KPHL international airport is one of many airports in the USA that is undergoing growth the FAA supports 5.2 billion expansion plan for this airport , runway expansion a rail system and even move a township to build airport runway on . the effect of the EPA the Terminal , all the delays time and the people fighting the progress. this is what I need please .

Use APA formatting.
No Abstracts needed.
Must provide 2 references minimum for each section (1-8) for a total of 16 references.
All references must be credible sources.
5 of 16 references must be cited from textbooks.
Total 4750 words minimum (not including references)

This is a capstone paper in business and management that includes the gradual development of a comprehensive and integrative business plan.

This paper should demonstrate critical thinking, effective communication, leadership, and global awareness in the area of Management, marketing, accounting, finance, economics, global perspectives, law, and political issues.

1. Overview for the Capstone Project The Capstone Project will consist of the creation of a market entry or a market expansion plan. A new software company XYZ (specializing in Operation Systems) will be the business for this capstone paper.

Overview
Create an Overview draft (500 words maximum)
Briefly describe the context of an imaginary software business ( Specializing in - Operation System like Microsoft, Linux, Mac OS).
Articulate the vision, mission, and strategy of the organization (or business unit or division).
Describe the sources of competitive advantage
Describe the nature of the business opportunity


2. Environment Analysis and Industry Analysis for the Capstone Project . Based on the organization selected, write the Environmental Analysis and Industry Analysis sections of the Capstone Project

Environmental Analysis and Industry Analysis
Using the Segments of the General Environment write the environmental analysis of your Capstone Project (500 word maximum.)
Incorporate the Five Forces of Competition to help write the Industry analysis of your Capstone Project.
Use the CAGE model (if you are entering global or international markets) applicable) to help you write the industry analysis of your Capstone Project.
What do you see as being the trends, outlook or forecast for the type of organization that you are writing about in your Capstone Project?


3. Based on the organization, write a Marketing Plan.

Marketing Plan for the Capstone Project
Based on the organization selected, write a (750 to 1000 words) Marketing Plan.

What is the size of the potential target market?
Describe the 4Ps of marketing in the organization (product/positioning, pricing, promotion, and placement)?



4. Organizational Plan for the Capstone Project Review the "Capstone Project" document. Based on the organization selected for this module, you will write an Organizational Plan.

Organizational Plan
Based on the organization selected, for this module write a Organizational Plan (750 word maximum) that addresses the following:

Describe who will comprise the management team and what talents or skills each of the team members will bring to the organization. Include a simple organizational chart.
Outline a McKinsey 7-S Assessment/Model as it applies to your business.
Describe the Business level strategy and how it fits with the corporate level strategy.


5. Operational Plan for the Capstone Project Review the "Capstone Project" document. Based on the organization selected, write an Operational Plan (500 words maximum).

Operational Plan
Based on the organization write a (500 word maximum) Operational Plan that addresses the following (guidelines):
What is the supply chain for your prospective organization? Where does your organization bring value in this supply chain?
Who are your main partners and suppliers? What are their locations? What is your contingency plan?
How will you optimize operational effectiveness in your organization? How will you ensure your firm is lean?
Consider your operational plan from a value chain perspective and identify and discuss the primary and support activities.




6. Project Review the "Capstone Project" document. Based on the organization selected, write a Financial Plan (500 words maximum plus spreadsheet(s) that addresses the following guidelines:

Create a Pro Forma income statement for your organization if applicable.

What will be your financial break-even point?

Calculate the COGS for your organization.

How will you use financial information to help you craft your business strategy?

What key financial ratio will you be using to measure the performance
of your organization to determine success?

Use Microsoft Excel for all computations where applicable. Ensure
that the Excel file includes the associated cell computations in order
to receive full credit. Prepare this assignment according to the APA guidelines. An abstract is not required.



7. Critical Risks Assessment and Milestones Schedule for the Capstone Project Review the "Capstone Project" document. Based on the organization you have
selected, this week you will write a Critical Risk Assessment and Milestones Schedule (500 words maximum plus a spreadsheet).




8. Strategic Leadership and Entrepreneurship for the Capstone Project
Based on the organization you have selected, write a (500 word maximum) Strategic Leadership and Entrepreneurship section that addresses the following topics:
What is your sphere of influence in your organization? Based on this, what impact can you have on the implementation of your business plan?
What is your own bias?
What hurdles do you anticipate?
What leadership style(s) will you have to demonstrate? Where do you fall short?
What are your strengths and weaknesses as it relates to your business?
How can you impact and influence others and your future organization to deliver the results you expect?



Final Revised Capstone Business Plan Project Revise the Overview written into an executive summary of business plan. Include a few sentences to describe each section of the business plan so the reader can understand what will follow in the detailed sections of the plan. Integrate the plans components developed in each module into a finalized strategic business plan.



9. Executive Summary
Revise the Overview of the initial Executive Summary of business plan.
a) Include a few sentences to describe each section of the Business Plan so the reader can understand what will follow in the detailed sections of the plan.

10. Finalize the Strategic Business Plan
Ensure Integrate plan components are developed in each section and present in a finalized Strategic Business plan.

Order Instructions
Chicago OHare International Airport (ORD) is what I would like it to be done on.

Airport Summary Report (ASR): Select a commercial airport in the United States and, using its website, annual report, or other sources such as periodical articles, provide a summary report of your airport that addresses the following areas:

1. History and development - airport profile
2. Administration and organizational structure
3. Aviation statistics (latest three years)
a. Aircraft operations
b. Enplanements
c. Deplanements
d. Total number of passengers
e. Air cargo and airmail (in thousands of pounds)
f. Daily arrivals
g. Daily departures
h. Non-stop markets
i. Financial results (latest two years)
4. Airside facilities
a. Runway data
b. Taxiways
c. Apron (sq.yds.)
d. Lighting aids/approach
e. Navigation aids
f. Airport data
g. Fuel
5. Terminal facilities
a. Terminal building design
b. Representative listing of retail establishments and banks
c. Ground transportation services - taxis, buses, and rental cars
d. Parking facilities
6. Airlines serving the airport
7. Hotels/lodging
8. Expansion plans - airside and landside
9. Other aviation businesses on airport property - FBOs, etc.
10. Air cargo facilities - carriers and foreign trade zone
11. Airport system - other GA and reliever airports
12. Noise abatement program and environmental issues
13. Impact on the local economy
14. Recent press releases - news and events
15. Marketing efforts
16. Federal services - FAA, customs, immigration, and naturalization services
17. Local links

The report must be at least 10 typewritten, double-spaced pages, excluding title page, index page, and reference page. Use the APA format Times New Romans 12pt pitch to include a bibliography and cover all of the above sub topics and subtopics. A good start would be to request a copy of the airport authority's annual report, news releases, and marketing/economic reports. Many airports prepare an economic report demonstrating the dollar impact of the airport to the community.

Here is a list of websites you can use also.

? American Association of Airport Executives (AAAE)
? Airports Council International - North America.
? Airport Business
? AINonline
? House Transportation and Infrastructure Committee
? Aviation Week
? findarticles.com
? landings.com
? Air Transport Association
? avweb.com.

Write a five page paper answering these questions after viewing the paper I am sending. This is an ongoing project please.

1.Develop the company's branding, pricing, and distribution strategy.
2.Provide the following marketing strategy information:
a.Classify the company's major competitors as inter- or intra-competitors. Categorize the competitors' major strengths and weaknesses.
b.Develop the differentiation strategy in relation to the closest competitor.
c.Establish whether the company's intention is to be a leader or follower within the industry.
d.Assess the level of impact that the salient macro-environmental issues (e.g., legal, technological, social, and economic, etc.) and trends with which the company must contend could potentially have on the company's marketing strategy.
e.Discuss the marketing research tools that you used in your marketing strategy.
3.Construct an implementation strategy for your hypothetical company in which you specify the essential activities and responsibilities. Include a timetable for completion of each component of your strategy.
4.Develop a five (5) year expansion plan that includes future profitability and market share growth. Include necessary graphs to explain your plan.
5.Specify two (2) social media and / or media tools that you would use as you develop your plan. Justify each of your chosen tools.
6.Choose two (2) performance standards, two (2) monitory methods, and two (2) financial controls that you would implement that differ from the standards that you had provided in Assignment 1. Justify your choices.
7.Assess the potential for your company's overall performance in relation to the marketing plan objectives.
8.Suggest the integrated marketing communications that are most relevant for your marketing plan. Relate each marketing communication to your company's advertising strategy.
9.Use at least five (5) academic resources that address sustainability and monitoring of effective marketing plans and determine the applicability for your hypothetical company. These resources should be industry specific and relate to your chosen product / service. Note: Wikipedia and other Websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:

The specific course learning outcomes associated with this assignment are:

?Develop strategies to assess performance and achieve marketing goals.
?Develop pricing strategies and distribution channels for products.
?Analyze integrated marketing communications and its relationship to advertising strategy.
?Design customer satisfaction evaluation processes and quality assurance measurements.
?Evaluate marketing research tools involved in the marketing process.
?Use technology and information resources to research issues in marketing management.

Explain your entrepreneurial endeavors involving a business you established. Your essay should be sectioned into the following topics: purpose, origin, innovation, strategy, successes, obstacles, expansion plan, long term vision and any other relevant information. Essay should include a section for each topic and each section should be labeled. If any of these topics are not applicable to your business, include the section heading with "not applicable.
In total 800-1000 words.

There are faxes for this order.

I would like Writer tjrand1 (tim randall) for this project.
For this and all the remaining SLP assignments you will continue to use your reference organization PetSmart ? that you described in the SLP for Module one.
For this Module, think about macro-economic indicators of performance, and how recent changes in these indicators have affected the performance of your organization. For example, how does the change in GDP affect the sales, profitability, expansion plans or competitiveness of your organization. Or, as another example, has the rise in the national rate of unemployment had any affect on your organizations' operational performance or management decisions?
Below are three examples of what is required for this assignment. The first two are examples of correct approaches and the third is an example of an incorrect approach.
Sample Mini-Analysis (1):
My organization is a beauty shop/spa that caters to middle class women. With the recession and rise of unemployment the shop has had decreased revenue and profit. This has been particularly true of the spa part of the business because that is more of a luxury service than the simple haircut and coloring end of the business.
Notice that the primary focus was on how this macro-economic indicator has affected the business. This is a good example of the approach to take.
Sample Mini-Analysis (2):
I will begin with the Employment Cost Index (ECI) and why it is important to the well being of TLMP. Companies such as TLMP must be able to anticipate inflation and the impact it will have on currency exchanges and how that would impact their international production and trade. The reason ECI is of less importance to TLMP then some of the other indicators, is because it is a lagging indicator. Albeit important, it is not an indicator that will provide advance data that would allow TLMP to make a change in plans to account for an anticipated change in economic policy.
Notice that the above emphasizes the effect the ECI will have on the costs to TMLP and management has to engage in planning if these costs are expected to increase. It also demonstrates that even though ECI is an important index it is limited in its ability for TMLP management to use it because it does not provide the data in time for the company to use it for its planning. This is a good example of the approach to take.
Sample Mini-Analysis (3):
The management of Pleble Corporation uses the Retail Sales report for its planning. They compare the sales of Pleble on a month to month basis, and break it down by its various product lines to spot where sales are falling or increasing.
Notice that this is NOT a correct focus. There is an important macro-economic indicator called the Retail Sales Report but the above analysis, after mentioning it, goes into a discussion of Pleble's sales report, and that is not a macro indicator because it is only about one company, not the entire economy. The proper focus would have been to utilize the national sales report in a way that would have helped Pleble management to forecast where their sales may be going in the near term future. For example, the downward trend of retail sales over the past 5 months indicates that Peble should reduce their inventory.
There are literally thousands of macro-economic indicators that are reported. Keep in mind that a given organization, such as a home builder, may be affected by housing starts, even though that indicator may have no affect on a defense contractor. The link to Investopedia just below lists 25 of the most commonly used macroeconomic indicators.
http://www.investopedia.com/university/releases/
Please address the following questions in a 3 page MS Word document:
1. Select three macro-economic indicators that you feel have the greatest impact on the operations and/or planning for your SLP organization. Remember that an economic indicator measures a change in the general or in a specific aspect of the economy and you should be assessing how each macro-economic change you have chosen affects your company. Explain why they are important to the current or future condition of your organization.
2. How sensitive do you think your organization was to the latest economic recession that began in 2007? CAUTION: You must be specific in your reasoning, with the focus directly on your SLP organization rather than making general comments that apply to any organization.
SLP assignment expectations:
Use information from the modular background readings as well as any good quality resource you can find. Make sure you cite all resources you use and provide a reference list at the end of your paper.
LENGTH: 3 typed and double-spaced pages.
In addition to the overall quality, depth, grammar, and organization of the paper, the following will, in particular, be assessed:
1. Your ability to choose appropriate macro-economic indicators that apply to your organization.
2. How well you are able to relate macro-economic indicators to the condition and performance of your organization.

Create a problem statement, from the issues you selected, which focuses management's efforts to resolve these issues and achieve the organizations goals.

