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Shrijani Education Foundation’s Govt. Regd No. GBBSD/234

National Academy of Management Studies

ISO 9001: 2008 certified first international B School

MARKS : 80 COURSE :

N. B.: 1) Attempt any Four Questions

2) All questions carries equal marks

Case: 1

TRI – STATE TELEPHONE

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

looked at the ceiling. How was he ever going to get out of this mess? At last night’s

public hearing. 150 angry customers had marched in to protest Tri – State’s latest

rate request. After the rancorous shouting was over and the acrimonious signs put

away, the protesters had presented state regulators with some sophisticated

economic analyses in support of their case. Additionally, there were a number of

emotional appeals from elderly customers who regarded phone service as their

lifeline to the outside world.

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

During the last five years, the company had experienced a tremendous amount of

change. In 1984, the AT & T divestiture sent shock waves throughout the industry,

and Tri-State Telephone had felt the effects, as pricing for long distance telephone

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service changed dramatically. The Federal Communications Commission instituted

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

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

Consumer groups, including the Consumer Federation of America and the Congress

of Consumer Organizations, had joined the protest, increasing their attention on the

industry and intervening in regulatory proceedings wherever possible. The FCC

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

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

and Judge Harold Greene both of whom were responsible for monitoring the AT & T

divestiture) continued to argue about what business companies like Tri – State

should be engaged in.

In addition, technology was changing rapidly. Cellular telephones, primarily

used in cars, were now hand-held and could be substituted for standard phones.

Digital technology was going forward, leading to lower casts and requiring

companies like Tri – state to invest to keep up with the state of the art. Meanwhile,

rate increases negotiated during the inflationary 1970s were keeping earnings

higher than regulators would authorize. New “Intelligent” terminals and software

developments gave rise to new uses for the phone network (such as using the phone

for an a arm system), but as long as customers paid one flat fee, the phone company

could not benefit from these new services.

Godwin’s company has recently proposed a new pricing system whereby

users of local telephone services would simply pay for what they used rather than a

monthly flat fee. All of the senior managers were convinced that the plan was fairer,

even though some groups who used the phone with netable frequency (like real

estate agents) would pay more. It would give the company an incentive to bring

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

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

would save money under the new plan. For instance, Godwin’s studies showed that

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the elderly were very light users of local service and could save as much as 20

percent under the new plan.

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

to proceed. If he backed off the new pricing plan, he would have to find a different

way to meet the challenges of the future – may be even different businesses to

augment company income. Alternatively, the company could not stand the negative

press from a protracted battle, even though Godwin thought that the regulators

were favorably disposed toward his plan. In fact, Godwin himself believed the

company should help its customers rather than fight with them.

Questions:

1. Who are the stakeholders in this case?

2. Which stakeholders are most important?

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

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

5. What should John Godwin do?

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CASE NO. 2

FRESH IDEAS AT FRESH FIELDS

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

for you foods.”

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

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

carries a wider variety of foods including fresh pasta, baked goods, and seafood and

deli selections. What distinguishes Fresh Fields from supermarkets lies in what is

absent from the shelves, rather than what is present, for Fresh Fields shoppers will

not find foods containing lots of preservatives and artificial flavorings, such as Jell –

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

offers is “ organic and conventional produce, meats, seafood, dairy products, baked

goods from an in – store bakery, deli items gourmet and vegetarian prepared foods,

a wide array of cheese, a full grocery department, an extensive selection of

supplements, skin enriching cosmetics and natural health care products and

environmentally friendly household goods.”

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

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

advantage of consumers’ new whopping preferences resulting from the trend.

According to a 1992 survey by Health Focus, a Pennsylvania – based research firm,

90 percent of shoppers say that health has become a factor in determining the food

they buy. This perhaps accounts for why many Americans are willing to pay up to

20 percent more for natural foods. Actually, the Fresh Fields premium tends to

hover closer to 5 percent, and when in season, Fresh Field’s locally grown organic

produce can even cost less than produce sold at other supermarkets.

A team of entrepreneurs began Fresh Fields in 1991. The team included 33

year old Mark Ordan, former Goldman Sachs investment banker as CEO and

President, 75 years Old Leo Kahn, founder of Staples, the prosperous office – supply

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sores, as chairman and 44 year old Jack Murphy, former manager of the Heartland

supermarket chain in New England, as Chief operating officer.

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

and Virginia. Expanding into Pennsylvania and Illinois, by mid – 1994 Fresh Fields

had opened a total of 14 stores in the four states, with more in the planning stages.

