Our Lady of the Pillar College – San Manuel, Inc.

District 3, San Manuel, Isabela

COLLEGE OF ACCOUNTANCY

CASES IN BUSINESS POLICY ISSUES

Strategic Management
MGT – 08

Before tackling the cases, this chapter introduces two products that have succeeded in employing strategies needed to make it
in a very competitive market.

As an example, Apple introduced a new product in 2006: iPod having single colors and a round click wheel. This has
competed with the very successful MP3 market. The success of iPod made Apple’s sales increase from USD 5.7 billion in
2002 to USD 19.3 billion in 2006.

LG Electronics: Chocolate Phone

(Adapted from Jang, Seongkein, Yoon, Yongki, Lee Inseong Kim, Jimwoo, Design-oriented New Product Development: LG
Electronics’ Chocolate Phone illustrates what it takes to be successful, Research, Technology Management Publications,
March 1, 2009.)

The project development team conceptualized the phone as not merely a device but as part of the consumer’s life. In other
words, consumers keep the mobile phones beside them when they sleep and carry them wherever they go.

The design for Chocolate Phone is simple, a pure black color for the exterior of the product and removal of unnecessary
decoration. All buttons are hidden under a black veil but then if this surface is touched, it would unveil itself. This creates a
sense of mystery which consumers prefer.

The succeed of the phone relies on maintaining a simple design concept while incorporating functions that give it a
competitive edge. One example is the multitasking support. This includes listening to music, taking pictures, using SMS and
accessing the internet. Anther advantage is the MP3 chip and a 52-MB built-in memory. This superiority is seen in its
competitors with only less than 100 MB of memory.

LG’s global marketing to meet the needs of its consumers globally includes an all-out launching all over the world. The
phone was introduces in 100 countries in 2006.

LG has adopted different strategies in different continents. In Europe, LG concentrated its promotion efforts with the black
label series, a strategy consistent with the European market that traditionally values design. In North America, to suit local
tastes, LG applied diverse functions to highlight the music-phone market. It included a touch wheel key on the phone’s front
surface to permit controlling music and added a Bluetooth stereo headset to support a wireless music experience. There is an
added feature of 2 GB external memory to store over 500 songs.

The Chocolate Phone enjoys a total support from top management coupled with the strong determination and trust of the
head of mobile lab on the product.

The head compares and analyzed the would-be competitor of Chocolate Phone to recognize and understand the market better.
The customer’s point of view provided a lot of insights in developing the Chocolate Phone.

CASE ANALYSIS #1
Pride and Prosper, Inc.
(This case is intended for classroom discussion only and is not intended to show correct or incorrect management of a case. It
is patterned from an actual situation of the company under study. Some personal details and information of the characters

STRATEGIC MANAGEMENT 1
involved are altered and the structures and procedures of the organization are purely hypothetical to fit in the situation being
portrayed in the case. The company is disguised to protect the identity of the owners.)

This company takes pride in being a pioneer in the manufacture of soaps. These soaps have become household names, thus,
making Pride and Prosper, Inc. as one of the more successful companies today.

Pride and Prosper made its first ever beauty soap, Mild in the early ‘30s. Mild has become a successful brand, thanks to the
housewives who have become hooked to daytime dramas on national television, which were then sponsored by Mild beauty
soap. Mild has also advertisements in radio and print.

The success of Mild prompted the Pride and Prosper, Inc. to manufacture detergents, toothpastes, lotions and shampoos.

The company gave importance to brand management and new product research and development, which other manufacturing
companies have neglected at that time. Their success relied heavily on a combination and integration of consumer research,
advertising and distribution.

The company has not been very successful recently. Annual sales growth has declined. This decline started over the last few
years. The decrease ranges from 2.6%-5% in the last 5 years. This prompted its CEO, Dick Harrigan, to meet its management
team and find out the cause of the steady decline in sales.

Another three years of decline would mean cutting off at least 30% of its 7,000 workforce. It also means a complete
reorganization and alignment of jobs and positions.

