Carlos M. Montanez
14-028

Answers to application lessons 4 through 7.

Chapter 4 – Concluding case
1. What do you think Custom Coffee & Chocolate’s mission is?
The mission of Custom Coffee & Chocolate (CC&C), is to provide the finest quality possible of coffee and chocolate to their customers so they can indulge.
2. Create a SWOT analysis for Custom Coffee & Chocolate.
Strengths
* Formal Education - Both, Bonnie and Stacy had formal education in management and marketing; this provides them the basic knowledge of how to manage a business. * Experience – They worked for several years in other companies acquiring the experience necessary to take on a challenge of establishing a new business. * Intimate knowledge of their core customer – As former students of the university, they have a good grasp of the people they cater to.
Weakness
* Location (Yes, location) – Anyone would think that the perfect location would be near the university, but I don’t think so and this is why: although the university is a good location, only have traffic during school seasons; take away summer recess, winter break, and all other holidays and off days and the opportunity to capture customers gets substantially reduced to those days when the university is open. Compare the university location against Pike Place Market, which is a business center with lots of business people and shoppers that work and shop all year around. Also, the spending power of business people is higher than that of students, thus allowing Bonnie and Stacy to offer their products at a higher price since these demographics are willing to pay a higher price for higher quality – not so with students since their disposable income is limited. One more point to ponder is the uneven flow of traffic; I can see lots of students going to Pike Place Market to shop and relax, but I don’t see too many business people and shoppers going to the university area to do likewise. It would have been a better location.

* Capital - Now that they have exhausted their savings and loan, they need to find new operational capital by any mean. It seems to me that the cash flow is sufficient since they decided to press-on, but careful analysis of future spending and obligations needs to be done.

* Price structure – The book states that they have struggled to find the right price point; although they have formal management and marketing education, they may need an external consultant to help them sort out a balance between cost and price. Their decision to purchase only fair trade coffee may add a restraint to what they can realistically charge for their products without affecting the bottom line. This last point resonates with the weakness of location as I stated previously (students are not willing to pay higher prices just as professionals do).

Opportunities * Social Media – Facebook, tweeter and other social media are great means to disseminate Custom Coffee and Chocolate’s menu, hours of operations, prices, etc. * Wire-less service – Always sought by students and faculty, is a good way to attract customers. * Expanding the menu and exploiting the eating habits of customers– They can incorporate different type of foods into their menu by taking in consideration the type of customers and even the seasons. For example, studies have shown that people eats more cake during the winter months and more sandwiches during the summer months. Students may prefer a quick snack (because of lack of time), rather than a substantial sandwich as a professor of faculty member may want since they do have the time. Also, the nutritional preference needs to be taken into account (health conscious vs sweet tooth). * Delivery service – It would be a great idea to deliver to students, faculty and residents in general since this in itself is a good marketing opportunity by exposing their product to the community and taking advantage of a captured market (residents and students in dorms).
Threats
* New franchise – The threat of a corporate establishing a franchise with their higher resources (a.k.a. STARBUCHS), to compete with CC&C should always be in the fore front of Bonnie and Stacy’s business strategy. * Wrong assessment of their core customers (wrong market strategy)– By incorporating things such as poetry and discussion groups, they are taking the risk of alienating all other type of students and faculty that are not “into” this kind of events, thus unwillingly labeling the coffee shop as a place for snobs, nerds, geeks and so forth. CC&C needs to be a place where everyone feels welcome. Furthermore, the fact that you can allure a customer to stay, do not mean that they will spend more money consuming their products; on the contrary, if a customer stay for chi-chat or whatever, they consume air conditioner, heat, water from the bathroom, leave more trash, make more mess, etc. In my opinion, a coffee shop with revolving clientele would make more money than a coffee shop with stagnant customers.