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

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

growers to find those who use natural methods of pest management and apply the

least amount of agricultural chemicals. In addition, Fresh Fields seeks meat and

poultry from farms, not factories, to avoid the growth – promoting drugs often used.

Fresh Fields also makes an effort to get to know the people who catch the seafood,

and seeks out fish caught in deep, clean waters, not from coastal waters threatened

by pollution.

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

customer. “Everybody says the same things please the customer – but while

everybody says it, not too many practice it. The customer is smarter than all of us.

Here we’re building an organization that zeroes in and keeps customer satisfaction

in mind.”

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

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

community members. Whereas at other stores, such as Wal – Mart, there is a single,

symbolic greeter by the door, every employee at Fresh Field is a sort of “greeter”,

and he or she looks up, smiles and says “hello” to shoppers as they pass by. Within

the company, there are no employees, there are only “associates” many of whom

Kahn knows by name.

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

relationship between the company and associates lies at the heart. From there,

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associates build relationship with suppliers to add the personal touch that is

integral to the Fresh Fields quality image.

As shoppers walk through the stores, numerous samples are offered.

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

Merri Mukai, a homemaker in Annandale, Virginia. “Then I tried the baked goods

and upped my spending by $60. Now I’m buying meats and eyeing the fish. They’ve

definitely got me hooked.”

Says Fresh Fields, “We guarantee your satisfaction unconditionally. You can

consider our guarantee as an opportunity to be adventurous and to try new

products, without risk. If for any reason you are less than completely satisfied with

something you purchase at Fresh Fields, we will cheerfully offer you a full refund.”

Questions:

1. What economic and social factors should Fresh Fields managers watch?

2. Suppose you manage a local supermarket and Fresh Fields comes to

town. How would you reinvent your organization to meet the challenges

posed by Fresh Fields?

Case: 3

RESPONDING TO ALLEGATIONS OF RACISM :

FLAGSTAR AND THE PLEDG

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

the marketplace and the workforce becoming more and more diverse, many

managers have redesigned their company’s cultures to reflect and encourage

multiculturalism. Changing a company’s culture, however, is often more difficult

than managers might first believe. At Denny”s for example, promoting

multiculturalism required a reworking of its corporate culture from top to bottom.

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

racism, by both customers and employees. Black customers asserted that they were

not receiving the same treatment at Denny’s as white customers. Some complained

that they were either forced to wait for their food longer than white customers or

denied service entirely, others said that they were forced to pre-pay for their meals

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

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

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

preventing blacks and other minorities from reaching management and franchise

positions. None of this garnered much attention, however, until a suit was filed on

March 24, 1993, by a group of minority customers in San Jose, California, who made

the all – too – familiar allegation that Denny’s had required cover charges and pre-

payment of meals from minority customers, but not from white customers.

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

apologized to the customers, and Flagstar CEO Jerry Richardson dropped the cover

charge and pre-payment policies and explained that they had been intended to

prevent late night “ dine – and – dash” theft and that any discriminatory

implementation of them was in direct violation of corporate policies. Richardson

admitted, however, that he had been unaware that the cover charge and pre-

payment policies even existed within the company. Furthermore, Richardson began

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

decree issued by the Justice Department that required spot testing of Denny’s

restaurants for discriminatory practices as well as an anti-discrimination training

program for all Denny’s staffers. “Our company does not tolerate discrimination of

any kind,” Richardson assured all, and his actions seemed to support his words.

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

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

Maryland. The six men claimed that while they received deliberately slow service,

their white counter parts were served in a timely fashion. “Hearing the allegations

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made yesterday by Six African – American Secret Service agents on national

television that they were not treated fairly at Denny’s was a painful experience for

our company,” Richardson admitted.

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

changes throughout Flagstar. In a late May Richardson issued an internal memo

that marked the beginning of Richardson’s pledge to change. “I am distressed that

some people in our company haven’t gotten the message that we will not tolerate

unfair treatment of customers,” he wrote. “ The past year has been a trying

experience, particularly for many of our African – American employees who are

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

pride in Denny’s.

Richardson stopped promising change and started creating it. On July 1,

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

which was the most far-reaching arrangement the civil – rights organization had

ever signed, represented a breakthrough in relations between minorities and

businesses. The plan targeted several specific problem areas within Flagstar. For

example, of Flagstar’s more than 120,000 workers, 20 percent were black, but only

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

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

increase the number of black-owned franchises; only one of Denny’s 405 franchises

was owned by a black person as of 1993, but Flagstar planned to have at least 53

black-owned franchises by 1997. Flagstar also agreed to direct more marketing

funds toward minority advertising and to begin purchasing more goods and services

from minority – owned businesses. In addition, Flagstar promised to appoint at

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

one billion dollars in jobs and economic benefits to minority workers and

companies by the year 2000.

