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 ORGANISATION BEHAVIOUR

 

Note: Solve any 4 Cases Study’s

 

CASE: I    Pushing Paper Can Be Fun

 

A large city government was putting on a number of seminars for managers of various departments throughout the city. At one of these sessions the topic discussed was motivation—how to motivate public servants to do a good job. The plight of a police captain became the central focus of the discussion:

I’ve got a real problem with my officers. They come on the force as young, inexperienced rookies, and we send them out on the street, either in cars or on a beat. They seem to like the contact they have with the public, the action involved in crime prevention, and the apprehension of criminals. They also like helping people out at fires, accidents, and other emergencies.

The problem occurs when they get back to the station. They hate to do the paperwork, and because they dislike it, the job is frequently put off or done inadequately. This lack of attention hurts us later on when we get to court. We need clear, factual reports. They must be highly detailed and unambiguous. As soon as one part of a report is shown to be inadequate or incorrect, the rest of the report is suspect. Poor reporting probably causes us to lose more cases than any other factor.

I just don’t know how to motivate them to do a better job. We’re in a budget crunch, and I have absolutely no financial rewards at my disposal. In fact, we’ll probably have to lay some people off in the near future. It’s hard for me to make the job interesting and challenging because it isn’t-it’s boring, routine paperwork, and there isn’t much you can do about it.

Finally, I can’t say to them that their promotions will hinge on the excellence of their paperwork. First at all, they know it’s not true. If their performance is adequate, most are more likely to get promoted just by staying on the force a certain number of years than for some specific outstanding act. Second, they were trained to do the job they do out in the streets, not to fill out forms. All through their careers the arrests and interventions are what get noticed.

Some people have suggested a number of things, like using conviction records as a performance criterion. However, we know that’s not fair—too many other things are involved. Bad paperwork  increases the chance that you lose in court, but good paperwork doesn’t necessarily mean you’ll win. We tried setting up the team competitions based on the excellence of the reports, but the officers caught on to that pretty quickly. No one was getting any type of reward for winning the competition, and they figured why should they bust a gut when there was on payoff.

I just don’t know what to do.

 

Question:

 

1.                  What performance problems is the captain trying to correct?

2.                  Use the MARS model of individual behavior and performance to diagnose the possible causes of the unacceptable behavior.

3.                  Has the captain considered all possible solutions to the problem? If not, what else might be done?

 

 

 

CASE: II    How Did I Get Here?

 

Something was not right. John Breckenridge opened his eyes, saw the nurse’s face, and closed them once more. Cobwebs slowly cleared from his brain as he woke up from his brain as he woke up from the operation. He felt a hard tube in his nostril, and tried to lift his hand to pull it out, but it was strapped down to the bed. John tried to speak but could make only a croaking sound. Nurse Thompson spoke soothingly, “Just try to relax, Mr. Breckenridge. You had a heart attack and emergency surgery, but you’re going to be OK.”

            Heart attack? How did I get here? As the anesthesia wore off and the pain set in, John began to recall the events of the past year; and with the memories came another sort of pain – that of remembering a life where success was measured in hours worked and things accomplished, but which of late had not measured up.

John recalled his years in college, where getting good grades had been important, but not so much as his newly developing love for Karen, the girl with auburn hair who got her nursing degree the same year as he graduated with a degree in software engineering. They married the summer after graduation and moved from their sleepy university town in Indiana to Aspen, Colorado. There John got a job with a new software company while Karen worked evenings as a nurse. Although they didn’t see much of each other during the week, weekends were a special time, and the surrounding mountains and nature provided a superb quality of life.

Life was good to the Breckenridges. Two years after they were married, Karen gave birth to Josh and two years later to Linda. Karen reduced her nursing to the minimum hours required to maintain her license, and concentrated on rearing the kids. John, on the other hand, was busy providing for the lifestyle they increasingly became used to, which included a house, car, SUV, ski trips, and all of the things a successful engineering career could bring. The company grew in leaps and bounds, and John was one of the main reasons it grew fast. Work was fun. The company was growing, his responsibilities increased, and he and his team were real buddies. With Karen’s help at home, he juggled work, travel, and evening classes that led to a master’s degree. The master’s degree brought another promotion—this time to vice president of technology at the young (for this company) age of 39.

The promotion had one drawback: It would require working out of the New York office. Karen sadly said goodbye to her friends, convinced the kids that the move would be good to them, and left the ranch house for another one, much more expensive and newer, but smaller and just across the river in New Jersey from the skyscraper where her husband worked. Newark was not much like Aspen, and the kids had a hard time making friends, especially Josh, who was now 16. He grew sullen and withdrawn and began hanging around with a crowd that Karen thought looked very tough. Linda, always the quiet one, stuck mostly to her room.

John’s new job brought with it money and recognition, as well as added responsibilities. He now had to not only lead software development but also actively participate in steering the company in the right direction for the future, tailoring its offerings to market trends. Mergers and acquisitions were the big things in the software business, and John found a special thrill in picking small companies with promising software, buying them out, and adding them to the corporate portfolio. Karen had everything a woman could want and went regularly to a health club. The family lacked for no material need.

At age 41 John felt he had the world by its tail. Sure, he was a bit overweight, but who wouldn’t be with the amount of work and entertaining that he did? He drank some, a habit he had developed early in his career. Karen worried about that, but he reassured her by reminding her that he had been really drunk only twice and would never drink and drive. Josh’s friends were a worry, but nothing had yet come of it.

Not all was well, however. John had been successful in Colorado because he thought fast on his feet, expressed his opinions, and got people to buy into his decisions. In the New York corporate office things were different. All of the top brass except the president and John had Ivy League, moneyed backgrounds. They spoke of strategy but would take only risks that would further their personal careers. He valued passion, integrity, and action, with little regard for personal advancement. They resented him, rightly surmising that the only reason he had been promoted was because he was more like he president than they were, and he was being groomed as heir apparent.

On November 2, 2004, John Breckenridge’s world began to unravel. The company he worked for, the one he had given so much of his life to build was acquired in a hostile takeover. The president who had been his friend and mentor was let go, and the backstabbing began in earnest. John found himself the odd man out in the office as the others jostled to build status in the new firm. Although his stellar record allowed him to survive the first round of job cuts, that survival only made him more of a pariah to those around him. Going to work was a chore now, and John had no friends like those he had left in Aspen.

Karen was little help. John had spent nearly two decades married more to his job than his wife, and he found she was more of a stranger than a comforter as he struggled in his new role. When he spoke about changing jobs, she blew up. “Why did I have to give up nursing for your career?” she said. “Why do we have to move again, just because you can’t get along at work? Can’t you see what the move did to our kids?”

Seeing the hurt and anger in Karen’s eyes, John stopped sharing and turned to his bottle for comfort. In time that caused even more tension in the home, and it slowed him down at work when he really needed to excel. John would often drink himself into oblivion when on business trips rather than thinking about where his life and career were going. On his last trip he hadn’t slept much and had worked far too hard. Midmorning he had been felled by a massive heart attack.

All of this history passed through John Breckenridge’s mind as he woke after the operation. It was time for a change.

 

Question:

 

1.                  Identify the stressors in John Breckenridge’s life. Which ones could he have prevented?

2.                  What were the results of the stress? Would you consider these to be typical to stress situations and lifestyle choices John made, or was John Breckenridge unlucky?

3.                  Assume you are a career coach retained by John Breckenridge to guide him through his next decisions. How would you recommend that John modify his lifestyle and behavior to reduce stress? Should he change jobs? Do you believe he is capable of reducing his stress alone? If not, where should he seek help?

 

 

 

 

 

 

CASE: III    The Shipping Industry Accounting Team

 

For the past five years I have been working at McKay, Sanderson, and Smith Associates, a mid-sized accounting firm in Boston that specializes in commercial accounting and audits. My particular specialty in accounting practices for shipping companies, ranging from small fishing fleets to a couple of the big firms with ships along the East Coast.

About 18 months ago McKay, Sanderson, and Smith Associates became part of a large merger involving two other accounting firms. These firms have offices in Miami, Seattle, Baton Rouge, and Los Angeles. Although the other two accounting firms were much larger than McKay, all three firms agreed to avoid centralizing the business around one office in Los Angeles. Instead the new firm—called Goldberg, Choo, and McKay Associates—would rely on teams across the country to “leverage the synergies of our collective knowledge” (an often-cited statement from the managing partner soon after the merger).

The merger affected me a year ago when my boss (a senior partner and vice president of the merger) announced that I would be working more closely with three people from the other two firms to become the firm’s new shipping industry accounting team. The other team members were Elias in Miami, Susan in Seattle, and Brad in Los Angeles. I had met Elias briefly at a meeting in New York City during the merger but had never met Susan or Brad, although I knew that they were shipping accounting professionals at the other firms.

Initially the shipping team activities involved e-mailing each other about new contracts and prospective clients. Later we were asked to submit joint monthly reports on accounting statements and issues. Normally I submitted my own monthly reports to summarize activities involving my own clients. Coordinating the monthly report with three other people took much more time, particularly because different accounting documentation procedures across the three firms were still being resolved. It took numerous e-mail messages an a few telephone calls to work out a reasonable monthly report style.

During this aggravating process it became apparent—to me at least—that this team business was costing me more time than it was worth. Moreover, Brad in Los Angeles didn’t have a clue about how to communicate with the rest of us. He rarely replied to e-mail. Instead he often used the telephone tag. Brad arrived at work at 9:30 a.m. in Los Angeles (and was often late), which is early afternoon in Boston. I typically have a flexible work schedule from 7:30 a.m. to 3:30 p.m. so I can chauffeur my kids after school to sports and music lessons. So Brad and I have a window of less than three hours to share information.

The biggest nuisance with the shipping specialist accounting team started two weeks ago when the firm asked the four of us to develop a new strategy for attracting more shipping firm business. This new strategic plan is a messy business. Somehow we have to share our thoughts on various approaches, agree on a new plan, and write a unified submission to the managing partner. Already the project is taking most of my time just writing and responding to e-mail and talking in conference calls (which none of us did much before the team formed).

Susan and Brad have already had two or three misunderstandings via e-mail about their different perspectives on delicate matters in the strategic plan. The worst of these disagreements required a conference call with all of us to resolve. Except for the most basic matters, it seems that we can’t understand each other, let alone agree on key issues. I have come to the conclusion that I would never want Brad to work in my Boston office (thanks goodness he’s on the other side of the country). Although Elias and I seem to agree on most points, the overall team can’t form a common vision or strategy. I don’t know how Elias, Susan, or Brad feel, but I would be quite happy to work somewhere that did not require any of these long-distance team headaches.

 

Question:

 

1.                  What type of team was formed here? Was it necessary, in your opinion?

2.                  Use the team effectiveness model in Chapter 9 and related information in this chapter to identify the strengths and weaknesses of this team’s environment, design, and processes.

3.                  Assuming that these four people must continue to work as a team, recommend ways to improve the team’s effectiveness.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE: IV    Conflict In Close Quarters

A team of psychologists at Moscow’s Institute for Biomedical Problems (IBMP) wanted to learn more about the dynamics of long-term isolation in space. This knowledge would be applied to the International Space Station, a joint project of several countries that would send people into space for more than six months. It would eventually include a trip to Mars taking up to three years.

IBMP set up a replica of the Mir space station in Moscow. They then arranged for three international researchers from Japan, Canada, and Austria 110 days isolated in a chamber the size of a train car. This chamber joined a smaller chamber where four Russian cosmonauts had already completed half of their 240 days of isolation. This was the first time an international crew was involved in the studies. None of the participants spoke English as their first language, yet they communicated throughout their stay in English at varying levels of proficiency.

Judith Lapierre, a French-Canadian, was the only female in the experiment. Along with obtaining a PhD in public health and social medicine, Lapierre had studied space sociology at the International Space University in France and conducted isolation research in the Antarctic. This was her fourth trip to Russia, where she had learned the language. The mission was supposed to have a second female participant from the Japanese space program, but she was not selected by IBMP.

The Japanese and Austrian participants viewed the participation of a woman as a favorable factor, says Lapierre. For example, to make the surroundings more comfortable, they rearranged the furniture, hung posters on the walls, and put a tablecloth on the kitchen table. “We adapted our environment, whereas Russians just viewed it as something to be endured,” she explains. “We decorated for Christmas because I’m the kind of person who likes to host people.”

 

New Year’s Eve Turmoil

 

 Ironically, it was at one of those social events, the New Year’s Eve party, that events took a turn for the worse. After drinking vodka (allowed by the Russian space agency), two of the Russian cosmonauts got into a fistfight that left blood splattered on the chamber walls. At one point a colleague hid the knives in the station’s kitchen because of fears that the two Russians were about to stab each other. The two cosmonauts, who generally did not get along, had to be restrained by other men. Soon after that brawl, the Russian commander grabbed Lapierre, dragged her out of view of the television monitoring cameras, and kissed her aggressively—twice. Lapierre fought him off, but the message didn’t register. He tried to kiss her again the next morning.

The next day the international crew complained to IBMP about the behavior of the Russian cosmonauts. The Russian institute apparently took no against the aggressors. Instead the institute’s psychologists replied that the incidents were part of the experiment. They wanted crew members to solve their personal problems with mature discussion without asking for outside help. “You have to understand that Mir is an autonomous object, far away from anything,” Vadim Gushin, the IBMP psychologist in charge of project, explained after the experiment had ended in March. “If the crew can’t solve problems among themselves, they can’t work together.”

Following IBMP’s response, the international crew wrote a scathing letter to the Russian institute and the space agencies involved in the experiment. “We had never expected such events to take place in a highly controlled scientific experiment where individuals go through a multistep selection process,” they wrote. “If we had known… we would not have joined it as subjects.” The letter also complained about IBMP’s response to their concerns.

Informed about the New Year’s Eve incident, the Japanese space program convened an emergency meeting on January 2 to address the incidents. Soon after the Japanese team member quit, apparently shocked by IBMP’s inaction. He was replaced with a Russian researcher on the international team. Ten days after the fight—a little over the month the international team began the mission—the doors between the Russian and international crews’ chambers were barred at the request of the international research team. Lapierre later emphasized that this action was taken because of concerns about violence, not the incident involving her.

 

A Stolen Kiss or Sexual Harassment

 

By the end of experiment in March, news of the fistfight between the cosmonauts and the commander’s attempts to kiss Lapierre had reached the public. Russian scientists attempted to play down the kissing incident by saying that it was one fleeting kiss, a clash of cultures, and a female participant who was too emotional.

“In the West, some kinds of kissing are regarded as sexual harassment. In our culture it’s nothing,” said Russian scientist Vadim Gushin in one interview. In another interview he explained, “The problem of sexual harassment is given a lot of attention in North America but less in Europe. In Russia it is even less of an issue, not because we are more or less moral than the rest of the world; we just have different priorities.”

Judith Lapierre says the kissing incident was tolerable compared to this reaction from the Russian scientists who conducted the experiment. “They don’t get it at all,” she complains. “They don’t think anything is wrong. I’m more frustrated than ever. The worst thing is that they don’t realize it was wrong.”

