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Coffee & Chocolate

Chapter 4.

1. What do you think Custom Coffee & Chocolate’s mission is?

In my opinion, the mission of Custom Coffee and Chocolate is to create a convenient and enjoyable atmosphere for students and other university people by providing the best sorts of coffee and snacks, increasing convenience by offering additional services and making visits to the café an unforgettable experience for the clients.

2. Create a SWOT analysis for Custom Coffee & Chocolate.

Strengths of Custom Coffee & Chocolate include their successful location, the growing reputation of the brand, high quality of coffee and chocolate, loyalty of the customers, and good understanding of their particular customer segment. Weaknesses currently include the lack of workforce (Kim and Brewer seem to be the only employees), small size of the café, tight budget, and the lack of two-way communication with the customers. There are plenty of opportunities for Custom Coffee & Chocolate, some of which were already mentioned in the case: expanded menu with desserts, tea and other beverages included, the possibility of online sales, delivery service, hosting various events, and the provision of a wireless internet connection in the café. Other opportunities include territorial expansion, adding more snacks and foods which can be prepared on the spot (perhaps even lunches for students), organizing various events and discounts for loyal customers, and opening more cafés in locations close to learning institutions (if such locations are available). Finally, there are certain threats for Custom Coffee & Chocolate. Currently they are vulnerable to strong competition, and if a major coffee and/or fast-food company like McDonalds or Starbucks enters the local market, the company will experience significant loss of revenue. Other threats include vulnerability to recession and inflation issues and trade regulations depending on university authorities.

3. Using the owners’ ideas for the future of their café, as well as your own ideas, outline a tactical plan for Custom Coffee & Chocolate.

A tactical plan should be based on strategic opportunities and is likely to contain step-by-step implementation of these strategic goals. For Custom Coffee & Chocolate, the following tactical actions can be recommended:

  • Hiring two part-time employees – within 1 month
  • Adding wireless connection option – within 2 months
  • Developing an expanded menu (with desserts, tea and beverages) – within 2 months
  • Opening a blog for announcements and customer feedback purposes – within 2 months
  • Expanding marketing and advertising policy (radio, TV, banner ads) – within 3 months
  • Testing and establishing the expanded menu – within 4 months
  • Making agreements with university authorities regarding hosting events for students – within 5 months
  • Development of a website with online ordering possibility and delivery options – within 6 months
  • Launching the website – within 8 months
  • Hiring an IT employee for network and website maintenance and online promotion – within 8 months
  • Hiring 4 part-time employees for delivery services – within 8 months
  • Search for two more bigger locations (close to current university or close to another educational institution) – within 11 months
  • Launch of two more Custom Coffee & Chocolate cafés and active promotion of the brand “Custom Coffee & Chocolate” – within 12 months

Chapter 5.

1. Refer to Table 5.3 on page 169 in the text. What would you do in each of the scenarios described ?

In the first case, the best alternative would be to report the inappropriate actions of the minister to the authorities; this action would not only be ethical with regard to the current situation, but will also prevent the minister from excessive use of power, thus making the whole atmosphere in the construction sphere in the region more healthy. Also, in this case, the competition might not win the project, because the decision will be made by someone else. Anyway, making an ethical decision for stopping corruption will be beneficial for the company’s image and for further construction activities.

The second situation is more ambiguous; if the insecticide is the only one which can combat the infestation of crops in Africa, and the infestation might lead to serious consequences, up to famine and deaths (and these consequences are worse than the potential effect of the insecticide), it is acceptable to let the minister use this insecticide, with signing proper agreements proving that the minister was informed of the side effects of this insecticide. However, if there are other insecticides which might help, or the consequences of using the toxic insecticide are more severe than the expected threat of infestation, then it is ethical not to sell this product. Also, it is necessary to consider methods of making this insecticide less toxic or stopping producing it.

In the third situation, I would not approve the ad plan, and will insist on testing the tires in the conditions of tropical heat and humidity, or would at least require to remove the words “most adverse” from the advertising. Regarding the “reduced” price, here the advertising should not actually be considered deceptive, because the pricing depends on the company, and in different regions different prices can be set (and then reduced), so I would not consider this a deceptive form of advertising. However, I would likely report the tire issue to the superiors and insist on further testing of the tires, because long-term consequences of not testing them in tropical conditions might be very significant, both for the company and for the customers.