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.
The tactical plan to implement the following ideas should be pursue aggressively, but methodically. * Expand menu immediately. This is an area where they need to do some trial and error; however, the amount of resources needed to implement an expanded menu is not detrimental so the risk of developing an unpopular item in the menu could be negligible. * Begin an aggressive advertising in surrounding areas as soon as budget allows. CC&C’s budget is tight so careful consideration to any kind of overhead expenditures needs to be perform. * Offer delivery service within one month. A supply of local students looking for extra cash should be abundant. The number of part-time delivery personnel will depend directly on the amount of take-out and delivery orders received. They should start with one person, but moving fast to two or even more if demand suffice. Insurance and possible liabilities of a part-time delivery person needs to be addressed. * Offer incentives (gimmicks), to keep loyal customers. Incentives could include, buy three – get one free, preferred customer discount, etc. This is something that can be implemented immediately as well. * Offer WI-FI connection. This service can be offered within a month. Once again, careful management of overhead expenditures is essential. * Use of social media. This is another area that can be implemented immediately, is virtually free. * Develop an “App”. Young people like apps, CC&C can develop an application for cellular phones with information about their menu, hours of operation, location a blog link and other links related to the university lifestyle. This could be a good venue to sell other business advertisements.
In my opinion, CC&C should seriously evaluate the possibility of opening a second store in Pike Place Market, where they should have opened the coffee shop in the first place. As I mentioned, Pike Place Market, offer a wider array of customers with better buying power, constant foot traffic and is not bounded by school seasons or holidays. The opening of this second store not only will complement CC&Cs income during the university off season, but it could become their top earning store. I understand that the rent in a business center like Pike Place Market will be considerable higher, but again, the customer base in that area worth the risk. More than a tactical plan, this can be construed as a strategic plan for CC&Ss future.

Chapter 5 – Subject Review questions 1. Refer to Table 5.3 on page 169 in the text. What would you do in each of the scenarios described?

Scenario one. Honestly – I will give the minister $20,000.00, $30,000.00 or whatever he wants in order for my company to land the project; however, I would let my bosses handle the situation as they may see fit. Why would I give in? It has nothing to do with my ethical and moral standards, this is the cost of doing business in some parts of the world. In some places outside of the United States is very common to have this kind of propositions, if I want to keep my job as a sales representative I need to “play the game or get out”; of course, this is based on the instructions of my bosses as well as their ethical business position. If I try to expose the minister to the local authorities, I run a good chance of been arrested for lying or even conspiring to blemish the reputation of the minister (whom may be a relative or a good friend of someone higher up in the government). I am sure is not fun to be in a jail in this part of the world.

Scenario two. Not allowing this African country the use of the insecticide could mean famine and death. Allowing them to use the insecticide could affect the health and lives of the people that will come in contact with this product. Both options carries a great deal or responsibilities and risk. I would sell the insecticide with the condition that my company will provide personnel to monitor or implement the use of the insecticide. We will provide an effective and safe method for them to use this product. If they do not agree to this condition, I would not sell them the insecticide. The liabilities of selling a potential deathly chemical could outweighs any profits gained from the sale.
As vice president of this company, I would start moving away from the sale of this particular product and would insist in the development of a safer insecticide.

Scenario three. This is where the legal department comes in, my job is to be sure that the sale of the tire is successful. I would ask the lawyers to define the phrase “most adverse conditions” and its implications for that specific market. It could be that the tire was tested in the desert under high temperatures or that it was tested in the artic with freezing temperatures. The most adverse conditions could mean different things for different people on different markets. The real problem is to be sure that the tire will handle the driving conditions of the market where it is going to be sold. If the engineers and designers are sure that the tire can handle that market and the lawyers agree that the advertising phrase do not constitute a violation of local laws and regulations, I would proceed with the sale of the tire. Nonetheless, I would point out to my supervisors that the reputation of the company could be damage globally if they consider this phrase to be deceptive or the tires themselves turn out to be substandard for those conditions. The extra bit of money (for a large company), that will take to test the tires for the new market, is worth it comparing to losing millions of dollars because of a not-so-honest advertising. I could suggest to my bosses that the advertising company could reconsider the phraseology and come up with some other way or phrase to point out the quality, durability or whatever other market cliché they may want to use as part of their advertising strategy.

