PRAGATI EDUCATION SOCIETY

NATIONAL INSTITUTE OF RETAIL MANAGEMENT

MARKS : 80 COURSE :

MRM

SUB : GENERAL MANAGEMENT

N. B. : 1) Attempt any Four Cases 2) All questions carries equal marks.

Case: 1

TRI – STATE TELEPHONE

John Godwin, Chief executive of Tri – State Telephone, leaned back in his

chair and looked at the ceiling. How was he ever going to get out of this

mess ? At last night’s public hearing. 150 angry customers had marched

in to protest Tri – State’s latest rate request. After the rancorous shouting

was over and the acrimonious signs put away, the protesters had

presented state regulators with some sophisticated economic analyses in

support of their case. Additionally, there were a number of emotional

appeals from elderly customers who regarded phone service as their

lifeline to the outside world.

Tri – State Telephone operated in three states and had sales of over $3

billion. During the last five years, the company had experienced a

tremendous amount of change. In 1984, the AT & T divestiture sent shock

waves throughout the industry, and Tri-State Telephone had felt the

effects, as pricing for long distance telephone service changed

dramatically. The Federal Communications Commission instituted a

charge to the effect that customers should have “access” to long –

distance companies whether or not they were in the habit of making long

distance calls. Consumer groups, including the Consumer Federation of

America and the Congress of Consumer Organizations, had joined the

protest, increasing their attention on the industry and intervening in

regulatory proceedings wherever possible. The FCC was considering

deregulating as much of the industry as possible, and congress was

looking over the commissioner’s shoulder. Meanwhile, the Department of

1

Justice and Judge Harold Greene both of whom were responsible for

monitoring the AT & T divestiture) continued to argue about what

business companies like Tri – State should be engaged in.

In addition, technology was changing rapidly. Cellular telephones,

primarily used in cars, were now hand-held and could be substituted for

standard phones. Digital technology was going forward, leading to lower

casts and requiring companies like Tri – state to invest to keep up with the

state of the art. Meanwhile, rate increases negotiated during the

inflationary 1970s were keeping earnings higher than regulators would

authorize. New “Intelligent” terminals and software developments gave

rise to new uses for the phone network (such as using the phone for an a

arm system), but as long as customers paid one flat fee, the phone

company could not benefit from these new services.

Godwin’s company has recently proposed a new pricing system

whereby users of local telephone services would simply pay for what they

used rather than a monthly flat fee. All of the senior managers were

convinced that the plan was fairer, even though some groups who used

the phone with netable frequency (like real estate agents) would pay

more. It would give the company an incentive to bring new services to

their customers, and customers would be able to choose which ones to

buy. None of them had anticipated the hue and cry from the very

customers who would save money under the new plan. For instance,

Godwin’s studies showed that the elderly were very light users of local

service and could save as much as 20 percent under the new plan.

After the debacle at the hearing the previous night, Godwin was

unsure how to proceed. If he backed off the new pricing plan, he would

have to find a different way to meet the challenges of the future – may be

even different businesses to augment company income. Alternatively, the

company could not stand the negative press from a protracted battle,

even though Godwin thought that the regulators were favorably disposed

toward his plan. In fact, Godwin himself believed the company should

help its customers rather than fight with them.

Questions :

1. Who are the stakeholders in this case ?

2

2. Which stakeholders are most important ?

3. What are the critical trends in Tri – State’s environment ?

4. Why do you think Tri – State’s customers are so upset ?

5. What should John Godwin do ?

CASE NO. 2

FRESH IDEAS AT FRESH FIELDS

Fresh Fields may be a supermarket, but what it’s super at selling is its

image : “Good for you foods.”

