Please read the fact patterns before class. We will answer the questions in our case teams during class.

Transcription

1 Management Decision WEB 2.0 You arrive early in the office to prepare for a meeting with your IT team. It has become increasingly clear to you that technology is changing and fast and many of the old IT tools your company still uses are becoming obsolete. Add to that your growing sales force of 20- somethings who find these tools unfamiliar and burdensome. They've been begging you to allow them to use the Web 2.0 tools on their smartphones. So you called this meeting to explore the possibilities with your IT team. Since you just bought your smartphone two weeks ago, you had to learn about the variety of Web 2.0 tools available and brush up on their costs and benefits. Social networking tools allow people to create a customized public (or private) profile and update it instantly. Internet-based applications like word processing, spreadsheets, and calendars take the software off your computer so you can create, manipulate, and use documents anytime, anywhere. And cloud computing enables information of all sorts to be stored not on individual devices that have to be synched or connected to a network but in a digital "cloud" which can be accessed from your desktop, your laptop, or your smartphone anywhere, anytime. "This has a lot of potential," you think. No more "Oops, I left that at the office" ruining a sales call, since documents can be accessed anywhere. You can keep up with your sales reps wherever they are and they can keep in touch with you, too. If they have questions in the middle of a sales call, they can get the information they need to clinch the deal on the spot, since information or the experts who can supply it are instantly accessible. Anyone in the company can access the most recent performance statistics, find out how many items are left in inventory, or contact a colleague instantly. And Web 2.0 tools even offer new ways to reach out to potential customers. Your tennis partner, whose company has already begun adopting these tools, told you, "We're a lot less mired in technology. Employees say they can spend less time dealing with the IT system and more time actually thinking about their work." You know that Web 2.0 has its disadvantages, though. It won't be cheap to adopt a cloudbased system, equip employees with the devices they'll need to access it, and train them how to use it. Also, tech companies are only beginning to integrate social networking, internet-based software, and cloud computing into a single system, so there are still bugs. Maybe it's worth adopting one or two tools and moving toward Web 2.0 gradually. It also means your IT team will have less control over the flow of information, and you're definitely concerned about security. Still, the advantages are significant, and adopting a system like this could transform your business. Questions 1. What decision criteria should you consider as you decide how to transition to Web 2.0? How would you weight those criteria? Which would be most important to you?

2 2. Generate a list of possible courses of action you could take. Evaluate those options based on your decision criteria. 3. How might you use groups to help you make this decision? Think about how you would involve your IT team. But also: How would you involve employees? 4. What would be a maximal decision? In other words, what is the optimal solution? Under what circumstances would you satisfice? What is a "good enough" alternative to the optimal solution?

3 SELLING TO WAL-MART Because of your company's success, the end-of-the-year accounting review is usually an upbeat occasion, and this December is no different. Your company manufactures an innovative kickstand that reduces injuries by keeping a child's bike from falling all the way to the ground. After the device was written up in a parents' magazine recently, sales to specialty bike shops your primary customers have started to climb. Despite the increased demand, you can still make kickstands to order. At a meeting with your management team, you remark that although sales are increasing at a slow but steady rate, the company still has a large amount of excess capacity. A colleague agrees and then enthusiastically announces, "I know how to take care of that. Let's sell to Wal-Mart!" A hush falls over the meeting. Becoming a Wal-Mart supplier would mean honing your current distribution process into a finely tuned, perfect delivery operation. The retailing behemoth gives suppliers a 30-second window to deliver their goods to Wal-Mart distribution centers; you currently ship product via UPS ground. Wal-Mart requires severe price concessions from all its suppliers, a practice that has forced many American manufacturers to outsource production overseas in order to get their production costs low enough to meet Wal-Mart's pricing mandates. Master Lock, Carolina Mills, Levi's, and, a bit closer to home, Huffy Bicycle are a few examples. Your company uses local suppliers for metal, paint, plastics, and packaging and pays its 25 workers above-market wages. Thankfully, at the moment your company is the only manufacturer of the kickstand, so you have more freedom to set a competitive price on that item. If you begin selling through Wal-Mart, however, imitators will soon follow, and that would definitely affect your already modest margins. Not to mention that Wal-Mart uses historical price data about a company and its competitors to drive prices down across industries. Suppliers are rarely if ever granted a price increase; on the contrary, they are asked for regular price decreases! In addition, if vendors want their products on Wal-Mart's shelves, they have to implement Wal-Mart's "customized business plans." Each year, the big retailer hands its suppliers detailed "strategic business planning packets." Wal-Mart grades its suppliers with weekly, quarterly, and annual report cards. And, when it comes to discussion of price, there is no real negotiation even for household brands. Plus, Wal-Mart often requires its suppliers to underwrite the costs of the retailer's supply-chain productivity initiatives, like using radio-frequency identification (RFID) tags on their products for inventory tracking, a system that can cost between $13 million and $23 million to put in place. Trying to meet Wal-Mart's requirements has pushed many small- and medium-sized businesses into bankruptcy. Businesses that stay afloat have generally done so by outsourcing to China (in areas like shoes, house wares, and apparel, 80 to 90 percent of Wal- Mart's inventory comes from China). But there are also benefits to selling to Wal-Mart. You have instant access to the world's largest global retailing network. Doing things the "Wal-Mart way" inevitably leads to more efficient operations. And the volume! You could sell exponentially more kickstands through Wal- Mart than through the small specialty retailers to whom you currently sell. If doing business with Wal-Mart is so bad, why do Unilever, P&G, and Dial sell 6, 17, and 28 percent of their goods, respectively, to the giant retailer? A former president of Huffy Bicycle once said that Wal-Mart gives you "a chance to compete. If you can't compete, that's your problem." You agree, to a point. Before you can voice any of the pros and cons, another manager expertly sums up the dilemma by saying, "The only thing worse than selling to Wal-Mart is not selling to Wal-Mart." Before you begin this Management Team Decision, each team member will probably need to do some preliminary research on Wal-Mart's business practices; go to the campus library to find articles on topics like productivity, inventory management, and even Wal-Mart's business practices. A visit to the Wal-Mart stores website ( ) can give you a wealth of information on how the company manages its suppliers. You may also wish to visit

4 the PBS show Frontline's web page "Is Wal-Mart Good for America?" ( Sources: C. Fishman, "The Wal-Mart You Don't Know," Fast Company, December 2003, 68-80; M. Boyle, "Wal- Mart Keeps the Change," Fortune, 10 November 2003, 46; C. Y. Chen, "Wal-Mart Drives a New Tech Boom," Fortune, May 2004; "Is Wal-Mart Good for America?," Frontline, Questions 1. As a team, use this exercise to practice one of the group decision-making techniques discussed in the chapter. Work together to decide which technique to use. 2. Do you apply to become a Wal-Mart supplier, with all that entails? Why or why not?

5 3. If you become a Wal-Mart supplier, what key areas of your operations will need to change and how? 4. Think about how the decision-making technique you chose affected the outcome of your decision. Do you think your collective decision would have been different if you had used, say, dialectical inquiry instead of the stepladder technique?