MBA PROGRAM

TOPIC: CONFLICT MANAGEMENT AND DECISION MAKING IN INTERNATIONAL

NGOs

CASE STUDY- I
Food for the Children, an international NGO based in the UK, provides food
grains and powdered milk to families where children are at risk of malnourishment or
starvation. It has provided food to families in the small South Pacific Island nation of
Papua Tuyua for the past eight years, utilizing the school system as the means of
identifying needy children and distributing the food. The Minister of Education in Papua
Tuyua has approved the involvement of the school system in this project, though each
year the process of approval has become more cumbersome and drawn out. Sarah Britton
has arrived from London for a one week visit as the representative from Food for the
Children sent to negotiate the arrangement, and she quickly comes to the opinion that the
Education Minister is delaying the process in hopes for a bribe. The local school officials
are eager for the food supplies and assure Sarah that they can distribute the food on their
own with or without the Minister’s approval.
Sarah sends an email to the executive committee in London requesting instructions on
what she should do. The food has to be supplied within the next several days before the
monsoons come.
Question: You are members of the executive committee. What should Sarah do?

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Prepared by Dr.A.Rama Mohan,

Professor

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 CASE STUDY-2

Topic: Transfer Pricing, Negotiated Transfer Prices, Divisional Autonomy

A mediator has been appointed by the head office of Greenwich company to agree
the purchasing of products X and X100. The original agreement was for the North
Division to purchase X and the Essex Division to purchase X100 and the level of
purchases to remain the same as the previous year.

The mediator appointed by head office has only recently joined the company and
is recently qualified. He has worked for the management accountant at the North Division
at another company but does not believe this helped him to get the job. Apparently this is
the first time that a manager from head office has been asked to mediate in a dispute
between divisions.

Initially the mediator talked to the two purchasing divisions separately. The
managers at the North Division gave details of current market prices for product X and
argued that Swansea was not lowering its prices in line with other suppliers. North
Division also complained about the new profit targets that have been set been set by head
office. Managers' were convinced that they must have the freedom to buy and sell outside
the company.

The managers at the Essex Division told a similar story. They gave details of how
market prices had fluctuated in the last 6 months. Their conclusion was that market prices
would continue to fall and therefore the Swansea Division must reduce its prices. Again
managers also argued that they must have the freedom to buy and sell outside the
company.

Finally a meeting with the Swansea Division was held. The managers did not
accept any of the points raised by the two purchasing divisions and argued that the
current arrangement had worked well and did not need changing. After returning to the
head office the mediator wrote a short report summarising the details of the original
agreement.

Details of the original agreement

The North Division purchases 3,000 units of product X from Swansea (the
supplying division) and another 1,000 units from an external supplier. The market price
for product X is £900 per unit. The Essex Division purchases 1,000 units of product
X100 from Swansea and another 1,000 units from an external supplier.

Details of the revised agreement

Swansea will continue to produce products X and X100. All of its production will
be sold to the North and Essex Divisions. No other customers are likely to found for these
products in the short term given that supply is greater than demand in the market. The

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mediator carefully considered the issues raised by the managers and suggested the
following compromise. He gave all of the divisions 7 days in which to comment.

Swansea will manufacture 2,000 units of X for the North Division and 500 units
of product X100 for the Essex Division. North will buy 2,000 units of X from Swansea
and 2,000 units from an external supplier at £900 per unit. Essex will buy 500 units of
X100 from Swansea and 1,500 units from an external supplier at £1,900 per unit.

Swansea Division Data 2013

Data based on original agreement

Product X X100
Direct materials £200 £300
Direct labor £200 £300
Variable overhead £300 £600
Transfer price £1,000 £2,000
Annual Volume 3,000 units 1,000 units

Question 1

Calculate the increase or decrease in profits for the three divisions and the
company if the head office agreement is imposed on managers. Discuss the problems
faced by mediator in this situation.

Question 2
Evaluate the implications of the following transfer pricing policies:

Transfer price = cost plus a mark-up for the selling division

Transfer price = standard cost plus a mark-up for the selling division.
Transfer price = incremental cost
Transfer price = price negotiated by the managers.