The management team led by Harrigan has all reasons to believe that one of the culprits is its present corporate culture.
Through third party consultants hired six months ago, the consultants concluded that Pride and Prosper Inc.’s culture is
conservative, slow-moving and bureaucratic. The recommendations discussed the need to change the present corporate
culture into a fast-moving, modern, more fast-paced internet-savvy organization. These recommendations are now being
studied by the management team. It was only now that it has been studied and being considered. It was set aside for a while
to attend to more important matters, as perceived by the management team.

Management also wants to do away with too much confidentiality of information and red tape. Sales goals were also not
aggressive. Pride and Prosper, Inc. needs to do these ambitious restructuring plans right away.

Management is also considering a joint venture with a manufacturing company, Gilligan’s Gum Company, because of its
massive distribution structure. Gilligan’s Gum Company manufactures gums, mint candies and breath fresheners. Pride and
Prosper, Inc. believes it can give the company a boost in the distribution of its product, Soon, the market will have a combine
product from Gilligan’s Gum Company breath freshener and Pride and Prosper, Inc.’s toothpaste, Fresh.

All these plans should be acted upon by management the soonest possible time. Harrigan and the rest have to prioritize and
make the right moves and priorities. They have to act now.

CASE ANALYSIS #2
Hamburger Plus
(This case is intended for classroom discussion only and is not intended to show correct or incorrect management of a case. It
is patterned from an actual situation of the company under study. Some personal details and information of the characters
involved are altered and the structures and procedures of the organization are purely hypothetical to fit in the situation being
portrayed in the case. The company is disguised to protect the identity of the owners.)

Hamburger Plus has thousands of outlets all over the world. Records show that about a thousand branches are opened every
month in many parts of the world. Because of its global operations, it is planning to spend USD 1.5 billion over the next five
years to make its operations digitally mastered through a system called Creative.

This move is prompted by a rapid decline in sales and a bulk of customer complaints here and there, from one branch to
another.

STRATEGIC MANAGEMENT 2
Creative is an ambitious multimillion dollar project which would allow Hamburger Plus management to monitor and actively
see how many burgers, fries, chicken and other products are being consumed at any of its stores at any time of the day.
Furthermore, management can see if a customer in a particular outlet is being served at the desired number of minutes.

Creative’s cost, however, would mean a 200% reduction in stockholders’ shares plus closing down at least 300 of its outlets
within the next 5 years. After that, Creative will do its work and Hamburger Plus will recoup its investments.

Creative would bring Hamburger Plus back to what it is know for: fastest, most consistent service in the industry.

Despite the very promising outcomes of Creative, there are members in the management team who are not in favor of
Creative. The Vice President for Operations said that is not worth it. Everything will just go down the drain. It will not
deliver what is supposed to deliver, adding to the fact that it is costly.

Another said that the faltering customer service is due largely to a slow flipping of burgers or simply put, is a general
slowdown of cooking burgers. Customers are so irritated by the long lines and long periods of waiting time before burgers
are served.

One stockholder said that Hamburger Plus has not introduced another hit product in the likes of burger patty strips in 1985.
Its signature burger, the ever-famous Jumbo Hamburger is already 35 years old.

Majority of the stockholders believe that the upcoming technology is not the answer for sending customers away during
lunch break but the sluggish customer service provided by the service crew.

Despite the objections, the CEO is very optimistic to invest in creative. He believes that it would give the executives the
opportunity to monitor operations and see to it that the product is consistent and the service lives up to the customer
expectations.

Based on the points and issues raised for and against Creative, the CEO would now decide for Hamburger Plus’ future. It
may be a go or shelve the project indefinitely.

CASE ANALYSIS #3
Best Engineering Consultancy, Inc.
(This case is intended for classroom discussion only and is not intended to show correct or incorrect management of a case. It
is patterned from an actual situation of the company under study. Some personal details and information of the characters
involved are altered and the structures and procedures of the organization are purely hypothetical to fit in the situation being
portrayed in the case. The company is disguised to protect the identity of the owners.)