Issues at Kudler Fine Foods:

1). The company strives to serve gourmet products this represents a challenge due to the internationalized economic crisis, which may reduce the demand for the Kudler Fine Foods products

2). The organic components used in the manufacturing of the foods and wines represent an issue as they are obtained at higher costs, which are then included in the retail price

3. A high retail price often reduces customer demand


Create an end vision for Kudler Fine Foods by describing where Kudler could be if this opportunity is realized by management actions.



Kudler Fine Foods Strategic Plan

Kudler Fine Foods will be the premiere gourmet grocery store for those savvy shoppers who are searching for the finest meats, produce, cheeses, and wine.
Social Responsibility Statement
Kudler Fine Foods uses only the finest organic ingredients. Whenever possible, we purchase local produce from organic farmers. We use unbleached flour in our bakery goods and we dont add unnecessary preservatives to our products. Food is rotated from the shelves on an ongoing basis. Those items that are still in good condition are donated to local homeless shelters and food kitchens.
Background
Kudler Fine Foods was established in 1998 when Kathy Kudler fulfilled her vision of establishing her own gourmet food store. Kathy had a passion for gourmet foods but found that her particular neighborhood just did not have a wide selection of products to choose from. Although she had no experience in operating a gourmet food shop, she believed that a one-stop shopping experience at a place with lots of variety and reasonable prices would be successful.
Kathy opened her first store and then a second and recently a third. The La Jolla store continues to grow while the Del Mar store has been having some difficulties. The store in Encinitas has just opened, but sales seem brisk. Kathy works seven days a week, visiting and
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working at each store sometimes daily. Kathy has hired a manager and an assistant manger for each store to handle much of the day-to-day details, cashiers to check people out and some part-time, local college students to help with stocking the shelves and constantly tending to the inventory to make sure that fresh product is always on the shelf. She also has hired specialists who advise and assist clients with their culinary needs. These specialists are located in each store, usually during regular business hours. Since the beginning, Kathy has handled all of the buying for the stores. In order to get the best price possible for products, Kathy buys in bulk for all three stores. While this approach saves Kathy money, ordering for all three stores on a weekly basis takes so much of her time, that she hardly has time to interact with the customers anymore. Because customers expect a high-quality product, Kathy makes sure that the product is pulled from the shelf and replaced as soon as possible if the turnover rate is less than expected. Kathy intends to continue providing fine quality foods to the local area, while expanding and opening new stores in the process. While cash flow is good, buildings are leased and not purchased and thus far, Kudler Fine Foods (KFF) has been able to operate without any outside investors.
Current Locations
Kathy opened her first store in 1998 in La Jolla, California. La Jolla was selected because it is the area in which Kathys initial needs assessment illustrated that a gourmet market is needed. La Jollas population was 44,424 and growing at 1.9% per year. The average median house price is just over $2 million. Kathys assumption that La Jolla would be a great place to open a gourmet store was quickly proven to be correct as her sales were strong from the beginning and continues to grow. Since the doors opened, Kathy spends most of her time at the stores, selecting and ordering product, occasionally running the cash register, and sometimes even stocking the shelves after the store closes or before it opens in the morning. Kudler Fine Foods was a success since it launched. In La Jolla, locals would stop by the store on their way home from the tennis court or the golf course or the office and purchase fresh produce and other products. As sales continued to increase, Kathy began to think about opening another store using the same model.
The La Jolla location had not only generated sales, but produced enough cash flow so that two years later Kudler opened its second store in Del Mar, CA. Del Mar is just far enough north of La Jolla that residents of Del Mar dont want to fight the I-5 traffic to visit La Jolla so this offered a great opportunity for growth. The two stores are only about 35 minutes apart on the freeway
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and Kathy can easily visit both locations for control and monitoring and to finalize the weekly inventory list and order product. Del Mars median household income in 2000 was $98,257. The population was only 4,389 people but the area was considered to be economically strong enough and it has been able to support the second store, just above break-even. In early 2003, as part of her expansion plan, Kathy opened a third store in Encinitas. Although Encinitas is located just a little more in-land than the other two locations, the average age of its residents was 39.7 and is expected to be a very good target market for gourmet foods. The average household income is just over $75,000 and with a population base of just over 50,000 people, we think that the Carlsbad, CA area might be a good area for the next store. The Del Mar store would be consolidated into the Carlsbad store once it is open. This will be discussed later in the marketing plan section.
Store Departments
Each store consists of the following departments:
Bakery
Each of our stores has its own modern European-Style Bakery. In the wee hours of the morning, our bakers begin mixing their dough and creating fresh breads and pastries including fruit tarts, table loaves, flat bread, and the flakiest croissants in Southern California. Our breads and pastries are made from old world recipes and the finest ingredientsIrish butter, organic eggs, and unbleached flour. Kudlers bakery products do not contain preservatives. We use only the freshest ingredients and rotate our inventory daily. We donate day-old bakery products to local charities who feed the homeless. The slogan for our bakery department is: If you arent satisfied that our baked goods are among the best you have tasted, your purchase if free!
Meats
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Our meat and seafood are procured from certified organic producers. The meat and seafood products are fresh and prepared in the store to order. The butcher shop in each store carries:
Dry, aged beef
A variety of poultry including turkey, duck, pheasant, quail, and chicken
Lamb
Home-made sausagesmade without preservatives

The slogan for our Meat department is: We will be happy to handle any special requests you may have.
Produce
Our produce department offers over 350 fresh fruits, vegetables, herbs, and spices. We stock 16 different varieties of apples as well as a wide range of tropical fruits from around the world. Experienced cooks know that the right combinations of herbs and spices will turn a good meal into a great meal. Herbs and spices are most flavorful when they are fresh, and we carry the freshest herbs and spices in the area. We have an Asian Specialty Produce department where we carry the produce, herbs, and spices that are the staples of Asian cooking. We know that our customers are interested in maintaining a healthy lifestyle while also trying to live within their budgets. We address these concerns by offering most of our produce in both organic and non-organic varieties. The slogan for our Produce department is:
If you dont see it, let us know and we will special order the item for you!
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Cheese and Dairy
Our stores carry a compete line of the finest dairy products including Irish butter and organic milk. We are known for our wide assortment of gourmet cheeses. We carry over 250 varieties of cheese from 21 countries. Our stores offer cheese made from cow, goat, and sheeps milk. We will also special order any cheese you may want that we do not carry in stock. The slogan for our Cheese and Dairy department is: Stop by any of our stores on a Saturday morning and experience a sampling of our cheese selections.
Wine
We have traveled the world to bring you an extensive collection of domestic and imported wines and spirits. Whether our customers want to mix the quintessential martini or find the perfect wine to serve at their next dinner party, Kudlers is the place to shop. They will find that our stores carry a wide variety of spirits and at prices that will meet any budget. While we are proud of our wide selection, we certainly dont want our customers to be intimidated, so each of our stores has a Wine Steward who will be more than happy to assist customers in making their selection. We also hold monthly wine appreciation classes so customers can learn the nuances of our wines.
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SWOT
STRENGTHS WEAKNESSES
Our STRENGTHS are:
1. Small organization
2. No direct competition
3. Lots of choices for the consumer
4. Very customer oriented
5. Good store locations
6. Kathys personal relationship with the staff
7. Repeat customers Our WEAKNESSES are:
1. Deal in mainly perishable goods
2. Specialty shops with high pay-roll
3. Small management team with lots of responsibilities
4. The Del Mar location is not doing as well as expected
5. Geographic expansion limitations

OPPORTUNITIES THREATS
Our OPPORTUNITIES are:
1. Geographic expansion throughout California
2. Delegate purchasing process to someone with more time and experience
3. Offer more catering services
4. Add more product line as we grow
5. Spread our brand outside of California as we grow
6. Opportunity to be acquired Our THREATS are:
1. Competing gourmet shops
2. The economy declining

STRENGTHS
1. Small organization. We are able to control and monitor all activities on a daily and weekly basis.
2. No direct competition. There are no other gourmet stores in our geographic area. Specialty stores are limited and, with the exception of major grocery chains and smaller, independent wine stores, we have no direct competition.
3. Lots of choices for the consumer. We offer 16 different kinds of apples, wines from all over the world, 250 variety of cheeses, and 350 fresh fruits and vegetables. No one, including the major grocery chains, offers such a diverse product variety.
4. Very customer oriented. Whenever possible, Kathy works the counter and spends time out in the store interacting with customers. She encourages the clerks to be friendly and helpful to the customers and ask if they found everything they were looking for. If several customers request the same item, Kudler orders that item for the shelves or will even offer to special order it for the customer.
5. The locations of the stores are in mid- to upper-range economic regions where potential customers can afford to pay gourmet prices for the better quality and healthy products and the greater variety.
6. Kathy is able to interact with all of the staff each week.
7. Repeat customers. Once customers come into the store, they tend to return every 7 to 10 days to purchase more products. Kudler Fine Foods has a great reputation in our neighborhoods.

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WEAKNESSES
1. Deal in mainly perishable goods. Because we do not use any preservatives, approximately 12% of our perishable goods are rotated out of inventory every two or three days, either by being thrown away or donated to local charities. Donated food is still in good condition, but not excellent condition so it is removed from the shelves on an ongoing basis.
2. Specialty shops with high pay-roll: Butcher, baker, wine steward, etc. Payroll of these specialty positions is higher than that of the clerks and stock personnel. It is also difficult to find qualified people for these positions when someone quits or when we open a new store. Our pay is a little bit below average so we allow all employees to take home some of the perishable goods to share with their family. While this does help put food on the table, it does not help some of our employees who have high living expenses.
3. Small management team with lots of responsibilities. When Kathy is sick or on vacation, no one is able to order replacement inventory or deal with major business issues.
4. The Del Mar location is not doing as well as expected. Although the area meets the economic demographics for a successful area, the town is too small to really support the store. Once the Carlsbad location is opened a few miles south, the Del Mar store will be phased out when the rental agreement expires.
5. Geographic expansion limitations. While there are many areas, just within California that would make great sites for future stores, it gets more and more difficult for Kathy to visit each store and maintain inventory and ordering. While we are planning to open the Carlsbad location and close down the Del Mar store, we are also considering San Francisco as our next out-of-the-area expansion, which will make it difficult for Kathy to use her current management approach.

OPPORTUNITIES
1. Geographic expansion throughout California. There are many more potential areas for new stores including San Diego, Palm Springs, San Francisco and Santa Barbara. Other areas will be considered with Carlsbad next on the list and then possible sites in the San Francisco area. The Asian Specialty Produce Department has been doing quite well and Kudler believes that the largest concentration of Asians in California is in the San Francisco area.
2. There is an opportunity to bring in outside management to help run the operation. With multiple locations, Kathy is quickly recognizing the fact that she is having a difficult time doing everything that needs to be done. She is thinking about hiring someone to help with purchasing and inventory tracking. These areas keep her in the back office of the stores instead of out front with the customers, which is the part that she enjoys.
3. There is an opportunity to offer more catering services. Kudler has provided some catering services upon request and in general, the customers have been very pleased with the service. Since Kathy handles the delivery, set-up, distribution, and clean-up for

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the event, she is able to keep costs down and the profit margin is 25% better than product profit margin in the stores. In addition, Kathy has received tips on top of the profit that basically pays her expenses to travel and set up the event.
4. Opportunity to add more product line as we grow. Customers are always asking if we carry a specific item or product. If we receive several requests for the same product, we ask our wholesalers if they can provide the product on a trial basis. Recently, we had a few people request Hungarian Wax Peppers which are commonly found on the East Coast of the United States but difficult to find on the West Coast.
5. Opportunity to spread our brand outside of California as we grow. Most specialty stores are in the eastern half of the United States so the entire west coast offers great opportunities particularly for those who have moved from New York, New Jersey and Philadelphia who are used to the specialty gourmet stores. We believe there are some additional opportunities in Naples, FL and Greenwich, CT that will be explored in the future as well.
6. Opportunity to be acquired. As we continue to grow, there is always the possibility that we may be acquired by another company. Kathy could consider such a move in the future as part of her retirement plan.

THREATS
1. While we currently dont have any competition, another gourmet shop could open in our geographic area. If we offer fresh and healthy products at a reasonable price hopefully we can keep competitors from entering the marketplace.
2. Economy could change and customers could stop buying gourmet foods. Gourmet foods (imported foods and organically grown food) cost just a little bit more than what you normally find in the grocery store. If the economy declines and peoples cash flow is decreased, customers may buy fewer gourmet items and purchase products at the local grocery store.