2. What are the arguments for and against the concept of corporate social responsibility? Where do you stand and why ?

I believe that corporate social responsibility is a must for every business due to many reasons. First of all, world economy is becoming more and more globalized, and problems emerging in one part of the world significantly affect the economy everywhere. Thus, businesses should be interested in corporate social responsibility first of all, because timely actions can help to avoid economic recessions and crises. Moreover, many CSR activities like environmental initiatives result in better effectiveness for the whole company; in addition to this, CSR initiatives attract public attention and strengthen brand image of the company, thus creating additional competitive advantage. Socially responsible actions create sustainable long-term benefits, and thus these actions not only help the world to become better, but also improve the company’s financial performance.

3. Discuss courage as a requirement for ethical behavior. What personal examples can you offer, either as an actor or as an observer ? Cite examples currently in the news media regarding this subject.

In many situations, ethical behaviour requires truth-telling, which, in its turn, requires courage. Deceptive practices are often easier and allow to avoid conflicts, but all of them lead to negative consequences in the long-term perspective. For example, when top management makes an agreement with a relative for the supply of spares, which appear to be broken or depreciated, the manager or the employee responsible for checking the quality of the supplies will need courage to reject these supplies (even against the top manager’s will). However, these actions will help to avoid main negative consequences.

A vivid example of unethical behaviour and the lack of courage to reveal the truth is the famous Enron scandal; the company was finally unable to perform its financial obligations, and tried to hide this through creative accounting and hiding the debts. However, eventually Enron filed for bankruptcy in 2001, and the confidence of the investors was inevitably hurt, and it was not only the trust in Enron – the general attitude had suffered as well.

Chapter 6.

1. Imagine you were the CEO of a major corporation. What approach to global competition would you choose for your company : international, multinational, global or transnational ? Thoroughly explain your reasoning.

The choice will significantly depend on the sphere of activities of the corporation, on its SWOT analysis and on the competitive advantages. However, in most case I will choose the transnational approach to global competition, which is based on the high attention to local responsiveness and at the same time, on strong focus for global integration. The idea of “think globally, act locally” is, in my opinion, the best choice for a large business. On one hand, this approach allows to use to economy of scale created by globalization, and to optimize the suppliers, distribution channels and allocation of resources in an optimal way. At the same time, this approach will lead to better acceptance of the products in different countries, due to product customization and high local responsiveness of the company. Transnational approach combines the benefits of global and multinational strategy, and thus it is reasonable to choose it as the main strategy.

2. What are the pros and cons of using expatriates, host country nationals and third country nationals to run overseas operations ? If you were expanding your business, what approach would you use and why?

Using expatriates can be good for transferring the company’s culture and implementation of strategic goals, but it is expensive and often employees might feel unsatisfied and frustrated during the whole period overseas. To hire host country nationals is cheaper, but the difference of cultures might create more differences for aligning the company’s culture and business practices in different countries. Third country nationals might be very appropriate when people with specific qualities are needed, and it is not possible (or too expensive) to hire a host country employee or an expatriate. However, relocation costs and the process of overcoming cultural differences might create additional obstacles for integrating the employee into the company’s environment. Since I have chosen a transnational approach to competition in the previous question, it would be appropriate to send several expatriates (some of them being top managers, and some being middle managers) to every international department, and to unite them with host country nationals at similar positions. In this way, it would be possible to customize the product and business activities with regard to the country specifics, and the overall culture could be aligned with the help of expatriates.

Chapter 7.

1. Describe the personality characteristics that Renee and Richard have that should help them navigate the difficulties of starting a business.

Albertelli and Rodriguez both have enough courage to pursue their ideas, and they love what they are doing – this is one of the components of their future success. Both entrepreneurs had business and marketing courses, which would likely help them in many business activities. Finally, these people are creative, can generate new ideas, and have an eye for business opportunities – qualities which are highly important for any entrepreneur.