Richardson also undertook efforts to restore Denny”s reputation as well as

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

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name given to a 60 – second TV spot, which aired in 41 television markets and on

the Black Entertainment Television network during a two-week period in June

1993. In it, Jerry Richardson and a representative sample of Flagstar’s 46,000

employees endorsed a solemn pledge to treat customers with “respect, diginity, and

fairness.” “The whole idea for the ‘pledge’ started with our desire to express

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

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

chose television for this special campaign because we felt it was important to show

people exactly who the Denny’s employees are”. Overall, response to “The Pledge”

was favorable. “Our phone has been ringing off the hook since Denny’s aired this

ad,” said W. Gregory Wims, president of the NAACP in Rockville, Maryland, the

largest branch in the Washington, D.C.area. “About 90 percent of our members

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

relations with people of color.

Experience, however, had taught Flagstar that mere policy statements do

little good in the absence of training and monitoring. With this in mind, Flagstar

reaffirmed its commitment to its agreement with the Department of Justice by

steping up its multicultural training programs and agreeing to allow the NAACP to

conduct its own inspection of Denny’s restaurants. Denny’s also set up a hot line for

employees to use to report possible instances of discrimination. In addition,

Flagstar made significant management changes during the summer of 1993 by

installing three executives considered particularly sensitive to diversity in the

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

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

There are companies that bury their heads in the sand and say, I’m going to conduct

my business the same way I’ve always conducted my business,” said Petty. “ And

then there are enlightened companies that say, “There are opportunities outside of

the way we’ve normally done business.”

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

model the company has set for other companies, but also because of Flagstar’s own

holdings, including 530 Hardee’s fast food units, 1,400 Denny’s family restaurants,

200 Quincy’s steak houses, 120 El Pollo Loco outlets and more than 2,000 Canteen

Corp. Food and Recreation Service accounts. The community’s response to the

allegations against Denny’s confirm that multiculturalism can no longer be ignored.

Questions :

1. How would you describe the organizational culture at Flagstar ?

2. How does Flagstar deal with diversity?

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

Case: 4

DISNEY’S DESIGN

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

company. It has earned this astounding reputation through tight control over the

entire operation : control over the open – ended brainstorming that takes place 24

hours a day ; control over the engineers who construct the fabulous theme – park

rides; control over the animators who create and design beloved characters and

adventurous scenarios ; and control over the talent that brings the many concepts

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

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

parameters established to meet those objectives. But in conjunction with the pre-

determined responsibilities, managers at Disney encourage independent and

innovative thinking.

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

reminder that whimsical thoughts, adventurous ideas, and all – out dreaming are at

the core of the company philosophy. The over all control over each department is

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tempered by this concept. Disney managers strive to empower their employees by

leaving room for their creative juices to flow. In fact, managers at Disney do more

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

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

impossible is part of what innovation means. Teams of imaginers gather together

in a brainstorming session known as the “Blue Sky” phase. Under the “Blue Sky”, an

uninhibited exchange of wild, ludicrous, outrageous ideas, both “ good” and “ bad”,

continues until solutions are found and the impossible is done. By demanding so

much of their employees, Disney managers effectively drive their employees to be

creative.

Current Disney leader Michael Eisner has established the “Dream as a Team”

concept. Eisner realized that managers at Disney needed to let their employees

brainstorm and create with support. As Disney president Frank Weds says, “If a

good idea is there, you know it, you feel it, you do it, no matter where it comes

from.”

Questions :

1. What environmental factors influenced management style at Disney ?

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

“Dream as a Team” ?

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

Disney ?

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Case: 5

“THAT’S NOT MY JOB” – LEARNING DELEGATION AT CIN-MADE

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

Cincinnati, Ohi-based manufacturer of paper packaging had not altered its product

line in 20 years. Labor costs had hit the ceiling, while profits were falling through

the floor. A solid quarter of the company’s shipments were late and absenteeism

was high. Management and workers were at each other’s throats.

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

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

times. The Cin – Made workforce is both flexible and deeply committed to the

success of the company. On-time delivery of products has reached 98 percent, and

absenteeism has virtually disappeared. There are even plans to form two spin – off

companies to be owned and operated by Cin-Made employees. In fact, at the one

day “Future of the American Workforce” conference held in July 1993, Cin-Made was

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

States.

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

empowerment is one part of the answer. Profit sharing is another.”