Risk Assessment and Mitigation Strategies
Risk Potential Impact Likelihood Detection Difficulty Value
5.1 Deal with perishable goods 7 7 3 147
5.2 Gourmet food concept may fail 10 6 3 180
5.3 Economic downturn 8.5 9 7 535.5
5.4 Competitors entering marketplace 8.5 8 8.5 578
5.5 Founder's health 10 7 10 700
5.6 Earthquake 7.5 7.5 10 562.5
5.7 Weather 8 7 7 392

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1. We deal in perishable goods. They have a short shelf-life and we often turn the inventory, either through sales or replacing product, to keep the inventory fresh. We have begun a program to track sales versus the time of year so we can more accurately order the correct quantities from year to year and location to location. We dont believe this is a significant risk.
2. There is always the possibility that the concept of a gourmet store might fail. The fact that Zabars in New York, Andros in Philadelphia and Provisions Gourmet Market in St. Louis, other well-known gourmet stores, have been in business sixty years or more indicates that this can be a very stable business once it is established. Many people living in Southern California have migrated from the East Coast and are unable to get some of the specialty foods they are accustomed to in the regular supermarket. We offer a viable alternative for them.
3. There is always the risk that the economy in Southern California could decline and not support gourmet stores. Right now, the economy is solid. Even though the area just went through a downturn due to the high-tech bubble, Northern California the San Francisco and Silicon Valley area absorbed most of the impact. While the economy is a concern, we cant control it so all we can do is watch our trends and order accordingly.
4. There is the risk of a major competitor entering the marketplace and taking market share away. Right now we dont see this happening. Trader Joes does have some stores in the area but we offer a more diverse and specialized product line for our select customers. We dont see anyone else opening a gourmet specialty store that would compete with us in the marketplace and try to take our market share away. We have repeat customers who are happy with our service.
5. Although Kathys health is great at the current time, there is always the possibility of something happening to her that would jeopardize the business. This is a concern as Kathy manages most of the financial aspects of the business, as well as making the final decisions on inventory and ordering. We plan to install an electronic, automated system in the future that will allow us to track these ordering.
6. There is always the possibility of an earthquake in Southern California that could alter the demographics and the economic stability of the region. We cant do anything about it and other competitors would be in a similar position.
7. There is the possibility that the weather could dramatically affect crop yields and our suppliers could dramatically increase the cost of perishable goods to us. This is another area that we cant control and the effect would be the same to our competitors.

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Stakeholder Analysis
We do have some stakeholders that we monitor. We view stakeholders as those entities, internal or external, who could affect our organization or be affected by our organization. The following list is not inclusive, but ones that we do keep in mind:
??Staff Our team of clerks and shelf-stock individuals are critical to our operation. Although Kathy visits each store, much of her time is spent doing back-office work so the staff members are really the ones having the day-to-day contact with the customers. While the work environment is not stressful, whenever someone quits or is fired, the whole store has to pick up the effort while a new person is hired and trained.
??Customers We try to take very good care of our customers. Clerks are encouraged to keep track of comments or requests, and share them with Kathy when she comes into the store. Some free samples of food are offered for tasting on a limited basis and we have monthly wine appreciation meetings. If a customer requests a product, we see if it is feasible for us to stock that item. If we cant, we offer to special order it. We take complaints about product or service very seriously and try to address any and all problems quickly.
??Wholesale Suppliers Our product comes to us from local, national and international suppliers. We purchase our fresh, organic fruits and vegetables locally from distributors who ensure that the product is of the highest quality. Our dairy products are offered locally and we receive our meats from all over the country. Some of our wine and cheese is imported through national and international wholesalers. We have good financial terms with suppliers and even though we order on a weekly basis, most allow us to pay in 30 days.
??Banks Our banks extend credit terms to Kathy when we are launching a new store and around the holiday season when we need to purchase more product than normal. Kathy also sometimes uses her credit line during the summer slow months to help carry the stores through. We have a great credit rating and relationship with our local banks.
??Competition Our competition locally is minimal and consists of a few specialty shops, major supermarket chains and some online gourmet shops. We think there is room for our stores in each of the marketplaces we are in and intend to move into.
??Kathy Kudler Kathy not only has the vision of the organization, she has established the culture and is the main management person. She hires new people, fires those not working out, finalizes the inventory numbers, places the weekly orders and controls the finances making sure all of the vendors get paid.

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Competitive Analysis
All of the stores are surrounded by multiple locations of traditional supermarkets such as Ralphs, Vons and Albertsons. These stores sell many of the products that Kudlers sells and they are beginning to advertise specialized sections offering organic produce and free-range meat. However, Kudlers is positioned to attract a more narrowly focused customer. KFF appeals to the person who sees themselves as a discriminating gourmet. Such people are looking for more than organic foodstuffs. They want the best foods, excellent customer service and the utensils necessary to create gourmet meals. As such, KFF is not in direct competition with the traditional supermarkets. There are a number of health food stores located near each of Kudlers locations; stores such as Trader Joes and Whole Foods. These stores concentrate on the organic nature of their products. While KFF stresses organic produce and meats, we dont see these stores as our direct competition. Our customers are more focused on the cooking and dining experience rather than the health conscious lifestyle. Also, our customers are less price conscious than the typical health food store customer. Given the diversity of the population of Southern California, it is not surprising that there are a number of stores featuring international foodstuffs. The better known ones are the International Market & Grill, Aria International Market, Indian International Food and the Balboa International Market. These stores are focused on foreign foods and not on the gourmet experience. Our employees have heard many customers relate how they had come to Kudlers after frequenting one of the international food stores because, while they may have had a particular ingredient, they didnt have the selection, tools, expertise or service that we provide. While KFF doesnt ave any direct competition, there are some businesses that are vying for the same customer base. One such store is Jonathans Market located in La Jolla. Jonathans is a specialty food store and restaurant. The main distinction between Jonathans and Kudlers is that Jonathans is more focused on its restaurant business and its wine department. They do have a large wine selection and a full-time sommelier. They also hold regular wine tasting events. Their meat, seafood and produce selections are somewhat limited and their meat and seafood seem to be priced a little high. While KFF and Jonathans are both seeking to attract a wealthier clientele, the persons frequenting Jonathans are not gourmands, but people who are attracted to the restaurant and the wine shop. While Jonathans is not a direct threat, Kathy needs to recognize that many of Jonathans clients could be enticed to shop at KFF. Jonathans should be considered competition for the La Jolla store and, perhaps, the Del Mar location. At a distance of over 10 miles, it probably isnt significant competition for the Encinitas location.
The Kitchen Witch is a gourmet kitchen utensil store located in Encinitas. In addition to selling utensils, the store also holds cooking classes. Although it is physically located in Encinitas, it has a Web site where it sells its products and takes registrations for its cooking classes. Because of its e-commerce site, it has to be viewed as competition for all of the KFF locations. Because it
14
only sells utensils, the Kitchen Witch can stock a much more extensive selection of cooking tools. While Kudlers carries many of the same brands as the Kitchen Witch, we cannot match the depth of the selection since most of our store space is devoted to the grocery items we carry. Harvest Ranch Market has stores located in Del Mar and Encinitas. The stores feature organic foods, an esoteric selection of wines and a deli. The stores are small and the prices seem a bit steep. We should recognize that we will have some competition from the Harvest Ranch Markets, but KFF should come out ahead based on our greater range of services (catering and classes), a larger selection and by paying close attention to prices. Our most serious competition is the Cardiff Seaside Market. The market has been in business since 1985. It offers produce, meats and seafood and caters to the gourmet market. It offers catering services. Located within 2 miles and 4 miles of the Encinitas and Del Mar locations respectively, the Cardiff Seaside Market does present competition to those locations. At a distance of over 12 miles from the La Jolla location, the Cardiff Market is not a serious concern. To date, the owners of the market have not been willing to expand. As Kudlers continues to expand into new markets and grows in size, the effect of the Cardiff Seaside Market should diminish.
Marketing
Kudlers has budgeted $368,200 for sales and marketing efforts for the year 2004. When Kathy started the first store in La Jolla, her sales and marketing efforts consisted of some internal and external signage. While she did some advertising in the local school yearbook and other small efforts, those ads were placed mainly to help other members of the community. As the store became a success and the second store was opened, she decided to take a more formal approach to sales and marketing. Based upon the businesses brief historical data, Kathy recognizes that it has two times a year when it receives the most sales. The first time of year, which is actually the second highest grossing period, is around the Easter holiday. Sales really spike beginning in October, through the Thanksgiving holiday all the way up through New Years. During these peak times of approximately 16 weeks, Kudler prints a flyer that is inserted into the local La Jolla Village News, the North County Times, and the Gay & Lesbian Times. Throughout the rest of the year Kudlers has a monthly flyer printed and distributed through the newspapers. Kudlers also occasionally advertises in local printed materials that advertise in mid- to upscale restaurants as well as some local radio station spots on an infrequent basis.
Kathy also has had printed up tri-fold brochures that advertise the catering business. These brochures are placed in the stores for customers to pick up if they wish and Kathy has them laying out at the events that she caters. She has also given out business cards at these events
15
and has had others call her to cater their special event. Recently, she also has noticed that some of the attendees of the catered events have been coming into the stores as well. Flyers are often printed for the wine and cheese tasting and other special events as well.
In the future, Kudlers wants to place advertisements in the San Diego-area telephone directories. Kudlers also wants to design and launch a website that offers many of its products to consumers as well as marketing the catering side of the business. This will be discussed more in the section regarding growth.
Future Growth
We are currently assessing other geographic areas in Southern California to continue our growth. We are interested in the Carlsbad, California area and we are looking at a site on Carlsbad Village Drive between Interstate 5 and the highway leading up the coast. The only major stores in that area are a Vons, an Albertsons, a Prontos Gourmet Market and a few convenience stores. There is a Japanese restaurant in this block, Sushi Taisho, which has been there for many years and is usually quite busy. During the summertime, many people come to Carlsbad to go to the beach and we expect our summer sales to be quite high. This will be described in more detail below. If we continue to be successful, we hope to use our cash flow to expand into this market within the next few five years. We are also looking at expanding into the San Francisco area. Even though this is several hundred miles from our current locations, we believe our Asian Specialty Produce department would be very successful in that area. After we open the Carlsbad location we will begin to scout sites in San Francisco. Our ultimate goal is to compete in high-end areas in other cities as well. Our long-term plan includes possible sites in: Scottsdale, Arizona; Naples, Florida; and Greenwich, Connecticut.
Website
Most of the more well-established gourmet food stores have launched very extensive websites that not only let local customers know what is going on, but also allow for people outside the driving area to purchase product direct. Our goal is to launch our first version of the website in June 2004. We will start with a basic site and add e-commerce capabilities as we fully automate all of our inventory and ordering system so that we can track sales and order replacement product.
16
New Locations
Our Del Mar location is not doing as well as expected due to the small population base of the area. Beginning in October 2006, we will begin the site selection process for a new location in Carlsbad, CA. Specifically; we are searching for a location that is on Carlsbad Village Drive between Interstate 5 and the ocean. The population in Carlsbad is around 90,000 and Oceanside (which is located next to Camp Pendleton) has a population of around 160,000 and is only five miles north of Carlsbad Village Drive. Because our Asian Produce Department does quite well, we believe those going to Sushi Taisho would be customers for our store. We also think our wine selection might be of interest to those who visit the wine tasting stores or micro-breweries in the area. We are hoping to have the new Carlsbad location open and operating by no later than June 2009. We also plan to close the Del Mar store and redirect those customers to the Carlsbad store. Since there are only a few exits on the I-5 freeway that separates Del Mar and Carlsbad, we feel sure that we will be able to service our current customers at the new store.
Telephone Directory Advertising
Since directory advertising costs hundreds of dollars a year, we have elected not toadvertise in the local directories; however, we believe that once we have standardized our ordering procedures, we might be able to encourage potential customers from San Diego to occasionally make the 40 minute drive up the freeway to shop at our gourmet store.
Catering
So far, the catering side of the business has not really been promoted, but it has been proven to be a profitable venture. Kathy handles all of the catering activities which usually require no on-site staff other than herself. She generally receives sizeable tips which helps add to the revenue stream as well. Although we do have some flyers posted in the stores advertising the catering service, we intend to promote this side of the business more, as we can charge more for the product as well as the service. We intend to have 10,000 multicolored flyers printed up. As customers check out, the clerks at each store will place the flyer into the bag until the 10,000 are distributed. Once the website is developed, a Catering link will be placed on the site with information on the service.
17
Coffee & Tea
Most gourmet stores offer a wide selection of coffees and teas. This is one area that can be expanded within the store. Profit margins are high on these products and the shelf life is longer than that of the fresh fruits and vegetables. These are also great products to offer on the website and to potential customers outside of our geographic area.
Fish Counter
Some of the East Coast gourmet stores offer fresh seafood in their stores. Since we are so close to the Pacific Ocean, we intend to expand our offerings by installing a fish counter in each of our stores. Our local wholesale food distribution company carries fresh fish and can simply add this to our order each week. We are hoping that this will help with summer sales as people are doing outdoor activities.
Deli
Although we have a meat department and a cheese department, we really dont have a deli where people can come in and select a product and quantity and have it cut or sliced the way they like. As part of our growth we intend to install a deli counter in each store to offer some of our products prepared to order. We will even offer samples of product for customers to try.
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Develop the Catering side of the business
Hire someone with finance background to help Kathy baofficebonfire
Jan. 2004 Jun. 2004 Oct. 2004 Nov. 2004 Nov. 2005 Oct. 2008 June 2009 Dec. 2009

GANTT CHART
Open the Carlsbad store and close out Del Mar location
Automate inventory and ordering system
Finish site location for Carlsbad store Carlsbad Village Drive
Develop a website & ordering system
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Financials
2003 Income Statement
Net Sales $10,796,200
Less: Cost of Goods Sold $6,965,118
Gross Income $3,831,082
Operating Expenses
Advertising $263,000
Amortization $88,390
Bad Debts $2,300
Bank Charges $23,750
Charitable Contributions $10,975
Systems & Network Contract $10,975
Credit Card Fees $691,456
HR Payroll Outsource $8,499
Depreciation $127,234
Dues & Subscriptions $2,559
Insurance $65,000
Custodial Contract $49,200
Interest $41,747
Maintenance Contract $42,000
Misc. $37,560
Office Expenses $8,300
Operating Supplies $5,500
Software Licenses $8,200
Permits & Licenses $3,500
Bonuses - Discretionary $1,330
Postage $46,000
Office Lease $25,530
Telephone $575
Travel $4,000
Utilities $3,060
Vehicle Expenses $13,046
Wages $933,917
Total Expenses $2,520,228

