, Rendell White, Jay Forester, etc.
When other famous businessmen – for example, Bill Gates – found their popularity by their innovations and ability to choose time for serious business deals; the success of Rupert Murdoch is based on his ability to be a perfect manager. Essence of this quality and main reasons of his career success the author tried to catch by formulating 10 secrets of successful business.
Murdoch is follower of old school of management. In description of professional way of ambitious manager you will not find “motives” which are so popular nowadays, as constant learning, delegation of extreme powers and responsibility. Business is a war, and life, by opinion of businessman, is nothing more nor less than “series of interconnected wars”.
Rupert Murdoch was born in Melbourne (Australia). He was a son of famous Australian military correspondent and publicist Sir Kate Murdoch (1886-1952) (Andrew Walker, p.5). After he graduated from Worchester college (Oxford, 1953) he inherited from his father two newspapers in Adelaide (Australia) – “Sunday Mail” and “The News”. In 1969 he bought his first newspaper in Great Britain – London “News of the World”.
Four years later he bought already two newspapers in the USA: “San Antonio News” (subsequently “Express-News”) and “Texas News”. In 1974 Murdoch finally settles down in New York and continues his business, buying more and more newspapers. From the beginning of 80-s people start to speak about Murdoch as one of biggest media-magnates of the world. After he bought in 1985 studio XX Century Fox Films, his power started to spread over cinema, and later over TV-industry as well.
Nowadays Rupert Murdoch is giant mammoth of Empire The News Corporation Ltd (Woopidoo! Biographies Business Masters, p.1), which consists of three regional colossi – News Ltd (Australia), News International (Great Britain) and News America Holdings Inc. (USA).
Totally News Corporation, which states a value of $30 milliards, consists of approximately 800 companies, from which 52 are quite big. The biggest enterprises: BSkyS, Los Angeles Dodgers, XX Century Fox Film and Star TV (Center for American Progress p.1). Annual income of Rupert Murdoch Empire was approximately $12 milliards during those years.
Rupert Murdoch is really prominent figure. By opinion of the author Stuart Crainer, co-founder of consulting company Suntop Media, in civil social conscience rules such a vicious image of Murdoch that nobody would like to share the same room with such a person.
Society remembers that already at the beginning of his career magnate didn’t disdain to use such means as to publish in once serious issues erotic and scandal materials; he fired his own workers without any compunction; in other words, he used everything, which in his opinion, in any way could assist in development of media giant (Capstonideas.com, p.1).

Total amount of holdings News Corporation

Information Systems Corporation: Transfer Prices and Goal Congruence.
The plant’s costs for the semiconductors are higher than the competitor’s market prices since its manufacturing costs are primarily fixed. This means that the cost per unit depends on how much is produced. The more semiconductors produced, the lower the cost per unit will be. On the reverse, the lesser the units produced, the higher the cost per unit will be. With the influx of high quality semi-conductors from the non-US companies with a price at or below that of the Semiconductor division, the product divisions began buying from external sources instead of purchasing within the company.

Since the production of the Semiconductor division is responsive to the demand for its products, it lessened its production as the demand declined resulting to a higher cost per unit for the semiconductors produced. Question 2: The controller should consider encouraging the product divisions to purchase from the Semiconductor division up to the latter’s unused capacity and purchasing the rest from external suppliers since this provides for better goal congruence. Since the Semiconductor division is operating with an unused capacity, it will not incur additional costs to accommodate such orders.

The production divisions will even be helping the Semiconductor division to lower its cost per unit. Also since it is an interdivisional transfer, it has no net effect on Information Systems Corporation as a whole. With respect to the other needed quantities, it would better serve the interest of the company if the production divisions purchase from external suppliers who offer lower prices since in such a case, the Semiconductor will need to incur additional costs to accommodate the extra orders.
Compared to the present scenario where the production division managers purchase all the standard semiconductors from external suppliers which results to sub-optimization, or the situation that transpires when managers do not act in the best interests of the company as a whole (Garrison & Noreen, 2000), the proposed alternative is more beneficial for the Information Systems Corporation as a whole. In connection with this suggestion, the company should consider revising its policy of evaluating its profits centers on profitability alone by taking into consideration other factors such as the above mentioned.
Question 3: All transfer pricing methods has its share of its disadvantages be it negotiated, at cost or at market price. For the case of Information Systems Corporation, the recommended method would be the negotiated transfer prices. This method maintains the independence of the divisions consistent with the spirit of decentralization and is also conducive to more informed managers with regard to the costs and benefits of the transfer to the Information Systems Corporation as a whole (Garrison & Noreen, 2000).
Given that in committing to buy RAMS from the Semiconductor division the production division managers are not assured that the cost and price will not increase later should the selling division fail to meet the planned volumes or its cost objectives, coupled with the reasonable assumption that both divisions will act to maximize their respective profits, the negotiated transfer pricing best provides for better goal congruence.
Both the selling and purchasing divisions will be acting in the best possible manner for their respective segments since they are being evaluated as profit centers at the same time the company’s overall goal is observed at their levels, resulting to an overall benefit for Information Systems Corporation. Reference Garrison, R. H. , & Noreen, E. W. (2000). Managerial Accounting Ninth Edition. United States of America: Irwin McGraw-Hill.