As engineering firm, Best Engineering Consultancy, Inc. made a partnership with a consulting firm, through an outsourcing
arrangement. It would outsource some of its engineering functions.

Within a span of two years, the number of engineers directly employed with Best Engineering Consultancy, Inc. diminished
from thirty to five. Moreover, the customers felt that engineering work was of low quality, at high value and beyond
schedule. The chief engineer was so disappointed that he resigned.

At the time of the partnership, the said firm had thirty personnel whereas the said outsourcing firm had thirty also. As
mentioned, because of resignation and termination, only five employees remained at Best Engineering Consultancy, Inc.

More so, Best Engineering Consultancy, Inc.’s billing reflected the consultant’s overhead costs and profits. The consultant
also charged the owner overhead costs to accommodate the employees that were moved to the new partnership office.

Supposedly, the budget for a project should be determined by negotiations between the sponsor and the project engineer. It
should stay within the boundaries allowed for a particular project.

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Partnering arrangements like Best Engineering Consultancy, Inc. did with another consultancy firm made it easy for the two
firms to trade their secret. Of course, there is a belief that outsourcing will substantially lessen fixed costs, despite exchanging
some trade secrets. However, the fixed costs are not properly charged to the project’s budgets. Therefore, there are
miscomputations and misappropriation of costs.

The CEO of Best Engineering Consultancy, Inc. is very much bothered with what is happening. The contract between the
firm and the outsourcing company ends next year. To preterminate the contract will mean a penalty of PHP 100,000. It would
also take a while to think of another strategy after the partnership.

CASE ANALYSIS #4
Jamieson Drugs, Inc.
(This case is intended for classroom discussion only and is not intended to show correct or incorrect management of a case. It
is patterned from an actual situation of the company under study. Some personal details and information of the characters
involved are altered and the structures and procedures of the organization are purely hypothetical to fit in the situation being
portrayed in the case. The company is disguised to protect the identity of the owners.)

Jamieson Drugs, Inc. has been in the industry for more than 25 years. To maintain its position as one of the top
pharmaceutical companies in the country, the company is pressed to cope with the demands and expectations of its
customers. Since there is a massive turnover of sales personnel, sales operations become paralyzed. There is insufficiency in
product detailing among hospital administrators, clinicians and doctors because recruitment has become very inefficient. HR
has depleted its talent pool. Adding to it is the cost of using the print media, internet posting and job fairs to get qualified
applicants. Sales have gone down to 2% of target this month due to this sales personnel turnover. Where have all the sales
representatives gone?

Jamieson Drugs, Inc. was founded with the concerted efforts of its General Manager and Southeast Asia Regional Marketing
Manager, Louie Franklin. Jamieson Drugs, Inc. is a division of the Jankinson Drugs Philippines. Jamieson Drugs, Inc., since
its founding in 1980, gas achieved a compounded annual growth rate of 35%. It is now one of the top ten companies which
competes in the antidiarrheal, antihistaminic, anti-acne and analgesic markets. In 1990, Jamieson Drugs, Inc. has developed
from a purely Ethical (prescription only) drugs to over-the-counter (OTC) drugs. This has brought in more sales growth to
Jamieson Drugs, Inc.

Jamieson Drugs, Inc. consists of 60% sales representatives and 40% key positions. Manufacturing since its inception has
been contracted out by International Laboratories. This decision was made by Mr. Franklin after several closure of
manufacturing plants due to the infiltration of radical elements of unions.

Sales Manpower Complement

Sales Representatives Total

New Hires 170
Tenured 80

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 Total 250

From the total of new hires, 150 were hired only last year. Based on the latest data, 25% will apply as call center agents, 30%
did not specify their plans but just said they are just tired and want to try another field and 25% will start a family. The latter
are women representatives.