Norbert Kraft, the Austrian scientist on the international team, also disagreed with the Russian interpretation of events. “They’re trying to protect themselves,” he says. “They’re trying to put the fault on others. But this is not a cultural issue. If a woman doesn’t want to be kissed, it is not acceptable.”

 

 

 

 

 

 

Question:

 

1.                  Identify the different conflict episodes that exist in this case. Who was in conflict with whom?

2.                  What are the sources of conflict for these conflict incidents?

3.                  What conflict management style(s) did Lapierre, the international team, and Gushin use to resolve these conflicts? What style(s) would have worked best in the situation?

 

 

 

 

 

 

 

 

 

 

CASE: V   Hillton’s Transformation  

 

Twenty years ago Hillton was a small city (about 70,000 residents) that served as an outer to a large Midwest metropolitan area. The city treated employees like family and gave them a great deal of autonomy in their work. Everyone in the organization (including the two labor unions representing employees) implicitly agreed that the leaders and supervisors of the organization should rise through the ranks based on their experience. Few people were ever hired from the outside into middle or senior positions. The rule of employment at Hillton was to learn the job skills, maintain a reasonably good work record, and wait your turn for promotion.

Hillton had grown rapidly since the mid-1970s. As the population grew, so did the municipality’s workforce to keep pace with the increasing demand for municipal services. This meant that employees were promoted fairly quickly and were almost guaranteed employment. In fact, until recently Hillton had never laid off any employee. The organization’s culture could be described as one of entitlement and comfort. Neither the elected city council members nor the city manager bothered the department managers about their work. There were few costs controls because rapid growth forced emphasis on keeping up with the population expansion. The public became somewhat more critical of the city’s poor services, including road construction at inconvenient times and the apparent lack of respect some employees showed towards taxpayers.

During these expansion years Hillton put most of its money into “outside” (also called “hard”) municipal services such as road building, utility construction and maintenance, fire and police protection, recreational facilities, and land use control. This emphasis occurred because an expanding population demanded more of these services, and most of Hillton’s senior people came from the outside services group. For example, Hillton’s city manager for many years was a road development engineer. The “inside” workers (taxation, community services, and the like) tended to have less seniority, and their departments were given less priority.

As commuter and road systems developed, Hillton attracted more upwardly mobile professionals to the community. Some infrastructure demands continued, but now these suburban dwellers wanted more “soft” services, such as libraries, social activities, and community services. They also began complaining about how the municipality was being run. The population had more than doubled between the 1970s and 1990s, and it was increasingly apparent that the city organization needed more corporate planning, information systems, organization development, and cost control systems. Resident voiced their concerns in various ways that the municipality was not providing the quality of management that they would expect from a city of its size.

In 1996 a new mayor and council replaced most of the previous incumbents, mainly on the platform of improving the municipality’s management structure. The new council gave the city manager, along with two other senior managers, an early retirement buyout package. Rather than promoting form the lower ranks, council decided to fill all three positions with qualified candidates from large municipal corporations in the region. The following year several long-term managers left Hillton, and at least half of those positions were filled by people from outside the organization.

In less than two years Hillton had eight senior or departmental managers hired from other municipalities who played a key role in changing the organization’s value system. These eight managers became known (often with negative connotations) as the “professionals.” They worked closely with each other to change the way middle and lower-level managers had operated for many years. They brought in a new computer system and emphasized cost controls where managers previously had complete autonomy. Promotions were increasingly based more on merit than seniority.

These managers frequently announced in meetings and newsletters that municipal employees must provide superlative customer service, and that Hillton would become one of the most customer-friendly places for citizens and those doing business with the municipality. To this end these managers were quick to support the public’s increasing demand for more soft services, including expanded library services and recreational activities. And when population growth flattened for a few years, the city manager and the other professionals gained council support to lay off a few outside workers due to lack of demand for hard services.

One of the most significant changes was that the outside departments no longer held dominant positions in city management. Most of the professional managers had worked exclusively in administrative and related inside jobs. Two had Master of Business Administration degrees. This led to some tension between the professional managers and the older outside managers.

Even before the layoffs, managers of outside departments resisted the changes more than others. These managers complained that their employees with the highest seniority were turned down for promotions. They argued for more budget and warned that infrastructure problems would cause liability problems. Informally these outside managers were supported by the labor union representing outside workers. The union leaders tried to bargain for more job guarantees, whereas the union representing inside workers focused more on improving wages and benefits. Leaders of the outside union made several statements in the local media that the city had “lost its heart” and that the public would suffer from the actions of the new professionals.

 

Question:

 

1.                  Contrast Hillton’s earlier corporate culture with the emerging set of cultural values.

2.                  Considering the difficulty in changing organizational culture, why did Hillton’s management seem to be successful at this transformation?

3.                  Identify two other strategies that the city might consider to reinforce the new set of corporate values.

 

 

HUMAN RESOURCE MANAGEMENT

 

Note: Solve any 4 Cases Study’s

 

CASE: I    Enterprise Builds On People

 

When most people think of car-rental firms, the names of Hertz and Avis usually come to mind. But in the last few years, Enterprise Rent-A-Car has overtaken both of these industry giants, and today it stands as both the largest and the most profitable business in the car-rental industry. In 2001, for instance, the firm had sales in excess of $6.3 billion and employed over 50,000 people.

Jack Taylor started Enterprise in St. Louis in 1957. Taylor had a unique strategy in mind for Enterprise, and that strategy played a key role in the firm’s initial success. Most car-rental firms like Hertz and Avis base most of their locations in or near airports, train stations, and other transportation hubs. These firms see their customers as business travellers and people who fly for vacation and then need transportation at the end of their flight. But Enterprise went after a different customer. It sought to rent cars to individuals whose own cars are being repaired or who are taking a driving vacation.

The firm got its start by working with insurance companies. A standard feature in many automobile insurance policies is the provision of a rental car when one’s personal car has been in an accident or has been stolen. Firms like Hertz and Avis charge relatively high daily rates because their customers need the convenience of being near an airport and/or they are having their expenses paid by their employer. These rates are often higher than insurance companies are willing to pay, so customers who these firms end up paying part of the rental bills themselves. In addition, their locations are also often inconvenient for people seeking a replacement car while theirs is in the shop.

But Enterprise located stores in downtown and suburban areas, where local residents actually live. The firm also provides local pickup and delivery service in most areas. It also negotiates exclusive contract arrangements with local insurance agents. They get the agent’s referral business while guaranteeing lower rates that are more in line with what insurance covers.

In recent years, Enterprise has started to expand its market base by pursuing a two-pronged growth strategy. First, the firm has started opening  airport locations to compete with Hertz and Avis more directly. But their target is still the occasional renter than the frequent business traveller. Second, the firm also began to expand into international markets and today has rental offices in the United Kingdom, Ireland and Germany.

Another key to Enterprise’s success has been its human resource strategy. The firm targets a certain kind of individual to hire; its preferred new employee is a college graduate from bottom half of graduating class, and preferably one who was an athlete or who was otherwise actively involved in campus social activities. The rationale for this unusual academic standard is actually quite simple. Enterprise managers do not believe that especially high levels of achievements are necessary to perform well in the car-rental industry, but having a college degree nevertheless demonstrates intelligence and motivation. In addition, since interpersonal relations are important to its business, Enterprise wants people who were social directors or high-ranking officers of social organisations such as fraternities or sororities. Athletes are also desirable because of their competitiveness.

Once hired, new employees at Enterprise are often shocked at the performance expectations placed on them by the firm. They generally work long, grueling hours for relatively low pay.

 

And all Enterprise managers are expected to jump in and help wash or vacuum cars when a rental agency gets backed up. All Enterprise managers must wear coordinated dress shirts and ties and can have facial hair only when “medically necessary”. And women must wear skirts no shorter than two inches above their knees or creased pants.

 

So what are the incentives for working at Enterprise? For one thing, it’s an unfortunate fact of life that college graduates with low grades often struggle to find work. Thus, a job at Enterprise is still better than no job at all. The firm does not hire outsiders—every position is filled by promoting someone already inside the company. Thus, Enterprise employees know that if they work hard and do their best, they may very well succeed in moving higher up the corporate ladder at a growing and successful firm.

 

 

Question:

 

1.                  Would Enterprise’s approach human resource management work in other industries?

2.                  Does Enterprise face any risks from its human resource strategy?

3.                  Would you want to work for Enterprise? Why or why not?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE: II    Doing The Dirty Work

Business magazines and newspapers regularly publish articles about the changing nature of work in the United States and about how many jobs are being changed. Indeed, because so much has been made of the shift toward service-sector and professional jobs, many people assumed that the number of unpleasant an undesirable jobs has declined.

In fact, nothing could be further from the truth. Millions of Americans work in gleaming air-conditioned facilities, but many others work in dirty, grimy, and unsafe settings. For example, many jobs in the recycling industry require workers to sort through moving conveyors of trash, pulling out those items that can be recycled. Other relatively unattractive jobs include cleaning hospital restrooms, washing dishes in a restaurant, and handling toxic waste.

Consider the jobs in a chicken-processing facility. Much like a manufacturing assembly line, a chicken-processing facility is organised around a moving conveyor system. Workers call it the chain. In reality, it’s a steel cable with large clips that carries dead chickens down what might be called a “disassembly line.” Standing along this line are dozens of workers who do, in fact, take the birds apart as they pass.

Even the titles of the jobs are unsavory. Among the first set of jobs along the chain is the skinner. Skinners use sharp instruments to cut and pull the skin off the dead chicken. Towards the middle of the line are the gut pullers. These workers reach inside the chicken carcasses and remove the intestines and other organs. At the end of the line are the gizzard cutters, who tackle the more difficult organs attached to the inside of the chicken’s carcass. These organs have to be individually cut and removed for disposal.

The work is obviously distasteful, and the pace of the work is unrelenting. On a good day the chain moves an average of ninety chickens a minute for nine hours. And the workers are essentially held captive by the moving chain. For example, no one can vacate a post to use the bathroom or for other reasons without the permission of the supervisor. In some plants, taking an unauthorised bathroom break can result in suspension without pay. But the noise in a typical chicken-processing plant is so loud that the supervisor can’t hear someone calling for relief unless the person happens to be standing close by.

Jobs such as these on the chicken-processing line are actually becoming increasingly common. Fuelled by Americans’ growing appetites for lean, easy-to-cook meat, the number of poultry workers has almost doubled since 1980, and today they constitute a work force of around a quarter of a million people. Indeed, the chicken-processing industry has become a major component of the state economies of Georgia, North Carolina, Mississippi, Arkansas, and Alabama.

Besides being unpleasant and dirty, many jobs in a chicken-processing plant are dangerous and unhealthy. Some workers, for example, have to fight the live birds when they are first hung on the chains. These workers are routinely scratched and pecked by the chickens. And the air inside a typical chicken-processing plant is difficult to breathe. Workers are usually supplied with paper masks, but most don’t use them because they are hot and confining.

And the work space itself is so tight that the workers often cut themselves—and sometimes their coworkers—with the knives, scissors, and other instruments they use to perform their jobs. Indeed, poultry processing ranks third among industries in the United States for cumulative trauma injuries such as carpet tunnel syndrome. The inevitable chicken feathers, faeces, and blood also contribute to the hazardous and unpleasant work environment.

Question:

1.                  How relevant are the concepts of competencies to the jobs in a chicken-processing plant?

2.                  How might you try to improve the jobs in a chicken-processing plant?

3.                  Are dirty, dangerous, and unpleasant jobs an inevitable part of any economy?

 

CASE: III    On Pegging Pay to Performance

 

“As you are aware, the Government of India has removed the capping on salaries of directors and has left the matter of their compensation to be decided by shareholders. This is indeed a welcome step,” said Samuel Menezes, president Abhayankar, Ltd., opening the meeting of the managing committee convened to discuss the elements of the company’s new plan for middle managers.

Abhayankar was am engineering firm with a turnover of Rs 600 crore last year and an employee strength of 18,00. Two years ago, as a sequel to liberalisation at the macroeconomic level, the company had restructured its operations from functional teams to product teams. The change had helped speed up transactional times and reduce systemic inefficiencies, leading to a healthy drive towards performance.

“I think it is only logical that performance should hereafter be linked to pay,” continued Menezes. “A scheme in which over 40 per cent of salary will be related to annual profits has been evolved for executives above the vice-president’s level and it will be implemented after getting shareholders approval. As far as the shopfloor staff is concerned, a system of incentive-linked monthly productivity bonus has been in place for years and it serves the purpose of rewarding good work at the assembly line. In any case, a bulk of its salary will have to continue to be governed by good old values like hierarchy, rank, seniority and attendance. But it is the middle management which poses a real dilemma. How does one evaluate its performance? More importantly, how can one ensure that managers are not shortchanged but get what they truly deserve?”

“Our vice-president (HRD), Ravi Narayanan, has now a plan ready in this regard. He has had personal discussions with all the 125 middle managers individually over the last few weeks and the plan is based on their feedback. If there are no major disagreements on the plan, we can put it into effect from next month. Ravi, may I now ask you to take the floor and make your presentation?”

The lights in the conference room dimmed and the screen on the podium lit up. “The plan I am going to unfold,” said Narayanan, pointing to the data that surfaced on the screen, “is designed to enhance team-work and provide incentives for constant improvement and excellence among middle-level managers. Briefly, the pay will be split into two components. The first consists of 75 per cent of the original salary and will be determined, as before, by factors of internal equity comprising what Sam referred to as good old values. It will be a fixed component.”

“The second component of 25 per cent,” he went on, “will be flexible. It will depend on the ability of each product team as a whole to show a minimum of 5 per cent improvement in five areas every month—product quality, cost control, speed of delivery, financial performance of the division to which the product belongs and, finally, compliance with safety and environmental norms. The five areas will have rating of 30, 25, 20, 15, and 10 per cent respectively.

“This, gentlemen, is the broad premise. The rest is a matter of detail which will be worked out after some finetuning. Any questions?”

As the lights reappeared, Gautam Ghosh, vice-president (R&D), said, “I don’t like it. And I will tell you why. Teamwork as a criterion is okay but it also has its pitfalls. The people I take on and develop are good at what they do. Their research skills are individualistic. Why should their pay depend on the performance of other members of the product team? The new pay plan makes them team players first and scientists next. It does not seem right.”

“That is a good one, Gautam,” said Narayanan. “Any other questions? I think I will take them all together.”

“I have no problems with the scheme and I think it is fine. But just for the sake of argument, let me take Gautam’s point further without meaning to pick holes in the plan,” said Avinash Sarin, vice-president (sales). “Look at my dispatch division. My people there have reduced the shipping time from four hours to one over the last six months. But what have they got? Nothing. Why? Because the other members of the team are not measuring up.”

“I think that is a situation which is bound to prevail until everyone falls in line,” intervened Vipul Desai, vice president (finance). “There would always be temporary problems in implementing anything new. The question is whether our long term objectives is right. To the extend that we are trying to promote teamwork, I think we are on the right track. However, I wish to raise a point. There are many external factors which impinge on both individual and collective performance. For instance, the cost of a raw material may suddenly go up in the market affecting product profitability. Why should the concerned product team be penalised for something beyond its control?”