20
Net Income Before Taxes $1,310,855
Plus: Interest Income $7,150
Less: Income Taxes $563,292
Less: Profit Sharing Bonus $75,470
Net Income After Taxes $679,243

21
2004 Pro Forma Income Statement
Net Sales $12,955,440
Less: Cost of Goods Sold $7,174,072
Gross Income $5,781,368
Operating Expenses
Wages $971,274
Utilities $3152
Insurance $65,000
Advertising $368,200
Vehicle Expenses $13,700
All Other Expenses $1,279,471
Total Expenses $2,700,797
Net Income Before Taxes $3,080,571
Less: Income Taxes $591,457
Net Income After Taxes $2,489,114

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Cash Flow Pro Forma Statement
January 2004 - December 2004 (In Thousands)
12% 6% 6% 9% 4% 5% 5% 6% 6% 9% 15% 17% 100%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TOTAL
Revenues $719 $719 $719 $1,440 $719 $719 $719 $719 $719 $1,440 $2,159 $2,159 $12,955
Expenses
Cost of Goods Sold $399 $399 $399 $797 $399 $399 $399 $399 $399 $797 $1,196 $1,196 $7,174
Wages $81 $81 $81 $81 $81 $81 $81 $81 $81 $81 $81 $81 $971
Utilities $.158 $.158 $.158 $.158 $.236 $.315 $.394 $.473 $.394 $.315 $.236 $.157 $3
Insurance $0 $0 $16 $0 $0 $16 $0 $0 $16 $0 $0 $16 $65
Advertising $20 $20 $41 $20 $20 $20 $20 $20 $41 $61 $61 $20 $368
Vehicle Expenses $.913 $.913 $.913 $.913 $.913 $.913 $.913 $.913 $.913 $.913 $2 $3 $14
All Other Expenses $107 $107 $107 $107 $107 $107 $107 $107 $107 $107 $107 $107 $1,279
Total Cash Flow $112 $112 $75 $433 $112 $96 $112 $112 $75 $392 $713 $736 $3,081

23
Contingency Plans and Exit Strategies
We try to carefully plan our operations and order product when we think our sales will be the highest. Because we deal quite a bit in perishable goods, we need to be aware of our buying patterns. Although we are in the process of automating the inventory and ordering process, we have been manually controlling and monitoring product as we go along. When our sales volume fluctuates more than 10% in either direction, that is a red flag, and we evaluate and try to determine why we missed our expectations. Sometimes we fail to recognize local community events that bring people into the community who then stop by the store. We conduct a lessons learned on all of these fluctuations and try to improve our performance for the next ordering cycle. If our sales are less than expected, we will make a note to do some extra promotional activity at that same time next year. If our sales exceed our expectations, we try to assess the reason why. Sometimes it is weather related, while other times it is related to special events or our marketing efforts. We try to monitor which products sell well and which ones we dont want to order anymore. The automated system will help us monitor this more but we still watch this closely, particularly as related to the perishable foods. Kathy Kudler is the vision behind the organization. She intends to grow and expand the business for 10 15 years, at which time she will reach retirement age. Her intent is to sell the entire organization at that time and no longer be involved in the operations.

Starbucks: Learning Team Case Study
Read the Starbucks case studies presented in the texts: p. 175 (Werther & Chandler, 2006) and Chapter 7, Williams, 2006. Prepare a 900-word analysis of the risks to Starbucks aggressive global expansion plans given the differences in customer valuations of Fair Trade practices depending on country. What form of global business do you think best fits Starbucks stores and products? Why? (Chapter 7, Williams, 2006). Starbucks plans to open roughly 450 overseas locations this year. Should it continue expanding in countries where it already operates, or should it open stores in new countries? Where do you think Starbucks should expand? Explain your decision.

There are faxes for this order.

Here is the information:

Introduction:

Competition Bikes Inc. is considering an expansion to Canada and is trying to determine whether to merge with or acquire the Canadian Biking Inc. facility. Part of the consideration in the decision to merge with Canadian Biking, Inc. or to acquire Canadian Biking is the source and management of the working capital for the operation. In this task, you will prepare a summary report that analyzes the proposed expansion.

Task:


Note: Be sure to submit a copy of your Excel workbook when submitting your JET2 Task 3 work. The evaluator will need a copy of your data to ensure correct evaluation.


A. Prepare a summary report in which you do the following:

1. Recommend a capital structure approach that maximizes shareholder return.

a. Justify your recommendation.

2. Discuss capital budget areas that raise concern.

Note: In your comments be sure to address your findings related to Net Present Value and Internal Rate of Return.


3. Discuss how working capital can be properly obtained and managed for the Canadian expansion.

4. Discuss whether Competition Bikes Inc. should merge with or acquire the Canadian Biking Inc. facility.

Company storyline:
TASK 3 - EXPANSION OPPORTUNITIES
CANADA MANUFACTURING
Current Canadian Business
Canadian customer orders currently comprise about 10% of the company output. The orders are shipped from the U.S. Due to the continuing increase in the Canadian business the management of Competition Bikes, Inc. is considering a location in Canada.
Expansion to Canada
Market research completed in the last month has shown that there are a sufficient number of high end bicycle shops which could carry the CarbonLite product. As with the current U.S. model, a distributor network would be established to handle all orders and to act in a sales management capacity with the retail stores.
The ability to provide cost effective, great customer service to the growing Canadian market is a primary concern. Other considerations include:
1. Qualified labor force
2. Cost of labor
3. Land cost comparisons.
4. Cost to construct a new manufacturing facility.
5. Tax incentives for chosen location.
6. Transportation cost and reliability for bringing in raw materials and component parts and for shipping of finished products to distributors.
7. Community facilities and support that will meet employees? needs for education and health care as well as for recreational and cultural activities.
8. Community business attitude
Management has reviewed the information and data from the completed market research, including considerations as listed above. After careful analysis, Competition Bikes, Inc. chose Toronto as a potential manufacturing site.
Management has been considering the decision for about a month but a complicating issue arose in the last week. A competitor called Canadian Bikes, Inc. has contacted Competition Bikes, Inc. regarding the possibility of a merger. Canadian Bikes, Inc. is also willing to discuss acquisition. Canadian Bikes, Inc. already has a facility within Canada. The CEO of Competition Bikes, Inc. has asked you to provide an analysis of the options and to provide a recommendation.
Canadian Bikes, Inc.
Canadian Bikes, Inc. has heard that Competition Bikes, Inc. is considering a Canadian location. The board of Canadian Bikes, Inc. has proposed the following options to Competition Bikes, Inc.:
a. Canadian Bikes, Inc. has offered to merge with Competition Bikes, Inc.
b. Canadian Bikes, Inc. has offered to be acquired by Competition Bikes, Inc. for $1.485/share (a 10% premium over the current market price of $1.35. Consider if this is a reasonable offer price?
c. Canadian Bikes, Inc. has also offered to license the Titanium technology for $200/unit. Company management thinks the product would have appeal in the U.S. market and would provide a large increase in sales. The product would be introduced into the Competition Bikes, Inc.
product line regardless of the expansion plans adopted above. The U.S. facilities have sufficient capacity to build out bikes on the Titanium frames.
In your analysis you will consider:
1. Building a new facility according to the current U.S. factory layouts.
2. Building the new facility to U.S. factory layouts specifications but sell the structure with a leaseback.
3. Finding a factory building and either lease it or buy it.
4. Merging with Canadian Bikes, Inc. The company has a lower cost competition bike that is based on a Titanium frame.
5. Acquiring Canadian Bikes, Inc.
6. Buying the Titanium frames from Canadian Bikes, Inc. for $450/frame.
7. Licensing the technology. This option will require a capital investment of $500,000 for each factory location. Management has a strong objection to this option.
Task 3
Competition Bikes, Inc. is considering an expansion to Canada and is trying to determine whether to merge with or acquire the Canadian Bikes, Inc. Inc. facility. In this task, you will prepare a summary report that analyzes the proposed expansion.
There are various options to consider. The following data are used in the analysis.
Capital Structure
Competition Bikes, Inc. has different capital acquisition methods to choose from to fund the Canadian expansion if the decision is made to go forward with the expansion. Complete an analysis of the alternative capital sources available to optimize the company capital structure after obtaining the funds necessary for expansion.
1. Compute the optimal capital structure based on obtaining the required funds from bank loan at 6%. The bank will require a compensating balance of $150,000 (earning 1%) to be maintained.
2. Computes the optimal capital structure based on obtaining the required funds by issuing only bonds.
3. The student computes the optimal capital structure based on obtaining the required funds by issuing 5 year, 9% bonds for 50% and preferred stock for 50%.
4. The student computes the optimal capital structure based on obtaining the required funds by issuing 5 year, 9% bonds for 20% and common stock for 80%.
5. The student computes the optimal capital structure based on obtaining the required funds by issuing 5 year, 9% bonds for 40% and common stock for 60%.
6. The student computes the optimal capital structure based on obtaining the required funds by issuing 5 year, 9% bonds for 60% and common stock for 40%.
Choose the best option after considering the risks inherent in the options available. What measure is used in this analysis that indicates the best option? Use that measure for your choice.
CAPITAL BUDGETING
Complete a capital budgeting analysis based on the next five years of projected cash flows. You will compute the after tax cash flows for five years using two different sales forecasts (given) and then compute the net present value and internal rate of return for both sales forecasts.
The following data support this capital budgeting analysis:
1. The cost to build the manufacturing facility is expected to be $400,000. (All figures are in US$) Working capital of $200,000 will also be necessary to support the operation. These two items will be considered as the total investment in the capital structure analysis.
2. The depreciation on the new asset will be based on a 10 year life. The building is expected to have $250,000 value at the end of the ten years.
3. Management has decided that the most reliable data for a capital budgeting analysis is to estimate the number of product sales using the U.S. pricing and cost data. It is anticipated that costs will be consistent in the new Canadian location.
Low demand:
The new factory is expected to sell 500 CarbonLite models in Year 9. Sales growth of 1% is expected year over year in Year 10 and Year 11, then 2% sales growth is expected year over year in Year 12 and Year 13. Cost of goods sold will increase proportionately.
Moderate demand:
The new factory is expected to sell 500 CarbonLite models in Year 9. Sales growth of 3% is expected year over year in Year 10 and Year 11, then 5% sales growth is expected year over year in Year 12 and Year 13. Cost of goods sold will increase proportionately.
The costs to produce the current product line are expected to grow at 2% per year.
4. The selling and administrative expenses for the Canadian operation are expected to be approximately $250,000 for the first year due to higher levels of advertising expense. The anticipates reducing the ad expense by $10,000 each year for three years before stabilizing thereafter as word of mouth advertising becomes the primary advertising.
5. Competition Bikes, Inc. requires a 10% hurdle rate to pursue a capital investment.
LEASE VS. PURCHASE ANALYSIS
Competition Bikes, Inc. found a suitable existing facility it could buy outright for $400,000 using one of the options from the capital structure analysis. However, 5 year lease financing has been offered at 6% with a $50,000 down payment. The leasing company would buy the building outright and then accept five $90,000 lease payments over 5 years. A $50,000 buyout option would be included so Competition Bikes, Inc. could choose to keep the location at the end of the five year lease.
JET5
MERGER vs. ACQUISITION.
Competition Bikes, Inc. has been approached by Canadian Bikes, Inc. about merging the two companies.
Additional data:
a. The Canadian Biking, Inc. shares were trading for $1.30/share (US$) at the end of Year 8.
b. In a merged company the Canadian Bikes, Inc. shares will be exchanged for Competition Bikes, Inc. shares on a 3:1 basis.
c. Competition Bikes, Inc. has the option to acquire Canadian Bikes, Inc. at an offer price 10% above the Year 8 ending share price.
Consider the advantages and disadvantages after completing the financial analysis necessary for each of these options. Consider the risk and reward from each option.
Task Requirements:
A. Prepare a summary report in which you do the following:
1. Recommend a capital structure approach that maximizes shareholder return.
a. Justify your recommendation.
2. Discuss capital budget areas that raise concern.
3. Discuss how working capital can be properly obtained and managed for the expansion operation.
4. Discuss whether Competition Bikes Inc. should merge with or acquire the Canadian Biking Inc. facility.

BACKGROUND:

Sharpest Communications ranks among the largest global public relations agencies, operating in more than 50 countries. With five global practices Brand Marketing, Corporate, Healthcare, Food and Nutrition, and Technology, it is looking to expand its portfolio into the fashion and lifestyle area, by acquiring already existing communications consultancies.

TASK:
You are an advisor to the board considering UK companies for acquisitions.
Write a background briefing paper for the board of Sharpest Communications on the economic climate in the UK for fashion, commenting on the competitive environment for marketing consultancies and the media in general. The briefing paper should be based on a PESTEL analysis.(1,000 words)

THE SITUATION TODAY
Clearly Paula set up PRPR to make money, travel, and fund her lifestyle, but has not really given any thought to what the future strategy of the business should be. As long as the number of clients increased and the bills got paid, Paula deflected any questions about new initiatives by her usual yes, darling. But nothing got done.


