ebert_ch03_eoc_exercises.doc

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Department
Management
Course
MGT 216
Professor
A H M E D R A W Y
Semester
Summer

Description
BUILDING YOUR BUSINESS SKILLS WORKING THE INTERNET Goal To encourage you to define the opportunities and problems for new companies doing business on the Internet. Background Information Let’s say that you and two partners plan to launch a new business. Using a virtual storefront on the Internet, you intend to offer local delivery services for books and magazines. Customers can select books and magazines after perusing any online retailer’s listings. But rather than placing an order with that retailer, which then entails paying postage and waiting several days for delivery, customers can place their order with your local company. You will purchase the desired item from a local discounter, deliver it within two hours, and collect a full retail price from the customer. Your profit margin will be the difference between the discount price you pay and the full retail price you collect from your customers. Method Step 1 Join with two other students and assume the role of business partners. Start by discussing this idea among yourselves. Identify as many strengths and weaknesses as possible for your potential new venture. Step 2 Based on your assessment, now determine the importance of the following new business issues:  Analyzing your competitive marketplace and how you should go about promoting your service  Identifying sources of management advice as expansion proceeds  The role of technology consultants in launching and maintaining a Web site  Customer-service policies and costs in a virtual environment  The primary pitfalls that could derail your business FOLLOW-UP QUESTIONS 1 Do you think this business would be successful? Why or why not? 2 Based on your analysis, what future developments could most affect your business? How might you best prepare yourself for these developments? 3 Do you think that operating a virtual storefront will be harder or easier than doing business from a traditional brick-and-mortar operation? Explain your answer. EXERCISING YOUR ETHICS: INDIVIDUAL EXERCISE FOLLOW-UP QUESTIONS BREAKING UP IS HARD TO DO The Situation Connie and Mark began a 25-year friendship after finishing college and discovering their mutual interest in owning a business. Established as a general partnership, their home- furnishings center is a successful business sustained for 20 years by a share-and-share- alike relationship. Start-up cash, daily responsibilities, and profits have all been shared equally. The partners both work four days each week except when busy seasons require both of them to be in the store. Shared goals and compatible personalities have led to a solid give-and-take relationship that helps them overcome business problems while maintaining a happy interpersonal relationship. The division of work is a natural match and successful combination because of the partners’ different but complementary interests. Mark buys the merchandise and maintains up-to-date contacts with suppliers; he also handles personnel matters (hiring and training employees). Connie manages the inventory, buys shipping supplies, keeps the books, and manages the finances. Mark does more selling, with Connie helping out only during busy seasons. Both partners share in decisions about advertising and promotions. The Dilemma Things began changing two years ago, when Connie became less interested in the business and got more involved in other activities. Whereas Mark’s enthusiasm remained high, Connie’s time was increasingly consumed by travel, recreation, and community- service activities. At first, she reduced her work commitment from four to three days a week. Then she indicated that she wanted to cut back further, to just two days. “In that case,” Mark replied, “we’ll have to make some changes.” Mark insisted that profit sharing be adjusted to reflect his larger role in running the business. He proposed that Connie’s monthly salary be cut in half (from $8,000 to $4,000). Connie agreed. He recommended that the $4,000 savings be shifted to his salary because of his increased workload, but this time Connie balked, arguing that Mark’s current $8,000 salary already compensated him for his contributions. She proposed to split the difference, with Mark getting a $2,000 increase and the other $2,000 going into the firm’s cash account. Mark said no and insisted on a full $4,000 raise. To avoid a complete falling out, Connie finally gave in, even though she thought it unfair for Mark’s salary to jump from $8,000 per month to $12,000. At that point, she made a promise to herself: “To even things out, I’ll just start taking a few things from the store home with me each month.” QUESTIONS TO ADDRESS 1 Identify the ethical issues, if any, regarding Mark’s and Connie’s respective positions on Mark’s proposed $4,000 salary increase. 2 What kind of salary adjustments do you think would be fair in this situation? Explain why. 3 There is another way for Mark and Connie to solve their differences: Because the terms of participation have changed, it might make sense to dissolve the existing partnership. What do you recommend in this regard? EXERCISING YOUR ETHICS: TEAM EXERCISE QUESTIONS TO ADDRESS PUBLIC OR PRIVATE? THAT IS THE QUESTION The Situation The Thomas Corporation is a very well-financed, private corporation with a solid and growing product line, little debt, and a stable workforce. However, in the past few months, there has been a growing rift among the board of directors that has created considerable differences of opinion as to the future directions of the firm. The Dilemma Some board members believe the firm should “go public” with a stock offering. Since each board member owns a large block of corporate stock, each would make a considerable amount of money if the company went public. Other b
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