“I have an observation to make too, Ravi,” said Menezes, “You would recall the survey conducted by a business fortnightly on ‘The ten companies Indian managers fancy most as a working place’. Abhayankar got top billings there. We have been the trendsetters in executive compensation in Indian industry. We have been paying the best. Will your plan ensure that it remains that way?”

As he took the floor again, the dominant thought in Narayanan’s mind was that if his plan were to be put into place, Abhayankar would set another new trend in executive compensation.

 

Question:

 

But how should he see it through?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE: IV      Crisis Blown Over

 

November 30, 1997 goes down in the history of a Bangalore-based electric company as the day nobody wanting it to recur but everyone recollecting it with sense of pride.

It was a festive day for all the 700-plus employees. Festoons were strung all over, banners were put up; banana trunks and leaves adorned the factory gate, instead of the usual red flags; and loud speakers were blaring Kannada songs. It was day the employees chose to celebrate Kannada Rajyothsava, annual feature of all Karnataka-based organisations. The function was to start at 4 p.m. and everybody was eagerly waiting for the big event to take place.

But the event, budgeted at Rs 1,00,000 did not take place. At around 2 p.m., there was a ghastly accident in the machine shop. Murthy was caught in the vertical turret lathe and was wounded fatally. His end came in the ambulance on the way to hospital.

The management sought union help, and the union leaders did respond with a positive attitude. They did not want to fish in troubled waters.

Series of meetings were held between the union leaders and the management. The discussions centred around two major issues—(i) restoring normalcy, and (ii) determining the amount of compensation to be paid to the dependants of Murthy.

Luckily for the management, the accident took place on a Saturday. The next day was a weekly holiday and this helped the tension to diffuse to a large extent. The funeral of the deceased took place on Sunday without any hitch. The management hoped that things would be normal on Monday morning.

But the hope was belied. The workers refused to resume work. Again the management approached the union for help. Union leaders advised the workers to resume work in al departments except in the machine shop, and the suggestions was accepted by all.

Two weeks went by, nobody entered the machine shop, though work in other places resumed. Union leaders came with a new idea to the management—to perform a pooja to ward off any evil that had befallen on the lathe. The management accepted the idea and homa was performed in the machine shop for about five hours commencing early in the morning. This helped to some extent. The workers started operations on all other machines in the machine shop except on the fateful lathe. It took two full months and a lot of persuasion from the union leaders for the workers to switch on the lathe.

The crisis was blown over, thanks to the responsible role played by the union leaders and their fellow workers. Neither the management nor the workers wish that such an incident should recur.

As the wages of the deceased grossed Rs 6,500 per month, Murthy was not covered under the ESI Act. Management had to pay compensation. Age and experience of the victim were taken into account to arrive at Rs 1,87,000 which  was the amount to be payable to the wife of the deceased. To this was added Rs 2,50,000 at the intervention of the union leaders. In addition, the widow was paid a gratuity and a monthly pension of Rs 4,300. And nobody’s wages were cut for the days not worked.

Murthy’s death witnessed an unusual behavior on the part of the workers and their leaders, and magnanimous gesture from the management. It is a pride moment in the life of the factory.

 

Question:

 

1.                  Do you think that the Bangalore-based company had practised participative management?

2.                  If your answer is yes, with what method of participation (you have read in this chapter) do you relate the above case?

3.                  If you were the union leader, would your behaviour have been different? If yes, what would it be?

 

CASE: V    A Case of Burnout

 

When Mahesh joined XYZ Bank (private sector) in 1985, he had one clear goal—to prove his mettle. He did prove himself and has been promoted five times since his entry into the bank. Compared to others, his progress has been fastest. Currently, his job demands that Mahesh should work 10 hours a day with practically no holidays. At least two day in a week, Mahesh is required to travel.

Peers and subordinates at the bank have appreciation for Mahesh. They don’t grudge the ascension achieved by Mahesh, though there are some who wish they too had been promoted as well.

The post of General Manager fell vacant. One should work as GM for a couple of years if he were to climb up to the top of the ladder, Mahesh applied for the post along with others in the bank. The Chairman assured Mahesh that the post would be his.

A sudden development took place which almost wrecked Mahesh’s chances. The bank has the practice of subjecting all its executives to medical check-up once in a year. The medical reports go straight to the Chairman who would initiate remedials where necessary. Though Mahesh was only 35, he too, was required to undergo the test.

The Chairman of the bank received a copy of Mahesh’s physical examination results, along with a note from the doctor. The note explained that Mahesh was seriously overworked, and recommended that he be given an immediate four-week vacation. The doctor also recommended that Mahesh’s workload must be reduced and he must take physical exercise every day. The note warned that if Mahesh did not care for advice, he would be in for heart trouble in another six months.

After reading the doctor’s note, the Chairman sat back in his chair, and started brooding over. Three issues were uppermost in his mind—(i) How would Mahesh take this news? (ii) How many others do have similar fitness problems? (iii) Since the environment in the bank helps create the problem, what could he do to alleviate it? The idea of holding a stress-management programme flashed in his mind and suddenly he instructed his secretary to set up a meeting with the doctor and some key staff members, at the earliest.

 

Question:

 

1.                  If the news is broken to Mahesh, how would he react?

 

2.                  If you were giving advice to the Chairman on this matter, what would you recommend?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE: VI    “Whose Side are you on, Anyway?”

It was past 4 pm and Purushottam Mahesh was still at his shopfloor office. The small but elegant office was a perk he was entitled to after he had been nominated to the board of Horizon Industries (P) Ltd., as workman-director six months ago. His shift generally ended at 3 pm and he would be home by late evening. But that day, he still had long hours ahead of him.

Kshirsagar had been with Horizon for over twenty years. Starting off as a substitute mill-hand in the paint shop at one of the company’s manufacturing facilities, he had been made permanent on the job five years later. He had no formal education. He felt this was a handicap, but he made up for it with a willingness to learn and a certain enthusiasm on the job. He was soon marked by the works manager as someone to watch out for. Simultaneously, Kshirsagar also came to the attention of the president of the Horizon Employees’ Union who drafted him into union activities.

Even while he got promoted twice during the period to become the head colour mixer last year, Kshirsagar had gradually moved up the union hierarchy and had been thrice elected secretary of the union. Labour-management relations at Horizon were not always cordial. This was largely because the company had not been recording a consistently good performance. There were frequent cuts in production every year because of go-slows and strikes by workmen—most of them related to wage hikes and bonus payments. With a view to ensuring a better understanding on the part of labour, the problems of company management, the Horizon board, led by chairman and managing director Aninash Chaturvedi, began to toy with idea of taking on a workman on the board. What started off as a hesitant move snowballed, after a series of brainstorming sessions with executives and meetings with the union leaders, into a situation in which Kshirsagar found himself catapulted to the Horizon board as work-man-director.

It was an untested ground for the company. But the novelty of it all excited both the management and the labour force. The board members—all functional heads went out of their way to make Kshirsagar comfortable and the latter also responded quite well. He got used to the ambience of the boardroom and the sense of power it conveyed. Significantly, he was soon at home with the perspectives of top management and began to see each issue from both sides.

It was smooth going until the union presented a week before the monthly board meeting, its charter of demands, one of which was a 30 per cent across-the board hike in wages. The matter was taken up at the board meeting as part of a special agenda.

“Look at what your people are asking for,” said Chaturvedi, addressing Kshirsagar with a sarcasm that no one in the board missed. “You know the precarious finances of the company. How could you be a party to a demand that can’t be met? You better explain to them how ridiculous the demands are,” he said.

“I don’t think they can all be dismissed as ridiculous,” said Kshirsagar. “And the board can surely consider the alternatives. We owe at least that much to the union.” But Chaturvedi adjourned the meeting in a huff, mentioning, once to Kshirsagar that he should “advise the union properly”.

When Kshirsagar told the executive committee members of the union that the board was simply not prepared to even consider the demands, he immediately sensed the hostility in the room. “You are a sell out,” one of them said. “Who do you really represent—us or them?” asked another.

“Here comes the crunch,” thought Kshirsagar. And however hard he tried to explain, he felt he was talking to a wall.

A victim of divided loyalities, he himself was unable to understand whose side he was on. Perhaps the best course would be to resign from the board. Perhaps he should resign both from the board and the union. Or may be resign from Horizon itself and seek a job elsewhere. But, he felt, sitting in his office a little later, “none of it could solve the problem.”

Question:

1.                  What should he do?

GENERAL MANAGEMENT

 

CASE: 1       GEORGE DAVID

 

George David has been CEO of United Technologies Corporation (UTC) for more than a decade. During that time he has received numerous accolades and awards for his performance as a CEO. Under his leadership UTC, a $343 billion conglomerate whose operating units include manufacturers of elevators (Otis Elevator), aerospace products (including Pratt & Whitney jet engines and Sikorsky helicopters), air conditioning systems, and fire and security systems, has seen earnings grow at 10–14 percent annually—impressive numbers for any company but particularly for a manufacturing enterprise.

 

According to David, a key to United Technologies’ success has been sustained improvements in productivity and product quality. The story goes back to the 1980s when David was running the international operations of Otis Elevator. There he encountered a Japanese engineer, Yuzuru Ito, who had been brought in to determine why a new elevator product was performing poorly. David was impressed with Ito’s methods for identifying quality problems and improving performance. When he was promoted to CEO, David realized that he had to lower the costs and improve the quality of UTC’s products. One of the first things he did was persuade Ito to work for him at UTC. Under David, Ito developed a program for improving product quality and productivity, known as Achieving Competitive Excellence (ACE), which was subsequently rolled out across UTC. The ACE program has been one of drivers of productivity improvements at UTC ever since.

Early in his tenure as CEO, David also radically reorganized UTC. He dramatically cut the size of the head office and decentralized decision making to business divisions. He also directed his accounting staff to develop a new financial reporting system that would give him good information about how well each division was doing and make it easier to hold divisional general managers accountable for the performance of the units under them. He then gave them demanding goals for earnings and sales growth and pushed them to improve processes within their units by implementing the ACE program.

At the same time David has always stressed that management is about more than goal setting and holding people accountable. Values are also important. David has insisted that UTC employees adhere to the highest ethical standards, that the company produce that have minimal environmental impact, and that employee safety remain the top consideration in the work-place.

 

When asked what his greatest achievement as a manager has been, David refers to UTC’s worldwide employee scholarship program. Implemented in 1996 and considered the hall-mark of UTC’s commitment to employee development, the program pays the entire cost of an employee’s college or graduate school education, allows employees to pursue any subject at an accredited school, provides paid study time, and awards UTC stock (up to $10,000 worth in the United States) for completing degrees. Explaining the program, David states, “One of the obligations that an employer has is to give employees opportunities to better themselves. And we feel it’s also very good business for us because it generates a better workforce that stays longer.”

 

David states that one of his central tasks has been to build a management team that functions smoothly over the long term. “People come to rely upon each other,” he says. “You have the same trusting relationships. You know people; they know you. You can predict them; they can predict you. All of that kind of begins to work, and it accelerates over the tenure of a CEO. If you have people bouncing in and out every two to three years, that’s not good.”

 

 

According to Sandy Weill, former chairman of Citicorp and a UTC board member, David has the right mix of toughness and sensitivity. “When somebody can't do the job he’ll try to help; but if that person is not going to make it work, that person won't be on the job forever.” At the same time Weill says, “He does a lot of things that employees respect him for, I think he is a very good manager. Even though David is demanding, he can also listen—he has a receive mode as well as a send mode.”

 

 

Questions

 

1.                  What makes George David such a highly regarded manager?

2.                  How does David get things done through people?

3.                  What evidence can you see of David’s planning and strategizing, organizing, controlling, leading, and developing?

4.                  Which managerial competencies does David seem to posses? Does he seem to lack any?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE: 2        BOOM AND BUST IN TELECOMMUNICATIONS

 

In 1997 Michael O'Dell, the chief scientist at World-Com, which owned the largest network of “Internet backbone” fiber optic cable in the world, stated that data traffic over the Internet was doubling every hundred days. This implied a growth rate of over 1,000 percent a year. O'Dell went on to day that there was not enough fiber optic capacity to go around, and that “demand will far outstrip supply for the foreseeable future.”

Electrified by this potential opportunity, a number companies rushed into the business. These firms included Level 3 Communications, 360 Networks, Global Crossing, Qwest Communications, World-Com, Williams Communications Group, Genuity Inc., and XO Communications. In all cases the strategic plans were remarkably similar: Raise lots of capital, build massive fiber optic networks that straddled the nation (or even the globe), cut prices, and get ready for the rush of business. Managers at these companies believed that surging demand would soon catch up with capacity, resulting in a profit bonanza for those that had the foresight to build out their networks. It was a gold rush, and the first into the field would stake the best claims.

However, there were dissenting voices. As early as October 1998 an Internet researcher at AT&T Labs named Andrew Odlyzko published a paper that de-bunked the assumption that demand for Internet traffic was growing at 1,000 percent a year. Odlyzko’s careful analysis concluded that growth was much slower—only 100 percent a year! Although still large, that growth rate was not nearly large enough to fill the massive flood of fiber optic capacity that was entering the market. Moreover, Odlyzko noted that new technologies were increasing the amount of data that could be sent down existing fibers, reducing the need for new fiber. But with investment money flooding into the market, few paid any attention to him. WorldCom was still using the 1,000 percent figure as late as September 2000.

As it turned out, Odlyzko was right. Capacity rapidly outstripped demand, and by late 2002 less than 3 percent of the fiber that had been laid in the ground was actually being used! While prices slumped, the surge in volume that managers had bet on did not materialize. Unable to service the debt they had taken on to build out their networks, company after company tumbled into bankruptcy—including WorldCom, 360 Networks, XO Communications, Global Crossing. Level 3 and Qwest survived, but their stock price had fallen by 90 percent, and both companies were saddled with massive debts.

 

Questions

 

1.                  Why did the strategic plans adopted by companies like Level 3, Global Crossing, and 360 Networks fail?

2.                  The managers who ran these companies were smart, successful individuals, as were many of the investors who put money into these businesses. How could so many smart people have been so wrong?

3.                  What specific decision-making biases do you think were at work in this industry during the late 1990s and early 2000s?

4.                  What could the managers running these companies done differently that might have led to a different outcome?

 

 

 

 

 

CASE: 3       DOW CHEMICAL

 

A handful of major players, compete head-to-head around the world in the chemical industry. These companies are Dow Chemical and Du Pont of the United States, Great Britain’s ICI, and the German trio of BASF, Hoechst AG, and Bayer. The barriers to the free flow of chemical products between nations largely disappeared in the 1970s. This, along with the commodity nature of bulk chemicals and a severe recession in the early 1980s, ushered in a prolonged period of intense price competition. In such an environment, the company that wins the competitive race is the one with the lowest costs. Dow Chemical was long among the cost leaders.