Information Systems Corporation: Transfer Prices and Goal Congruence

Fedex Corporation Essay.
Federal Express (FedEx) Corporation could be said to be the world’s leading shipping company which was originally known as FDX Corp. In January 1998, it acquired Caliber Systems Inc. and through the sales made the company sort to build and expand on basis of its strength in delivery services. Today, it has several companies that compete under the same name and logo, mainly: FedEx Express, FedEx Ground, FedEx Freight, FedEx Office, FedEx Custom Critical, FedEx Trade Networks and FedEx Services. Fed-ex could easily be assumed to have all the necessary resources needed to run its everyday operations.

It is true that this company is well equipped with the latest technology, machinery and transportation we could think of. Aside from this, the company could look into introducing a training program that could gradually build to become a training institution. It may not be as far-fetched as it sounds because this company has been able to acquire a global reputation that is commendable. All these within a matter of years. Having a training program that seeks to coach those hoping to work for or with FedEx, would boost customer confidence in the company.

(Madan, 2005, P. 14) The training program would offer training in all areas and aspects of FedEx. From management to baggage handling to packaging and transportation to customer care and relations. It is an investment project that could be worthwhile in the future. The trainees would be trained by the best in the field and in turn provide the best services in the field. FedEx has numerous competitors in the courier industry but has emerged top courier provider in the United States, thanks to its strategic plans and direction.
Having the training program assures the company’s stakeholders of quality production and service. Of course for this program to be in effect, funds have to be provided. FedEx has a net income of US$ 765 million (financial statements 2010, Q3) and so with proper planning, installment of the program would not be hindered by lack of funding par se. There are a number of challenges that the program could face before inception into the organization. They include, cost of risk, inception and general operating costs for the program, politics involved in trying to get it through committees and public relations.
Looking into the cost of risk involved in introducing this program, they stand undesirable to some extent. On one end, a training program ensures of a better future in terms of the company’s investor and stakeholder relations. It will increase their confidence and trust in the company as a company that seeks to be the best in the world. (Madan, 2005, P. 15) On the other end, the move to implement this new program could be the worst decision made if the results do not reflect the projections made when the idea was first introduced.
I have chosen to assume a growth projection of 15% upon implementation of the program. The computations on revenue, operating income and net income are done against the financial reports in 2009. It is a long-term project as results will start to show once training has commenced and the first students have implemented what they have learnt. This could be estimated to take 6-9 months. (Thareja & Capstone project, 1999, P. 24) The general costs of operation and other expenses will increase as a result of the program’s implementation.
For a while before the company breaks-even, less profits or even losses will be felt but with the 15% projection, returns will be worth it. The organizational structure of any company is an important part that could determine the order of operations and decision-making. Through my research I have come to understand FedEx to be a very flexible employer and regards it employees with such high esteem. As to such, top management is open to suggestions from anyone and everyone within the organization, who feels that their idea could help the organization attain its goals.
Although it is not very clear, I want to believe that the same relaxed mode goes with decision-making. Bringing forth a proposal such as this is not easy if the flow of communication is too tight. Such a channel discourages creativeness among employees and thus the company misses out on great chances at innovations and advancements. This also encourages internal politics that are not healthy and could hinder effective flow of communication. Internal politics only slows work down and results in sub-standard products and services.
Public relation is another sensitive area in relation to a company’s growth and development. It is the same public that you rely on for your very existence. Therefore, it is with utmost importance that FedEx treats its stakeholders with the respect accorded to them. If a company has a bad public image, then it is almost of no use to encourage people to join your organization for the training program. Good public image translates to good public response and support to your services and new ideas. (Wetherbe, 2000, P. 27) CONCLUSION
Generally, FedEx is a good employer and it is clear that they want their employees to work under conducive conditions. Similarly, the company expects the staff to be at their best and perform beyond expectations. With rapid technological advances and increasing management styles, the training program will ensure tat FedEx stays ahead of its competitors and have the upper hand with the economy and market share. It is one of their goals to be the global leader in offering this transportation service. Installing this program could be a step in the right direction!

