Management Chapter 5 The Refleece Products Appeal Consumers Concerned With Social Responsibility The Same Patagonia

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

B O X E D T E X T D I S C U S S I O N Q U E S T I O N S

ENTER THE WORLD OF BUSINESS—Chobani Yogurt Fights for Dominance in the Yogurt Market

Hamdi Ulukaya, the founder of Chobani Yogurt, made it into the billion-dollar venture it is now. At one time,

Greek yogurt accounted for less than 1 percent of the yogurt market in the United States; it now makes up

1. What are some likely reasons that Chobani Yogurt has become such a success?

2. Describe some of the challenges that Chobani is facing.

3. Why is it such an issue when a major retailer drops a product from its shelves?

CONSIDER ETHICS AND SOCIAL RESPONSIBILITY—The Difference between Successful Entrepreneurs and

Fraudsters

There are surprising similarities in the characteristics of famous entrepreneurs and fraudsters. Fraudsters

tend to be intelligent, creative, persuasive, and seemingly confident—all characteristics of many successful

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

1. What characteristics do fraudsters and successful entrepreneurs share?

2. What are some major differences in the personalities of fraudsters and successful entrepreneurs?

3. Why is a lack of empathy fairly common among fraudsters?

GOING GREEN—ReFleece: A Simple but Sustainable Product

Sam Palmer and Jennifer Feller took a risk with their idea for a sustainable iPad case. They refinanced their

home and took out a home equity loan for $150,000 to found ReFleece in 2012, a business that uses up-

1. Why do you think a simple concept such as a tablet case made from up-cycled material became

successful?

2. How were the ReFleece founders able to fund their start-up company? What risks did they accept to

make their idea into a reality?

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

3. How has the partnership with Patagonia likely affected ReFleece’s sales?

S U P P L E M E N T A L L E C T U R E

When Expansion Can Lead to Failure

The textbook points out that one of the problems with small businesses is the inability to cope with growth.

The following lecture describes a small business expansion that is typical of the experience of other firms.

Matt Morgan was the manager of a variety store that was part of a large national chain. The variety store

was located in a small town of 10,000 in southern Florida. The small town was growing rapidly because

tourists from the North had discovered the town’s beautiful beach on the Atlantic.

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

The town’s response to the Orange Connection had been overwhelming. The Orange Connection was

frequently overflowing, and some customers had to be turned away. Matt and Nettie began to think about

expanding to a larger facility. After a year of doing some simple surveying and talking with everyone who

would discuss the matter, the Morgans decided to knock out their south wall and develop a restaurant with

three times the space of the original Orange Connection. During the renovation and construction, crowds

continued at their normal peak level.

1. Why do you think the new expanded restaurant did not succeed?

Consumers probably valued the original Orange Connection because it contained more of a family,

homey feel to it. It was unlike other restaurants around the area in its simplicity and convenience, and its

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

2. What could the Morgans have done differently in their planning?

The Morgans should have performed more market research to determine why customers valued their

C O N T R O V E R S I A L I S S U E

Are Small Businesses Dependent on the Presence of the Owner?

Many small businesses begin as one-person operations. Most small business owners put in extremely long

hours and seldom take vacations. Although such firms later employ other workers, the management style

and personality of the owner seem to be necessary to the survival of the firm. Here are some examples.

Ted and Ralph formed a partnership to operate a service station in a large midwestern city. Both were on the

premises from 7 a.m. until closing at 8 p.m. Both were skilled at greeting the public, and they made many

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

1. Why does it seem to be necessary for the owner(s) to be on the premises all the time?

Customers likely begin to associate the owners with the business, particularly if it’s a small business. A

business is more than just a place to buy merchandise; it also consists of the personalities of the workers

2. Can there be personality cults in small businesses? Is it possible for customers to create a personality

cult around the owners of a business?

3. How might the owner go about reducing customers’ dependency upon the presence and/or

personality of the owner and leading customers to depend more on the business itself?

Students’ answers will vary.

S O Y O U W A N T T O B E A N E N T R E P R E N E U R O R

A S M A L L B U S I N E S S O W N E R

What is one of the most common reasons people become entrepreneurs?

C H E C K Y O U R P R O G R E S S

1. Why are small businesses so important to the U.S. economy?

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

2. Which fields tend to attract entrepreneurs the most? Why?

3. What are the advantages of starting a small business? The disadvantages?

4. What are the principal reasons for the high failure rate among small businesses?

5. What decisions must an entrepreneur make when starting a small business?

6. What types of financing do small entrepreneurs typically use? What are some of the pros and cons of

each?