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

reached rock bottom. Having recently suffered a pay cut, employees at Cin- Made

came to work each day, performed the duties required of their particular positions,

and returned home-nothing more. Frey could see that his company was suffering.

“To survive we needed to stop being worthy adversaries and start being worthy

partners,” he realized. Toward this end, Frey decided to call a meeting with the

union. He offered to restore worker pay to its previous level by the end of the year.

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

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

relationship with its employees.” Frey proclaimed at the meeting. He therefore

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proposed a new arrangement that would encourage a collaborative employee-

management relationship “Employee participation will play an essential role in

management.”

Managers within the company were among the first people to oppose Frey’s

new idea of employee involvement. “My three managers felt they were paid to be

worthy adversaries of the unions.” Frey recalled. It’s what they’d been trained for.

It’s what made them good managers. Moreover, they were not used to participation

in any form, certainly not in decision making.” The workers also resisted the idea of

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

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

responsibility for anything more than doing their own jobs the way they had always

done them,” Frey noted. Employees were therefore skeptical of Frey’s overtures

toward “employee participation.” “We thought he was trying to rip us off and shaft

us,” explained Ocelia Williams, one of many Cin-Made employees who distrusted

Frey’s plans.

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

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

made my two grand pronouncements, I was determined to press ahead and make

them come true.” But still ahead lay the considerable challenge of convincing

employees to take charge :

I made people meet with me, then instead

Of telling them what to do, I asked them.

They resisted.

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

say, or “How are we going to allocate the

overtime on this order ?”

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“That’s not my job,” they’d say.

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

World can we have participative management

If you won’t participate?

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

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

Gradually, Frey made progress. Managers began sharing more information

with employees. Frey was able slowly to expand the responsibilities workers would

carry. Managers who were unable to work with employees left, and union relations

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

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

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

same machine, but now is also responsible for ordering almost $ 100,000 in

supplies.

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

throughout Cin-Made. Joyce Bell, president of the local union, still runs the punch

press she always has, but now also serves as Cin- Made’s corporate safety director.

The company’s scheduling team, composed of one manager and five lead workers

from various plant areas, is charged with setting hours, designating layoffs, and

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

hourly employees and two managers, is responsible for interviewing applicants and

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

term planning of labor, materials, equipment, production runs, packing, and

delivery. Employees even meet daily in order to set their own production schedules.

“We empower employees to make decisions, not just have input,” Frey remarked. “I

just coach.”

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Under Frey’s new management regime, company secrets have virtually

disappeared. All Cin-Made employees, from entry-level employees all the way to the

top, take part in running the company. In fact, Frey has delegated so much of the

company’s operations to its workers that he now feels little in the dark. “I now know

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

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

they are the way of doing business – good business. “We, as workers, have a lot of

opportunities,” said Williams. “If we want to take leadership, it’s offered to us.”

Questions:

1. How were principles of delegation and decentralization incorporated

into Cine – Made operations?

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

3. What were some of the barriers to delegation and empowerment at Cin

–Made?

4. What lessons about management in a rapidly changing marketplace can

be learned from the experience of Cin – Made?

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CASE NO. 6

HIGH-TECH ANSWERS TO DISTRIBUTION

PROBLEMS AT ROLLERBLADE

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

more goods. When a manager finds that inventory exceeds demand, the answer lies

in making fewer goods. But what if a company management finds that they just do

not know which situation applies?

This is the situation that recently confronted management at Rollerblade, the

popular skate manufacturer based in Minnetonka, Minnesota. Rollerblade has been

one of the leading firms in the fast growing high performance roller skate

marketplace, it matters a great deal for Rollerblade managers whether demand and

inventory are in balance, or not.

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

door. The managers found that workers were not able to ship products because, as

a result of poor storage structures, they could not find the products. Once they were

found, overcrowded aisles, in addition to other space constraints, still prevented

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

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

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

there was no more useable space left in the warehouse, a severe backlog of

customer orders, and picking errors were clearly in the unacceptable range,” added

Ram Krishnan, Principal of NRM Systems, based in St. Paul, Minnesota.

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

have introduced a collection of computer simulations, ranging in cost roughly from

$10,000 to $30,000, that assist managers in generating effective facility designs.

With the help of layout Master IV simulation software, developed by NRM,

Rollerblade Management was able to implement a new distribution design. As a

result of the distribution improvement, Rollerblade was able to increase the number

of customer orders processed daily from140 to 410 and eliminate order backlog.

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“Now we have a different business,” says Ellis. “The new layout has taken us from

being in a crunch, to being able to plan.

Questions:

1. With retailers as their primary customers, what customer competitive imperatives could be affected by Rollerblade’s inventory problems?

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

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