Given that organizations are seen more and more as minisocieties, the prospect of applying political principles to management makes a great deal of sense. Federalism is particularly appropriate because it offers a well-recognized system for dealing with paradoxes of power and control: the need to make things big by keeping them small; to encourage autonomy but within bounds; and to combine variety and shared purpose. Federalism responds to these paradoxes by balancing power among those in the center of the organization, those in the centers of expertise, and those in the center of the action--the operating businesses. Federalism avoids the risks of autocracy and the overcontrol of a central bureaucracy. It ensures a measure of democracy and creates a "dispersed center" that is more a network than a place. McKinsey Award Winner.
As the Cold War ends and demand decreases, the defense industry faces its most profound shift since the end of World War II. Boom-bust patterns drive the industry, but in addition to a cyclical drop in procurement, reforms of the 1980s shaved contractors' profits and greatly increased the risk of bidding on new programs. Furthermore, many contractors have crippling excesses of production and engineering capacity. Defense contractors can no longer seek to grow faster than their industry is growing. Instead, they must shrink faster than their industry is shrinking, and they must shrink smart to capture the large market that will remain for those who survive. Shrinking smart means investing only in those businesses in which the company can be preeminent and stripping down, shutting down, selling, or spinning off everything else.
Tidewater Corp. CEO Bob Salinger faces a dilemma: his most valuable employee, boat designer Ken Vaughn, is also his most destructive. Because of his great talent, Vaughn is critical to the company's future growth and profitability. But his antagonism toward Tidewater's recent reorganization is causing disruptions all over the company, and Vaughn has become increasingly violent. If Salinger fires Vaughn, he risks losing him to a competitor, who would than be in position to grab Tidewater's market share. But if he keeps Vaughn, the company's necessary reorganization may be seriously damaged. Salinger is waffling in the decision and has made a tough situation even worse.
After 30 years on the corporate fast track, Ken Veit lost his high-powered job at one of the world's largest insurance companies and was forced to take an entrepreneurial leap of faith. In 1989, Veit signed a franchise agreement to own and operate a Cartoon Corner store in a new mall in Scottsdale, Arizona. But despite Veit's careful forecasting, he suffered a series of unexpected catastrophes. The mall failed to keep its promises. The franchiser lost its venture capital. The Gulf War dried up retail traffic. When the mall and his store finally opened in May 1991, they did so in the midst of a recession. Although the media is full of the inspirational stories of other former executives, Veit has learned that the life of an entrepreneur is not all it's cracked up to be.
Out of a sense of corporate responsibility, many of today's manufacturers are making commodity-like components to preserve jobs. This single-minded focus on preserving jobs can become a self-defeating objective. It often results in insourcing parts that are easy to manufacture, largely to make work, while outsourcing those that are hard to make. Over time, fixed costs rise, product differentiation declines, and manufacturing performance remains stagnant as employees become complacent. The very survival of the company is threatened. Companies must learn how to not make things: how to not make the parts that divert a company from cultivating its repertoire of skills--parts its suppliers could make more efficiently. Managers must gain the confidence to make strategic discriminations among the thousands of parts they know mostly in terms of cost, not function or importance to the product.
Charles River Jazz Festival must decide whether to press a compact disk (CD) of Friday's jazz performance for sale on Saturday and Sunday. The idea to press CDs is novel, so there is considerable uncertainty about how receptive customers will be. The festival must decide whether to press CDs only on Friday or pay for an option to press them on Friday and Saturday. A simulation is performed to help estimate Saturday and Sunday CD demand. One input of the simulation is a regression relating Saturday and Sunday attendance to Friday attendance and weekend weather conditions. The case illustrates how several different quantitative techniques--decision analysis, regression, and simulation--can be integrated in an analysis of a managerial decision problem. Provides practice in decision analysis; illustrates use of simulation and regression in obtaining probability estimates.
Describes the design and implemenation of a quality improvement program. Sterling Chemical's management hoped the program would improve teamwork and productivity at the plant.
L.L. Bean must make stocking decisions on thousands of items sold through its catalogs. In many cases, orders must be placed with vendors twelve or more weeks before a catalog lands on a customer's doorstep, and commitments cannot be changed thereafter. As a result, L.L. Bean suffers annual losses of over $20 million due to stockouts or liquidations of excess inventory. Provides a context in which buying decisions that balance costs of overstocking and understocking when demand is uncertain are made and implemented on a routine basis.
Consists of five exercises. Using simplified decision problems, the exercises illustrate how to value perfect information in decisions under uncertainty.
Nopane is a proprietary drug that sells in much of the United States. It faces substantial competition. The brand manager is undertaking an experiment to determine whether ad copy should be emotional-based or rational-based. The data and associated regression results are included. Useful for an introductory course on statistics, market research, or regression analysis.
A paper company is unable to compete on cost as a result of the installation of three very efficient paper machines by competitors. Prices for its products are falling by the day, and the company is making a loss. In the face of such competition, management feels that the only course of action is to improve "flexibility" and/or take advantage of the flexibility they already have. The problem is that no one knows quite what flexibility is, let alone how to implement an improvement plan. The case describes four improvement paths, each of which might be considered to improve "flexibility." The conflicts between these plans are also considered by the company. In addition, the sales force gives a look at the flexibility requirements of the company from the customer's viewpoint.
ImmuLogic Pharmaceutical Corp., a development-stage biotechnology company, is considering making an initial offering of common stock. The diverse perspectives of the entrepreneur, venture capitalist, investment banker, and institutional investor are explored. Problems of valuation are highlighted. The challenges posed by "windows" for public offerings are considered.