A New Age grocery store, Fresh Fields falls somewhere between a

health food store and a traditional supermarket. It is not merely a health

food store, because it carries a wider variety of foods including fresh

pasta, baked goods, seafood and deli selections. What distinguishes

Fresh Fields from supermarkets lies in what is absent from the shelves,

rather than what is present, for Fresh Fields shoppers will not find foods

containing lots of preservatives and artificial flavourings, such as Jell – O

and Oreos, that they can purchase at other supermarkets. What Fresh

Fields offers is “ organic and conventional produce, meats, seafood, dairy

products, baked goods from an in – store bakery, deli items gourmet and

vegetarian prepared foods, a wide array of cheese, a full grocery

department, an extensive selection of supplements, skin enriching

cosmetics and natural health care products and environmentally friendly

household goods.”

3

The arrival of Fresh Fields coincides with that of the New Age, health

– conscious trend of the 1990s, and the company has not hesitated in

taking advantage of consumers’ new whopping preferences resulting from

the trend. According to a 1992 survey by Health Focus, a Pennsylvania –

based research firm, 90 percent of shoppers say that health has become a

factor in determining the food they buy. This perhaps accounts for why

many Americans are willing to pay up to 20 percent more for natural

foods. Actually, the Fresh Fields premium tends to hover closer to 5

percent, and when in season, Fresh Field’s locally grown organic produce

can even cost less than produce sold at other supermarkets.

A team of entrepreneurs began Fresh Fields in 1991. The team

included 33 year old Mark Ordan, former Goldman Sachs investment

banker as CEO and President, 75 years Old Leo Kahn, founder of Staples,

the prosperous office – supply sores, as chairman and 44 year old Jack

Murphy, former manager of the Heartland supermarket chain in New

England, as Chief operating officer.

Within the first 19 months, five Fresh Fields locations opened in

Maryland and Virginia. Expanding into Pennsylvania and Illinois, by mid –

1994 Fresh Fields had opened a total of 14 stores in the four states, with

more in the planning stages.

Much of Fresh Field’s success can be attributed to the fact that the

company offers only the freshest produce, often from local growers. The

company screens growers to find those who use natural methods of pest

management and apply the least amount of agricultural chemicals. In

addition, Fresh Fields seeks meat and poultry from farms, not factories, to

avoid the growth – promoting drugs often used. Fresh Fields also makes

an effort to get to know the people who catch the seafood, and seeks out

fish caught in deep, clean waters, not from coastal waters threatened by

pollution.

According to Kahn, though, the key to Fresh Field’s success lies in

pleasing the customer. “ Everybody says the same things please the

customer – but while everybody says it, not too many practice it. The

customer is smarter than all of us. Here we’re building an organization

that zeroes in and keeps customer satisfaction in mind.”

4

Instilled in Fresh Fields is a warm, friendly caring culture that begins

with Kahn and travels through to all stakeholders: employees, suppliers,

customers, community members. Whereas at other stores, such as Wal –

Mart, there is a single, symbolic greeter by the door, every employee at

Fresh Field is a sort of “ greeter”, and he or she looks up, smiles and says

“hello” to shoppers as they pass by. Within the company, there are no

employees, there are only “associates” many of whom Kahn knows by

name.

Much of what Fresh Fields is about is relationship building. The

warm relationship between the company and associates lies at the heart.

From there, associates build relationship with suppliers to add the

personal touch that is integral to the Fresh Fields quality image.

As shoppers walk through the stores, numerous samples are

offered.

“ Originally, I bought organic produce and spent $25 to $30 every week or

two.” Says Merri Mukai, a homemaker in Annandale, Virginia. “Then I

tried the baked goods and upped my spending by $60. Now I’m buying

meats and eyeing the fish. They’ve definitely got me hooked.”

Says Fresh Fields, “We guarantee your satisfaction unconditionally.

You can consider our guarantee as an opportunity to be adventurous and

to try new products, without risk. If for any reason you are less than

completely satisfied with something you purchase at Fresh Fields, we will

cheerfully offer you a full refund.”

Questions :

1. What economic and social factors should Fresh Fields

managers watch ?

2. Suppose you manage a local supermarket and Fresh Fields

comes to town. How would you reinvent your

organization to meet the challenges posed by Fresh

Fields ?