ESSENTIAL READING
Cox, D,(1999), Business Accounts, 2nd Edition, Worcester, Osborne Business
Huczyinski, A, and Buchanan, D (2007) Organizational Behaviour- An Introductory Text, 6th Edition, Harlow: FT Prentice Hall.
Izhar, R and Hontoir, J, (2001),Accounting, Costing and Management ,Oxford: Oxford University Press.
Mullins, L (2007), Management and Organisational Behaviour, 8th Edition, Harlow: FT Prentice Hall.
Worthington I and Britton C (2006) The Business Environment, 5th ed, Harlow: FT Prentice Hall.

WEBSITES:
Fame
Fashion Trak
www.ft.com
www.cipd.co.uk
www.ketchum.com
www.marksandspencer.co.uk
www.johnlewispartnership.co.uk
www.asilverpr.co.uk



PRPR has grown fast and as the client base expanded more staff were taken on. There are 12 full-time operational staff. There are 4 main account divisions (Fashion, Events, Entertainment and Music). Each division has a head of PR but no dedicated PR Assistants, of which there are eight. Teams are put together on an ad hoc basis supported by a stream of unpaid work experience trainees, usually four at any one time. In addition there is an Office Manager who organises the day to day running of the office and a Finance Manager. There is no Human Resources person. Paula hires and fires.

At PRPR things are done Paulas way. As a self-made businesswoman she feels she knows best and expects staff to follow. Staff that dont like it tend to leave after a while (sometimes to set up rival consultancies). The more experienced PR heads tend to feel badly treated and listened to more by their clients than their own boss within the organisation.

In the office the younger staff get on well and socialise after work in Covent Garden wine bars. However amongst the others there is a lot of competition between divisions and individuals, bitchiness, poaching of clients, etc. When more senior staff have suggested more of a team approach to working, Paula just said but we are all a team.

Whilst most staff are pleased to be working in PR, the company itself makes little effort to provide much motivation. Pay and perks are poor for the industry and the workplace atmosphere fraught. The address is trendy but the back office is drab and cramped. Paula is always screaming that they are near bankruptcy whilst running up enormous expenses for extravagant flower arrangements, her personal wardrobe and cosmetic enhancements. Younger college trained staff tend to move on as soon as they can.

There is no formal selection or interview procedure and PRPR has been lucky not to have been taken to an Employment Tribunal over discrimination or unfair dismissal. If Paula likes you she takes you on. There is no formal career structure or staff appraisal.

FUTURE PLANS
PRPR has ambitious but vague expansion plans to extend the companys portfolio to include new accounts in lifestyle, cosmetics and fragrances. It is planned to have at least six new staff at the office, but it is not clear how these key people will be recruited other than by Paulas ad hoc methods. It is also unclear how they will physically be fitted in

It is obvious that PRPR, whilst very go ahead in promoting its clients products and services, is not a modern organisation from an organisational or human resources perspective. It needs to improve its practices urgently, preferably before starting its expansion.
Paula has not thought through the implications of her growing business, but she does know that her time is fully committed running the business as it is now.

Paula Rich PR has now engaged you as a management consultant to tackle these issues and advise her.




There are faxes for this order.

Week 4 Actual Questions
Corporate Finance: Core Principles and Applications 3th edition Ross, Westerfield, Jaffe, Jordan
Discussion Question 1 Chapter 15 Concept Question 7 Page 486
Observed Capital Structures Refer to the observed capital structures given in Table 15.3 of the text. What do you notice about the types of industries with respect to their average debt-equity ratios? Are certain types of industries more likely to be highly leveraged than others? What are some possible reasons for this observed segmentation? Do the operating results and tax history of the firms play a role? How about their future earnings prospects? Explain.
(Your answer should be in no more than 200 words.)


TABLE 15.3
Capital Structure Ratios for Selected U.S. Nonfinancial Industries (SIC codes in parentheses)
Source: Ibbotson Associates 2008, Cost of Capital Quarterly, 2008 Yearbook

Debt as a percentage of the Market Value Equity and Debt (Industrial Media, %)
High Leverage
Air transport (451) 57.91
Building construction (15) 40.38
Communications (48) 33.57
Hotels and lodging (701) 44.16
Paper (26) 25.06

Low Leverage
Biological products (2836) 5.89
Computers (3571) 1.60
Drugs (283) 6.76
Educational services (82) 7.81
Electronics (367) 3.29

Definition: Debt is the total of short-term debt and long-term debt. Values are industry medians of five-year averages.

Discussion Question 2 See Student Guide for the actual question.


Debt Ratio A utility company is allowed to charge prices high enough to cover all costs, including its cost of capital. Public service commissions are supposed to take actions to stimulate companies to operate as efficiently as possible in order to keep costs, hence prices, as low as possible. Some time ago, AT&T?s debt ratio was about 33 percent. Some people (Myron J. Gordon in particular) argued that a higher debt ratio would lower AT&T?s cost of capital and permit it to charge lower rates for telephone service. Gordon thought an optimal debt ratio for AT&T was about 50 percent. Do the theories presented in Chapters 14 and 15 support or refute Gordon?s position?
(Your answer should be in no more than 200 words.)

Assignments Chapter 14 Page Closing Case: Stephenson Real Estate Recapitalization on page 458.
STEPHENSON REAL ESTATE RECAPITALIZATION
Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The company purchases real estate, including land and buildings, and rents the property to tenants. The company has shown a profit every year for the past 18 years, and the shareholders are satisfied with the company?s management. Prior to founding Stephenson Real Estate, Robert was the founder and CEO of a failed alpaca farming operation. The resulting bankruptcy made him extremely averse to debt financing. As a result, the company is entirely equity financed, with 15 million shares of common stock outstanding. The stock currently trades at $34.50 per share.
Stephenson is evaluating a plan to purchase a huge tract of land in the southeastern United States for $95 million. The land will subsequently be leased to tenant farmers. This purchase is expected to increase Stephenson?s annual pretax earnings by $23 million in perpetuity. Kim Weyand, the company?s new CFO, has been put in charge of the project. Kim has determined that the company?s current cost of capital is 12.5 percent. She feels that the company would be more valuable if it included debt in its capital structure, so she is evaluating whether the company should issue debt to entirely finance the project. Based on some conversations with investment banks, she thinks that the company can issue bonds at par value with an 8 percent coupon rate. Based on her analysis, she also believes that a capital structure in the range of 70 percent equity/30 percent debt would be optimal. If the company goes beyond 30 percent debt, its bonds would carry a lower rating and a much higher coupon because the possibility of financial distress and the associated costs would rise sharply. Stephenson has a 40 percent corporate tax rate (state and federal).
1. If Stephenson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain.
2. Construct Stephenson?s market value balance sheet before it announces the purchase. 3. Suppose Stephenson decides to issue equity to finance the purchase.
a. What is the net present value of the project?
b. Construct Stephenson?s market value balance sheet after it announces that the firm will finance the purchase using equity. What would be the new price per share of the firm?s stock? How many shares will Stephenson need to issue in order to finance the purchase?
c. Construct Stephenson?s market value balance sheet after the equity issue, but before the purchase has been made. How many shares of common stock does Stephenson have out- standing? What is the price per share of the firm?s stock?
d. Construct Stephenson?s market value balance sheet after the purchase has been made. 4. Suppose Stephenson decides to issue debt in order to finance the purchase.
a. What will the market value of the Stephenson company be if the purchase is financed with debt?
b. Construct Stephenson?s market value balance sheet after both the debt issue and the land purchase. What is the price per share of the firm?s stock?
5. Which method of financing maximizes the per-share stock price of Stephenson?s equity?
Week 5
Corporate Finance: Core Principles and Applications 3th edition Ross, Westerfield, Jaffe, Jordan
Discussion Question 1 - Chapter 3 Closing Case Page 81-83 (Answer question 3 only from this case. Your answer should be in no more than 200 words.).
RATIOS AND FINANCIAL PLANNING AT EAST COAST YACHTS
After Dan?s analysis of East Coast Yachts? cash flow (at the end of our previous chapter), Larissa approached Dan about the company?s performance and future growth plans. First, Larissa wants to find out how East Coast Yachts is performing relative to its peers. Additionally, she wants to find out the future financing necessary to fund the company?s growth. In the past, East Coast Yachts experienced difficulty in financing its growth plan, in large part because of poor planning. In fact, the company had to turn down several large jobs because its facilities were unable to handle the additional demand. Larissa hoped that Dan would be able to estimate the amount of capital the company would have to raise next year so that East Coast Yachts would be better prepared to fund its expansion plans.
To get Dan started with his analyses, Larissa provided the following financial statements. Dan then gathered the industry ratios for the yacht manufacturing industry.
EAST COAST YACHTS 2010 Income Statement
Sales $617,760,000
Cost of goods sold 435,360,000
Selling, general, and administrative 73,824,000
Depreciation 20,160,000
EBIT $ 88,416,000
Interest expense 11,112,000
EBT $ 77,304,000
Taxes 30,921,600
Net income $ 46,382,400
Dividends $ 17,550,960
Retained earnings $ 28,831,440

EAST COAST YACHTS 2010 Balance Sheet
Current assets
Cash and equivalents $ 11,232,000
Accounts receivable 20,208,000
Inventories 22,656,000
Other 1,184,000
Total current assets $ 55,280,000

Fixed assets
Property, plant, and equipment $462,030,000
Less: accumulated depreciation (114,996,000)
Net property, plant, and equipment $347,034,000
Intangible assets and others 6,840,000
Total fixed assets $353,874,000
Total assets $409,154,000
Current liabilities
Accounts payable $ 24,546,000
Notes payable 18,725,000
Accrued expenses 6,185,000
Total current liabilities $ 49,456,000
Long-term debt $146,560,000
Total long-term liabilities $146,560,000
Stockholders? equity
Preferred stock $ 3,000,000
Common stock 40,800,000
Capital surplus 31,200,000
Accumulated retained earnings 186,138,000
Less treasury stock (48,000,000)
Total equity $213,138,000
Tot liab & shareholders? equity $409,154,000

Yacht Industry Ratios
LOWER UPPER
QUARTILE MEDIAN QUARTILE
Current ratio 0.86 1.51 1.97
Quick ratio 0.43 0.75 1.01
Total asset turnover 1.10 1.27 1.46
Inventory turnover 12.18 14.38 16.43
Receivables turnover 10.25 17.65 22.43
Debt ratio 0.32 0.49 0.61
Debt-equity ratio 0.51 0.83 1.03
Equity multiplier 1.51 1.83 2.03
Interest coverage 5.72 8.21 10.83
Profit margin 5.02% 7.48% 9.05%
Return on assets 7.05% 10.67% 14.16%
Return on equity 9.06% 14.32% 22.41%

1. East Coast Yachts uses a small percentage of preferred stock as a source of financing. In calculating the ratios for the company, should preferred stock be included as part of the company?s total equity?
2. Calculate all of the ratios listed in the industry table for East Coast Yachts.
3. Compare the performance of East Coast Yachts to the industry as a whole. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How would you interpret this ratio? How does East Coast Yachts compare to the industry average for this ratio?
4. Calculate the sustainable growth rate for East Coast Yachts. Calculate external funds needed (EFN) and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalculate the ratios in the previous question. What do you observe?
5. As a practical matter, East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the shareholders don?t want to dilute their existing ownership and control positions. However, East Coast Yachts is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations about the feasibility of East Coast?s expansion plans?
6. Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount. However, fixed assets often must be increased in specific amounts since it is impossible, as a practical matter, to buy part of a new plant or machine. In this case, a company has a ?staircase? or ?lumpy? fixed cost structure. Assume that East Coast Yachts is currently producing at 100 percent of capacity and sales are expected to grow at 20 percent. As a result, to expand production, the company must set up an entirely new line at a cost of $95,000,000. Prepare the pro forma income statement and balance sheet. What is the new EFN with these assumptions? What does this imply about capacity utilization for East Coast Yachts next year?

Discussion Question 2 Chapter 13 Concept Questions 5, 7 or 9 on Page 423-424). That means answer only one question. Your answer should be in no more than 200 words.)
5. Efficient Market Hypothesis A stock market analyst is able to identify mispriced stocks by comparing the average price for the last 10 days to the average price for the last 60 days. If this is true, what do you know about the market?

7. Efficient Market Hypothesis What are the implications of the efficient market hypothesis for investors who buy and sell stocks in an attempt to ?beat the market??

9. Efficient Market Hypothesis There are several celebrated investors and stock pickers frequently mentioned in the financial press who have recorded huge returns on their investments over the past two decades. Is the success of these particular investors an invalidation of the EMH? Explain.

