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ANSWERS TO CHAPTER 1 QUESTIONS
ANSWER 1.1
There are four reasons why Tom Taylor takes the order as
directed:
A. It is not an accepted practice in the U.S. to disobey one’s
boss. Insubordination is a valid cause for instant discharge.
ANSWER 1.2
Nancy Bush should do the following:
A. Develop the evaluation criteria for the decision (e.g., cost,
speed of delivery, time to market, quality control, supplier
relationship, availability of plant capacity, novelty of
ANSWER 1.3
A useful solution is one which ensures that the student does
not have to pay tuition for the new semester on the one hand, and
that it satisfies the requirement of having customer feedback
data to substantiate the value of the report on the other. The
following is a way to accomplish both requirements:
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ANSWER 1.4
The answer to this question is a definite “maybe.” Obviously,
his computation of the cost is correct. However, his estimation
of the realizable benefit is questionable.
The engineering manager has so far failed to show that 100
hours of labor saved per month can be effectively used to yield
tangible and measurable financial benefit for the company. If the
saved labor time is used by workers to drink more coffee and/or
socialize more, then there is no evidence that the president will
see a benefit of $1500/month. Real benefits are possible under
the following circumstances:
A. If, because of the saved labor time, the company can now
reduce the labor force by half a person per year (e.g., by way of
ANSWER 1.5
Peter Drucker pointed out in his book (Drucker 1999) that
business managers face a number of challenges in the new
millennium. These include: (1) management’s new paradigms, (2)
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ANSWER 1.6
The literature has identified several reasons for
innovations in services to be lagging behind those in
manufacturing.
(1) Some service enterprises believe that service ideas and
innovations are readily imitated by competitors.
(2) Others view the impact of service innovations on
profitability difficult to assess because specific
(5) Goods sectors are focused on developing novel
equipment/machineries, which are marketed to client
companies or used. On the other hand, services sectors
are focused on using equipment/machineries to customize
As a result, many service enterprises are said to shy away from
aggressively pursuing new service development projects. It does
not have to be this way.
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Answer 1.7
Data mining is an advanced numerical modeling technique that
could be used to extract valuable insights from databases that
record the transactional activities and consumption patterns of
customers. A well-known example is the way Harrah’s Entertainment
applied Data mining to improve its profitability [Loveman,
(2003)].
For example, the company identified that 26% of its
gamblers generated 82% of its revenue, the Pareto Principle.
These core customers are typically former teachers, doctors,
Such information allows the company to fine-tune their
knowledge of customer segments using advanced numerical modeling
techniques. By designing its marketing program accordingly, the
company secured customer loyalty and superior profitability by
having an absolute focus on customer service.
1. Since the core customers are slot machine players, the
company redesigned the floor plan to make it easier for
2. To encourage customer loyalty, the company introduces
the “Total Rewards” card that allows them to accumulate
3. Train all staff to focus on (1) speed and (2)
friendliness (smiling and addressing the customer by
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4. As speed of service (check in at reception, dinning
rooms, car parking, etc) is critical to most customers,
the company divides customers into three tiers: gold,
5. Because customers spend more when they stay in casino
hotels, the company offers free rooms to high value
gamblers.
Answer 1.8
Based on a study of Royal Canadian Bank, Harrah’s
Entertainment, and Continental Airlines, [Gulati and Oldroyd
(2005)] suggest that pursuing a customer focus strategy is a
journey which requires three preparation steps:
(1) Develop a comprehensive database about the
customers.
Information generated about customers is then made available to
all customer-facing employees. The company induces a major shift
in employee attitude to keep customer initiatives at the fore
front by training their employees to acquire and practice