5

Case: 3

RESPONDING TO ALLEGATIONS OF RACISM :

FLAGSTAR AND THE PLEDG

The 1990 s have witnessed an increased emphasis on valuing diversity.

With both the marketplace and the workforce becoming more and more

diverse, many managers have redesigned their companies cultures to

reflect and encourage multiculturalism. Changing a company’s culture,

however, is often more difficult than managers might first believe. At

Denny”s for example, promoting multiculturalism required a reworking of

its corporate culture from top to bottom.

In the early 1990s, Denny’s found itself the target of numerous

allegations of racism, by both customers and employees. Black customers

asserted that they were not receiving the same treatment at Denny’s as

white customers. Some complained that they were either forced to wait

for their food longer than white customers or denied service entirely,

others said that they were forced to pre-pay for their meals while white

customers in the restaurant were not. There were also allegations that

Denny’s restaurants would close if there were too many black customers.

In addition, Denny’s was accused of discriminatory hiring practices as well

as preventing blacks and other minorities from reaching management and

franchise positions. None of this garnered much attention, however, until

a suit was filed on March 24, 1993, by a group of minority customers in

San Jose, California, who made the all – too – familiar allegation that

Denny’s had required cover charges and pre-payment of meals from

minority customers, but not from white customers.

In response to these charges, Denny’s parent company, Flagstar,

formally apologized to the customers, and Flagstar CEO Jerry Richardson

dropped the cover charge and pre-payment policies and explained that

they had been intended to prevent late night “ dine – and – dash” theft

and that any discriminatory implementation of them was in direct

violation of corporate policies. Richardson admitted, however, that he had

been unaware that the cover charge and pre-payment policies even

existed within the company. Furthermore, Richardson began talks with

civil rights groups such as the NAACP. Flagstar also signed a consent

6

decree issued by the Justice Department that required spot testing of

Denny’s restaurants for discriminatory practices as well as an anti-

discrimination training program for all Denny’s staffers. “ Our company

does not tolerate discrimination of any kind,” Richardson assured all, and

his actions seemed to support his words.

Then, on May 24, 1993, six black Secret Service agents filed suit

against Denny’s for allegedly having denied them service at a Denny’s in

Annapolis, Maryland. The six men claimed that while they received

deliberately slow service, their white counter parts were served in a timely

fashion. “Hearing the allegations made yesterday by Six African –

American Secret Service agents on national television that they were not

treated fairly at Denny’s was a painful experience for our company,”

Richardson admitted.

The highly publicized suit served as a catalyst that set off a

whirlwind of changes throughout Flagstar. In a late May Richardson

issued an internal memo that marked the beginning of Richardson’s

pledge to change. “ I am distressed that some people in our company

haven’t gotten the message that we will not tolerate unfair treatment of

customers,” he wrote. “ The past year has been a trying experience,

particularly for many of our African – American employees who are

embarrassed by what happened. This is my personal pledge to them to

restore their pride in Denny’s.

Richardson stopped promising change and started creating it. On

July 1, 1993, Flagstar reached an historic agreement with the NAACP. The

agreement, which was the most far-reaching arrangement the civil –

rights organization had ever signed, represented a breakthrough in

relations between minorities and businesses. The plan targeted several

specific problem areas within Flagstar. For example, of Flagstar’s more

than 120,000 workers, 20 percent were black, but only 4.4. percent of its

managers were black. Under the agreement, at least 12 percent of

Flagstar’s managers will be black by the 2000. The company also wanted

to increase the number of black-owned franchises; only one of Denny’s

405 franchises was owned by a black person as of 1993, but Flagstar

planned to have at least 53 black-owned franchise by 1997. Flagstar also

7

agreed to direct more marketing funds toward minority advertising and to

begin purchasing more goods and services from minority – owned

businesses. In addition, Flagstar promised to appoint at least one

minority to its board of directors. In all the plan will direct more than one

billion dollars in jobs and economic benefits to minority workers and

companies by the year 2000.