Few small-business owners have the funds necessary to start a business. Small-business owners can

obtain financing from friends and family. However, the relationship may suffer if the business fails. Small

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

7. List the types of management and financial assistance that the Small Business Administration offers.

• counseling for firms in difficulty

• consulting on operations improvements

8. Describe the franchising relationship.

9. What demographic, technological, and economic trends are influencing the future of small businesses?

10. Why do large corporations want to become more like small businesses?

G E T I N V O L V E D

1. Interview a local small-business owner. Why did he or she start the business? What factors have led to

the business’s success? What problems has the owner experienced? What advice would he or she offer

a potential entrepreneur?

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

2. Using business journals, find an example of a company that is trying to emulate the factors that make

small businesses flexible and more responsive. Describe and evaluate the company’s activities. Have

they been successful? Why or why not?

3. Using the business plan outline in Appendix B, create a business plan for a business idea that you have.

(A man named Frederick Smith once did a similar project for a business class at Yale. His paper became

the basis for the business he later founded: Federal Express!)

B U I L D Y O U R S K I L L S

The Build Your Skills exercise allows students to measure their Creativity Quotient, which comes from

exercising your right brain hemisphere. Students might find this interesting in determining their own

Here are some additional ideas for giving your students some help in developing their creativity skills:

2. At the next class session, have them report in one of the following formats the results of your creativity

conditioning.

a. Write a 2-3 paragraph paper for your instructor where you highlight some positive/negative results

of your “mental workouts.”

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

Mental Aerobic Exercises

• If you’re right–handed, try using your left hand to do things. If you’re left-handed, switch to your right for

a while.

• Do a jigsaw or crossword puzzle.

• Watch three-quarters of a movie on video, stop the tape, and think of your own ending.

• Stretch your thinking beyond what might be your typical approach to solving problems. See if you can

solve one of these brain teasers (answers provided below):

1. Arrange the letters below into one word:

2. Change the Roman numeral that represents the number 9 (IX) into a 6 by using only one line.

3. Determine in what order the numbers below are arranged:

• Go to the library and look up an article or find a biography about a famous creative person (Thomas

• Go to a day-care center and spend a half hour observing 2-, 3-, and 4-year-olds at play. Jot down any

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

•

Answers to brain teasers: (If no one gets the answer for any of these brain teasers, you may want to give the

hint provided in parentheses before giving the answer.)

1. ONE WORD (HINT: Are you taking the instructions very literally?)

2. SIX (HINT: The instructions did not say it had to be a Roman numeral six)

B U I L D Y O U R B U S I N E S S P L A N

Small Business, Entrepreneurship and Franchising

Intuitively, students turn to the Internet for their information first. While this is a good idea, you

don’t want them to neglect what resources are available to them locally. The Chamber of

S E E F O R Y O U R S E L F V I D E O C A S E:

S O N I C—A S U C C E S S F U L F R A N C H I S E W I T H A N O L D-F A S H I O N E D

D R I V E-I N E X P E R I E N C E

Case Overview

Sonic, the largest drive-in fast food chain in the United States, offers customers a dose of nostalgia with its

1950s-style curbside speakers and carhop service. It was started as a sole proprietorship, then became a

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

1. What is Sonic’s competitive advantage over other fast food franchises?

2. What are the advantages of becoming a Sonic franchisee?

3. What are the disadvantages of buying into the Sonic franchise?

Like with any business, franchisees must work hard to make their businesses successful. It can also be

T E A M E X E R C I S E

Have students explore successful global franchises. They should go to the companies’ websites and find the

requirements for applying for three franchises. The chapter provides examples of successful franchises.

Students should ask themselves: What do the companies provide, and what is expected to be provided by

T E R M P A P E R O R P R O J E C T T O P I C S

These topics may be assigned as individual or collaborative projects:

1. The Small Business Administration: Past and Present

Ferrell / Hirt / Ferrell:

Business

Instructor’s Manual – Chapter 5

G U E S T S P E A K E R S U G G E S T I O N S

1. A representative of the Small Business Administration, the Small Business Development Centers, or

Small Business Institutes to speak about the functions of the organization.

3. A local franchisee to speak about the start-up, operation, advantages, and disadvantages of

T E A C H I N G S U G G E S T I O N S

1. Vary the sequence of classes for the sake of variety.

2. For a writing exercise, begin by asking students to write for approximately five minutes on the topic of:

What Are the Advantages of Franchises for the Small-Business Owner?

4. Go over the practice quiz provided. Discuss answers in class.

6. Spend a short amount of time by going over the answers to the questions for the video case. Students