Case and Questions

ANALYZE THE CASE ON ONE PAGE AND ANSWER THE QUESTIONS 1-2 ON THE OTHER PAGE AND NUMBER THE QUESTIONS - NO APA OR SOURCE PLEASE Victoria was starting to wonder about the implications of her actions as well as her company's strategy. She had begun working for Kona International (Kl) after graduating from Pacific West University with degrees in both finance and marketing. KI was the leader in franchised home repair outlets in the United States. In twenty-five years, Kl had grown from several stores in the Pacific Northwest to 250 located throughout the United States and Canada. Kona International came to dominate the markets that it entered by undercutting local competitors on price and quality. The lower prices were easy to charge because Kl received large quantity discounts from its vendors. The franchise concept also helped create another barrier to entry for KI's competitors. By expanding rapidly, KI was able to spread the costs of marketing to many more stores, giving it still another differential advantage. This active nourishment of its brand image coupled with some technological advances such as just-in-time inventory, electronic scanners, and electronic market niching had sent KI's stock soaring. As a result, it had a 50% share of the market. KI had done such an excellent job of positioning itself in its field that articles in major business newspapers were calling it "the Microsoft of Home Improvement". The view was that "KI is going to continue to be a very profitable endeavor, with less expected direct competition in a slow-growth, high-margin market for the future." Wendy, Victoria's boss, had brought her in on Kl's next potential conquest: the New England states of Maine, Vermont, New Hampshire, Connecticut, and Massachusetts. "This is the last big potential market," Wendy said at a planning session with her senior staff. "I want you to realize that when we launch into these states we're going to have to be ruthless. I'd like your suggestions as to how we're going to eliminate the competition." One person spoke up: "We first need to recognize that there are only five major players (multiple-store chains), with Home Designs being the largest." "The top corporate people want us to attack Maine, New Hampshire, and Vermont first and then make a secondary attack on the other two states," interjected Victoria. "Our buildings are four months from completion," Wendy pointed out,"and the media blitz is due to start one month prior to the twenty-store grand opening. With that much exposed capital from our franchises, we need to make sure everything goes well. Vicky, have you completed your price analysis of all of the surrounding home repair stores?" "Yes, and you're not going to like the news," Victoria replied. "Many of the stores are going to be extremely competitive relative to our normal pricing. In a few cases, they seem to have an edge." Wendy turned to Ed. "Ed, how much cash flow/reserves have you been able to calculate from the five players?" "Well, Wendy, it looks like if we slash our prices for about six months to a year, we could drive all but Home Designs into near bankruptcy, providing that our promotional campaign doesn't have a misstep." "What about personnel, Frank?" Wendy cut in."Have you done the usual research to see about hiring away the five players' key personnel?" "Yes, but many won't go unless they get a 50 percent raise, which is way out of line with our other stores." At this point, Wendy slammed her fist on the table and 0shouted, "I'm tired of hearing negative reports! It's our job to drive out the competition, so I want solutions!" There was a long silence in the room. Wendy was noted for her quick temper and her quick firings when things didn't go as planned. She had been the first woman to make it this high in the company, and it wasn't the result of being overly pleasant. "So this is what we're going to do," Wendy said softly. "Frank, you're going to hire those key people at a 50 percent increase. You're going to keep the unions away from the rest of the people. In eighteen months, when these overpriced employees have trained the others, we'll find some way of getting rid of them. Ed, you're going to lean on the players' bankers. See if we do business with them as well. See what other information you can squeeze out of them. Victoria, since you're the newest, I'm putting you in charge of breaking the pricing problem. I want-you to come up with a unique pricing strategy for each of the twenty stores that will consistently undercut the competition for the next eighteen months, even if we have to lose money on everything in the stores! The franchisees will go with this once we explain the payout." One of the newer staff asked, "If we're successful, doesn't that make us a monopoly in the area? Don't we have to worry about antitrust issues?" Wendy raised her eyebrow a little and said, ''We don't mention the word monopoly around here as if it were wrong. It took the Feds decades to break up AT&T. Microsoft was next on their list, and now it's MasterCard. We're in retail. No one has ever had problems with the Feds in this industry. By the time they deal with what we're doing, we will all be retired." QUSTIONS NUMBER 1 AND 2 ANSWER THEM SEPARATE AND NUMBER THE QUESTION ON THE SECOND PAGE 1. How can managers develop practical ethical training, guidelines, practices, and feedback in their own work groups or departments? Give some examples of how you think one could implement such practices in an organization with which you are familiar. 2. How can “Groupthink” influence ethical decision-making? Also, how can a manager try to combat groupthink if it is leading individuals toward unethical decision-making?