Fedex Corporation Essay

ZOLL Medical Corporation Strategic Marketing.
The U. S. market is the largest single consumer of medical equipment and supplies in the world. Similarly, U. S medical technology equipment manufacturing companies are the global market leaders in medical device production. The domestic external defibrillator market has been segmented into primary and secondary segments. Primary markets include; hospitals, pre-hospital, the public access markets, and the alternative health care markets. Hospital market is further subdivided into the acute care hospitals, non-acute centres, the non-treatment areas, and military care areas.
Within these areas, there are unique defibrillators purchasing patterns which have developed distinct solutions for combating sudden cardiac arrest (SDA). The end users in this market are the doctors and nurses. Pre-hospital markets are the first responders or the initial medical personnel on the scene. Emergency response e. g. ambulances, also, the professionally medically trained personnel are the primary users. Also targeted are paramedics who have advanced life-saver training or the emergency responsive teams with the basic life saver training (BLS).
Others in this category are fire-fighters and the police who usually are the first to arrive at the scene of emergency. 2. 0 Situational Analysis U. S. external defibrillator market was uniformly divided in 2004, between the pre- hospital at 29. 9 percent, hospitals at 30. 2 percent, and the public access markets at 29. 5 percent. The alternative care sector had 10. 3 percent. The public access sector will however overtake the other segments by 2006, and with forecasts of 36. 2 percent by 2011. The conventional hospital and pre-hospital segments external defibrillator markets are expected to shrink from 33.

