Parent and Distribution Company Case Study

Outline

This is an essay containing five case studies which helps in professional as well as personal life of the students. Each case study analysis is designed in such a way that there is a brief summary of the case followed by the problem statement, solution to the problems and finally learning applications of each case study. The first case study is about business decision making relating to the Burt Bees firm of Roxanne Quimby Burt. The firm is faced with increased operational expenses restricting the profitability of the business. The second case study is about the medical field in which research opportunities in the problems of Kidney Stone and its solutions is discussed. Third case study is about problems encountered by a person namely Mr. Wayne when he was in need of huge money for the higher education of his children. Different solutions for overcoming the problems are explained. Fourth case study describes light wave technology and its advantages. It also mentions about different steps in the development and growth of LED technology. It further shows details about the light market in the world. The last case study explains the bank documents.

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Business Decision making in Burt Bees Firm of Roxanne Quimby Burt

Summary of the case

Roxanne Quimby is the owner and President of Burt Bees Manufacturing firm.

Burt Bees firm is dealing in beeswax- based personal care products. Most of the operations in the Burt Bees are related to hand made products. Hand made crafts are also manufactured and marketed by them. The business was started at Maine and it achieved great market acceptance together with profitability. In the previous home at Maine, employees were very loyal towards their duties and functions. Roxanne Burt is required to spend 20 hours a day for controlling the entire manufacturing and marketing operations. The services of managerial personnel are not available in Maine. There were 44 employees in the Maine assisting Roxanne. The remuneration for these employees was low and thus economical production was possible in Maine. But it faces operational problems in many ways. The potential growth is limited at $ 3 million. Excessive costs associated with location in Northern Maine are another problem. In Maine the transportation cost was high due to vast distance from metropolitan areas. High pay roll taxes are required in Maine at about 20%. Lack of expertise is another major problem restricting the business growth. The employees in the firm are welfare moms and they lack adequate skill for productive efficiency. Even though they have good attitude to work lack of skills is affecting the operational efficiency. All of the production operations are by hand.

In order to remove the operational problems in the Maine, Roxanne relocate their business at North Carolina. In North Carolina there are various operational advantages. Large supply of skilled labor is the major advantage. Managers can be hired for managing the production as well as marketing functions. The tax system was also supportive and offers higher growth potential. But the cost of labor was higher in new location. Manufacturing operations are required to be automated for minimizing the production cost. For this they have to produce new range of products instead of their hand made product range. This changes the entire production function in the new location.

Statement of the problem

The increased labor cost and need for changing the product line of the business called for automation of the production operation. In view of this Roxanne has decided to relocate the business from Maine. But the reasons for shifting the operations to North Caroline still remain, in the Maine. There are three options before Roxanne Quimby. The following are the three options.

  1. Continuing the business in the North Carolina by recruiting new employees and managerial personnel and manufacturing equipment because it offers better tax support, skilled labor force and better growth potential. By applying automation for new product range, labor cost can be controlled.
  2. Get back to Maine as the availability of cheap labor is assured in Maine. The services of 44 former employees are still available in Maine and they are very loyal to their functions. Hiring of new employees can be avoided through this. The original product line that proved great success for the firm can be sustained by getting back to Maine.
  3. Sell out the business to external parties..

Proposed Solution

It is better for Roxanne Burt to sell out her business for external parties. Considering the requirement for changes in the product line of Burt Bees for applying automation in the North Carolina, it is better to sell out the business. In Maine, lack of growth potential and high transportation cost is still remaining and a get back to Maine is not suitable for Roxanne. By selling out the business, Roxanne can fulfil her ambition to go to India and work among the tribal women making handicraft in the country.

Learning Applications

From the case study discussed above it becomes clear that in business, decision making is a crucial as well as complex process. In order to sustain the business profitability appropriate decisions need to be taken on timely basis. In case of business with lack of growth potential it is better to sell out the business for entering into new activities. (E-MGT 655 case analysis unit 1).

