68. In the late 1990s, management at General Motors decided to improve the
competitiveness of its products by stressing product quality, style, and innovation. The objective
was to improve the image of GM vehicles and thus improve sales and brand loyalty. Managers
decided to push this strategy in both the manufacturing and marketing divisions of the firm. One
of the key moves to implement this strategy was to insist that GM dealers stop price-cutting and
push brand value and image instead. GM exerted some control over dealers’ pricing/selling
strategy in part by reducing the money it set aside for dealers to use in local ads.
Required:
Was General Motors following a strategy of cost leadership or differentiation at this time?
Comment on how effective you think the new strategy in dealer relations is likely to be.
69. In six months you are scheduled to graduate with a degree in business. You have a major
in accounting and minors in finance and management information systems. In the first few
chapters of your cost management text, there are repeated references to the following two terms:
strategic management and the strategic emphasis to cost management.
Required:
Explain these ideas, using as a framework your need to develop a plan for interviewing
successfully for a challenging professional opportunity within the next six months.
70. One of the many changes in the business environment in recent years that has had
significant impact on cost management practices is a “focus on the customer”. You are part of
the management team in a medium-size Internet service company. The company is just three
years old and is growing dramatically, doubling its customer base every six months.
Required:
(a) Describe your typical customer’s needs and service expectations.
(b) How has the doubling of your firm’s customer base every six months affected its ability to
maintain this focus on the customer? If this dramatic growth continues, what are some specific
actions your firm can take to retain its goal of “focus on the customer”?
71. Apex Corporation manufactures a complete line of high quality bits for electric drills. Apex
has a good record for product innovation and effective marketing and distribution. An increase in
domestic and international competition during the past two years has limited the firm’s sales
growth to 3 percent per year, down from the previous five-year average annual growth of 5
percent. In addition, market share declined by 0.5 percent this past year. Apex is experiencing
profit reductions caused by price competition and manufacturing cost increases.
Required:
Choose one of the 13 contemporary management techniques introduced in Chapter 1: Explain
why the technique you selected is appropriate in helping Apex develop a plan for reversing the
decline in sales growth and controlling the growth in costs.
72. The manager of a business unit of a large corporation made some projections regarding
sales and profits for the upcoming final quarter of the year. The managers’ performance
evaluation and compensation depended significantly on his ability to meet budget goals. The
manager discovered that the final quarter would have to be a particularly good quarter in order to
meet these goals. He decided to implement a sales program offering liberal payment terms in
order to pull some sales that would normally occur next year into the current year. Customers
accepting delivery in the fourth quarter would not have to pay the invoice for 140 days. Also, he
sold some equipment that was not being used and realized a significant profit on the sale.
Required:
Are these actions ethical? Why or why not?
73. As an inspector for a manufacturer of specialized electronic instruments, you head up the
quality assurance program at one of the firm’s manufacturing plants. In recent days, it has come
to your attention that a large order involving several hundred expensive instruments for an
important customer does not meet all the required specifications. Specifically, the circuit which
has been designed by your firm to warn the user of possible malfunction does not appear to work
consistently. The firm’s engineers say that the problem should have no significant results for the
customer, as it does not affect the functionality of the instrument in any way. Moreover, the
engineers indicate that it is a high priority for them to find an answer to the mysterious behavior
of the circuit, and they will develop a fix as soon as possible, and make sure the customer is
provided the fix, probably as part of a routine update or maintenance. The marketing V.P.
indicates that the customer wants these instruments urgently, and that no quality assurance
issues will get in the way.
The quality assurance head knows that the order is very important to the firm, as the firm has
faced declining revenues in several recent months. Also, while the intentions of the engineers are
likely to be sincere, the quality assurance head knows that they are very busy with current and
new products, and are unlikely to have the time to deal with this problem in a timely manner.
Required:
What are the ethical issues involved in the case for the quality assurance head? What steps
would you suggest be taken?
74. The controller of one division of a large diversified firm is compensated by salary plus
bonus. The bonus is a significant part of total compensation, and is based directly on the profits
of the division. Thus, the controller has an incentive to find ways to increase profits, including the
delay of discretionary expenses such as research and development, delay of maintenance and
repair of manufacturing equipment, and delay of sales promotions.
Required:
Is finding ways to increase profits as described above unethical? Why or why not? Who is to
blame, if anyone?
75. Required:
Consider the contemporary management techniques and how they might be used in each of the
following industry groups. For which industry type is each management technique most
applicable?
76. Required:
Identify two of the most successful companies or organizations in today’s business environment,
in your opinion. Explain why they are so successful.
77. Samsung, the large Korean manufacturer of electronics, has just developed a new 80–
inch plasma TV. The TV is expected to retail in the range of $50,000. Normally, Samsung sells its
TVs and other electronics in Big Box retailers such as Best Buy. In this case, Samsung is thinking
of choosing a different means to retail the product.
Required:
What retail store or stores, or what method would you suggest Samsung should use in selling its
new TV?
78. The premier auto manufacturer, BMW, introduced a new compact SUV (the X3) in an
effort to grab a greater share of the overall luxury car market. Because its own resources were
pretty well tapped out by a large number of new vehicles BMW had already introduced, the
automaker decided to have the new SUV built by the parts manufacturer, Magma International,
based in Toronto. The vehicles would be manufactured by Magma in an Austrian plant.
Required:
Comment on the strategic issues surrounding BMW’s introduction of this new SUV. Do you think
the company made the right decisions? Why or why not?
79. The story of the telecom giant WorldCom came to a sad turn in 2002 as the firm filed for
bankruptcy, with some of the managers facing criminal charges for fraud. In 2000 a severe slump
in the telecom business led to pressures within WorldCom to reduce expenses and improve the
financial statements to meet investor expectations. On orders from top managers, accountants
within the firm created fraudulent financial statements, ultimately resulting in an $11 billion
fraud. The fraud was detected as a result of an inquiry by the SEC, which led an internal auditor
within WorldCom to start an investigation that uncovered the fraud in 2002. The successor firm,
MCI (which had previously merged with WorldCom and is now part of Verizon), under the
leadership of new top management, formed the office of chief ethics officer who had the
responsibility for MCI’s policy of training all MCI’s U.S.-based employees, an ethics hotline, an
ethics pledge signed by the firm’s top 100 executives, and a company code of ethics, among other
responsibilities.
Required:
What should be the role of an ethics officer? To whom should the ethics officer report within the
organization? Do you think MCI had a good plan for ensuring ethical behavior within the firm?
How would you change the MCI ethics policy, if at all?