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 CASE STUDY-3

You have just been hired as a consultant to Tangier Industries, USA, a newly formed
company. The company President, Mr. John Meeks, is seeking your advice as to the
appropriate inventory method Tangier should use to value its inventory and cost of goods
sold. Mr.Meeks has narrowed the choice to LIFO (Last in First Out) might be better for
tax purpose, but FIFO (First in First has certain advantages for financial reporting to
investors and creditors. You have been told that the company will be profitable in its first
year and for the foreseeable future.

Questions:
a) Prepare a report for the president describing the factors that should be
considered by Tangier in choosing between LIFO and FIFO.
b) Give your necessary suggestions to the company for better method of inventory
system.

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 CASE STUDY-4

Vinod was a scientist in the R and D department of the Indian Space Research
Organization (ISRO). He worked for the Institution ever since he received his degree 15
years earlier and he was clearly recognized as one of the best researchers in the area. He
spent many hours keeping current on the literature, and he knew how to set up tight
research designs. Knowledgeable in space research, he had a reputation for sticking to his
guns about how specific research studies should be conducted. He believed that if
something was not done well, it should not be done at all. A number of his discoveries
had saved the company of millions of dollars in foreign exchange. His colleagues
frequently came to him for advice about how to proceed on various projects. He was
convinced about the correctness of his advice. In short, Vinod was a star in the
organization.

Early in February 2000, Roney would retire as head of R& D. The decision about
his successor was in the hands of Dr Arun the chairman of ISRO. Roney recommended
Vinod because his record of his outstanding service. The new position required large
amounts of administrative work and less research. Roney and Dr. Arun discussed some of
these issues with Vinod. He would no longer be in charge of specific research projects,
but because everyone came to him for advice, he could still be actively involved in
research. Vinod thought long about the offer. The promotion meant more money and
recognition. Starting June 1, Vinod became the head of the R& D department. It was not
long before things started to go wrong. First, of all, Vinod had more difficulty keeping up
with the literature. Other priorities seemed to always interfere with his reading time. He
also noticed a distinct cooling in the way his colleagues treated him.

At first they had continued to come to him with questions and problems. Vinod
responded as he always had "Here's how it has to be done". In few cases his advice was
not followed. He also got into a number of arguments with Dr Arun. In many cases he
demanded more financial support from Dr Arun to conduct various research projects in
the way he felt it should be done. It got to the point where almost every interaction
between the two resulted in an argument.

Finally, Dr. Arun knew that something had to be changed. He went to Vinod and
told him that he had to (1) compromise more and accept the realities of his job. (2) Step
down from his position, or (3) leave ISRO.

Questions:

1. Why do you think Vinod was not successful at this job?

2. Why did problem start to occur between Vinod and his colleagues?
3. Do you think the selection of Vinod to the position of R and D Head was the right
move? How should this process of selection have been conducted?

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 Case Study-5

Red Lobster operates over 670 casual-dining seafood restaurants in the US and
Canada, employing more than 63,000 people. When Red Lobster developed a new
business strategy to focus on value and improve its image, it established a new vision,
mission, and goals for the company. The restaurant chain simplified its menu with the
highest-quality seafood it could offer at mid-range prices, traded its restaurants’ tropical
themes for a crisp, clean look with white-shirt-and-black-pants uniforms for its
employees, and added Northeastern coastal imagery to its menu and Web-site. Executing
the new mission and differentiation strategy required hiring fun, hospitality-minded
people who shared its values.

Although Red Lobster had not had any problem with hiring restaurant managers,
the company felt that the managers it hired did not always reflect Red Lobster’s strategy,
vision and values. The company also realized that their old job descriptions did not
reflect the passion its new strategy needed from its employees.

Questions:
1. What is the problem in this case?
2. Do you believe that Red Lobster’s Company values are good?
3. What it should do in writing its job descriptions to improve the fit between its new management
hires and its new business strategy?

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