Assignments Chapter 13 Closing Case Page 428-429

You have been at your job with East Coast Yachts for a week now and have decided you need to sign up for the company?s 401(k) plan. Even after your discussion with Sarah Brown, the Bledsoe Financial Services representative, you are still unsure as to which investment option you should choose. Recall that the options available to you are stock in East Coast Yachts, the Bledsoe S&P 500 Index Fund, the Bledsoe Small-Cap Fund, the Bledsoe Large-Company Stock Fund, the Bledsoe Bond Fund, and the Bledsoe Money Market Fund. You have decided that you should invest in a diversified portfolio, with 70 percent of your investment in equity, 25 percent in bonds, and 5 percent in the money market fund. You have also decided to focus your equity investment on large-cap stocks, but you are debating whether to select the S&P 500 Index Fund or the Large-Company Stock Fund.
In thinking it over, you understand the basic difference in the two funds. One is a purely passive fund that replicates a widely followed large-cap index, the S&P 500, and has low fees. The other is actively managed with the intention that the skill of the portfolio manager will result in improved performance relative to an index. Fees are higher in the latter fund. You?re just not certain on which way to go, so you ask Dan Ervin, who works in the company?s finance area, for advice.
After discussing your concerns, Dan gives you some information comparing the performance of equity mutual funds and the Vanguard 500 Index Fund. The Vanguard 500 is the world?s largest equity index mutual fund. It replicates the S&P 500, and its return is only negligibly different from the S&P 500. Fees are very low. As a result, the Vanguard 500 is essentially identical to the Bledsoe S&P 500 Index Fund offered in the 401(k) plan, but it has been in existence for much longer, so you can study its track record for over two decades. The graph below summarizes Dan?s comments by showing the percentage of equity mutual funds that outperformed the Vanguard 500 Fund over the previous ten years.1 So for example, from January 1977 to December 1986, almost 70 percent of equity mutual funds outperformed the Vanguard 500. Dan suggests that you study the graph and answer the following questions:
1. What implications do you draw from the graph for mutual fund investors?
2. Is the graph consistent or inconsistent with market efficiency? Explain carefully.
3. What investment decision would you make for the equity portion of your 401(k) account? Why?
NOTE: You need to review your textbook for the graph.
Source: Author calculations using data from the Center for Research in Security Prices (CRSP) Survivor Bias-Free U.S. Mutual Fund Database.
1Note that this graph is not hypothetical; it reflects the actual performance of the Vanguard 500 Index Fund relative to a very large population of diversified equity mutual funds. Specialty funds, such as international funds, are excluded. All returns are net of management fees, but do not include sales charges (which are known as ?loads?), if any. As a result, the performance of actively managed funds is overstated.

Week 6 Actual Questions
Corporate Finance: Core Principles and Applications 3th edition Ross, Westerfield, Jaffe, Jordan
Discussion Question 1 Chapter 5 Closing Case Page 166-167 (Answer Question 6 and 7 only. Your answer should be in no more than 200 words.)
After Dan?s EFN analysis for East Coast Yachts (see the Closing Case in Chapter 3), Larissa has decided to expand the company?s operations. She has asked Dan to enlist an underwriter to help sell $40 million in new 20-year bonds to finance new construction. Dan has entered into discussions with Renata Harper, an underwriter from the firm of Crowe & Mallard, about which bond features East Coast Yachts should consider and also what coupon rate the issue will likely have. Although Dan is aware of bond features, he is uncertain as to the costs and benefits of some of them, so he isn?t clear on how each feature would affect the coupon rate of the bond issue.
1. You are Renata?s assistant, and she has asked you to prepare a memo to Dan describing the effect of each of the following bond features on the coupon rate of the bond. She would also like you to list any advantages or disadvantages of each feature.
a. The security of the bond, that is, whether or not the bond has collateral.
b. The seniority of the bond.
c. The presence of a sinking fund.
d. A call provision with specified call dates and call prices.
e. A deferred call accompanying the above call provision.
f. A make-whole call provision.
g. Any positive covenants. Also, discuss several possible positive covenants East Coast Yachts might consider.
h. Any negative covenants. Also, discuss several possible negative covenants East Coast Yachts might consider.
i. A conversion feature (note that East Coast Yachts is not a publicly traded company). j. A floating rate coupon.
Dan is also considering whether to issue coupon bearing bonds or zero coupon bonds. The YTM on either bond issue will be 6.5 percent. The coupon bond would have a 6.5 percent coupon rate. The company?s tax rate is 35 percent.
2. How many of the coupon bonds must East Coast Yachts issue to raise the $40 million? How many of the zeroes must it issue?
3. In 20 years, what will be the principal repayment due if East Coast Yachts issues the coupon bonds? What if it issues the zeroes?
4. What are the company?s considerations in issuing a coupon bond compared to a zero coupon bond?
5. Suppose East Coast Yachts issues the coupon bonds with a make-whole call provision. The make-whole call rate is the Treasury rate plus .40 percent. If East Coast calls the bonds in 7 years when the Treasury rate is 5.6 percent, what is the call price of the bond? What if it is 9.1 percent?
6. Are investors really made whole with a make-whole call provision?
7. After considering all the relevant factors, would you recommend a zero coupon issue or a regular coupon issue? Why? Would you recommend an ordinary call feature or a make-whole call feature? Why?

Discussion Question 2 Chapter 20 Closing Case Page 662 (Answer Question 5 only. (Your answer should be in no more than 200 words. )
EAST COAST YACHTS GOES INTERNATIONAL
Larissa Warren, the owner of East Coast Yachts, has been in discussions with a yacht dealer in Monaco about selling the company?s yachts in Europe. Jarek Jachowicz, the dealer, wants to add East Coast Yachts to his current retail line. Jarek has told Larissa that he feels the retail sales will be ap- proximately ?5 million per month. All sales will be made in euros, and Jarek will retain 5 percent of the retail sales as commission, which will be paid in euros. Since the yachts will be customized to order, the first sales will take place in one month. Jarek will pay East Coast Yachts for the order 90 days after it is filled. This payment schedule will continue for the length of the contract between the two companies.
Larissa is confident the company can handle the extra volume with its existing facilities, but she is unsure about any potential financial risks of selling its yachts in Europe. In her discussion with Jarek, she found that the current exchange rate is $0.73/?. At this exchange rate, the company would spend 70 percent of the sales income on production costs. This number does not reflect the sales commis- sion to be paid to Jarek.
Larissa has decided to ask Dan Ervin, the company?s financial analyst, to prepare an analysis of the proposed international sales. Specifically, she asks Dan to answer the following questions:
1. What are the pros and cons of the international sales plan? What additional risks will the company face?
2. What happens to the company?s profits if the dollar strengthens? What if the dollar weakens?
3. Ignoring taxes, what are East Coast Yachts? projected gains or losses from this proposed arrangement at the current exchange rate of $0.73??? What happens to profits if the exchange rate changes to $0.80??? At what exchange rate will the company break even?
4. How could the company hedge its exchange rate risk? What are the implications for this approach?
5. Taking all factors into account, should the company pursue international sales further? Why or why not?

Analyze and discuss small business growth in terms of growth strategy, business forms, short and medium term goals, financing assistance, organizational structure and staffing needs, customers and promotion, and ethics and social responsibility. Students are expected to apply business and management concepts learned in our course.
By completing this assignment, students will meet the outcome(s):
? identify the critical business functions and how they interact in order to position the organization to be effective in the current business environment;
? explain the importance of the integration of individuals and systems to organizational effectiveness;
? describe the ethical and social responsibilities that confront a business.
?
Required Elements of the Final Project:
? Read critically and analyze the case below, Planning for Growth;
? Review the project description listed above and review the final project grading rubric, which you will find in the Syllabus and under the Course Content area of our classroom;
? In your paper, answer the following questions:
? What steps should Kelly take to organize and prioritize her business growth strategy?
? What business form might make sense, given her expansion plans, and why?
? Focusing primarily on Kelly?s short-term goals, what kind of financial assistance might be available to Kelly? Which options would you recommend, and why?
? How might Kelly?s staffing needs change? What kind of organizational structure do you think Kelly?s expanded business should have, and what is the best way for her to organize, orient, and train her restaurant staff (e.g., functional categories, units, teams, flat or vertical hierarchy) to meet the needs of her new business?
? How should Kelly deal with her current customers in regard to the change? What kind of promotion should she consider in attracting customers to her new location?
? What are the ethical issues and potential social responsibilities highlighted by this change? (Consider customers, employees, the current and new communities, and other stakeholders.) How might these issues be dealt with most appropriately?

Required Formatting of Paper:
? This report should be double spaced, 12-point font, and four to five pages in length excluding the title page and reference page;
? Format in Microsoft Word or Rich Text Format (rtf);
? Title page;
? Follow this format for your paper (based on elements detailed above)
? Title page
? Introduction
? Body, in paragraph form. Use the following section headings:
? Growth Strategy
? Business Form
? Financial Assistance
? Organizational Structure and Staffing Needs
? Customers and Promotion
? Ethical Issues and Social Responsibility
? Summary paragraph
? Reference page formatted according to APA requirements. Include at least three
? This paper is to be written in the third person. There should be no words in the paper such as ?I and we;?
In-text citations from the course material. If you use additional sources from the Internet or the library, do not forget to use in-text citations and include in the reference.
? Paraphrase and do not use direct quotes.

Case Study: Planning for Growth
Kelly?s Sandwich Stop is one of the best-known and most loved sandwich concessions in town. In business for about five years, she sells sandwiches and other lunch items made from locally produced food from her mobile food trailer. Kelly?s passion and talent for creating reliably fresh, tasty lunch fare popular among a business clientele (largely employees and shoppers) has made her small enterprise a booming success.
In the last year, Kelly added a bicycle-towed concession that travels to different strategic locations in town, selling her popular sandwiches to customers who work beyond walking distance of Kelly?s Sandwich Stop. She now has a total of four employees, all part-time, working both concessions. Because she caters to urban customers, her concessions operate on week days from 10 am to 2 pm. To promote word-of-mouth advertising, Kelly uses Facebook to publish her daily menus and the locations of the bicycle concession.
As a sole proprietor, Kelly has been pleased with her lunch business success. Now it?s time to get serious about the future of her business. In the short and medium term, she wants to see it grow into a potentially more lucrative enterprise, implementing a greater variety of food products and services, and increasing her competitive edge in the region. Ever the ardent entrepreneur, Kelly?s long-term dream is to develop her creative, health-conscious culinary skills and services into a wider clientele outside the region.
An opportunity has arisen to lease restaurant space about 10 miles away from her trailer concession location, close to a mall and the suburbs and nearer to her local food producers. Kelly has jumped at the chance. While she has hired professional business consultants to help her set up the space, design the menu, and implement the opening of the restaurant, she must also consider the short- and long-term financial, HR, and management needs of such an expansion. Kelly is particularly sensitive to her relationship to her customers, employees, and the community.

Writing summary paper.
The paper should be two pages, single spaced with the topic discussed and introduced in your introduction paragraph. Discuss the issues involved and/or the current situation that your article tackles. Give the both arguments if the topic is a debated issue within the industry. You can include your thoughts and how it might affect you, if
relevant.(YOU WILL FIND THE ARTICLE BELOW)