2. Richard and Renee decided to focus their marketing efforts on the artisans who made the shoes. Do you think this is a wise decision? Why or why not?

I believe this was a very successful decision, because this idea would create a specific competitive advantage for the “Shoes With Soul”. Currently more and more people are becoming aware of the problems in developing countries. If the customers knew that they did not only purchase shoes for their own use, but also helped women in struggling regions to support their living, they would feel proud of themselves and would naturally choose this product over others. For other customers, the individuality of the shoes would also matter, and knowing the story of their creation would make the product unique compared to millions of typically manufactured shoes. Thus, I believe that telling the story of the artisans was a great and very wise idea.

3. What management challenges might cause Shoes With Soul to stumble?

First of all, it is likely that Shoes With Soul will have more public attention and will have to expand now. The new challenges created by growth will attract more competition to the company, and the costs of business might increase (for example, the problems of storing the inventory and managing the orders will arise). Moreover, the artisans might not be able to make enough shoes to satisfy the growing demand, and thus Richard and Renee will have to manage customer queues in some way. Such issues as misuse of funds and delegation problems might also follow the growth of the company. The use of formal control systems, the need to hire new employees and the issues of managing the larger system might also become certain stumbling blocks for the entrepreneurs.

4. Describe two or three steps that Richard and Renee could take to avoid these stumbling blocks and guide their new business to success.

First of all, Richard and Renee should try to forecast the increase of the demand, and prepare a sound business plan for the expansion opportunity. They need to establish the business plan and financial issues related to this plan, and have to contact the artisans in order to be able to forecast the maximal amount of shoes which could be produced. They might also seek for other suppliers of shoes (and maybe other handcraft items), since their customers might be interested in expanding the assortment. Richard and Renee should also clearly define their roles and responsibilities, and hire an administrator or an accountant, if they would not be able to handle all amount of work together. Thorough planning and analysis can help them to avoid the stumbling issues created by the growth of the company.

Internet exercise.

1. Identify how functional strategies are utilized to support the growth of this organization.

McDonalds is closely watching the customers’ tastes and preferences, and its functional strategies with regard to products are highly effective; for example, when the trends towards healthy lifestyle emerged, the company developed low-calorie products and menu, and reduced the percentage of fat in some high-calorie meals. In addition to this, McDonalds offers franchising opportunities, and this creates great flexibility with regard to local adaptation in every country, and at the same time supports the brand.

2. Describe how low cost and differentiation strategies are employed by this company.

McDonalds has always been known for its low-cost offers, and although not every product in the menu has a low price, there is a choice of products (seasonal, for some franchises), which are sold at very low prices. Often, meals or combinations of products are offered at record prices. The latter idea also employs differentiation approach: customers can choose different variants of meal packages sold at very good prices. Differentiation can also be witnessed in different international locations of McDonalds: the choice of products and meals is customized to match the preferences of the population, although key meals might remain the same in many countries.

3. Do you feel this organization’s vision statement is adequate and provide a thorough explanation of it’s purpose ? Why or why not ?

The search for “mission” or “vision” formulation at the website of McDonalds did not produce a particular result; however, there is a page called “Values in action” at their website (http://www.mcdonalds.com/us/en/our_story/values_in_action.html). They mention total life cycle approach, effective waste management, animal welfare and sustainability as key values. Also, the values listed at McDonalds corporate responsibility website (http://www.aboutmcdonalds.com/mcd/csr/about/values.html) include customer experience as the core of the business, people commitment, ethical business practices, giving back to the communities, continuous strive for improvement, and increase of business profitability.

In my opinion, these values and vision might be quite effective, but existing McDonalds practices do not fully comply with the proclaimed values; for example, the employees at McDonalds have to pass a long way until they’re really respected and valued. Moreover, propagation of fast-food results in growing obesity rates and McDonalds’ effect in this process is also significant. It is evident that the company is struggling to reduce these negative effects, but there still is a lot of space for improvement. Also, it is not clear how business practices of the franchisers relate to the proclaimed values. Thus, I believe that a more adequate formulation of vision and mission could be adopted by the company (or at least made more visible to the customers).