For years Dow’s managers insisted that part of the credit belonged to its “matrix” organization. Dow’s organizational matrix had three interacting elements: functions (such as R&D, manufacturing, and marketing), businesses (like ethylene, plastics, and pharmaceuticals), and geography (for example, Spain, Germany, and Brazil). Managers’ job titles incorporated all three elements (plastics marketing manager for Spain), and most managers reported to at least two bosses. The plastics marketing manager in Spain might report to both the head of the worldwide plastics business and the head of the Spanish operations. The intent of the matrix was to make Dow operations responsive to both local market needs and corporate objectives. Thus the plastics business might be charged with minimizing Dow’s global plastics production costs, while the Spanish operation might determine how best to sell plastics in the Spanish market.

When Dow introduced this structure, the results were less than promising: Multiple reporting channels led to confusion and conflict. The many bosses created an unwieldy bureaucracy. The overlapping responsibilities resulted in turf battles and a lack of accountability. Area managers disagreed with managers overseeing business sectors about which plants should be built where. In short, the structure, didn’t work. Instead of abandoning the structure, however, Dow decided to see if it could made more flexible.

Dow’s decision to keep its matrix structure was prompted by its move into the pharmaceuticals business is very different from the bulk chemicals business. In bulk chemicals, the big returns come from achieving economies of scale in production. This dictates establishing large plants in key locations from which regional or global markets can be served. But in pharmaceuticals, regulatory and marketing requirements for drugs vary so much from country to country that local needs are far more important than reducing manufacturing costs through scale economies. A high degree of local responsiveness is essential. Dow realized its pharmaceutical business would never thrive if it were managed by the same priorities as its mainstream chemical operations.

Accordingly, instead of abandoning its matrix, Dow decided to make it more flexible to better accommodate the different businesses, each with its own priorities, within a single management system. A small team of senior executives at headquarters helped set the priorities for each type of business. After priorities were identified for each business sector, one of the three elements of the matrix—function, business, or geographic area—was given primary authority in decision making. Which element took the lead varied according to the type of decision and the market or location in which the company was competing. Such flexibility that all employees understand what was occurring in the rest of the matrix. Although this may seem confusing, for years Dow claimed this flexible system worked well and credited much of its success to the quality of the decisions it facilitated.

By the mid-1990s, however, Dow had refocused its business on the chemicals industry, divesting itself of its pharmaceutical activities where the company’s performance had been unsatisfactory. Reflecting the change in corporate strategy, in 1995 Dow decided to abandon its matrix structure in favor of a more streamlined structure based on global product divisions. The matrix structure was just too complex and costly to manage in the intense competitive environment of the time, particularly given the company’s renewed focus on its commodity chemicals where competitive advantage often went to the low-cost producer. As Dow’s then-CEO put it in a 1999 interview, “We were an organization that was matrixed and depended on teamwork, but there was no one in charge. When things went well, we didn’t know whom to reward; and when things went poorly, we didn’t know whom to blame. So we created a global divisional structure and cut out layers of management. There used to be eleven layers of management between me and the lowest-level employees; now there are five.

 

 

Questions

1.                  Why did Dow Chemical first adopt a matrix structure? What benefits did it hope to derive from this structure?

2.                  What problems emerged with this structure? How did Dow try to deal with them? In retrospect, do you think those solutions were effective?

3.                  Why did Dow change its structure again in the mid-1990s? What was Dow trying to achieve this time? Do you think the current structure makes sense given the industry in which Dow operates and the strategy of the firm? Why?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE: 4       REBRANDING MCJOBS

 

As with most fast-food restaurant chains, McDonald’s needs more people to fill jobs in its vast empire. Yet McDonald’s executives are finding that recruiting is a tough sell. The industry is taking a beating from an increasingly health-conscious society and the popular film Supersize Me. Equally troublesome is a further decline in the already dreary image of employment in a fast-food restaurant. It doesn’t help that McJob, a slang term closely connected to McDonald’s, was recently added to both Merriam-Webster’s Collegiate Dictionary and the Oxford English Dictionary as a legitimate concept meaning a low-paying, low-prestige, dead-end, mindless service job in which the employee’s work is highly regulated.

McDonald’s has tried to shore up its employment image in recent years by improving wages and adding some employee benefits. A few years ago it created the “I’m loving it” campaign, which took aim at a positive image of the golden arches for employees as well as customers. The campaign had some effect, but McDonald’s executives realized that a focused effort was needed to battle the McJob image.

Now McDonald's is fighting back with a “My First” campaign to show the public—and prospective job applicants—that working at McDonald's is a way to start their careers and develop valuable life skills. The campaign’s centerpiece is a television commercial showing successful people from around the world whose first job was at the fast-food restaurant. “Working at McDonald's really helped lay the foundation for my career,” says ten-time Olympic track and field medalist and former McDonald's crew member Carl Lewis, who is featured in the TV ad. “It was the place where I learned the true meaning of excelling in a fast-paced environment and what it means to operate as part of a team.”

Richard Floersch, McDonald's executive vice president of human resources, claims that the company’s top management has deep talent, but the campaign should help to retain current staff and hire new people further down to hierarchy. “It’s a very strong message about how when you start at McDonald's, the opportunities are limitless,” says Floersch. Even the McDonald's application form vividly communicates this message by showing a group of culturally diverse smiling employees and the caption “At McDonald's You Can Go Anywhere!”

McDonald's has also distributed media kits in several countries with factoids debunking the McJob myth. The American documentation points out that McDonald's CEO Jim Skinner began his career working the restaurant’s front lines, as did 40 percent of the top 50 members of the worldwide management team, 70 percent of all restaurant managers, and 40 percent of all owner/operators. “People do come in with a ‘job’ mentality, but after three months or so, they become evangelists because of the leadership and community spirit that exists in stores,” says David Fairhurst, the vice president for people at McDonald's in the United Kingdom. “For many, it’s not a job, but a career.”

McDonald's also hopes the new campaign will raise employee pride and loyalty, which would motivate the 1.6 million staff members to recruit more friends and acquaintances through word of mouth. “If each employee tells just five people something cool about working at McDonald's, the net effect is huge,” explains McDonald's global chief marketing officer. So far the campaign is having the desired effect. The company’s measure of employee pride has increased by 14 percent, loyalty scores are up by 6 percent, and 90-day employee turnover for hourly staff has dropped by 5 percent.

But McDonald's isn't betting on its new campaign to attract enough new employees. For many years it has been an innovator in recruiting retirees and people with disabilities. The most recent innovation at McDonald's UK, called the Family Contract, allows wives, husbands, grandparents, and children over the age of 16 to swap shifts without notifying management. The arrangement extends to cohabiting partners and same-sex partners. The Family Contract is potentially a recruiting tool because family members can now share the same job and take responsibility for scheduling which family member takes each shift.

Even with these campaigns and human resource changes, some senior McDonald's executives acknowledge that the entry-level positions are not a “lifestyle” job. “Most of the workers we have are students—it’s a complementary job,” says Denis Hennequin, the Paris-based executive vice president for McDonald's Europe.

 

 

Questions

 

1.                  Discuss McDonald's current situation from a human resource planning perspective.

2.                  Is McDonald's taking the best approach to improving its employer brand? Why or why not? If you were in charge of developing the McDonald's employer brand, what would you do differently?

3.                  Would “guerrilla” recruiting tactics help McDonald's attract more applicants? Why or why not? If so, what tactics might be effective?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE: 5       TRANSFORMING REUTERS

 

London-based Reuters is a venerable company. Established in 1850 and devoted to delivering information around the world by the fastest means available—which in 1850 meant a fleet of 45 carrier pigeons—by the late 1990s the company had developed into one of the largest providers of information in the world. Although Reuters is known best to the public for its independent, unbiased news reporting, 90 percent of Reuters’ revenues are generated by providing information to traders in financial markets. In the 1990s the company used a proprietary computer system and a dedicated telecommunications network to deliver real-time quotes and financial information to Reuters terminals—devices that any self-respecting financial trader could not function without. When Reuters entered the financial data business in the early 1970s, it had 2,400 employees, most of them journalists. By the late 1990s its employee base had swelled to 19,000 most of whom were on the financial and technical side. During this period of heady growth Reuters amassed some 1,000 products, often through acquisitions, such as foreign-language data services, many of which used diverse and sometimes incompatible computer delivery systems.

The late 1990s were the high point for Reuters. Two shocks to Reuters’ business put the company in a tailspin. First came the Internet, which allowed newer companies, such as Thompson Financial Services and Bloomberg, to provide real-time financial information to any computer with an Internet connection. Suddenly Reuters was losing customers to a cheaper and increasingly ubiquitous alternative. The Internet was commoditizing the asset on which Reuters had built its business: information. Then in 2001 the stock market bubble of the 1990s finally broke; thousands of people in financial services lost their jobs; and Reuters lost 18 percent of its contracts for terminals in a single year. Suddenly a company that had always been profitable was losing money.

In 2001 Reuters appointed Tom Glocer as CEO. The first nonjournalist CEO in the company’s history, Glocer, an American in a British-dominated firm, was described as “not part of the old boys’ network.” Glocer had long advocated that Reuters move to an Internet-based delivery system. In 2000 he was put in charge of rolling out such a system across Reuters but met significant resistance. The old proprietory system had worked well, and until 2001 it had been extremely profitable. Many managers were therefore reluctant to move toward a Web-based system that commoditized information and had lower profit margins. They were worried about product cannibalization. Glocer’s message was that if the company didn’t roll out a Web-based system, Reuters’ customers would defect in droves. In 2001 his prediction seemed to be coming true.

Once in charge, Glocer again pushed an Internet-based system, but he quickly recognized that Reuters’ problems ran deeper. In 2002, the company registered its first annual loss in history, £480 million, and Glocer described the business as “fighting for survival.” Realizing that dramatic action was needed, in February 2003 Glocer launched a three-year strategic and organizational transformation program called Fast Forward. It was designed to return Reuters to profitability by streamlining its product offering, prioritizing what the company focused on, and changing its culture. The first part of the program was an announcement that 3,000 employees (nearly 20 percent of the workforce) would be laid off.

To change its culture Reuters added an element to its Fast Forward program known as “Living Fast,” which defined key values such as passionate and urgent working, accountability, and commitment to customer service and team. A two-day conference of 140 managers, selected for their positions of influence and business understanding rather than their seniority, launched the program. At the end of the two days the managers collectively pledged to buy half a million shares in the company, which at the time were trading at all-time low.

 

 

After the conference the managers were fired up; but going back to their regular jobs, they found it difficult to convey that sense of urgency, confidence, and passion to their employees. This led to the development of a follow-up conference: a one-day event that included all company employees. Following a video message from Glocer and a brief summary of the goals of the program, employees spent the rest of the day in 1,300 cross-functional groups addressing challenges outlined by Glocer and proposing concrete solutions. Each group chose one of “Tom’s challenges” to address. Many employee groups came up with ideas that could be rapidly implemented—and were. More generally, the employees asked for greater clarity in product offerings, less bureaucracy, and more accountability. With this mandate managers launched a program to rationalize the product line and streamline the company’s management structure. In 2003 the company had 1,300 products. By 2005 Reuters was focusing on 50 key strategic products, all delivered over the Web. The early results of these changes were encouraging. By the end of 2004 the company recorded a £380 million profit, and the stock price had more than doubled.

 

 

Questions

 

1.                  What technological paradigm shift did Reuters face in the 1990s? How did that paradigm shift change the competitive playing field?

2.                  Why was Reuters slow to adopt Internet-based technology?

3.                  Why do you think Tom Glocer was picked as CEO? What assets did he bring to the leadership job?

4.                  What do you think of Glocer’s attempts to change the strategy and organizational culture at Reuters? Was he on the right track? Would you do things differently?

 

CONSUMER BEHAVIOR

 

Note: Solve any 4 Cases Study’s

 

 

CASE: I  Toyota

 

Of all the slogans kicked around Toyota, the key one is kaizen, which means “continuous improvement” in Japanese. While many other companies strive for dramatic breakthrough, Toyota overtook Ford Motor Company to become the second largest automaker in the world. Ford had been the second largest since 1931.

            Toyota simply is tops in quality, production, and efficiency. From its factories pour a wide range of cars, built with unequaled  precision. Toyota turns out luxury sedans with Mercedes-Benz-like quality using one-sixth the labor Mercedes does. The company originated just-in-time production and remains its leading practitioner. It has close relationships with its suppliers and rigid engineering specifications for the products it purchases

            Toyota’s worldwide leadership in the automotive industry was built on its competitive advantage across the supply chain. Between 1990 and 1996, Toyota reduced part defects by 84 percent, compared to 47 percent for the Big 3. It also reduced the ratio of inventories to sales by 35 percent versus 6 percent. These reduction advantages occurred despite the fact the Big 3 relied on identical suppliers. A study by Jeff Dyer of The Wharton School of the University of Pennsylvania and Kentaro Nobeoka of Kobe University attributed Toyota’s success partly to its implementation of bilateral and multilateral, knowledge-sharing routines with suppliers that result in superior Interorganizational or network learning. Toyota uses six approaches to facilitate knowledge sharing: (1)a supplier association;(2) teams of consultants;(3)voluntary study groups;(4)problem-solving teams;(5)interfirm employee transfers; and (6)performance feedback and monitoring processes. This effort also involves intense levels of personal contact between Toyota and its suppliers.

            Toyota pioneered quality circles, which involve workers in discussions of ways to improve their tasks and avoid what it calls the three Ds: the dangerous, dirty, and demanding aspects of factory work. The company has invested $770 million to improve worker housing, add dining halls, and build new recreational facilities. On the assembly line, quality is defined not as zero defects but, as another slogan puts it, “building the very best and giving the customer what she/he wants.” Because each worker serves as the customer for the process just before hers, she becomes a quality control inspector. If a piece isn’t installed properly when it reaches her, she won’t accept it.

            Toyota’s engineering system allows it to take a new car design from concept to showroom in less than four years versus more than five years for U.S. companies and seven years for Mercedes. This cuts costs, allows quicker correction of mistakes and keeps Toyota better abreast of market trends. Gains from speed feed on themselves. Toyota can get its advanced engineering and design done sooner because, as one manager puts it, “We are closer to the customer and thus have shorter concept time.” New products are assigned to a chief engineer who has complete responsibility and authority for the product from design and manufacturing through marketing and has direct contacts with both dealers and consumers. New-model bosses for U.S. companies seldom have such control and almost never have direct contact with dealers or consumers.

            The 1999 Harbour Report, a study of automaker competencies in assembly, stamping, and powertrain operations, stated that the top assembly facility in North America (based on assembly hours per vehicle) is Toyota’s plant in Cambridge, Ontario. In this plant, a Corolla is produced in 17.66 hours. Toyota was also rated number one in engine assembly, taking just 2.97 hours to produce an engine.

            In  Toyota’s manufacturing system, parts and cars don’t get build until orders come from dealers requesting them. In placing orders, dealers essentially reserve a portion of factory capacity. The system is so effective that rather than waiting several months for a new car, the customer can get a built-to-order car in a week to 10 days.

            Toyota is the best carmaker in the world because it stays close to its customers. “We have learned that universal mass production is not enough,” said the head of Toyota’s Tokyo Design Center. “In the 21^st century, you personalize things more to make them more reflective of individual needs.”