this is the article:
The Economy
http://countrystudies.us/saudi-arabia/34.htm
Saudi Arabia Table of Contents
THE DEVELOPMENT OF THE SAUDI ARABIAN ECONOMY has gone hand in hand with the establishment and expansion of the Saudi state during the last fifty years. The process of building the state, fortified by oil revenues distributed through the modern institutions of bureaucracy, worked to unify this economically diverse country. So pervasive has been the influence of these relatively young institutions that few vestiges of the old economy survive unchanged.
Before the discovery of oil in the Arabian Peninsula, it would be difficult to speak of a unified entity such as the Saudi Arabian economy. Before the 1930s, the region that would later come under the control of the Saudi state was composed of several regions that lived off specific resources and differentiated human activities. The western province, the Hijaz, for example, depended chiefly on subsistence agriculture, some long-distance trade, and the provision of services to pilgrims traveling to the holy cities of Mecca and Medina. A plantation economy that grew dates and other cash crops dominated the Eastern Province (also known as Al Ahsa, Al Hasa, and Ash Sharqiyah). An extremely hostile environment determined geographical separation of peoples. Because permanent habitation could exist only where there was water--at natural springs and wells--the long distances between water sources isolated clusters of people and hampered travel. The difficulty of travel also discouraged penetration from the outside, as did the lack of readily exploitable natural resources.
The discovery of oil in the Eastern Province in 1938 came just six years after another major development: the establishment of the Kingdom of Saudi Arabia, which unified a number of diverse areas of the peninsula under one ruler. Moreover, the rebuilding of Europe after World War II and its need for cheap, reliable sources of oil greatly enhanced the position of the newly established Saudi Arabian oil industry. The combination of these three events formed the basis of the current structure of the Saudi economy.
The quantum jump in revenues that flowed into the treasury of Abd al Aziz Al ibn Abd as Rahman Saud (ruled 1932-53) fortified his position and allowed the king to exert greater political and economic control over the territories he had conquered. At the apex of the economy was the state with all the mechanisms needed to ensure the rule of the Saud family (Al Saud). The state became the widespread agent of economic change, replacing the traditional economy with one that depended primarily on the state's outlays.
The conjuncture of these events also thrust Saudi Arabia, by virtue of its location and its enormous oil assets, into the center of the West's strategic concerns. At first the issue was the reconstruction of Europe; later, however, the steady flow of oil from the kingdom would be regarded as essential for international economic stability. In this sense, Saudi oil production and investment policies have assumed paramount importance to the industrialized world and, more recently, the developing world. This importance of oil to the West, particularly to the United States, could not have been more clearly underscored than it was by the Iraqi invasion of Kuwait in August 1990 and may have been a key reason for the massive military effort marshaled to expel Iraq from Kuwait. After the Persian Gulf War (1991), Saudi Arabia's standing in the world oil market increased, because it was the only major oil-producing country that had significant excess capacity of crude oil production and thereby a strong influence on international oil supplies and prices.
Maintaining this position in the international oil market has been the basis of Saudi economic policy in the early 1990s and was likely to remain so in the near future. Despite attempts to diversify the economy, developing a self-perpetuating nonoil sector has proved more difficult than earlier Saudi planners had envisioned. This is not to say that the government has not raised the average Saudi citizen's standard of living to one of the highest levels in the world and established for most of its inhabitants world-class infrastructural and social services. But sustaining real income growth still depended primarily on government spending, which was largely facilitated by oil revenues. Therefore, the government could not afford to neglect the oil sector, the primary engine of economic growth.
Developing the oil sector was crucial to domestic political stability, and it was the kingdom's importance as an oil producer that guaranteed its protection during the gulf crisis. During the early 1990s, it was becoming clear that with the expected decline of oil production from the republics of the former Soviet Union, combined with the stagnating output in other debt-ridden and geologically constrained Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil producers, Saudi Arabia had the chance to obtain a disproportionate share of any net increment of crude oil demand over the coming years.
Saudi Arabia had set out to meet this challenge with a major capacity expansion plan for its oil industry. First, the Saudi Arabian Oil Company (Saudi Aramco, the national oil company) accelerated plans to push sustainable domestic crude oil production capacity by 1995 to between 10.5 million and 11 million barrels per day (bpd) from 8.4 million bpd in 1992, with an increased share of lighter grades of crude oil produced. Second, the Saudi Arabian Marketing and Refining Company (Samarec) planned to upgrade its refineries to meet the new environmental standards in the West and growing domestic demand. Third, following its acquisition of downstream assets in the United States and the Republic of Korea (South Korea), the kingdom planned to purchase refining capacity closer to key consuming markets. Although shrouded in secrecy that made details observer, this strategy seemed designed to obtain or increase Saudi Arabia's market share.
During the 1970s and early 1980s, the sharp increase in oil prices relieved the chronic financial constraints that had plagued the Saudi state since its inception. Massive oil revenues, combined with delays in using the funds and the Saudi economy's limited absorptive capacity, created large financial surpluses in both the private and government sectors of the economy. The vast majority of these assets were invested in international financial institutions and in Western government securities.
After 1982 government authorities were obliged to change their emphasis from managing surpluses to coping with growing budgetary and balance-of-payments shortfalls. With the downturn in oil prices beginning in 1982, oil revenues to the kingdom began to recede. Given the huge investment expenditures to which it was already committed, the government was forced to finance large budget and current account deficits of the external balance of payments through foreign asset drawdowns. At first, the small decline in oil prices was considered a necessary "cooling off" period and a chance to review the investment program begun fifteen years earlier. Facing an ever-worsening international oil supply glut, the burden of reducing oil output under OPEC's newly installed quota system fell largely on Saudi Arabia. The kingdom's oil revenues therefore took a double blow--reduced prices and reduced exports--not to mention the devaluation of the United States dollar, the currency in which oil is sold on international markets. By late 1985, responding to domestic concerns, Saudi Arabia sharply boosted oil output in an attempt to regain its market share and to impose production discipline on other OPEC members. This policy led directly to the oil price crash of 1986.
The replacement in 1986 of well-known Minister of Petroleum and Mineral Resources Ahmad Zaki Yamani by Hisham Muhi ad Din Nazir, and King Fahd ibn Abd al Aziz Al Saud's personal intervention in the kingdom's oil affairs, were followed by a more commercial approach to oil exports that was designed to maintain Saudi Arabia's world market share. Greater OPEC discipline and a revival in world demand, stimulated by lower oil prices and rapid economic growth in Asia, helped return some buoyancy to the oil markets after 1986. Nonetheless, oil revenues in the late 1980s remained at 25 percent to 30 percent of levels during the early 1980s and proved insufficient to cover government expenditures and offset imports, thus perpetuating budget and external payment deficits. The authorities further reduced foreign assets and attempted to stanch capital flight (aggravated by the short-lived Iranian military thrusts into Iraq in 1986 and 1987 and the "tanker was" of 1987) and to induce the repatriation of private capital through the sale of government bonds. This strategy stemmed the hemorrhage. By early 1990, following the end of the Iran-Iraq War two years earlier, increased oil output and higher oil prices combined with improving private sector confidence to revive an economy that had contracted for several years in a row.
In the two months following the Iraqi invasion of Kuwait in 1990, all government efforts at restoring confidence in the economy since the 1986 price crash evaporated, precipitating another large outflow of private capital and a virtual standstill in domestic investment. But as oil prices and Saudi output soared to replace embargoed Iraqi and Kuwaiti oil, and with the arrival of the United Nation (UN) coalition forces, calm returned to the economy, helped no doubt by substantial expenditures related to the war effort. After the war, the repatriation of private funds and renewed economic confidence created what some journalists called a "miniboom." Despite budgetary problems at home and international economic problems, promising regional trade prospects emerged. Such prospects consisted of new markets in Iran, Central Asia, and South Asia, as well as the reconstruction of Kuwait, that opened new opportunities for Saudi businessmen.
The Persian Gulf War was disastrous for government finances, however. Higher oil revenues were insufficient to cover the estimated US$60 billion that the war cost the Saudi government. The authorities had to deplete the last of the financial reserves remaining from the oil-boom days of the early 1980s. In mid-1992, official external assets stood at the minimum needed for ensuring confidence in the Saudi currency, the riyal, and for maintaining prudent reserves. Although budgetary and external deficits have been sharply reduced, the government was forced to borrow on the international market and to reduce subventions to government enterprises, such as Saudi Basic Industries Corporation (Sabic) and Saudi Aramco, forcing such firms to seek capital overseas.
The status of government accounts in the aftermath of the Persian Gulf War clouded the prospects for smooth financing of the three major expenditure categories on the ruling family's priority list for the 1990s: the oil-sector capacity-expansion plan, major increases in defense and arms purchases, and the maintenance of public investments to sustain the domestic standard of living. The options faced by the government to alleviate its financial constraints were limited, especially on the oil revenue front, and debt financing would be clearly unsustainable over the medium term. During the 1990s, therefore, the government will probably strive for financial maneuverability by reducing the dependence of the private sector on government funds and by attempting to diversify budget revenue sources.

One task that your team will face is to analyze growth opportunities for expansion. There are several factors that will impact your decision making, ?Total demand in any quarter will be determined by (1) the market?s sales potential, (2) the seasonal and economic conditions of the global economy, and (3) the nature and extent of competition? (Cadotte & Bruce, 2003, p.3).

Another consideration is one of ethics; do your company values support the expansion
choices you will be making? Decision making tied to ethics and values may not be easy
but can be advantageous. McMurrian and Matulich (2006) cite Ferrell ?These
advantages include higher levels of efficiency in operations, higher levels of
commitment and loyalty from employees, higher levels of perceived product quality,
higher levels of customer loyalty and retention, and better financial performance (Ferrell
2004)? (p.11).

As part of the management team, you will need to be in consensus on expansion
plans and will be using your values as one filter to make your final decision.

Requirements

In a 4-6 page APA formatted paper excluding title page, reference page, abstracts,
diagrams, and other visual/oral aids as appropriate, you will:

? Discuss the challenges of values based business decision making ethics in the
current marketplace.
? Research all four markets that you can expand into and assess the current social
and political climate of each.
? Pick three that are the best fit for you based on the comparison to company
values.
? Create recommendations that include a detailed rationale for your three choices.

Task 2A - P2: Identify and describe the impact of governnment spending on Balfor Beatty (http://www.balfourbeatty.com/)

P2
-----
For a through answer you should ensure that you cover:

> A description and examples of the type of work Balfour Beatty does that is funded by government spending
> A description of how general government spending might affect Balfour Beatty
> An explanation of PFI work and how the PFI policy has affected Balfour Beatty
> An assessment of how important government spending is to Balfour Beatty and the knock-on effects of changes in government spending levels.


Unit 39 - M1: Analyse the implications of government policies on Balfour Beatty

M1
-----
Analysing requires you to break the situation down and look in detail at all aspects. In this case you should look in detail at the following.

> A thorough discussion of how changes in the levels and priorities of government spending might affect Balfour Beatty. You should also outline how the managers of Balfour Beatty might reach changes.
> An explanation of the multiplier mechanism, how changes in government spending affect it and how this in turn could affect Balfour Beatty. You should also outline how the managers of Balfour Beatty react to such changes.
> Effects on the firms possible expansion plans.

1. Ethics and Firm's Goals
Review Concept Questions 3, 5 and 6. Can goals like avoiding unethical or illegal behavior be in conflict with the goal of the firm? How does this complicate the agency problem? Fully explain your reasoning in at least 200 words. Respond to at least two of your fellow students' postings.
3) Agency Problems
Who owns a corporation? Describe the process whereby the owners control the firm?s management. What is the main reason that an agency relationship exists in the corporate form of organization? In this context, what kinds of problems can arise?
5. Goal of the Firm
Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an overemphasis on short-term profits at the expense of long-term profits.
6. Ethics and Firm Goals
Can our goal of maximizing the value of the stock conflict with other goals, such as avoiding unethical or illegal behavior? In particular, do you think subjects like customer and employee safety, the environment, and the general good of society fit in this framework, or are they essentially ignored? Try to think of some specific scenarios to illustrate your answer.

2. Cash Flow
In at least 200 words, fully answer questions 3.
CASH FLOWS AT EAST COAST YACHTS
Because of the dramatic growth at East Coast Yachts, Larissa decided that the company should be reorganized as a corporation (see our Chapter 1 Closing Case for more detail). Time has passed and, today, the company is publicly traded under the ticker symbol ?ECY?.
Dan Ervin was recently hired by East Coast Yachts to assist the company with its short- term financial planning and also to evaluate the company?s financial performance. Dan graduated from college five years ago with a finance degree, and he has been employed in the treasury department of a Fortune 500 company since then.
The company?s past growth has been some- what hectic, in part due to poor planning. In anticipation of future growth, Larissa has asked Dan to analyze the company?s cash flows. The company?s financial statements are prepared by an outside auditor. Below you will find the most recent income statement and the balance sheets for the past two years.

EAST COAST YACHTS
Balance Sheet

2009 2010 2009 2010
Current Asset Current liabilities
Cash and equivalents $10,752,000 $11,232,000 Account payable $23,701,440 $24,546,000
Accounts receivables $19,116,000 $20,208,000 Notes payable $20,220,000 $18,725,000
Inventory $17,263,200 $22,656,000 Accrued expenses $ 5,472,000 $ 6,185,000
Other $ 1,108,800 $ 1,184,000 Total current liabilities $49,393,440 $49,456,000
Total current assets $48,240,000 $55,280,000
Long-term deb $129,360,000 $146,560,000
Fixed assets Total long-term liabilities $129,360,000 $146,560,000

Property, plant, and equipment $408,816,000 $462,030,000
Less Accumulated depreciation ($94,836,000) ($114,996,000)
Net property, plant, and equipment $313,980,000 $347,034,000
Intangible assets and others $ 6,840,000 $ 6,840,000 Stockholders? equity
Total fixed assets $320,820,000 $353,874,000 Preferred stock $ 3,000,000 $ 3,000,000
Common stock $ 30,000,000 $ 40,800,000
Capital surplus $ 12,000,000 $31,200,000
Accumulated retained earnings $157,306,560 $186,138,000
Less treasury stock ($12,000,000) ($48,000,000)
Total equity $190,306,560, $213,138,000
Total assets $369,060,000 $409,154,000 Total liabilities and shareholders? equity $369,060,000 $409,154,000

Larissa has also provided the following information. During the year, the company raised $40 million in new long-term debt and retired $22.8 million in long-term debt. The company also sold $30 million in new stock and repurchased $36 million. The company purchased $60 million in fixed assets, and sold $6,786,000 in fixed assets.

Larissa has asked Dan to prepare the financial statement of cash flows and the accounting statement of cash flows. She has also asked you to answer the following questions:

1. How would you describe East Coast Yachts? cash flows?
2. Which cash flows statement more accurately describes the cash flows at the company?
3. In light of your previous answers, comment on Larissa?s expansion plans.

THE COMPANY THAT WAS SELECTED IS __________ABBOTT LABORATORIES_________

Trident University
Module 2 ? SLP
Macro-Economic Indicators: GDP, CPI, Unemployment, Interest Rates

All links tested on June 15, 2012

For this and all the remaining SLP assignments you will continue to use your reference organization -- ABBOTT LABORATORIES --the one you described in the SLP for Module one.

THE SELECTED COMPANY IS "ABBOTT LABS"
PLEASE MAKE SURE THE SOURCES CAN BE VERIFIED!!!!!

For this Module, think about macro-economic indicators of performance, and how recent changes in these indicators have affected the performance of your organization. (ABBOTT LABORATORIES) For example, how does the change in GDP affect the sales, profitability, expansion plans or competitiveness of your organization. Or, as another example, has the rise in the national rate of unemployment had any affect on your organizations' operational performance or management decisions?