A well-known firm, Manpower Magnate has offered outsourcing services to Jamieson Drugs, Inc. in the likes of some HR
functions such as recruitment, training and payroll. Jamieson Drugs, Inc. is looking on the possibility of outsourcing initially
its recruitment function. However, the HR Head, Joseph Nierras is contemplating on using a third party since this is the first
time that the company is outsourcing the entire function. The most HR did before is the executive search for sensitive
positions and hiring a manpower agency to source out temporary hires. This particular move might pose some opposition
from various departments, specifically Marketing and Sales Department since the first assignment if ever of Manpower
Magnate is to source out sales representatives. This Department is always know for being meticulous in hiring salespeople.
Sales supervisors always take time out to interview shortlisted candidates for sales. They also make sure that sales
representatives undergo very rigid testing and interviewing to ensure that they are the right fit.

Manpower Magnate is relatively new in the outsourcing industry. Barely four years, Manpower Magnate started operations in
2003 will call center operations. Then in 2005, it also offered services for Business Process Outsourcing (BPO) and has
major clients here and abroad. BPO functions include payroll, recruitment, compensation surveys and legal services. Among
the four functions, recruitment is relatively new. It was only in the early part of 2007 that Manpower Magnate has been hired
for recruitment services of a multinational company. Jamieson Drugs, Inc. does not have any feedback yet. Manpower
Magnate maintains confidentiality of its clients and has not revealed their identity. Jamieson Drugs, Inc. has to rely on what
Manpower Magnate says as having an excellent track record in outsourcing.

At this point, Mr. Nierras has to decide if it will outsource its recruitment function. The company’s sales figures are not
getting higher. Incumbent sales representatives are complaining of heavy workload since they have to fill in also those who
have resigned.

CASE ANALYSIS #5
Carlo Recio
(This case is intended for classroom discussion only and is not intended to show correct or incorrect management of a case. It
is patterned from an actual situation of the company under study. Some personal details and information of the characters
involved are altered and the structures and procedures of the organization are purely hypothetical to fit in the situation being
portrayed in the case. The company is disguised to protect the identity of the owners.)

Carlo Recio has been in the maintenance crew for eight years now. Carlo Recio’s uncle was a national sales manager for the
infant formula plant and arranged a part-time job for Carlo Recio, who then finished vocational school and went on a full-
time job from janitorial to maintenance. Carlo Recio learns quickly and he has acquired a variety of skills in addition to his
specialized training. He has also maintained a good relationship with the other employees.

The maintenance supervisor suffered a heat stroke recently and decided to take an early retirement at 55 years old. The plant
manager told Carlo Recio that he is highly recommended by the maintenance supervisor. Carlo Recio knows very well that
the supervisor would always be called over in the wee hours of the morning or midnight to supervise emergency repairs.
Some of his co-workers advised him to accept the offer but he does not know the consensus of the majority. He is also
concerned with Al who relieved the supervisor several times when the latter was sick.

Later on, Carlo Recio decided to accept the position. The plant manager warned that he should exercise his authority on the
job. Carlo Recio made a pattern of his performance based on the former supervisor. He empowered the crew to do the job on
their own and is only after the end results. He is also fair in pointing out problems. On the other hand, the crew likes his
supervision and has respected him as a supervisor.

There are no significant events in the plant except that Carlo Recio has notices some horsing around the job. When he pointed
out this attitude, the crew displayed a certain coolness. Later on, after a few weeks, he sensed resentment whenever he tries to
help a crew member about a particular assignment. He now feels a certain ill feeling about being a manager.

However, he continued. It is now time to make important strategies that would be helpful for the plant. The strategies to be
implemented need the cooperation of the crew. He is quite hesitant on the implementation of the strategies for he feels no one
will support them.

The strategies should require extra hours of work although the crew will be given overtime pay and meal allowance. It will
entail a sacrifice of six weekends. He is still uncertain of their support and cooperation and these changes should be
implemented two weeks from now.

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