Richardson also undertook efforts to restore Denny”s reputation as

well as his own. At the forefront of his efforts was “The Pledge”. “The

Pledge” was the name given to a 60 – second TV spot, which aired in 41

television markets and on the Black Entertainment Television network

during a two-week period in June 1993. In it, Jerry Richardson and a

representative sample of Flagstar’s 46,000 employees endorsed a solemn

pledge to treat customers with “respect, diginity, and fairness.” “The

whole idea for the ‘pledge’ started with our desire to express support for

our own employees.” Explained David Hurwitt, Flagstar’s senior vice

president of marketing. “ These people have been very much under the

gun. We chose television for this special campaign because we felt it was

important to show people exactly who the Denny’s employees are”.

Overall, response to “ The Pledge” was favourable. “ Our phone has been

ringing off the hook since Denny’s aired this ad,” said W. Gregory Wims,

president of the NAACP in Rockville, Maryland, the largest branch in the

Washington, D.C.area. “About 90 percent of our members approve of the

commercials and the steps Denny’s has been taking to improve relations

with people of color.

Experience, however, had taught Flagstar that mere policy

statements do little good in the absence of training and monitoring. With

this in mind, Flagstar reaffirmed its commitment to its agreement with the

Department of Justice by steping up its multicultural training programs

and agreeing to allow the NAACP to conduct its own inspection of Denny’s

restaurants. Denny’s also set up a hot line for employees to use to report

possible instances of discrimination. In addition, Flagstar made significant

management changes during the summer of 1993 by installing three

executives considered particularly sensitive to diversity in the workplace:

Norman Hill, Joe Russell, and Ron Petty. Russell was appointed head of

8

the diversity training program, and Hill came on board to oversee field

hiring. “ There are companies that bury their heads in the sand and say,

I’m going to conduct my business the same way I’ve always conducted my

business,” said Petty. “ And then there are enlightened companies that

say, “There are opportunities outside of the way we’ve normally done

business.”

The steps taken by Flagstar have been significant, not only because

of the model the company has set for other companies, but also because

of Flagstar’s own holdings, including 530 Hardee’s fast food units, 1,400

Denny’s family restaurants, 200 Quincy’s steak houses, 120 El Pollo Loco

outlets and more than 2,000 Canteen Corp. Food and Recreation Service

accounts. The community’s response to the allegations against Denny’s

confirm that multiculturalism can no longer be ignored.

Questions :

1. How would you describe the organizational culture at

Flagstar ?

2. How does Flagstar deal with diversity ?

3. What challenges could Flagstar face in its near future ?

Case: 4

DISNEY’S DESIGN

The Walt Disney Company is heralded as the world’s largest

entertainment company. It has earned this astounding reputation through

tight control over the entire operation : control over the open – ended

brainstorming that takes place 24 hours a day ; control over the engineers

who construct the fabulous theme – park rides; control over the animators

9

who create and design beloved characters and adventurous scenarios ;

and control over the talent that brings the many concepts and characters

to life. Although control pervades the company, it is not too strong a grip.

Employees in each department are well aware of their objectives and the

parameters established to meet those objectives. But in conjunction with

the pre-determined responsibilities, managers at Disney encourage

independent and innovative thinking.

People at the company have adopted the phrase “Dream as a

Team” as a reminder that whimsical thoughts, adventurous ideas, and all

– out dreaming are at the core of the company philosophy. The over all

control over each department is tempered by this concept. Disney

managers strive to empower their employees by leaving room for their

creative juices to flow. In fact, managers at Disney do more than

encourage innovation. They demand it. Projects assigned to the staff “

imaginers” seem impossible at first glance. At Disney, doing the

seemingly impossible is part of what innovation means. Teams of

imaginers gather together in a brainstorming session known as the “Blue

Sky” phase. Under the “Blue Sky”, an uninhibited exchange of wild,

ludicrous, outrageous ideas, both “ good” and “ bad”, continues until

solutions are found and the impossible is done. By demanding so much of

their employees, Disney managers effectively drive their employees to be

creative.