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Medical Technology innovations of Newland

Summary of the case

Sarah Foster is the cofounder and president of Newland medical Technologies. She had been working with hip implant design for Johnson and Johnson in Massachusetts for two years. Sarah liked the work. Her husband was a professor at a local college. She had been looking for a business opportunity in medical device Sarah Foster was very much interested to work in this field. That time her friend, an urologist at the Brigham and Women’s Hospital in Boston suggested that there was a need for good stents in urology. Urologist stated that ureter physically dilated in the presence of human body. Sarah explained that inducing a larger dilation would recover the urine flow and help pass kidney stones.

Statement of the Problem

The important problem included in the case study is the problem of Kidney stone otherwise known as the urethral stone. A large number of people in United States are affected by this problem. This decease is very dangerous and painful with stone blocked in the ureter and urine flow. A person affected with kidney stone was usually treated in hospital under emergency, where urologist provides better treatment which is to be safe and helpful. The Urologist were sophisticated and averse to risk. They were concerned with the comfort and safety of patient. In 2001 there were 7100 licensed urologists in the United States. On an average 140 stone patients had treatment in that year.

In the modern world patients are well educated about this decease and had strong preferences. Patients wanted immediate removal of the pain and stone. The kidney stone decease affected persons mostly in the age between 20 and 40.

Solutions to the problem

For overcoming these problem Urologists introduced a new technique. Urologists discussed the needs with “Double- J”. It is an ordinary polyurethane stent inserted into the ureter to remove pain by allowing urine to flow around the stone. Double J is able to keep stones in the ureter and then choose a method to eliminate such stones. It helps to determine the size and place of the stone and right to use to difficult equipment.

Patients with stones less than 5mm in size naturally waited in pain for a few days or up to several weeks for the stone to pass. With the help of ultra sound and laser technologies the big stones were broken up. Basketing was another technique to remove the stone very effectively. This system used by a skill surgeon can take lot of time for the removal. In 1999 Sarah started brainstorming a sheath covered stent. It was similar equipment as the Double J. The main aim of this system is to remove obstacles to urine flow to a greater degree than otherwise.

Learning Application

This case study explains the problem and causes of kidney stone and suggestion by the urologist that a person affected by kidney stone should take treatment immediately. In the present world patients have good knowledge about this decease and they identified that the removal of stone is very necessary. (H-MGT 655 case analysis unit 2).

Entrepreneurship qualities; a case study

Summary of the case

This is a case study about a person who is in urgent need of money for meeting the expenses of higher studies of his children. The person in this case study has a lot of entrepreneurship qualities. The name of the person is Wayne Postoak who is a hard worker. Though he was an instructor in a school he was forced to leave the job due to the requirement of the urgent money. Mr. Sam, the father of Wayne was the role model for Wayne from whom he learned so many entrepreneurship qualities and other human traits. Wayne learned from his father how to work hard. He got an opportunity to start a construction company. But he is facing so many hindrances in starting up a company.

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Statement of the problem

The problem that is going to be explained is the problem faced by Mr. Wayne. Mr. Wayne was in an urgent need for cash for higher education of the children. He realized that with his income as an instructor in a school, it is difficult to fund for the higher education of the children. His son Darren Wayne was interested in becoming a medical doctor. For becoming a doctor, a lot of money is required towards fees and other expenses. He left the job in school looking for a better income. The best available option was to start up a construction company as he was experienced in the construction industry. His father was the role model for him in the construction industry. Though Mr. Wayne himself found that starting a construction company is a real solution, there were so many obstacles in starting up a company. The obstacles are explained below.

  1. Lack of required capital: Mr. Wayne was having only $20,000. But this amount was not adequate for starting a construction company. This is the main obstacle faced by Wayne.
  2. Lack of adequate employees: Another problem was that he faced scarcity of employees. Without labors the construction work is impossible.
  3. Lack of equipments: For the carrying out the construction works machineries and equipments are necessary. But Wayne does not have the machineries and equipments required for the work.
  4. Lack of similar experience: Though Wayne had experience in the construction field he does not have experience in bridge construction projects.
  5. Absence of estimator: A construction company requires the service of an estimator. But Mr. Wayne does not have an estimator.

Solution for the problems

As Mr. Wayne is very much interested in seeing his children in good position, he has to solve these problems or obstacles. The solutions are explained below.