1 and 38. 6 percent market allocation in 2001 respectively, to a low of 26. 2 and 25. 2 percent market share correspondingly. Public access market is the latest and potentially largest frontier for the automated external defibrillators devices which consists of all non- public facilities. This are meant to ensure the defibrillator devices are located within easy reach of the general public or any potential victims, hence minimize the response time. All the emergency response teams are also targeted.
Penetration of this market by automated external defibrillators has been made possible due to the portability of the devices, the ease of use, and affordability. Public members like the untrained co-workers, passer-by, and a family member are the intended end users. However, in some public places, trained professional personnel are usually the intended end users. The last segment is the alternate health care market. This encompasses the ambulance services which include the doctor’s offices, dentists, outpatient surgical centres, medical diagnostic laboratories and hospices.
2. 1: Environment Approximately 450,000 people die from sudden cardiac arrest (SCA) in USA alone. This has led to rapid expansion of the external defibrillator market from the early 1990s. Defibrillators are handy electronic devices that mechanically treat sudden cardiac arrest (SCA). They detect potentially mortal cardiac arrhythmias of ventricular fibrillation and ventricular tachycardia in a trauma victim and are able to treat the same through defibrillation or the application of a controlled electrical therapy which ‘arrest’ the arrhythmia.
This has led to rapid expansion of the external defibrillator market from the early 1990s. The devices were initially set up in hospitals in the 1960s. Using monophasic waveforms, the early technology were set up in health centres in the form of crash carts. This technology was only changed in the 1990s, when the biphasic waveforms were initiated. This new technology allowed for less power shocks while stabilizing and even improving shock effectiveness. Even with this improvements studies showed that the slow response by the emergency teams were still contributing to high mortality rates.
The industry is therefore still under pressure for improvement in technology development and expanded device placements in order to improve the survival rates. This has made the external defibrillators market to be of high growth, with the potential of revolutionizing the emergency resuscitation treatment. 2. 2: Industry The U. S. external defibrillator market penetration is dependent on the specific market and device segment. Initially defibrillators were only located at medical treatment areas however, the public access market was largely neglected.
The seven firms engaged in the automated external defibrillators development in the U. S. can be categorized into three segments according to size. The first segment is composed of the firms not confined to the automated external defibrillators only, but further engages in other medical equipment devices development. The other group is composed of the firms which mainly deal with automated external defibrillators, and lastly the small defibrillator company start up firms. The first group is composed of Medtronic Emergency Response; Philips Medical; Zoll Medical and Welch Allyn.
The second segment has Cardiac Science, while the last grouping is made up of Defibtech and Heartsine. The market leader is Medtronic Emergency Response with a 42. 9 percent share, with Philips next at 24. 0 percent and Zoll at 21. 3 percent. The balance is held by Cardiac Science which has 5. 2 percent and Welch Allyn at 4. 7percent. Heartsine and Defibtech have minimal share of the market. Medtronicshare of the market has slipped from the high of 47percent in 2002 with the entry of Heartsine and Defibtech in the market coupled with the acquisition of MRL by Welch Allyn.
These changes seem insignificant in view of the tremendous growth in the external defibrillator market. The market share equation is expected to remain uninterrupted if no new technology is unveiled in the near future. 2. 3: Organization Zoll Medical Corporation is one of the major resuscitation solutions providers. Its principal activities are to design, manufacture and market non-invasive cardiac resuscitation devices and related software. It’s a financially stable public company which has a reputable product and reliable record.
Zoll develops comprehensive resuscitation technologies that include external defibrillators, pacemakers, disposable electrodes and other accessories. This are sold in mainly in the US market and more than 140 other countries. The company has direct operations, distributor networks, and business partners throughout the US, Canada, Latin America, Europe, the Middle East and Africa, Asia and Australia. Zoll Corporation is the third largest manufacturer and distributor of automatic and non-automatic external defibrillators
To be the market leader, it needs to have diverse market strategies. 2. 4: Market Strategy Zoll Medical Corporation has being steadily diversifying its products by acquiring several additional resuscitation technology developing companies. This has enhanced its potential to be granted large contracts in the medical professional sector, with its enhanced product portfolio, for example, hospitals and similar emergency medical services center. A product, Infuse has penetrated the lucrative military market.
Its CPR focused product line has the new additions like AutoPulse Resuscitation System and the ResQPOD Circulatory Enhancer. Zoll also has acquired device patents, which are integral to its future technology development with defibrillators. Zoll is the third largest company in the U. S. market for defibrillators. Zoll market strategies are clearly geared towards further market penetration, but the firm has yet to really challenge the market players in the lucrative hospital segment and the potentially high growth public access markets.
Its market strategies should be more focused on the mass market segment with its new CPR aligned devices. 3: Problems Found in Situational Analysis 3. 1: Statement of Primary Problem: Targeting the Wrong Customer Zoll has mainly been focusing on the non-AED devices market rather. This market is dominated by Medtronic with Phillips second and Zoll. Zoll Medical focus on non-AEDs is misplaced in view of the projected future market forecasts. (Frost and Sullivan – 2005) With the AEDs market expected to dominate the market reaching a high of 92.
5 percent of all unit shipments by 2011, the AEDs will be dominating the market in the future. 3. 2. Statement of Secondary Problem: Producing Premium Products for a Commodity Market Zoll should re-focus on development of production cost effective models that will sustain its revenue. The company’s AEDs products are too expensive to the company in terms in terms of their production costs. The high production costs erode the company’s revenue base. The company should produce devices that are less cost effective while maintaining its high quality. 4.
Strategic Alternatives for Solving Problems 4. 1: Alternative 1 Zoll Medical can initiate the following alternatives. The company should focus on designing and developing a device that has low production costs. This is due to the fact that the main problem affecting manufacturers of the AEDs is low unit price due to the price sensitive nature of the market. The new device can incorporate a feature for administering cardiopulmonary resuscitation (CPR) as there is an ongoing debate on whether CPR should be administered first rather than use of AEDs.