Regarding the reduced pricing strategy, I don’t think this is deceptive since each company set or mark up their products as they please. The pricing structure of a product is subject to all kind of marketing tactics and this is one of them.

2. What are the arguments for and against the concept of corporate social responsibility? Where do you stand and why? First, the argument against CSR. Regardless of the mission statement of any corporation, their true mission is to earn money. No corporation is in the business of losing money. Some may say it takes a lot of money to be a social responsible company – money that can go straight to their shareholders, instead it is been “waited” on social programs or just been responsible with the environment. Although, companies do spend a lot of money in social agendas, the truth is that they gain a lot of benefits, from just been a socially responsible corporation. Studies have indicated that shoppers are willing to switch brands to support companies that contribute to a social cause. People feel better from knowing that part of the money they are spending in a product will be used to do good somewhere in the world or even down the street. My opinion is that we all receive benefits from a socially responsible company in one way or another, especially if that company is pro a healthy environment. Cleaning the environment or spending lots of money by using costly methods of production so the environment is not affected, is perhaps the simplest form of benefiting from a socially responsible organization. 3. Discuss courage as a requirement for ethical behavior. What personal examples can you offer, either as an actor or an observer? Cite examples in the news media regarding this subject. The decision to be a wihistleblower or to cross your boss’s order goes beyond just been courageous, it implies that you may be affecting your whole career and the future of your family. I cannot honestly say what I would do in a particular situation, except one; when the safety and lives of people could be jeopardized. If someone loses his or her life or their health is affected because the company acted negligently, I would never forget myself knowing that I could have prevented that situation. Everyone is different and no one can predict what they will do if they encounter an ethical dilemma of great magnitude – you need to be there to know and still, your own actions may surprise you. One example I can discuss is the case of a high ranking member of my military base (years ago). In this case, he knew of a romantic and improper relationship between an enlisted and an officer, both married to different spouses. The husband of the enlisted woman found out and called the inspector general (IG). A middle ranking officer that also knew what was happening was the person that told the IG, that the high ranking officer was aware of the situation. After the investigation, the IG determined that the high ranking officer failed to take action to correct the improper relationship of these two individuals and apply the Uniform Code of Military Justice (UCMJ). The two individuals in the improper relationship were dismissed from the service and the high ranking officer was removed from his position and his career terminated shortly after. The middle ranking officer still in the military.

Chapter 6 – Subject Review question 1. Imagine you are 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. Of course, it all depends on what kind of corporation I will be running. Each corporation will use the model that best suits its global strategy. However, let’s say that I am the CEO of a company the manufactures an array of different products (from household goods to oil exploration) - I would prefer the transnational model of global competition. As a transnational company, we would be able to be responsive to local market conditions and at the same time maximize cost economics in manufacturing and research and development. The cost advantage in manufacturing will arise from production of the company’s products in those countries with the lowest per-unit cost. The cost advantage in R&D will arise from performing those tasks in countries with high skilled labor and suitable infrastructure. Then, the integration of the products can come together in the location the company is targeting. 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? Expatriates Pros Cons Transferring corporate culture. Culture shock or unreadiness Oversee of tactical and functional Expensive Strategies. Rejection of host culture Provide unbiased response to the Frustration for culture and language barrier overall performance of the product. Distance from family and friends (Homesick) Protection when transferring technology, Family problems proprietary methods or recipes. Host-country nationals Cheaper Transferring of corporate culture may Know the culture so there be an issue. is no culture shock and distance May not have the expertise needed from family and friends is not an issue.

Third country national May have the expertise necessary Expensive to deploy If I were expanding my business I would use a combination of more host-country national and few expatriates (or as needed). Third Country Nationals (TCN) knows the local culture, the government’s laws and regulations. Being native of a country gives the TCN manager an advantage over the expatriates of knowing the taste, market conditions and plain simple –the people. The expatriate will be there to watch for the best interest of the company.

Chapter 7 – Concluding case