  1. Take up the project with confidence: Wayne has to take up the project with confidence. In his childhood his father used to inspire and make him confident in every action or responsibility undertaken by him.
  2. Fulfilling the capital requirement: The required capital can be obtained from the financial institutions as loans on the security of the land. He can repay the loan slowly after starting the construction company. He can also seek the help from his family for financing the project.
  3. Recruiting the required employees: Wayne has to recruit the required employees for starting up the company and for its smooth functioning. The labors can be hired based on the project requirement.
  4. Acquiring the necessary equipments: As Mr. Wayne had previous experience in construction industry he has the idea of the equipments required for the construction work. He can purchase the required machinery and equipments with cash loan.
  5. Appointing an estimator: he has to appoint an estimator to study and submit a report of the expected cost of the project.
  6. Seek full support from the family: Wayne has to seek the full support of his family. With the support of his family he can make his proposed construction company a grand success.

Learning Application

It is opportune to state here the commonly known fact that there is no substitute for hard work. From the case study discussed above, it is clear that majority of the problems in one’s life can be solved if one takes initiative and does hard work to solve the problem. He has to make use of his previous experience and knowledge for solving the problem. This era is an era of competition in which there are less chances of success for those who do not have good educational qualification. Full support of the family is required for pursuing higher education. But whatever position one achieved with his educational qualification and experience he is not supposed to forget some human traits or qualities like co-operation, respect for others, sharing mentality etc. (K – MGT 655 case analysis unit 3).

Invention and growth of Lightwave Technology

Summary of the Case

Invention of electric bulb is a mile stone in the history of the world. Development of Light wave technology is another important step. It helps to use bulbs without fear for health and save electricity. Now LED and SSL are very popular in the world. It became so popular within only few years. It indicates the advantages of lightwave technology.

LED came as an alternative way for solving the drawbacks of traditional bulbs. LED is a small conductor producing light as a result of passing electricity. It was developed around 1960. Now it is used in different electronic equipments like VCR, stereo, clocks etc. LED technology is widely used in automobile industry. Widespread usage of LED in United States alone will save $1000 billion at the end of 2025. It is not a small amount. At the initial stage Light wave technology was not progressing well. It faced economic downturn from the market but after two years it was on a come back. Electric bulb was invented by Thomas Alwa Edison at the end of 19th century. In this period itself light market became active. Light market is a combination of two products; lamp and fixtures. At the beginning of 20th century illumination products came into market. At that time majority of these products were from US. The products included both indoor and outdoor lighting lamps. US are the top level consumers of illumination products. Now illumination industry is spread in almost all parts of the world. A lot of multinational companies are working in this field. They manufacture products for both residential and commercial purposes. Legacy incandescent cover 5 percentages and fluorescent lamp cover 20 percentage of the entire LED industry.

Compared to the normal bulb LED has many advantages. They are

  1. Normal light bulb generate heat, reducing in the process the life span of the bulb. LED does not generate heat. So it does not effect the life period of the bulb.
  2. Traditional fixtures cannot generate colors, but solid-state lighting (SSL) can generate colors.
  3. Normal light emits ultraviolet (uv) rays and it causes damage or discolor for both human cells and for other materials. LED does not have any ultraviolet radiation problem.

In early 1990’s two persons, one George Kinson and another one Dr. Schyler Weiss dreamt about LED with full spectrum of colors. Around 1994 they started their work for developing a digital palette by using brass, glass and gas. At 1997 they began their work for developing a business model of this product.

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Statement of the problem

In this era one cannot imagine a world without electricity and bulbs. Traditional bulb has a lot of draw backs. It is not good for human body and for other materials. Electricity is a depleting energy in this world. Scientists are deeply concerned about this problem and are working to find a solution to this.

Proposing a Solution

Develop a new light emitting system which does not emit ultraviolet rays and consumes less electricity. Light wave technology can be considered as a solution for this problem. Light Emitting Diodes (LED) is a product of the Light wave technology. In 1997 a new product was invented by companies through combining LED with microprocessor which can generate 24 bit color and a lot of dramatic effects. They got patent for this invention and created more prototypes. They enhance the light wave with tiny light wave microprocessor, color filtered bulb and mechanical controls. They conducted many more experiments in LED technology. Their experiments succeeded and it helps to save large amount of electricity and money and it has got increased life span. Due to these advantages popularity of LED has increased and it is widely used in hospitals, residences and industrial sectors. Some countries like California are offering subsidies for promoting the usage of SSL. Compared to 1995 it got 500 percent growth in 1999 and is still growing.

