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Krispy Kreme Krispy Kreme is a Relatively

Krispy Kreme Krispy Kreme is a Relatively

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Published by ct_hidayah

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Published by: ct_hidayah on Jan 06, 2010
Copyright:Attribution Non-commercial


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Krispy Kreme
Krispy Kreme is a relatively small doughnut seller. It has only 292 stores while Dunkin Donutshas 3,600 outlets in the United States. In spite of its size, Krispy Kreme has been described bymany as “the hottest brand in America.” The company’s success in an environment that is notconducive to food operations succeeding is due to a mix of “shrewdness, original thinking, andentrepreneurship.” The company originated in Winston-Salem, North Carolina, where it stilloperates a plant that fills a 50-pound bag with doughnut mix every seven seconds. It recentlyopened a new plant in Effingham, Illinois, that fills a bag every three seconds. This second plantallows the company to reduce costs while increasing its output. The company began in the mid-1930s when Vernon Rudolph bought a secret recipe for yeast doughnuts from a French pastrycook. Rudolph ran the company until his death in 1973 when he died without naming asuccessor. His death caused the company problems for the next decade.1. Refer to Krispy Kreme. The building of the Effingham plant increased the __________ of theKrispy Kreme operation.a. effectiveness d. efficiency b. synergy e. empathyc. advocacy2. Refer to Krispy Kreme. Which management function had Rudolph not performed at the time of his death?a. planning d. leading b. marketing e. organizingc. controlling3. Refer to Krispy Kreme. As the CEO of Krispy Kreme, Rudolph would have been responsiblefor:a. developing employees’ commitment to the company b. creating a positive organizational culturec. monitoring the business’s environmentd. creating a context for changee. doing all of these things4. Refer to Krispy Kreme. As the entrepreneur who founded the company, Rudolph had a(n) ______ role.a. managerial d. interpersonal b. informational e. organizationalc. decisional5. Refer to Krispy Kreme. To be successful, managers need four skills. The fact that Rudolph wasa skilled baker when he purchased the secret doughnut recipe indicates he had __________ skills.a. technical d. human b. interpersonal e. motivationalc. conceptual
When people use the Internet or make calls on their cell phones, the companies providing theInternet and cell phone service are probably using products made by Nortel Networks. With its products used everywhere in the world, Nortel should be performing well. At least that’s whatMike Zafirovski thought before he became Nortel’s new CEO and began working to turn aroundthe financially struggling company. He had hoped that his 25 years at GE, where he ran five of itskey businesses, and his five years as the president and chief operating officer at Motorola wouldhave prepared him to be Nortel’s new CEO. But he underestimated the pressures andexpectations, as well as the magnitude of problems that were now his responsibility. The most
serious problem occurred six months after he became CEO. After the previous management teamoverreported earnings to trigger corporate bonuses, Nortel had supposedly solved the company’sfinancial-reporting problems. But now, for the third year in a row, Nortel had incorrectlyoverestimated its profits and had to report, yet again, that it had earned substantially less than firstreported. This time the problem wasn’t fraud, but poor accounting controls. To no one’s surprise,Wall Street hammered Nortel’s stock price. Soon after, shareholders who had seen the value of  Nortel stock lose $30 billion brought two class-action lawsuits against the company, seeking $9 billion in damages. The lawsuits, if successful, would put Nortel out of business. The mounting problems had demoralizing effects within the company; the percentage of employees highlysatisfied with their jobs dropped from 51 percent before to 40 percent after. With Nortel needingto get better fast, Zafirovski started by dealing with the large problems that demanded immediateaction. First, the company publicly admitted the accounting errors and released new financialstatements. It severed its relationship with the accounting firm which had audited its books for more than a decade. Then Mike invited the attorneys from the lawsuits to work directly with himand a small team of Nortel managers by using a court-appointed mediator to work toward asettlement. Zafirovski apologized for Nortel’s errors, saying, “We let you down.” He asked themto “not kill the company,” because in doing so, “you would receive absolutely nothing.” Hisapology worked. By the next morning, Nortel had agreed to partially compensate shareholders for their losses by paying $2.4 billion in cash and stock. The shareholders involved in the lawsuitaccepted the settlement, which allowed Nortel to stay in business. But, to pay the settlement,Zafirovski had to address his second large problem. Nortel, the only unprofitable company in itsindustry, was running out of cash. Mike’s job as CEO was to persuade skeptical financialcompanies to lend Nortel $2 billion to keep the company afloat. So he traveled to seven cities inone week to try to convince them that Nortel was worth the risk, even though Nortel hadn’t had positive cash flows for more than six years. Said Zafirovski, “I could see the skepticism on their faces. It was pretty tough.” He obtained the $2 billion in loans, but only after agreeing to pay ahigh interest rate of 10.75 percent. With billions in losses, improving efficiency was one of Zafirovski’s most important goals. To decrease costs by $1.5 billion, he slashed bureaucracy,reducing the number of management layers from ten to seven, cut administrative expenses,reduced spending on research and development, and slashed the overall number of parts used inits products. And, while it was difficult to do, cutting retirement pensions and health care costssaved Nortel $100 million a year. At the time this was written, things had begun to improve for  Nortel. Customers, for example, reported a dramatic 20 percent increase in satisfaction over a six-month period. That coincided with a 17 percent increase in sales and Nortel’s first quarterly profitin years. But, Zafirovski knows that a complete turnaround will take time, most likely three tofive years. After a year in the job, what did Zafirovski have to say about his transition as a newCEO? “I have been stretched beyond what I thought I was capable of. It's difficult to have anappreciation for all these pressures and expectations unless you've experienced them before.”1. Refer to Nortel. Which traditional management function will be the key in ensuring that Nortelreduces wastes, decreases costs, and still operates efficiently?a. organizing d. motivating b. leading e. controllingc. goal setting2. Refer to Nortel. As CEO of Nortel, Zafirovski:a. is responsible for developing employees' commitment to the company's performance b. monitors and manages the performance of subunits and individual managers who report tothemc. is responsible for setting objectives consistent with organizational goalsd. teaches employees how to do their job more efficientlye. coordinates and links groups, departments, and divisions within a company

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