Zoll already has a similar device in the market, hence will only need redesigning. By concentrating on a unique product aimed at minimizing the manufacturing cost, Zoll will have a clear competitive edge over the firms in the market. The product must however maintain the company’s excellent reliability, durability, and easy to use. The more advanced high end products should therefore be limited to the expensive non-AED devices. The projected new devices will enable the company enter the high growth markets in private and public institutions.
Defibtech’s LifeLine AED is an example of such a device. A firm like Zoll Medical with larger distribution channels, high reputation, and vast resources can have huge success by coming up with an efficient reliable device, aimed at mass market. By virtue of being able to minimize costs, the company will realize higher revenues hence concentrate on even better designed mass market products. The potential for the public mass markets which includes homes, health clubs, police cars, shopping malls, theatres etc is very huge and represents the future for the AED manufacturers.
Unlike the heavily crowded hospital market, the mass market penetration is largely un- chartered territory. Defibtech a start-up company has managed to cut a niche targeting ‘small’ markets as dentists offices, physician offices etc. The current defibrillator technology requires high power hence appreciating the manufacturing costs. Developments of a pioneering device aimed at cutting down on the cost of production will dramatically lower its cost price and guarantee Zoll Medical high returns.
It would also benefit from the present consumer awareness and positive drive towards sudden cardiac arrest (SDA) and early defibrillation that are the major drivers in the external defibrillation market. A manufacturing company like Zoll can actively campaign for the enactment of legislation process while supporting the lobbying organisations like the American Heart Association to help hasten the passage of favourable legislation. This includes the adjustment of the Good Samaritan legislation to allow a manufacturer to only follow the laws of the state where it is domesticated.
Lobbying for legislation to requiring placements of the AEDs in specific areas like health clubs. 4. 2: Description of Strategic Alternative 2 Another alternative a firm like Zoll Medical can use is in enhancing its revenues and market share is the development of dual-mode AEDs. These are devices designed to have the capabilities of the basic AEDs plus the more advanced non-automatic external defibrillators. This hybrid device will be the balance to counteract the inexpensive basic AEDs which are pulling down the manufacturers profits, by incorporating the more advanced manual features employed in the non-AEDs.
This dual-mode device will be moderately priced hence ease the pressure on the manufacturing firms, while at the same time not be too primitively expensive for the semi-professional consumers. These groups include the police, hospitals, EMS, and fire departments that can be equipped with these dual-mode devices. These dual-mode devices can be aggressively marketed to the specific institutions to encourage greater sales for the companies. The strategy of using dual-mode devices should also ensure the continued use of the basic AEDs to help sustain the current market and similarly the expensive non-AEDs to also maintain that market.
The development of the dual-mode devices should therefore be complimentary to the other existing defibrillators and enact a fresh market segment thereby enhancing the manufacturing firm’s revenues. Phillips’ HeartStart FR2+ device is an enduring example of this market model. This alternative should be coupled with manufacturers enhancing and maintaining their distribution lines. By using the distributors who already have established programs, they will be able to assist Zoll Medical in the fitting, maintenance of the devices and instruction on use with the consumers.
The distributors, who have other equipment on site, will be in a better position to extend the same maintenance services to the AEDs devices. This is after also undergoing own training with Zoll Medical. This service integration will benefit both Zoll Medical by reducing costs and the distributors as the latter will have a better value preposition with their clientele. To improve revenues, Zoll market strategy for the firm should be focused mainly on the AED market in the public sector. In 2001, non-AED was the major revenue earners with a market segment of 59.
7 percent. Since then, the growth of the AED market has been more rapid and prediction is that it will surpass the non-AED sector by 2005. Public awareness of SCA has driven the growth patterns towards the AED with the need for early defibrillation gaining prominence. Although this sector has less revenue returns, the ability to offload large shipments counteracts the sectors negative price elasticity. It is therefore prudent for a firm to concentrate on this mass market with its tremendous growth potential to secure and enhance its market share.
By 2011, the AED market share is forecasted to be at 57. 3 per cent. (Frost and Sullivan, 2005) 5. 0: Selected Strategic Alternative The first alternative involving concentration on the mass market as the company’s market driver is obviously the better alternative to be used by a firm like Zoll Medical. By emphasizing on its superior technological development and renovation, the company will be able to re-enter the AED market with a low cost, specialized device that will be available easy to use but capable of upstaging other AEDs in the market.
The main objective is to ensure penetration and capture of a unique niche in the public sector. High volume sales for the device which with low production costs will radically improve its market share and revenue. However, the company will still keep its other production lines intact but utilize the same distribution channels. The firm will also lobby for more favourable legislation through the various agencies like American Heart Association (AHA) and state legislators to ensure more public access to its products. Summary The U. S. external defibrillator market has very good prospects for growth.
This is evident in the widespread public awareness of the importance of application of defibrillator to offset sudden cardiac arrest (SCA) to trauma victims. The implication of litigation against public institutions has also led to the urgency of the installations of the AEDs. There is also pressure on the legislators to enact appropriate laws concerning the AEDs across the country. Zoll Medical Corporation as one of the manufacturing firms in the AED market needed to implement appropriate marketing strategies towards exploiting the favorable demand market for the AEDs by initiating the right mix of marketing strategies.
References
Medical Equipment Industry, Paddock, Richard, Hein, Matthew DOC/ITA/MAS/OHCG, (202; C/ITA/MAS/OHCG, (202) 482-5014) 482-3360 Medical Device Daily, The Daily Medical Technology Newspaper, June 23, 2004 Vol. 8 No. 120 Special report, Defibtech gains a niche in very competitive AED Market Johnson, Holland (2004) Cardiac Science Announces Exclusive Partnership with the City of San Diego To Outfit Automated External Defibrillators Throughout The City, www. cardiacscience. com American Heart Association: Learn & Live, available from, www.
amaericanheart. org (Retrieved October 21, 2008) American Red Cross: Saving a Life is as Easy as A-E-D available from, www. redcross. org (Retrieved October 21, 2008) FDA Heart Health Online: Automated External Defibrillator (AED), available from, www. fda. gov/hearthealth/treatments/medicaldevices/aed. html (Retrieved October 21, 2008) State Laws on Heart Attacks, Cardiac Arrest & Defibrillators, available from, www. ncsl. org/programs/health/aed. html (Retrieved October 21, 2008)