Learning Application

At the beginning stage LED developers started their company without any employees recruited from outside. in 1997 they appointed one person and in 2000 they had 75 employees. They developed new products and introduced them in the market by understanding the market needs. Now it has a huge amount as investment. But they faced a lot of problems in their path. With the success of LED technology in the world, many other companies came into this field. The invention of light wave technology was a revolutionary step in science and technology. By using this technology, the traditional color concept of light which is white, changed to a spectrum of colors. Nowadays LED is used for the manufacturing of watch, mobile phones etc. It is also used in entertainment industry. (N – MGT 655 case analysis unit 4).

Bank documents requirements for the Parent Company

Case summary

The Parent Company is controlled by a group of venture capitalists for over 6 to 7 years. Two thirds of the shares of the Parent Company is with the venture capitalists and the operating manager. The Parent Company is dealing with manufacturing operations. Their marketing is concentrated on United States. For this purpose they have overseas license. They have an annual turn over of $ 3 million to 4 million. The assets of the company are secured for a loan with Union Trust Bank. Thus the company had a negative asset value. During the last five years, no profit is earned by the parent company.

In order to improve the financial performance of the company, expansion strategy is adoptable method. For this purpose the Parent Company got in contact with the Retail Company TRC, a chain of retailers. The company also entered into agreement with the major supplier of the Retail Company, TDC. TDC was the largest and privately owned distribution company in the industry. They have an annual sale of approximately $ 25 million. Their record of earnings is uneven in nature.

In Nov 2000 the Parent Company acquired the Retail Company for $ 2.5 million capital investment and $ 500000 worth non-competition agreement with the owner and chief operating officer. The Retail Company has potential for market growth and had wide area of business operations including Massachusetts, New York, and Connecticut. Their annual revenues are of approximately $ 500000.

Statement of the problem

The parent company acquired the distribution company in August 2001 and 20% of the stock of the Parent Company is offered to the owners of the merged company as compensation. The share capital of the diluted company is attributed to the Parent Company. In addition to this they raised approximately $3.2 million capital from its venture capitalists for the expanded business functions resulting from merger. The owners of the distribution company have stock of 20% in the new company. Under the contracting agreement with the owners of the distribution company, the parent Company is need monthly payment and lease payments on equipments. As per the consulting contract and lease contract Parent Company requires monthly payments and it can be minimized by decreasing the wholesales by about 10% or more. The sellers of the Distribution Company had outstanding secured notes and it needs full payout within the schedule. The attitude of the owners and Chief operating officer of the Distribution Company were not favorable at the time of merger.

Proposed solution

The extraordinary demands of the Distribution Company’s cash flow can be avoided through reducing the wholesales by about more than 10%. In order to satisfy the lending bank of the distribution company it is better to follow the demands of the lending banks. The financial supplier of the Distribution Company has to be maintained for financing the merged company. For this purpose, the lending bank is insisting on a credit facility modification agreement. Along with this, the selling shareholder is required to pledge their 20 percent interest in the Parent Company as additional security for the loan. Added to this, the secured loan of the sellers was also subordinated to the bank.

Learning Application

The acquisition of a business requires taking the liabilities together with the assets of the company. In order to sustain the financial dealings of the company after its merger with a less profitable company, the lending banks always want additional requirements for assuring the security. (Q-MGT 655 case analysis unit 5).

References

E-MGT 655 Case analysis unit 1: Financing entrepreneurial ventures. (Provided by customer).

H-MGT 655 Case analysis unit 2: Financing entrepreneurial ventures. (Provided by customer).

K-MGT 655 Case analysis unit 3: Financing entrepreneurial ventures. (Provided by customer).

N-MGT 655 Case analysis unit 4: Financing entrepreneurial ventures. (Provided by customer).

Q – MGT 655 case analysis unit 5: Financing entrepreneurial ventures. (Provided by customer).

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