            In 1999, Toyota committed to a $13 billion investment through 2000 to become a genuinely global corporation without boundaries. In this way, it will be able to create worldwide manufacturing facilities that produce cars according to local demand. Its goal is to achieve a 10 to 15 percent global market share by 2010.

            Why the drive towards customization of vehicles? Part of this is due to fierce competition that provides consumer with a multitude of choices. The Internet enables consumers to be more demanding and less compromising. They now have access to the lowest prices available for specific models of vehicles with all of the bells and whistles they design. From the comfort of their homes, they are able to bypass dealers and still find the vehicle of their dreams.

            Senior management at Toyota believes that kaizen is no longer enough. The senior vice president at the Toyota USA division, Douglas West, states that his division is committed to both creating and executing a new information system to drive the fastest, most efficient order-to-delivery system in the North American market. Toyota management has come to realize Kaizen alone can no longer predict business success. The sweeping changes taking place in the business environment can no longer rely on the kaizen philosophy of small, sustained improvements. In fact, one expert in the industry believes that “pursuing incremental improvements while rivals reinvent the industry is like fiddling while Rome burns.” Competitive vitality can no longer be defined by continuous improvement alone.

 

 

Question:

1.                  In what ways is Toyota’s new-product development system designed to serve customers?

2.                  In what ways is Toyota’s manufacturing system designed to serve customers?

3.         How does Toyota personalize its cars and trucks to meet individual consumer needs?

 

 

 

 

 

 

 

 

 

 

 

CASE: II  Exposure, Attention, and Comprehension on the Internet

 

The Internet universe literally grows more cluttered by the minute. According to Network Solutions, Inc., which registers the vast majority of Web addresses around the world, about 10,000 new addresses are registered each day. That means by the time you finish reading this case, about 60 new domain names will have been gobbled up. With all the clutter on the Web, how have some firms been able to stand out and attract millions of customers?

            First, there are some basics to which online firms must attend. These cost little more than some time and a little  creativity. The first is creating a good site name. The name should be memorable (yahoo.com), easy to spell (ebay.com), and/or descriptive (wine.com—a wine retailer). And, yes, ideally it will have a .com extension. This is the most popular extension for e-commerce, and browsers, as a default, will automatically add a .com onto any address that is typed without extension.

            The second priority is to make sure the site comes up near the top of the list on any Web searches. If you use Lycos.com to perform a search for “used books,” you get a list of more than 2.6 million websites. Studies have shown that most people will look only at the top 30 sites on the list, at most. If you are a used-book retailer and you show up as website #1,865,404 on the search list, there is a very good chance you will not attract a lot of business. A 1999 Jupiter Research study reveals that “searching on the Internet” is the most important activity, and Internet users find the information they are looking for by using search engines and Web directories. A good Web designer can write code that matches up well with search engine algorithms and results in a site that ranks high on search lists.

            Virtually all popular websites have those basics down pat. So the third step is to reach out proactively to potential customers and bring them to your site. Many companies have turned to traditional advertising to gain exposure. Television advertising can be an effective option—albeit an expensive one. In late January 1999, hotjobs.com spent $2 million—half of its 1998 revenues—on one 30-second ad during the Super Bowl. According to CEO Richard Johnson, so many people tried to visit the site that the company’s servers jammed. Johnson says the number of site hits was six times greater than in the month before. A quirky ad campaign may or may not help. Pets.com, now de-func, built its image around a wise-guy sock puppet. CNET, a hardware and software retailer, ran a series of television ads featuring cheesy music, low-budget sets, and unattractive actors. One such ad featured two men—one in a T-shirt that said ”you,” another in a T-shirt labeled “the right computer” – coming together and joining hands thanks to the efforts of another guy in a CNET T-shirt. The production quality was rudimentary enough that any sophomore film student could have produced it. The spots were so bad that they stood out from the slick, expensive commercials to which viewers were accustomed. Critics ripped the campaign to shreds, but CNET called it a success.

            Other Internet firms have used sports sponsorships to increase visibility. CarsDirect.com, a highly rated site that allows consumers to purchase automobiles online, once purchased the naming rights to NASCAR auto race (the CarsDirect.com400). Lycos also has tried to make the most of NASCAR’s increasing popularity. It spent hundreds of thousands of dollars to have its name and logo plastered all over the car of popular driver Johnny Benson. Meanwhile, online computer retailer Insight and furniture seller galleryfurniture.com each targeted football fans by purchasing the naming rights to college bowl games.

            Of course, if you can reach consumers while they are in front of their computers rather than their television sets, you may stand an even better chance of getting them to your site. However, typical banner ads are inefficient, averaging click-through rates of only about 0.5 per cent (only one of every 200 people exposed to the ad actually clicked on the ad). Too often, banner ads are just wallpaper; consumers may see them but they usually are not sufficiently stimulated to click-through. However, Michele Slack of the online advertising group Jupiter Communications believes banner ads can be useful if used correctly. “The novelty factor is wearing off,” she says. But “when an ad is targeted well and the creative is good, click-through rates are much higher.”

            An alternative way to reach people who are already online is through partnerships. One of the most visible examples of such an alliance is the one between Yahoo! And Amazon.com. Let’s say you’re working on a project on the Great Depression and you want to see what kind of information is available online. If you go to Yahoo! And type in “Great Depression,” you will not only be presented with a list of websites, but you will also see a link that will allow you to click to see a list of books on the Great Depression that are available through Amazon. Another example of a successful partnership was forged in 1998 between Rollingstone.com and the website building and hosting service Tripod. Every one of the 3,000 artist pages on Rollingstone.com contained a link to Tripod. The goal was to encourage fans to use Tripod’s tools to build webpages dedicated their favorite singers or bands. According to the research company Media Metrix, during the course of the alliance Tripod jumped from the Web’s fourteenth most popular website to number eight. Alliances with nonvirtual companies are another options. In 2003, the Internet classified firm CareerBuilder kicked off a cross-promotional campaign with major Internet firms, including AOL and MSN.

            A less subtle but nonetheless effective way to build traffic is to more or less pay people visit your site. One study showed more than half of Internet consumers would be more likely to purchase from a site if they could participate in some sort of loyalty program. Hundreds of online merchants in more than 20 categories have signed up with a network program called ClickRewards. Customers making purchases at ClickRewards member sites receive frequent-flier miles or other types of benefits. Mypoints.com offers a similar incentive program in which customers are rewarded with air travel, gift certificates and discounts for shopping at member merchants. The search engine iwon.com was even more direct. It rewards one lucky visitor each weekday with a $10,000 prize. According to Forrester Research, companies in 2002 spent about $6 billion annually on online incentives and promotions.

            Finally, some firms rely on e-mail to thoroughly mine their existing customer databases. The auction site Onsale (later merged with Egghead.com) proved just how successful e-mail can be. It sent out targeted e-mails to its customers based on their past bidding activities and previously stated interests. Click-through rates on these targeted e-mails averaged a remarkable 30 percent. E-mail marketing also holds promise for business-to-business firms. The Peppers and Rogers Group is a marketing firm that gives presentations around the United States. At the end of the presentations, people are invited to go to the company’s website and sign up for their e-mail newsletter, Inside 1 to 1. The newsletter invites readers to visit the Peppers and Rogers website to learn more about various articles, promote their products and services, and participate in forums. Inside 1 to 1 now boasts a subscriber base of 45,000, but the company estimates that about 200,000 people actually see it because subscribers forward it to their friends and colleagues. About 14,000 people visit the Peppers and Rogers site each week, with traffic often peaking immediately after the newsletter is sent.

            As you can see, there is no one effective method for generating interest in a website. The same methods that have worked for some firms have failed for others. One certainty is that as the Internet grows and more people do business online, Internet firms will have to find ever more creative ways to expose customers to their sites and keep their attention once there.

 

 

 

 

 

 

 

 

 

Questions:

 

1.                  Consider the e-mail campaigns discussed in the case. Why do you think these campaigns were successful? Discuss the attention processes that were at work. Do you see any potential drawbacks to this type of marketing?

2.                  During the 2000 Super Bowl, ABC invited viewers to visit its Enhanced TV website. Fans could play trivia, see replays, participate in polls and chat rooms, and view player statistics. The site received an estimated 1 million hits. Why? Frame your answer in terms of exposure, attention, and comprehension.

3.                  Think about your own Web surfing patterns. Write down the reasons you visit sites. Which of the marketing strategies discussed in the case do you find most (and least) influential?

 

 

 

 

 

 

CASE: III  Peapod Online Grocery—2003

 

The online grocery turned out to be a lot tougher than analysts thought a few years ago. Many of the early online grocers, including Webvan, ShopLink, StreamLine, Kosmom, Homeruns, and PDQuick, went bankrupt and out of business. At one time, Webvan had 46 percent of the online grocery business, but it still wasn’t profitable enough to survive. The new business model for online grocers is to be part of an existing brick-and-mortar chain. Large grocery chains, like Safeway and Albertson’s, are experiencing sales growth in their online business but have yet to turn a profit. Jupiter Research estimates that online grocery sales will be over $5 billion by 2007, about 1 percent of all grocery sales, while it expects more than 5 percent of all retail sales to be online by then. A few years ago, optimistic analysts estimated online grocery sales would be 10 to 20 times that by 2005, but it didn’t work out that way.

            One of the few online grocers to survive in 2003 is Peapod, the first online grocer, started by brothers Andrew and Thomas Parkinson in 1990. However, even Peapod was failing until 2001 when Dutch grocery giant Royal Ahold purchased controlling interest in the company for $73 million. Peapod operates in five markets, mainly by closely affiliating itself with Ahold-owned grocery chains. Peapod by Giant is in the Washington, DC, area, while Peapod by Stop and Shop runs in Boston, New York, and Connecticut. The exception is Chicago, where Peapod operates without an affiliation with a local grocery chain. Peapod executives claim the company is growing by 25 percent annually and has 130,000 customers, and all of its markets except Connecticut are profitable. Average order size is up to $143 from $106 three years earlier.

            The online grocery business seemed like a sure winner in the 1990s. Dual-income families strapped for time could simply go online to do their grocery shopping. They has about the same choices of products that they would have had if they went to a brick-and-mortar grocery, about 20,000 SKUs (stockkeeping units). They could browse the “aisles” on their home computers and place orders via computer, fax or telephone. The orders were filled at affiliated stores and delivered to their homes in a 90-minute window, saving them time and effort and simplifying their daily lives. For all this convenience, consumers were willing to pay a monthly fee and a fee per order for packaging, shipping, and delivery. Since most of the products purchased were well-known branded items, consumer faced little risk in buying their traditional foodstuffs. Even perishables like produce and meat could be counted on to be high quality, and if consumers were concerned, they could make a quick trip to a brick-and-mortar grocery for these selections. However, while all of this sounded good, most consumers didn’t change their grocery shopping habits to take advantage of the online alternative.

            Currently analysts do not expect the online grocery industry to take off in the near future, if ever. Miles Cook of Bain & Company estimates that only 8 to 10 percent of U.S. consumers will find ordering groceries online appealing, but only about 1 percent will ever do so. He concludes: “This is going to remain a niche offering in a few markets. It’s not going to be a national mainstream offering.” Jupiter Media Metrix analyst Ken Cassar concludes that “The moral of the story is that the ability to build a better mousetrap must be measured against consumers’ willingness to buy it.”

           

Question:

 

1.                  What behaviors are involved in online grocery shopping? How does online shopping compare with traditional shopping in terms of behavioral effort?

2.                  What types of consumers are likely to value online grocery shopping from Peapod?

3.                  Overall, what do you think about the idea of online grocery shopping? How does it compare with simply eating in restaurants and avoiding grocery shopping and cooking altogether?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASE: IV         Sony

In just over half-century, Sony Corporation has from a 10-person engineering research group operating out of a bombed-out department store to one of the largest, most complex, and best-known companies in the world. Sony co-founders Masaru Ibuka and Akio Morita met while serving on Japan’s Wartime Research Committee during World War II. After the war, in 1946, the pair got back together and formed Tokyo Telecommunications Engineering Corporation to repair radios and build shortwave radio adapters. The first breakthrough product came in 1950, when the company produced Japan’s first tape recorder, which proved very popular in music schools and in courtrooms as a replacement for stenographers.

            In 1953, Morita came to the United States and signed an agreement to gain access to Western Electric’s patent for the transistor. Although Western Electric (Bell Laboratory’s parent company) suggested Morita and Ibuka use the transistor to make hearing aids, they decided instead to use it in radios. In 1955, Tokyo Telecommunications Engineering Corporation marketed the TR-55, Japan’s first transistor radio, and the rest, as they say, is history. Soon thereafter, Morita rechristened the company as Sony, a name he felt conveyed youthful energy and could be easily recognized outside Japan.

            Today Sony is almost everywhere. Its businesses include electronics, computer equipment, music, movies, games, and even life insurance. It employs 190,000 people worldwide and does business on six continents. In 1999, Sony racked up sales of $63 billion; 31 percent of those came from Japan, 30 percent from the United States, and 22 percent from Europe. (To visit some of Sony’s country-specific websites, go to www.sony.com and click on “Global Sites.”)

            Perhaps Sony’s most famous product is the Walkman. Created in 1979, the Walkman capitalized on what some perceived as the start of a global trend towards individualism. From a technological standpoint, the Walkman, was fairly unspectacular, even by 1979 standards, but Sony’s marketing efforts successfully focused on the freedom and independence the Walkman provided. One ad depicted three pairs of shoes sitting next to a Walkman with the tag line “Why man learned to walk.” By 2000 more than 250 million Walkmans had been sold worldwide, but Sony was concerned. Studies had shown that Generation Y (ages 14 to 24) viewed the Walkman as stodgy and outdated. So Sony launched a $30 million advertising and marketing campaign to reposition the product in the United States. The star of the new ads was Plato, a cool, Walkman-wearing space creature. The choice of a nonhuman character was no accident according to Ron Boire, head of Sony’s U.S. personal-mobile group. He wanted a character that would appeal to the broadest possible range of ethnic groups—thus, the space creature. Boire explains, “An alien is no one, so an alien is everyone.”

            Sony’s current vision, however, extends far beyond the Walkman: to become a leader in broadband technologies. Sony looks forward to a day when all of its products—televisions, DVDs, telephones, game machines, computers, and so on—can communicate with one another and connect with the Web on a persona network. A Sony executive provides an example of such technology in action: “Say you are watching TV in the den, and your kids are playing their music way too loud upstairs,” he says. “You could use your TV remote to call up an onscreen control panel that would let you turn down your kids’ stereo, all without having to get up from your recliner.”

            Sony sees its new PlayStation2 filling a major role in the Internet of the future. In March 2000, Sony introduced the PlayStation2 in Japan and sold 1 million units within a week. Newsweek featured the PlayStation2 on its cover that spring, even though it wasn’t offered in the United States until later in the year. Most consumers probably bought PlayStation2 to play video games, but its potential goes far beyond that. It is actually powerful enough to be adapted to guide a ballistic missile. Sony envisions consumers turning to the PlayStation2 for not only games but also movies, music, online shopping, and any other kind of digital entertainment currently imaginable. Ken Kutaragi, president of Sony Computer Entertainment, predicts the PlayStation2 will someday become as valuable as the PC is today: “A lot of people always assumed the PC would be the machine to control your home network. But the PC is a narrowband device that… has been retrofitted to play videogames and interactive 3-D graphics. The PlayStation2 is designed from the ground up to be a broadband device.”