Current Disney leader Michael Eisner has established the “Dream as

a Team” concept. Eisner realized that managers at Disney needed to let

their employees brainstorm and create with support. As Disney president

Frank Weds says, “If a good idea is there, you know it, you feel it, you do

it, no matter where it comes from.”

Questions :

1. What environmental factors influenced management style at

Disney ?

2. What kind(s) of organizational structure seem to be

consistent with “Dream as a Team” ?

10

3. How and where might the informal organization be a real

asset at

Disney ?

Case: 5

“ THAT’S NOT MY JOB” – LEARNING DELEGATION

AT CIN-MADE

When Robert Frey purchased Cin – Made in 1984, the company was near

ruin. The Cincinnati, Ohi-based manufacturer of paper packaging had not

altered its product line in 20 years. Labor costs had hit the ceiling, while

profits were falling through the floor. A solid quarter of the company’s

shipments were late and absenteeism was high. Management and

workers were at each other’s throats.

Ten years later, Cin – Made is producing a new assortment of highly

differentiated composite cans, and pre-tax profits have increased more

than five times. The Cin – Made workforce is both flexible and deeply

committed to the success of the company. On-time delivery of products

has reached 98 percent, and absenteeism has virtually disappeared.

There are even plans to form two spin – off companies to be owned and

operated by Cin-Made employees. In fact, at the one day “Future of the

American Workforce” conference held in July 1993, Cin-Made was

recognized by President Clinton as one of the best – run companies in the

United States.

“ How did we achieve this startling turnaround ?” mused Frey.

“Employee empowerment is one part of the answer. Profit sharing is

another.”

In the late spring of 1986, relations between management and labor

had reached rock bottom. Having recently suffered a pay cut, employees

at Cin- Made came to work each day, performed the duties required of

their particular positions, and returned home-nothing more. Frey could

see that his company was suffering. “To survive we needed to stop being

worthy adversaries and start being worthy partners,” he realized. Toward

this end, Frey decided to call a meeting with the union. He offered to

11

restore worker pay to its previous level by the end of the year. On top of

that, he offered something no one expected : a 15 percent share of Cin-

Made’s pre-tax profits. “ I do not choose to own a company that has an

adversarial relationship with its employees.” Frey proclaimed at the

meeting. He therefore proposed a new arrangement that would

encourage a collaborative employee-management relationship

“Employee participation will play an essential role in management.”

Managers within the company were among the first people to

oppose Frey’s new idea of employee involvement. “My three managers

felt they were paid to be worthy adversaries of the unions.” Frey recalled.

It’s what they’d been trained for. It’s what made them good managers.

Moreover, they were not used to participation in any form, certainly not in

decision making.” The workers also resisted the idea of extending

themselves beyond the written requirements of their jobs. “ (Employees)

wanted generous wages and benefits, of course, but they did not want to

take responsibility for anything more than doing their own jobs the way

they had always done them,” Frey noted. Employees were therefore

skeptical of Frey’s overtures toward “employee participation.” “We

thought he was trying to rip us off and shaft us,” explained Ocelia

Williams, one of many Cin-Made employees who distrusted Frey’s plans.

Frey, however, did not give up, and he eventually convinced the

union to agree to his terms. “ I wouldn’t take no for an answer,” he

asserted. “Once I had made my two grand pronouncements, I was

determined to press ahead and make them come true.” But still ahead

lay the considerable challenge of convincing employees to take charge :

I made people meet with me, then instead

Of telling them what to do, I asked them.

They resisted.

“ How can we cut the waste on his run ?” I’d

say, or “How are we going to allocate the

overtime on this order ?”

“That’s not my job,” they’d say.

12

“But I need your input,” I’d say. “How in the

world can we have participative management

if you won’t participate ?

“ I don’t know,” they’d say. “ Because that’s

not my job either. That’ s your job. ?”

Gradually, Frey made progress. Managers began sharing more

information with employees. Frey was able slowly to expand the

responsibilities workers would carry. Managers who were unable to work

with employees left, and union relations began to improve.