ZOLL Medical Corporation Strategic Marketing

Rondell Data Corporation.
The Rondell Data Corporation was founded in 1920 to manufacture the electrical testing devices invented by Bob Rondell. Over the years, Rondell built its reputation as a source of “high-quality, innovative designs”. Delays in releasing the new Model 802 wide-band modulator has begun to put that reputation at stake and caused increased pressure among production and engineering staff. (Daft, pg 531-538) Rondell operates with the functional structure (Daft, pg 107), that doesn’t appear to function effeciently. The Director of Engineering has seen high turnover having had a new leader each of the past three years.
It appears that this position is been designated as the company “scapegoat” (McGinnis, 2009) and therefore being blamed for all the problems that Rondell is facing with releasing the 802 modulator. Rondell has failed in adapting to the changing environments (Daft, pg 149) that can keep the company moving in a forward direction. There is an appearance that the company’s departments still operate in their specific silo’s (BusinessDictionary). According to the Production Supervisor, Dave Schwab, “to be efficient, production has to be self-contained” and “other departments should be self-contained as well”. Daft, pg 537) As such, they do not share needed information across departments or assist in problem solving by offering solutions based on their department observations.
A prime example lies in the opening portion of the case study in which Frank, the Director of Engineering services, received a message back that the model released for production “can’t be produced either…” . (Daft, pg 531). While the reader is not given the full content of the message, I was left with the assumption that it did not go much past what is shown. Ideally, the note would have contained information that said “this can’t be produced because…. however, if we try to…. ”. Not only would the message relay the problem as to why the design couldn’t be produced, it might provide a direction for engineering to pursue. “People at the grassroots level are often able to see and interpret changes or problems sooner than managers”. (Daft, pg 151) Rondell continues to be mired in it’s past successes. The culture leaves it difficult for them to change based on the established view points of their leaders – the old timers. (Daft, pg 188). Doc wants to move at his own pace and to do “his own thing” (Daft, pg 532).

He doesn’t feel the same pressure as his boss and doesn’t have a sense of accountability to the company. Frank Forbus was just the latest in the line of scapegoats to go through Rondell. Jim Kilman most likely would have been successful but the sense is Rondell is extremely reluctant to change. Rondell should research other organizational structures such as a horizontal structure (Daft, pg 125) which would promote team work and collaboration throughout the organization to stop the engineering revolving door and restore the company’s reputation.
References
BusinessDictionary. (n. d. ). Retrieved November 10, 2012, from BusinessDictionary. com: http://www. businessdictionary. com/definition/silo-mentality. html Daft, R. L. (2008). Organization Theory and Design (Vol. 10). South-Western Cengage Learning. McGinnis, A. (2009, November 24). The Scapegoat Theory; Are You or Someone You Know a Scapegoat. Retrieved November 10, 2012, from Yahoo Voices: http://voices. yahoo. com/the-scapegoat-theory-someone-know-a-4951510. html? cat=5

Rondell Data Corporation