            The PlayStation2 also reflects a changing attitude within Sony regarding partnerships with other companies. Toshiba helped Sony design the Emotion Engine, which powers the PlayStation2. In previous years, these kinds of alliances were the exception rather than the rule with the Sony. Sony was perceived as arrogant because it rarely cooperated with other companies, preferring to develop and popularize new technologies on its own. Recently, however, that has changed. Sony has worked with U.S. based Palm to develop a new hand-held organizer with multimedia capabilities, cooperated with Intel to create a set of standards for home networks, and launched a joint venture with Cablevision to build a broadband network in the New York metropolitan area. Nevertheless, some critics believe Sony remains too insular, looking on from the sidelines while other companies join forces to create entertainment powerhouses. Sony has no alliances with U.S. cable or television networks, raising some doubts about its ability to fully develop its home Internet services. Sony has talked with other music companies about possible joint venture, but nothing has come to fruition.

            Unlike many U.S.-based multinationals, Tokyo-based Sony traditionally has marketed itself on a regional rather than a global basis. For example, Sony has almost 50 different country-specific websites from which consumers can order products. However, there are signs that strategy may be changing, at least to some degree. Sony launched www.Sonystyle.com, a website that is the company’s primary online outlet for selling movies, music, and electronic products. Sony also plans to provide product service and support on the site, and eventually software upgrades as well. The current main website (www.sony.com) is mainly a source for corporate and investor information. Also, in 1997 Sony embarked on a worldwide ad campaign to make itself and its products more relevant in the eyes of younger consumers. Ironically, much of Sony’s future growth may come from its own backyard. The primary buyers of electronic and digital products are ages 15 to 40. It is estimated that by 2010, two-thirds of the people in the world in that age bracket will live in Asia. Tokyo is already a powerful influence on Asian culture. Asia’s most popular youth magazines are published in Tokyo, and most of the music Asian young people listen to comes form Tokyo. So part of Sony’s challenge is to continue to grow on a global scale while paying close attention to the burgeoning market at home.

            Immediately following World War II and for some years thereafter, the label “Made in Japan” connoted cheap, shoddy, imitation products. Today, for many people, that same label stands for excellence and innovation. Certainly Sony can take much of the credit that transformation. Now the question is whether Sony’s products and marketing efforts can keep pace (or set the pace) in the upcoming age of digital convergence.

 

Question:

 

1.                  Identify and discuss some of the cultural meanings for Sony possessed by consumers in your country. Discuss how these cultural meaning were developed and how they influence consumers’ behaviors (and affect and cognition). What is the role of marketing strategies in creating and maintaining (or modifying) these cultural meanings?

2.                  It is often stated that the world is becoming smaller because today people communicate relatively easily across time and distance. Discuss whether that has been beneficial for Sony. What are some marketing challenges it presents?

3.                  What do you think about Sony’s tradition of region-specific or nation-specific marketing? Would Sony be better served by working to create a more uniform global image?

 

CASE: V   Pleasant Company

 

Samantha Parkington fights for women’s suffrage. Addy Walker escapes from slavery. Kirsten Larson builds a life in the frontier. Characters from feminist novel? No, these plucky heroines are part of The American Girls Collection, a line of historical dolls that are the darlings of 7- to 12 year-olds. Christmas orders piled up so fast at Pleasant Co.—the privately held doll-maker—that company vice presidents had to pack boxes in the warehouse.

            Former president, Pleasant Rowland, who began the company with royalties she received from writing primary school reading books knew her vision had to be broad. Simply launching a me-too doll would have meant failure.

            Before Rowland got her idea she went shopping for dolls for her two nieces. All she found were Barbies that wore spiked heels, drove pink Corvettes, and looked as if they belonged in strip joints. Though industry sources told her she couldn’t sell a mass market doll for over $40—some Barbies cost less than $10—Rowland gambled that boomer parents would pay more for one that was fun and educational.

            Each of Pleasant Co.’s five dolls represents an era of American history. Addy is from the Civil War, and Samantha is described as a “bright Victorian beauty.” Parents can also buy historically accurate replicas of clothes, furniture, and memorabilia, such as the June 6, 1944, Chicago Daily Tribune headlined “Allies Invade France, made for Molly McIntire, the 1940s doll. The 18-inch dolls cost $84; add in all the accessories, including $80 dresses for the doll’s owner, and the price exceeds $1000. Every doll also stars in its own series of novels, with titles like Kirsten Learns a Lesson Samantha Saves the Day. The heroines go on adventures and cope with moral dilemmas; for example, Felicity Merriman, a colonial girl, has to decide whether to continue her tea parties while her father fights King
George Ill’s tea tax. Says Rowland: “We try to give girls chocolate cake with vitamins.”

            Pleasant Co. decided early on not to compete doll to doll on toy store shelves. Defying industry wisdom, Rowland began selling only through her own catalog. She counted on her dolls’ being so different that word of mouth would take care of sales. She also coddled her customers. Pleasant Co. opened a “hospital” for broken dolls, so when brother sticks a pair of scissors through Molly’s head, Mom can return her to Pleasant Co. for repairs. For $35 the company does the surgery then mails Molly—now wearing a hospital gown and carrying a certificate of health form the house doctor—home to recuperate.

            Will Pleasant Co.’s dolls have legs? Rowland says movies, CD-ROMs, and theme parks aren’t out of the question. But she’ll expand only as long as she can keep the business special. She refuses to license her products on T-shirts and lunch boxes, fearing that too much exposure would cheapen the doll’s image. Says Rowland: “It never hurts to play hard to get.”

            In 1998, Mattel, Inc., purchased Pleasant Co., which continues to operate as an independent subsidiary. During the same year, American Girl Place, the company’s first retail and entertainment site, opened in downtown Chicago, and a second store opened in New York in 2003. The stores are a little girl’s delight. Visitors can purchase dolls, books, and clothing; view a musical revue; and have tea, lunch, or dinner at the Café at American Girl Place. The Chicago store sold $35 million worth of products in 2003.

 

Question:

 

1.                  Why do consumers pay $84 for a Pleasant Company doll when they can buy other dolls much more cheaply at retail stores?

2.                  Considering money, time, cognitive activity, and behavioral effort costs, are Pleasant Company dolls more or less costly than dolls that can be purchased at retail stores?

3.                  What recommendations do you have for Pleasant Company to increase sales and profits?

 

ADVERTISE MANAGEMENT

Attempt Only 4 Case Study

 

Case I- The Day That Wal-Mart Dropped the Smiley Face

 

Retail giant wal-mart annually spends close to a half billion dollars on advertising, so the company’s decision in the first month of 2005 to run full-page ads in more than 100 newspapers was not really surprising. What was surprising was the copy in those ads, which said nothing about low-priced toasters or new music CDs. Instead, the ads featured a photo of workers in their blue Wal-Mart smocks and a letter from Wal-Mart CEO Lee Scott. Scott’s letter was blunt and to the point: “When special interest groups and critics spread misinformation about Wal-Mart, the public deserves to hear the truth. Everyone is entitled to their own opinions about our company, but they are not entitled to make up their facts.”

 

Not the sort of message many would expect from a company whose television ads often feature a yellow “smiley-face” flying around a Wal-Mart store lowering prices. But it is a clear sign that Wal-Mart believes it can no longer afford to ignore several societal trends that threaten the company’s success and profitability.

 

Wal-Mart is the largest and most successful retailer in the world. It employs more people than any other private company in the United States (almost 1.2 million) and has world-wide sales of over a quarter trillion dollars, more than four times that of its nearest competitor. The foundation of this impressive record is the company’s ability to keep it promise of customer-friendly service and low prices.

But with success comes attention and not all of it good. Several lawsuits claim Wal-Mart shorts overtime pay and one lawsuit claimed female employees face discrimination in pay and promotions. Wal-Mart’s expansion plans have also run into trouble, as some cities and states, citing concerns ranging from low wages, inadequate benefits, environmental damage, and harm to local economies, have passed laws to make it difficult or impossible for Wal-Mart to build its giant superstores.

           

In response to past criticisms of its diversity policies, Wal-Mart created company-wide postings of promotional opportunities, created a new position for a director of diversity, and slashed the bonuses of managers who fail to achieve diversity hiring targets. Scott himself stands to lose $600,000 from his annual bonus if Wal-Mart does not meet diversity goals. Recent years have also seen the CEO spend more time meeting with investors, community groups and the media.

 

But in recent years Wal-Mart has begun to use advertising as a way of addressing criticisms that the company is not a good employer. At first, much of this advertising was “soft-sell” emphasizing happy Wal-Mart employees. The new campaign is clearly more direct: The copy seeks to address misperceptions about employee wages and benefits, noting that full-time company employees are paid an average of $ 9.68 – substantially higher than what is required by federal law (%5.15). The copy also notes that a majority of Wal-Mart employees said benefits were important to them when they chose to take a job at the retailer. Complementing the ads is a PR campaign in select cities using employees and press conferences. In Tampa, Florida, for example, employee Michael Martin told reporters, “I’m making more after working four years at Wal-Mart than I did after nine years at Winn-Dixie.” Martin, a department manager, noted, “I left Winn-Dixie because I couldn’t get a promotion. Here I got one after six months.”

 

Why is the company using a new approach? “For too long, others have had free rein to say things about our company that just are not true,” said lee Scott, president and chief executive office. “ Our associates [Wal-Mart speak for employees] are tired of it and we’ve decided to draw our own line in the sand.” It is too soon to know if the campaign will succeed, although some are already skeptical. According to retail marketing consultant Jordan Zimmerman, aggressive mage campaigns like Wal-Mart’s are rare and costly. And ads that directly address the company’s critics will not likely replace the company’s regular advertising (including the smiley face), which is not scheduled to change any time soon. But the new ads do constitute a small change in the nature of the dialogue Wal-Mart has with consumers and society. Only tie will tell if they help Wal-Mart to stay on top.

           

 

Questions:

1.    What is Wal-Mart doing with its latest campaign? What are the difficulties involved in such an effort?

2.    A recent Advertising Age article noted that Wal-mart customers are less likely to read newspapers and more likely to watch television than the population as a whole. Why, then did Wal-mart choose newspapers for its new campaign?

3.    Analyze this Wal-Mart campaign and explain its purpose referring to the discussion in this chapter of the roles and functions of advertising. What is its primary purpose? Do you think it will be effective at accomplishing that purpose?

 

 

Case II  - Toyota Goes after Tuners

 

Young people with limited incomes often look for a great deal on a new car. One way to save money is to forgo options and upgrades, like a sunroof or a CD player. But when Toyota introduced its funky “Scion” brand, it considered offering a version without something most people assume comes standard: paint. Although they ultimately decided against the idea, at one point Toyota’s plan was to sell the brand with just gray primer.

 

Toyota wasn’t really targeting people so cheap they wouldn’t spend money on paint. Just the opposite – the car company was going after a group with money to burn, called tuners. Tuners are young car buyers who live to customize hteir cars. The trend really began among young Asian Americans, who typically bough t inexpensive Asian import cars and then spent thousands of dollars customizing them. The hobby has spread to other young people, so that today Asian Americans are a minority of tuners. But Japanese brands remain the cars of choice among those dedicated to creating a work of art on wheels. Explaining the idea of a “no paint” option, Jim Farley, Scion general manager, says, “As much as possible, we want to give them [tuners] a black canvas.”

 

What does a tuner do with his car? He (or she; women make up almost 20 percent of the tuner subculture) might take a basic Honda, add a large and loud exhaust system, paint the intake manifolds, and add ride-lowering springs. Other popular add-ons are technologies that increase vehicle speed, like turbochargers, superchargers, and nitrous kits. And there are some serious bucks involved. The Specialty Equipment Market Association estimates that auto after-market spending (spending on car accessories after the original car purchase) increased from $295 million in 1997 to 2.3 $billion in 2002. The motivation? “ You build a car for yourself,” says one day install on Acura RSX Type-S engine into his Honda Civic. “ The satisfaction is in making it your own and knowing that nobody will ever have something that’s the same.”

 

The amount of money tuners spend is reason enough to attract the attention of marketers. GM hoped to interest tuners in its Saturn Ion, Chevrolet Cavalier, and Pontiac Sunfire when it when it launched a “ Tuner Tour” of 10 National Hot Rod Association races. GM allowed young car enthusiasts to play games and enter contests for prizes, as it in turn collected names and e-mail addresses. GM’s focus on relationship marketing makes sense because tuners don’t watch a lot of TV. Both Mitsubishi and Ford believe the best way to reach them is with product placements in movies (Mitsubishi bought air time in the popular for (“2 Fast 2 Furious”). But even companies selling products unrelated to cars are interested in the tuner lifestyle. Pepsi has hired tuners to customize some of its promotional vehicles.

 

Which brings us full circle back to Scion, Toyota’s goal is to make the new car an immediate hit with tuners. So rather than spend a great deal of money on network television, Toyota decided to sponsor a 22-minute movie On the D.L. The movie is a comical docudrama that tells the story of a pair of musicians trying to obtain their first drivers licenses. The stars are musicians trying to obtain their first drivers licenses. The stars are musicians from youth-oriented bands: Ahmir “Questlove” Thompson, from the Roots, and DJ King Britt, who played for the Digable Planets. The film premiered at the Tribeca film festival, after which segments were shared on peer-to-peer networks such as Kaazaa. Toyota hopes that enthusiasts will download the segments and share them with friends.

     

Questions:

1.    Why are tuners so attractive to marketers, even after accounting for their spending power?

2.    Evaluate Toyota’s strategy of targeting tuners with the Scion campaign. What are the difficulties for a large company in marketing effectively to a youth-oriented subculture? What techniques do you think companies like Toyota are using to try to understand their market?

3.    Explain how “tuner” campaigns, such as those by GM and Toyota, work. Analyze these campaigns using the Facets Model to identify the effects they are designed to achieve. How would you determine if these campaigns are effective?

Case III- Starbucks Makes TV Less Intrusive

 

Starbucks coffee is now sold in grocery stores but how many people realize it? To get that message out, the well known coffee house chain needed to reach its customers nationwide with that message.

Television commercials would be the obvious way to reach those people, but Starbucks’ management knew that their customers are not big fans of television commercials and resent the interruption of their favorite program. That’s why starbucks has been such an infrequent advertiser on TV. Its on-air promotional activities have been limited primarily to radio and its only previous use of TV had been support announcements on public TV.

 

That was the problem facing Starcom’s MediaVest group. The agency used a creative solution: It recommended a partnership with the Bravo cable network. Bravo would run four Independent Film Channel (IFC) movies on Friday nights for a month and Starbucks would buy all the commercial time surrounding the movie airings.

The MediaVest team knew that Bravo’s “IFC Friday” night films would be a good way to reach the stakeholder audience because research had described that customer base as people who are up on the latest trends, like to attend live performances of the arts, are apt to see a movie during the weekend it opens, and generally are interested in cutting edge things. Mediavest calls this customer “the attuned explorer.”