Empowerment began to happen. By 1993, Cin Made employees were

taking responsibility for numerous tasks. Williams, for example, used to

operate a tin-slitting machine on the company’s factory floor. She still

runs that same machine, but now is also responsible for ordering almost $

100,000 in supplies.

Williams is just one example of how job roles and duties have been

redefined throughout Cin-Made. Joyce Bell, president of the local union,

still runs the punch press she always has, but now also serves as Cin-

Made’s corporate safety director. The company’s scheduling team,

composed of one manager and five lead workers from various plant areas,

is charged with setting hours, designating layoffs, and deciding when

temporary help is needed. The hiring review team, staffed by three hourly

employees and two managers, is responsible for interviewing applicants

and deciding whom to hire. An employee committee performs both short

– and long – term planning of labor, materials, equipment, production

runs, packing, and delivery. Employees even meet daily in order to set

their own production schedules. “We empower employees to make

decisions, not just have input,” Frey remarked. “I just coach.”

Under Frey’s new management regime, company secrets have

virtually disappeared. All Cin-Made employees, from entry-level

employees all the way to the top, take part in running the company. In

fact, Frey has delegated so much of the company’s operations to its

13

workers that he now feels little in the dark. “ I now know very little about

what’s going on, on a day-to-day basis,” he confessed.

At Cin-Made, empowerment and delegation are more than mere

buzzwords; they are the way of doing business – good business. “ We, as

workers, have a lot of opportunities,” said Williams. “ If we want to take

leadership, it’s offered to us.”

Questions :

1. How were principles of delegation and decentralization

incorporated into Cine – Made operations ?

2. What are the sources and uses of power at Cin – Made ?

3. What were some of the barriers to delegation and

empowerment at Cin –Made ?

4. What lessons about management in a rapidly changing

marketplace can be learned from the experience of

Cin – Made ?

CASE NO. 6

HIGH-TECH ANSWERS TO DISTRIBUTION

PROBLEMS AT ROLLERBLADE

When a manger finds that demand exceeds inventory, the answer lies in

making more goods. When a manager finds that inventory exceeds

demand, the answer lies in making fewer goods. But what if a company

management finds that they just do not know which situation applies ?

14

This is the situation that recently confronted management at

Rollerblade, the popular skate manufacturer based in Minnetonka,

Minnesota. Rollerblade has been one of the leading firms in the fast

growing high performance roller skate marketplace, it matters a great

deal for Rollerblade managers whether demand and inventory are in

balance, or not.

Rollerblade was in a bind. The product literally could not be

shipped out the door. The managers found that workers were not able to

ship products because, as a result of poor storage structures, they could

not find the products. Once they were found, overcrowded aisles, in

addition to other space constraints, still prevented efficient shipping

because the workers could barely manage to get the products out the

door. “ We were out of control because we didn’t know how to use space

and didn’t have enough of it,” said Ian Ellis, director for facilities and

safety. “Basically, there was no more useable space left in the

warehouse, a severe backlog of customer orders, and picking errors were

clearly in the unacceptable range,” added Ram Krishnan, Principal of NRM

Systems, based in St. Paul, Minnesota.

The answer for Rollerblade was found in technology. High-tech

companies have introduced a collection of computer simulations, ranging

in cost roughly from $10,000 to $30,000, that assist managers in

generating effective facility designs. With the help of layout Master IV

simulation software, developed by NRM, Rollerblade Management was

able to implement a new distribution design. As a result of the

distribution improvement, Rollerblade was able to increase the number of

customer orders processed daily from140 to 410 and eliminate order

backlog. “Now we have a different business,” says Ellis. “ The new layout

has taken us from being in a crunch, to being able to plan.

Questions : 1. With retailers as their primary customers, what customer

competitive imperatives could be affected by Rollerblade’s inventory problems ?

2. How appropriate might a just – in – time inventory system be for a product such as roller skates ?”

3. What opportunities are there fore Rollerblade managers to see themselves as selling services, instead of simply roller skates ?

15

16