 

Even though Starbucks bought all the commercial time, the MediaVest team recommended letting the movies run uninterrupted. Starbucks’ advertising message was delivered in supporting Bravo promotions of the movies during each week leading up to the Friday night telecast. About 40 seconds of each 60-second preview spot showed scenes from the movie and 20 seconds promoted Starbucks s the movie sponsor.

 

Other promotional activities were also used in support of the campaign. One month before the movies aired, a $1 off coupon for a bag of Starbucks Coffee was sent to 3 million targeted consumers around the country, along with a viewer guide introducing the Starbucks-sponsored independent movie festival.

 

Starbucks billboards also appeared during the movie month coinciding with the independent film industry’s annual telecast, which aired on both Bravo and IC.

The innovative Bravo partnership wound up not only increasing sales of Starbucks Coffee by 15 percent for the month the campaign ran, but also increased viewership on Bravo by 33 percent. These results led the campaign to be named a Media Plan of the year by Adweek magazine.

 

Questions:

1.    What was the problem Starbucks wanted to overcome in order to effectively advertise that its coffee brand was available in supermarkets?

2.    How did the partnership work? Is there anything you could recommend that would extend the reach of this campaign?

 

Case IV - Wpp’s Owner-a British Knight with Every (Marketing) Weapon at His Disposal

 

To the uniformed, nothing about Martin Sorrell or his company, the WPP group, may be quite what it seems. Although he was awarded a knighthood, Sir Martin is anything but a reserved aristocrat. And while WPP is one of the four largest agency holding companies in the world, the initials actually stand for Wire & Plastic products, the British company Sorrell used to gobble up some of the world’s most famous advertising agencies. The roster of agencies now under the WPP’s wing includes industry leaders Ogivly and Mother, Burson-Marsteller, Hill & knowlton, young & Rubicam, and J. Walter Thompson, to name just a few.

            Large conglomerates like WPP made frequent headlines in the 1990s, a period of great consolidation in the advertising industry. Faced with harsh economic and business realities, individual advertising agencies chose to give up independent existence in order to become parts of large communication companies that offered clients all the tools for an integrated campaign, including advertising, direct marketing, public relations, and sales promotion. In the new millennium, dealing with one (or several) of the four large holding companies, WPP Group (England), Interpublic(U.S), Publicis Groups (France), and Omnicom (U.S), is the way the world’s biggest advertisers do business.

            While each of the conglomerates is led by a charismatic and dynamic individual, none appears to have an edge on Sorrell, who was described in a recent Fortune article as “…confident, witty, and a tod arrogant, talking rapidly about the future of advertising and the challenges of keeping fractious clients and ad agencies happy.” Fortune also noted that “In an industry populated by shameless schmoozers, the 59-year-old Sorrell is in a league of his own.”

            These characteristics have served Sorrell well, In 2004 he squared off against rival Publicis Groups and its CEO, Maurice Levy, in pursuit of one of the last great independent agencies, Grey Advertising, New York. During the battle Advertising Age opined that Publicis had a big advantage because Levy and Grey chair Edward Meyer were friends and had spoken about merging in the past. In addition, both Grey and Publicis created ads for consumer giant procter & Gamble, while WPP agency Ogilvy & Mather counted P&G’s competitor Unilever among its most important clients. (It is customary for agencies not to work for competing accounts.) A Unilever spokesperson, asked for his thoughts about the possibility of working with an agency that created ads for his most important rival, suggested that “In the past, we’ve not seen it to be such a good idea. “But nobody familiar with Martin Sorrell was surprised when at the end of the day he convinced Grey to sign with WPP and persuaded Procter & Gamble to stay as well.

            Unlike many of his peers, Sorrell has never written a word of copy, nor has he ever penciled a print design or directed a broadcast commercial. Sorrell’s talents are organizational and strategic; although he is an expert in the world of finance, Sir Martin cautions, “I may be a bean counter, but I’m not an accountant.” To drive home the point he posed for WPP’s annual report surrounded by lima and pinto beans.

            So how does Martin Sorrell continue to win in the high-stakes agency world? His vision, developed years before most of his rivals caught on, that twenty-first-century clients would want a complete menu of marketing communication services, all of which work synergistically, is one important reason for his success. Tenacity, energy, focus, and a willingness to do whatever is needed to win are also traits that come to mind. All these are illustrated in the story of Sorrell’s drive to land Korean giant Samsung when the company put its advertising up for review in the spring of 2004. Samsung spends almost $400 million each year supporting its brands, which is reason enough for agencies to salivate for the account. Sorrell believes that the company holds even greater appeal because of his forecast that advertising growth in the twenty-first century will come disproportionately from Asia.

            So Sorrell did whatever he could to attract Samsung’s attention. Like any savvy agency head, he assigned his best people to generate creative ideas to pitch to Samsung executives. But unlike most agency heads, he didn’t stop there. After discovering that a Samsung-financed museum was having a grand opening in Seoul, Sorrell jumped on a plane and ended up being the only agency person there. Samsung executives found themselves receiving emails from Sorrell at all time of the day and night. Peter Stringham, marketing director of HSBC, a company that Sorrell landed after several years of trying, commented, “Martin can be quite persistent. He was there from the first meeting to the last. He’d pitched to us a couple of times before and not gotten the account, but he’d had his eye on it for years.”

            Needless to say, in the fall of 2004, Samsung announced it was awarding its account to WPP. In the new millennium, British knights may not wear armor, carry a crest, or rescue damsels in distress. But Sir Martin Sorrell knows how to triumph in the competitive world of advertising agencies.

 

Questions

1.    Why do large clients like Samsung wish to work with giant holding companies like WPP instead of with smaller agencies?

2.    What qualities help Sorrell to be successful? Why are these qualities so important for his company’s success?

3.    Explain how Martin Sorrell wins clients and builds positive agency-client relationships. How does he see the agency’s role in marketing?

 

 

Case V - Boycott This!

 

A recent ad for a Nike hiking shoe used copy that was probably intended to be humorous. The copy suggested that Nike’s shoe could help the use avoid turning into “…a drooling, misshapen non-extreme-trail-running husk of my former self, forced to roam the earth in a motorized wheelchair with my name embossed on one of those cute little license plates you get at carnivals….” Marcie Roth, an advocacy director for the National Council on Independent Living, didn’t find it funny. “Nike is trying to be sensationalist, and they’re doing it on the backs of the disabled,” thundered Roth, adding, “We won’t tolerate it.” Nike apologized and immediately pulled the ad. But Roth announced that her group was interested in more than just an apology, because the disabled, in Roth’s words, had been “dissed.” Nike was asked to include disabled actors in its ads and hire a greater number of disabled workers. Otherwise, suggested Roth, Nike could expect a boycott.

            Boycotts are certainly one way for consumers to let advertisers know when they’ve gone too far. While some advertisers, notably Benetton, delight in creating controversy, that vast majority try to avoid the unwanted attention and possible loss of sales that a boycott might bring. Armed with this knowledge, consumers and interest groups regularly threaten boycotts and there are several Web sites that track the dozens of product boycotts that are occurring at any given time. Recently the Web site “Ethical Consumer” listed boycott of Adidas (for allegedly using kangaroo skin in the manufacture of some boots), Air France (for allegedly transporting primates), Bayer (for allegedly supporting policies favoring the use of genetically modified crops), and even entire nations (Israel, China, Morocco, and Turkey).

            Although Ethical Consumer’s rationales for supporting boycotts appear motivated by left-leaning or progressive concerns, conservative groups use them too. The American Family
Association, based in Tupelo, Mississippi, has sent tens of thousands of e-mails threatening boycotts to advertisers Geico, Best Buy, Foot Looker, and Finish Line. The AFA is not upset with the ads placed by these companies, but rather with the program in which the ads appear: South Park. The AFA claims its e-mail campaigns caused Lowe’s, Tyson, ConAgra, and Kellogg’s to stop placing ads in ABC’s surprise hit Desperate Housewives.

            Some companies resist boycott pressures. Proctor & Gamble ignored AFA pressure to stop its support for gay-friendly legislation in Cincinnati. Subway Vice President Chris Carroll said his company ignored threatened boycotts caused by the company’s decision to run ads in a documentary that was unflattering to Democratic presidential nominee John Kerry.

            And then there’s Pepsi. In 2003 the brand signed hip-hop artist Ludacris to appear in a “fun-oriented” campaign, but outspoken cable show host Bill O’Reilly immediately ripped Pepsi and urged “…all responsible Americans to fight back and punish Pepsi for using a man who degrades women, who encourages substance abuse, and does all the things that hurt…the poor in our society. I’m calling for all Americans to say, ‘Hey, Pepsi, I’m not drinking your stuff. You want to hang around with Ludacris, you do that, I’m not hanging around with you.”

            A Pepsi representative appearing on O’Reilly’s show denied that the artist’s provocative lyrics (one album featured a song called “Move Bitch”) were relevant to the Pepsi campaign. But the following day Pepsi canceled the campaign. For viewers of a certain age, the entire affair was reminiscent of the controversy that erupted several years earlier when Pepsi canceled ads featuring Madonna after she appeared in a controversial music video. But Pepsi’s decision did not mark the end of the controversy. After the announcement, Ludacris and the Hip-Hop Summit Action Network, an organization run by his producer, Russell Simmons, threatened their own boycott. Following several days of negotiations, the second boycott was called off. Ludacris would not be a spokesperson for Pepsi, but the soft-drink giant agreed to a deal to make a multi-million-dollar donation over several years to the rapper’s foundation.

 

Questions:

1.    What do you think about consumer boycotts? Are they unhealthy attempts to infringe on the speech rights of others? Or are they a healthy sign that consumers can take action against the ethical lapses of advertisers?

2.    How should a company respond to the threat of a boycott? Consider the different responses of Nike, Subway, Lowe’s, Proctor & Gamble, and Pepsi. How well do you think each of these companies reacted to boycott pressure? Did any of the companies hurt their brand because of the way they reacted to boycotts?

3.    How would you review advertising ideas that you suspect are controversial and might generate a backlash? Is it ever justified to “push the envelope” in the areas of good taste and social responsibility? How would you decide if such approaches are effective?

 

Case VI - How Advertising Works

If It Walks Like the Aflac Duck

 

You’ve probably never heard of the American Family life Assurance Co., nor likely to be familiar with its primary service: supplemental workplace medical insurance, a type of insurance that is used by people to help cover the many loopholes and deductibles in their primary insurance coverage. Then again, if you are like 90 percent of U.S. consumers, maybe you have heard of the company. In its advertising it calls itself “AFLAC.”

            The four-year AFLAC campaign is the work of Linda Kaplan Thaler, owner of the New York agency that bears her name. Thaler’s ads are not known for their subtlety. Among her credits are the Toy’s R Us jingle “I don’t want to grow up,” and the successful campaign for Clairol Herbal Essences, featuring on “orgasmic” hair-washing experience. The Herbal Essences ads strike some as funny, others as quite possibly offensive, but sales of the product have skyrocketed to almost $700 million a year.

            In many ways Thaler’s ads hearken back to the 1960s, when it was common to feature “sex, schmaltz, chirpy jingles and ‘talking’ babies and animals,” as the New York Time’s advertising columnist Stewart Elliott puts it. Industry insiders have been known to snipe at Thaler’s work, and few would describe her campaigns as “edgy.” But as Maurice Levy, CEO of the giant advertising company Publicis, observes, “There are people who do advertising for what I call the advertising for the consumer. She is doing advertising mush more for the consumer.” Thaler herself notes, “We’re doing our job when we find ways to get people to buy things.”

            Thaler’s AFLAC ads, by almost any measure, are her best. Almost all feature a white duck desperately screaming “AFLAC” at people who need supplemental insurance. Unfortunately, the duck’s audience never quite seems to hear him. Most of the ads contain a fair amount of slapstick, usually at the expense of the duck, whose exasperated-sounding voice originates with former Saturday Night Live cast member Gilbert Gottfried. “He’s got the right answer but nobody is listening, and that’s a situation that resonates with people,” says Kathleen Spencer, director of AFLAC’s corporate communications. “There’s also just something inherently comical about a duck.”

            The campaign has been enormously successful. Since the ads first began running, brand name awareness has increased from 15 percent to 90 percent. Over the same period year-to-year sales increases have almost doubled. Dan Amos, CEO for AFLAC, believes that “our name recognition with our advertising campaign to truly help our company.” In 2003 Ad Age named the commercial featuring the duck and the Amazing Kreskin (who hypnotizes a man into thinking he is a chicken) the most-recalled spot in America.

            But what makes the AFLAC campaign truly remarkable is how little it has cost the company. The duck has a higher Q score (a measure of a character’s familiarity and appeal) than both Ronald McDonald and the Energizer Bunny, but whereas Energizer has spent almost a billion dollars over 15 years on advertising, and McDonald’s spends almost $700 million every year, AFLAC’s ad budget is only $45 million a year. There is no denying that Thaler’s work for AFLAC is a triumph of both effectiveness and value.

 

 

Questions:

1.    Some viewers don’t like the AFLAC ads. Can an ad still accomplish its intended purposes if people find it annoying?

2.    The AFLAC campaign is more than four years old. In your opinion, will the campaign stay effective for the foreseeable future?

3.    What makes AFLAC ads so effective? Is it something more than their entertainment value? If so, what else contributes to their success?

 

SALES MANAGEMENT

Note: All cases are Compulsory

CASE 1: Phillips Company

Sam McDonald, vice-president of sales of the Phillips Company, was concerned with the potential of his sales force in correcting his company’s image in the electric utility industry. The Phillips Company, one of the leading manufacturers of steam power plants in the United States, was located in Philadelphia. The company was started by Aaron Phillips, who began manufacturing small steam engines in Philadelphia in 1846. Currently the company had annual sales in excess of  $200 million and sold power plants to industrial users throughout the world. McDonald was concerned because public utilities, important users of steam power equipment, only accounted for 12 to 15 percent of Phillips’ sales. Some utilities were good customers, but many other major utilities never bought from the company at all. Concerned with whether this low acceptance was a result of a poor image of steam power plants as a power alternative or a poor image of the Phillips Company as a source of steam power plants, McDonald suggested to top management that they explore the buying attitudes and motivation of electric utility companies as completely as possible. To remove the risk of personal bias, an outside research agency was called in to conduct the survey.

The research agency set out to find out what customers and potential customers really thought of the Phillips Company. Depth interviews were carried out with influential buying personnel in a selected sample of all electric utilities. The results that were presented to the executive committee in September were not too pleasant to hear. In general, Phillips’ engineering skills were rated highly; product quality and workmanship were considered good. However, a number of respondents thought of Phillips as a completely static company. They were completely unaware of Phillips’ excellent research operations and many new product developments.

The research organization pointed out other useful information about the Phillips Company and its market. Sales were normally personnel related; that is, personal relationships and personalities were important in the buying decision. The buying responsibility was widely dispersed for products sold by Phillips. As many as forty people, ranging from the president down, might be involved in a purchase. Many Phillips salespeople were not too well informed about the details of new product developments and would probably need additional training to be able to answer technical questions.

It was obvious to McDonald that Phillips’ communications methods had failed completely to keep potential utility customers aware of changes taking place in the company and its products. Some method had to be devised to break down the communications barrier and sell Phillips products. At this point a disagreement developed between the advertising and sales departments as to how to go about changing the image. Representatives of the advertising department came up with two possible approaches that could be used separately or jointly. First, they might advertise in mass media to get across the Phillips story. Second, they could launch an intensive publicity campaign, blanketing all new media and particularly utilities trade media with information and press releases. McDonald’s suggested approach started with a complete upgrading of information to the sales force about new-product developments and current research. Then, the sales staff could make presentations directly to prospects in the field. Flipcharts and visual aids could be used where appropriate. Alternatively, the company could try to schedule educational meetings for key electric utility personnel. This would require a traveling symposium, staffed by top personnel and equipped with audiovisual aids, that could spend several hours with groups of employees in selected utilities across the country.

 

Question:

1.      What action should the Phillips Company have taken to change the company image in the public utility field?

 

CASE 2: Diamond Pump

Homer Castleberry had held the job of vice-president at Diamond Pump for five years. Lately he had had the feeling he was running on an endless tread-mill, never getting anywhere. Returning from an extended trip visiting seven sales agents in the western states, a postponement of an eighth visit found him with two uncommitted days in Kansas City. For the first time in many months, he had the time to sit back and evaluate his job, his performance and his future.

Diamond Pump Company, a subsidiary of Greyson Industries, Inc., manufactured positive displacement pumps for use in the chemical, petroleum, and other industries. Diamond gear pumps, screw pumps, and progressive cavity pumps were sold through several hundred distributors. Distribution covered the entire United States, Canada, and most of the free world. In addition, Diamond sold specially designed pumps direct to original equipment manufacturers. Throughout its 118-year history, Diamond has been a strong competitor in the industrial market and enjoyed a fine reputation as a maker of quality pumps. The company had achieved a sales increase each year for twenty consecutive years. In spite of this success, management felt that the company could find better ways of handling certain nagging distribution problems.

INDUSTRY STRUCTURE AND PRICING

The industrial pump industry was dominated by several large companies, with Diamond among the largest. Because pumps were used in such a variety of applications, no one of these companies could provide the best pump for each application. Most companies, including Blackmer Company and Viking Corporation, two major competitors, produced only screw-type and gear-type pumps respectively. Diamond, in contrast, offered a diverse standardized line that included both types. These standard pumps were purchased by a wide variety of users, primarily for process applications.

Original equipment manufacturers (OEMs) comprised the other major customer group, a group that had become an increasingly important market segment. OEMs included petroleum tank truck manufacturers, for example, who required specially designed pumps not offered in Diamond’s standard product line.

Prices tended to be uniform among competing pump manufacturers. The customer’s decision to buy was based mainly on the quality of service. The pump’s performance characteristics were also important, and price played a limited role in the buying decision. While Castleberry tried to limit price increases to one a year, this objective recently had fallen victim to the escalating prices of raw materials, which comprised the major portion of costs, as well as to rising over-head costs.

Promotion

National advertising in trade journals comprised the bulk of the promotional effort. Castleberry and the advertising agency aimed at two important targets: the first consisted of petroleum tank truck manufacturers, petroleum storage operations, and the like. Diamond appealed to these potential buyers through Fuel Oil News, Chemical Engineering, and National Petroleum. Inquiries resulting from these advertisements were turned over to the sales agents and distributor in the area from which the inquiry originated.

The second equally important target was comprised of engineers and product designers who determined what brands of equipment would be included in product specification sheets for new products. The jobs of sales personnel at the company and distributor level were made more difficult if the Diamond pump was not specified initially. Therefore, advertisements in trade journals such as Design News were placed to influence the design specifications.

Diamond also advertised in the Yellow Pages section of telephone directories in major metropolitan areas. These ads listed all Diamond sales agents and distributors in the metropolitan area.

Sales Agents—Distribution

Homer Castleberry achieved distribution through twenty-one commissioned sales agents who were responsible for marketing pumps in their respective geographic areas. While these sales agents personally called on OEMs in their territories, OEM accounts were serviced by distributors under the supervision of the sales agents. There were 425 Diamond distributors employing 2,000 sales personnel.

The sales agent was responsible for selecting Diamond distributors. Distributors were approved by Homer Castleberry, approvals being based on credit-worthiness and ability to promote Diamond products. Castleberry insisted that distributors not selling competing lines. Additionally, the distributor was required to have a quality image, that is, sell high-quality complementary products and provide excellent service and technical advice.

Because customers for Diamond pumps required good fast service and competent technical help, the sales agent tried to ensure that distributor salespeople were well informed. This was done through periodic training. In addition, the agents often accompanied distributor personnel on sales calls. Installation of a Diamond WATS line enabled sales agents to get fast answers to technical questions raised by customers.

Sales agents were required to establish and maintain personal contact with current and potential OEM customers. This was difficult at times because individuals involved in deciding specifications for new products were often hard to identify. Agents, however, agreed that the results could be worth the effort. Recently, diligence led one sales agent to a contract under which Diamond supplied the pumps used to filter hot oil in Kentucky Fried Chicken’s pressure cookers.

Distribution Problems

Despite success in increasing sales revenue and maintaining profitability, Castleberry felt that the company could be more efficient in-handling certain nagging distribution problems. Attracting high-quality distributors was becoming increasingly difficult. Sales agents testified that distributors were reluctant to “change partners” even though the Diamond Company offered a broader line than did present pump suppliers. Agents also pointed out that distributor sales personnel were often unwilling or unable to seek individuals who had significant input to buying decisions; for example, engineers and production people. “If the purchasing agent says, ‘no’ they just give up,” said a Diamond sales agent. Another agent said there weren't enough hours in the day to supervise distributors and also work with OEM customers. Castleberry summed it up, “The numbers look good every month, but I get the feeling that we could do better. We need greater effectiveness in distribution.”

 In evaluating his performance as a sales executive, Castleberry decided that he had been spending all his time on operating responsibilities. He had been so busy putting out fires and handling day-to-day problems, he had neglected planning almost entirely. He wasn’t even sure that he had done a very efficient job of handling operations.

 

Questions:

1.                  Describe Castleberry’s major operations responsibilities. How well is he carrying out each of these responsibilities?

 

2.                  What kind of planning activities should Castleberry be carrying out regularly? What planning areas need immediate attention?

 

3.                  How do you suppose Castleberry’s time should be divided operations and planning?

 

 

 

 

 

 

CASE 3: Central CATV, Inc.

Thomas Wagner, sales manager of Central CATV, Inc., was concerned about a high turnover of sales personnel, as well as certain other problems that has surfaced recently. The average Central CATV salesperson stayed with the company for less than seven months. Although actual sales were close to projected levels, Wagner felt the need for immediate action. He believed that correction of the turnover problem would enable Central CATV to achieve higher sales.

Cable television was developed to alleviate signal reception problems in rural areas. Recognizing that people are willing to pay for variety in programming, CATV moved into cities that were receiving two or three channels and offered them between ten and twelve channels. Gaining acceptance in medium-sized cities, cable television went into large metropolitan areas and offered up to twenty-five television channels. CATV systems in the United States served nearly 13 million homes, or over 17 percent of the total homes with television sets.

The operational concept was simple. A large tower in antennas capable of bringing in signals from outlying centers was erected. The signals were then sent out via coaxial cables to subscribers’ homes. Amplifiers were used to clarify and boost the signals along the cable network.

Cable system start-up costs included construction of the master antennas, the cable network, and initial promotion. The initial outlay was relatively high and most cablevision companies did not earn a profit until the third year of operation. Once start-up costs were absorbed, generally there was excellent profit potential because of low operational costs.

For the previous three years, Central CATV had served a southern market comprised of over 60,000 persons, nearly 40 percent of whom were students at a large university. The company bought the cablevision system from the “pioneering” operator and immediately expanded the cable network from 100 miles to 200 miles and from six stations to ten stations. Central CATV charged an installation fee of $35 and a monthly service fee of $8.95.

Central CATV serviced nearly 30 percent of the TV viewing market in its operating area. The goal was to have 50 percent of the market by the end of the fifth year of operation. Wagner felt that a realistic objective since, without the cable, it was possible to receive only two television channels.

The only advertising Central CATV had sponsored occurred shortly after its takeover of the operation. There had been need to overcome the poor service reputation of the predecessor. Central used a three-month radio and newspaper campaign emphasizing the theme that “a new progressive company has taken over CATV.” After this campaign, there was no further advertising. Wagner believed additional advertising unnecessary as most people were aware of CATV and the product “sold itself.”

 The sales force had one full-time and two part-time salespersons. Although the sales personnel reported directly to Wagner, his only “contact” with them, other than for occasional phone calls, were the billing invoices sent to the sales office after they had made sales. Sales personnel were paid straight commissions of $12 per sale. Management estimated that a full-time salesperson could earn up to $22,000 annually, although no person had ever been with Central that long. Part-time salespeople earned about $8,000. The personnel were not assigned territories, and there was no quota system.

Sales personnel attempted to close on the first call. They believed that most prospects already knew about CATV and had a predetermined opinion as to its value. Consequently, when salespeople could not close a sale on the first call, they generally did not make a callback.

In addition to the three salespeople, Wagner had an agreement with most local TV dealers. The dealers acted as cable television salespersons despite the fact that they competed with the cable service, since they sold rooftop antennas which were not needed with the cable hookup. Central paid dealers $15 for each sale made. The dealers liked this arrangement since, if they could not sell a customer a rooftop antenna, they usually succeeded in getting $15 commission for a cable system “sale.”

During the past several months, three developments caused deep concern for Wagner: (1) a large number of subscription cancellations, (2) an increase in customer complaints, and (3) a great increase in the number of mail and phone orders for the cable service. In addition, there was continued difficulty in retaining sales personnel. The subscription cancellations were over and above those associated with students leaving the university. The rapid turnover of accounts because of students leaving town was not a problem, according to Wagner.

Although sales were satisfactory, Wagner believed that investigation and correction of the problems, especially that of high personnel turnover, would enable Central CATV to attain and even surpass its projected sales goal. He could not understand why these problems had appeared simultaneously. He was not sure which problem to attack first but felt that the most important was the high personnel turnover.

 

Question:

 

1.                  Suggest what Wagner should have done to reduce personnel turnover and eliminate the other problems at Central CATV.

 

 

 

 

 

 

CASE 4: Driskill Manufacturing Company 

Jack Dixon, sales manager, and Henry Granger, director of marketing research, of the Driskill Manufacturing Company, were in complete disagreement about the current method of preparing sales quotas.

The Driskill Manufacturing Company marketed a line of maintenance equipment used all over the country, in a variety  of businesses, and had attained considerable prestige in the field. The company was comfortably successful, and its marketing effort showed no great sign of weakness. But the management, aware of external trends in motivation and control of sales personnel, and also aware of some internal friction among the sales staff, decided to scrutinize its motivation and compensation methods. Desiring the advantages of up-to-date knowledge and an unbiased point of view, Driskill engaged a management consulting firm specializing in selection, evaluation, compensation of employees, and management development to make a study of its existing practices.

 The consulting firm discovered that Driskill’s current compensation and motivation practices were the result of adjustments to meet change almost on an emergency basis rather than a result of long-term planning. The original plan, adopted a number of years ago, had been continually amended piecemeal, and adequate consideration had not been given to the effect of amendments upon other provisions or upon the plan’s overall ability to promote the achievement of objectives. The result was a patchwork of policies, not an integrated program; it worked to the advantage of some sales personnel while inadvertently penalizing others.

Driskill knew that there was some dissatisfaction among the field sales force with its current practices and policies, but it did not know how strong this feeling was or how much it might affect sales. Recognizing that any new program was more likely to succeed if the sales force was given an opportunity to participate in its preparation, management emphasized that the private study would not be followed by a general announcement of sweeping changes. Instead, the study was to based upon general cooperation and interest, involving carefully worked out changes.

The sales force welcomed the chance to have a say, and indicated approval of management’s interest in their opinions.  Many of the staff brought not only a spirit of interest but lists of subjects to discuss, having given considerable previous thought to the matter. Dissatisfactions were minor, often even unrecognized. The sales force generally agreed that the company’s prices were competitive and that the product was one of quality, superior to competitors’ in design and workmanship. Commission rates were generally satisfactory. Persons on straight commission felt, however, that an increase in commission rates on the new higher-priced equipment was due because of the greater selling effort required. But the staff on salary plus commission, who sold more of the lower-priced equipment, were not greatly concerned with the matter. The salary-plus commission personnel were mostly people with less than five years service with the company.

Approximately one-third of the sales force was paid on a straight-commission basis, receiving 7 percent on all sales and paying all their own expenses. These were the older salespeople, who had been with the company longest. The other salespeople were paid on a salary-plus-commission basis. New sales recruits were started at a salary of $18,000 and received semiannual increases on a merit basis. The average salary was $25,500. Every salaried salesperson was given an annual quota and received a commission of 4 percent on all sales above the quota. In addition, Driskill paid all selling expenses incurred by the salaried sales personnel; expenses averaged $700 per month per salesperson.

Earnings of the sales staff on a salary-plus-commission basis averaged $21,000. For example, R.C. Andersen, who had been selling for Driskill for five years, had a quota of $355,000 and received a salary of $18,500. Since his actual sales were $415,000, he earned a commission of $2,400, or a total income of $20,900. R.A. Scott, who had been selling for Driskill for fifteen years, was paid on a straight-commission basis. His gross earnings were slightly in excess of the average of $29,500 in gross income earned by the commission salespeople.

Since the commission sales personnel were generally more experienced, and since their incomes were directly related to their productivity, management had never felt it necessary to give them specific quotas or volume goals. Quotas for the salaried staff members were based on a running three-year average of each person’s past sales. Arbitrary figures were selected for sales personnel who had not yet been three years on the job; these quotas represented a compromise between the experience of the salespeople formerly in the territory and the level of experience of the new person. Jack Dixon, the sales manager, believed that the basis for determining quotas was a satisfactory one. During the past ten years, 85 percent of the salaried sales staff had managed to exceed their quotas and earn some commission. In Dixon’s opinion, therefore, the motivation was satisfactory to achieve maximum selling effort on the part of the sales force.

Henry Granger, the newly appointed director of marketing research, was less satisfied with the existing quotas. He claimed that any good salesperson could have exceeded quotas under conditions prevailing in recent years in the industry. He also believed that the existing system, based on past sales, merely tended to perpetuate past weaknesses. He suggested that future quotas be based upon a division of the annual forecast of sales among the individual territories and that the basis for division should be other than past sales.

Dixon supported the existing system, claiming that past sales had been an adequate basis for the establishment of quotas in the past. He held, furthermore, that if any new establishment of quota preparation were adopted, it should be based primarily of the buildup of sales estimates by the individual salespersons for the coming year.

Questions:

1.                  If you were acting as a consultant for the Driskill Company, what recommendations would you make with respect to the preparation of quotas of the sales force?

 

2.                  How would you evaluate the arguments of the sales manager and the marketing research director?