**Below are three examples of what is required for this assignment. The first two are examples of correct approaches and the third is an example of an incorrect approach.

Sample Mini-Analysis (1):
My organization is a beauty shop/spa that caters to middle class women. With the recession and rise of unemployment the shop has had decreased revenue and profit. This has been particularly true of the spa part of the business because that is more of a luxury service than the simple haircut and coloring end of the business.

Notice that the primary focus was on how this macro-economic indicator has affected the business. This is a good example of the approach to take.

Sample Mini-Analysis (2):
I will begin with the Employment Cost Index (ECI) and why it is important to the well being of TLMP. Companies such as TLMP must be able to anticipate inflation and the impact it will have on currency exchanges and how that would impact their international production and trade. The reason ECI is of less importance to TLMP then some of the other indicators, is because it is a lagging indicator. Albeit important, it is not an indicator that will provide advance data that would allow TLMP to make a change in plans to account for an anticipated change in economic policy.

Notice that the above emphasizes the effect the ECI will have on the costs to TMLP and management has to engage in planning if these costs are expected to increase. It also demonstrates that even though ECI is an important index it is limited in its ability for TMLP management to use it because it does not provide the data in time for the company to use it for its planning. This is a good example of the approach to take.

Sample Mini-Analysis (3):
The management of Pleble Corporation uses the Retail Sales report for its planning. They compare the sales of Pleble on a month to month basis, and break it down by its various product lines to spot where sales are falling or increasing.

Notice that this is NOT a correct focus. There is an important macro-economic indicator called the Retail Sales Report but the above analysis, after mentioning it, goes into a discussion of Pleble's sales report, and that is not a macro indicator because it is only about one company, not the entire economy. The proper focus would have been to utilize the national sales report in a way that would have helped Pleble management to forecast where their sales may be going in the near term future. For example, the downward tend of retail sales over the past 5 months indicates that Peble should reduce their inventory.

There are literally thousands of macro-economic indicators that are reported. Keep in mind that a given organization, such as a home builder, may be affected by housing starts, even though that indicator may have no affect on a defense contractor. The link to Investopedia just below lists 25 of the most commonly used macroeconomic indicators.

http://www.investopedia.com/university/releases/

1. Select three macro-economic indicators that you feel have the greatest impact on the operations and/or planning for your SLP organization. Remember that an economic indicator measures a change in the general or in a specific aspect of the economy and and you should be assessing how each macro-economic change you have chosen affects your company. Explain why they are important to the current or future condition of your organization.

Note: It is always good to use at least one indicator that measures your industry, like housing starts if you are looking at a realtor or construction company, but if you cannot think of any that applies to your SLP company then use GDP, CPI, and retail sales. One restriction; Do not use interest rates on this question because it is the subject of the second question.

The Federal Reserve has written an interesting article on yield curves as a leading economic indicator and this should be read to answer question 2.
? http://www.newyorkfed.org/research/capital_markets/ycfaq.html
2. In the module 1 case you learned about Federal Reserve policy regarding their ability to influence interest rates. In the module 2 case you learned about the yield curve and interest rate theory. Put this knowledge to use in answering the following question. If the Federal Reserve decided to raise interest rates how would this affect your SLP organization? Address areas such as sales, profitability, ability and cost of using debt to finance investment or other needs. What you write here is a small sample of how Fed interest rate policy can affect the economy.

LENGTH: 2-3 typed and double-spaced pages.
In addition to the overall quality, depth, grammar, and organization of the paper, the following will, in particular, be assessed:
1. Your ability to choose appropriate macro-economic indicators that apply to your organization.
2. How well you are able to relate macro-economic indicators to the condition and performance of your organization.

I would like writer "BOLAVENS" to complete this assignment.

Principles of Macroeconomics:
http://catalog.flatworldknowledge.com/bookhub/reader/2728?cid=&e=rittenmacro-ch12

For this and all the remaining SLP assignments you will continue to use your reference organization (FedEx is my reference organization) -- the one you described in the SLP for Module one.

For this Module, think about macro-economic indicators of performance, and how recent changes in these indicators have affected the performance of your organization. For example, how does the change in GDP affect the sales, profitability, expansion plans or competitiveness of your organization. Or, as another example, has the rise in the national rate of unemployment had any affect on your organizations' operational performance or management decisions?

Below are three examples of what is required for this assignment. The first two are examples of correct approaches and the third is an example of an incorrect approach.

Sample Mini-Analysis (1):

My organization is a beauty shop/spa that caters to middle class women. With the recession and rise of unemployment the shop has had decreased revenue and profit. This has been particularly true of the spa part of the business because that is more of a luxury service than the simple haircut and coloring end of the business.

Notice that the primary focus was on how this macro-economic indicator has affected the business. This is a good example of the approach to take.

Sample Mini-Analysis (2):

I will begin with the Employment Cost Index (ECI) and why it is important to the well being of TLMP. Companies such as TLMP must be able to anticipate inflation and the impact it will have on currency exchanges and how that would impact their international production and trade. The reason ECI is of less importance to TLMP then some of the other indicators, is because it is a lagging indicator. Albeit important, it is not an indicator that will provide advance data that would allow TLMP to make a change in plans to account for an anticipated change in economic policy.

Notice that the above emphasizes the effect the ECI will have on the costs to TMLP and management has to engage in planning if these costs are expected to increase. It also demonstrates that even though ECI is an important index it is limited in its ability for TMLP management to use it because it does not provide the data in time for the company to use it for its planning. This is a good example of the approach to take.

Sample Mini-Analysis (3):

The management of Pleble Corporation uses the Retail Sales report for its planning. They compare the sales of Pleble on a month to month basis, and break it down by its various product lines to spot where sales are falling or increasing.

Notice that this is NOT a correct focus. There is an important macro-economic indicator called the Retail Sales Report but the above analysis, after mentioning it, goes into a discussion of Pleble's sales report, and that is not a macro indicator because it is only about one company, not the entire economy. The proper focus would have been to utilize the national sales report in a way that would have helped Pleble management to forecast where their sales may be going in the near term future. For example, the downward tend of retail sales over the past 5 months indicates that Peble should reduce their inventory.

There are literally thousands of macro-economic indicators that are reported. Keep in mind that a given organization, such as a home builder, may be affected by housing starts, even though that indicator may have no affect on a defense contractor. The link to Investopedia just below lists 25 of the most commonly used macroeconomic indicators.

http://www.investopedia.com/university/releases/

1. Select three macro-economic indicators that you feel have the greatest impact on the operations and/or planning for your SLP organization. Remember that an economic indicator measures a change in the general or in a specific aspect of the economy and and you should be assessing how each macro-economic change you have chosen affects your company. Explain why they are important to the current or future condition of your organization.

Note: It is always good to use at least one indicator that measures your industry, like housing starts if you are looking at a realtor or construction company, but if you cannot think of any that applies to your SLP company then use GDP, CPI, and retail sales. One restriction; Do not use interest rates on this question because it is the subject of the second question.

The Federal Reserve has written an interesting article on yield curves as a leading economic indicator and this should be read to answer question 2.

http://www.newyorkfed.org/research/capital_markets/ycfaq.html


2. In the module 1 case you learned about Federal Reserve policy regarding their ability to influence interest rates. In the module 2 case you learned about the yield curve and interest rate theory. Put this knowledge to use in answering the following question. If the Federal Reserve decided to raise interest rates how would this affect your SLP organization? Address areas such as sales, profitability, ability and cost of using debt to finance investment or other needs. What you write here is a small sample of how Fed interest rate policy can affect the economy.



LENGTH: 2-3 typed and double-spaced pages.

In addition to the overall quality, depth, grammar, and organization of the paper, the following will, in particular, be assessed:

1. Your ability to choose appropriate macro-economic indicators that apply to your organization.

2. How well you are able to relate macro-economic indicators to the condition and performance of your organization.

Explore Kudler Fine Foods and respond to the following questions:

What is the difference between an issue and a problem?

What are some of the issues at Kudler Fine Foods.

Kudler Fine Food's Strategic Plan below.

Mission
Kudler Fine Foods is committed to providing our customers with the finest selection of the very best foods and wines so that your culinary visions can come true.
Vision
Kudler Fine Foods will be the premiere gourmet grocery store for those savvy shoppers who are searching for the finest meats, produce, cheeses, and wine.
Social Responsibility Statement
Kudler Fine Foods uses only the finest organic ingredients. Whenever possible, we purchase local produce from organic farmers. We use unbleached flour in our bakery goods and we dont add unnecessary preservatives to our products. Food is rotated from the shelves on an ongoing basis. Those items that are still in good condition are donated to local homeless shelters and food kitchens.
Background
Kudler Fine Foods was established in 1998 when Kathy Kudler fulfilled her vision of establishing her own gourmet food store. Kathy had a passion for gourmet foods but found that her particular neighborhood just did not have a wide selection of products to choose from. Although she had no experience in operating a gourmet food shop, she believed that a one-stop shopping experience at a place with lots of variety and reasonable prices would be successful.
Kathy opened her first store and then a second and recently a third. The La Jolla store continues to grow while the Del Mar store has been having some difficulties. The store in Encinitas has just opened, but sales seem brisk. Kathy works seven days a week, visiting and
4
working at each store sometimes daily. Kathy has hired a manager and an assistant manger for each store to handle much of the day-to-day details, cashiers to check people out and some part-time, local college students to help with stocking the shelves and constantly tending to the inventory to make sure that fresh product is always on the shelf. She also has hired specialists who advise and assist clients with their culinary needs. These specialists are located in each store, usually during regular business hours. Since the beginning, Kathy has handled all of the buying for the stores. In order to get the best price possible for products, Kathy buys in bulk for all three stores. While this approach saves Kathy money, ordering for all three stores on a weekly basis takes so much of her time, that she hardly has time to interact with the customers anymore. Because customers expect a high-quality product, Kathy makes sure that the product is pulled from the shelf and replaced as soon as possible if the turnover rate is less than expected. Kathy intends to continue providing fine quality foods to the local area, while expanding and opening new stores in the process. While cash flow is good, buildings are leased and not purchased and thus far, Kudler Fine Foods (KFF) has been able to operate without any outside investors.
Current Locations
Kathy opened her first store in 1998 in La Jolla, California. La Jolla was selected because it is the area in which Kathys initial needs assessment illustrated that a gourmet market is needed. La Jollas population was 44,424 and growing at 1.9% per year. The average median house price is just over $2 million. Kathys assumption that La Jolla would be a great place to open a gourmet store was quickly proven to be correct as her sales were strong from the beginning and continues to grow. Since the doors opened, Kathy spends most of her time at the stores, selecting and ordering product, occasionally running the cash register, and sometimes even stocking the shelves after the store closes or before it opens in the morning. Kudler Fine Foods was a success since it launched. In La Jolla, locals would stop by the store on their way home from the tennis court or the golf course or the office and purchase fresh produce and other products. As sales continued to increase, Kathy began to think about opening another store using the same model.
The La Jolla location had not only generated sales, but produced enough cash flow so that two years later Kudler opened its second store in Del Mar, CA. Del Mar is just far enough north of La Jolla that residents of Del Mar dont want to fight the I-5 traffic to visit La Jolla so this offered a great opportunity for growth. The two stores are only about 35 minutes apart on the freeway
5
and Kathy can easily visit both locations for control and monitoring and to finalize the weekly inventory list and order product. Del Mars median household income in 2000 was $98,257. The population was only 4,389 people but the area was considered to be economically strong enough and it has been able to support the second store, just above break-even. In early 2003, as part of her expansion plan, Kathy opened a third store in Encinitas. Although Encinitas is located just a little more in-land than the other two locations, the average age of its residents was 39.7 and is expected to be a very good target market for gourmet foods. The average household income is just over $75,000 and with a population base of just over 50,000 people, we think that the Carlsbad, CA area might be a good area for the next store. The Del Mar store would be consolidated into the Carlsbad store once it is open. This will be discussed later in the marketing plan section.
Store Departments
Each store consists of the following departments:
Bakery
Each of our stores has its own modern European-Style Bakery. In the wee hours of the morning, our bakers begin mixing their dough and creating fresh breads and pastries including fruit tarts, table loaves, flat bread, and the flakiest croissants in Southern California. Our breads and pastries are made from old world recipes and the finest ingredientsIrish butter, organic eggs, and unbleached flour. Kudlers bakery products do not contain preservatives. We use only the freshest ingredients and rotate our inventory daily. We donate day-old bakery products to local charities who feed the homeless. The slogan for our bakery department is: If you arent satisfied that our baked goods are among the best you have tasted, your purchase if free!
Meats
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Our meat and seafood are procured from certified organic producers. The meat and seafood products are fresh and prepared in the store to order. The butcher shop in each store carries:
Dry, aged beef
A variety of poultry including turkey, duck, pheasant, quail, and chicken
Lamb
Home-made sausagesmade without preservatives

The slogan for our Meat department is: We will be happy to handle any special requests you may have.
Produce
Our produce department offers over 350 fresh fruits, vegetables, herbs, and spices. We stock 16 different varieties of apples as well as a wide range of tropical fruits from around the world. Experienced cooks know that the right combinations of herbs and spices will turn a good meal into a great meal. Herbs and spices are most flavorful when they are fresh, and we carry the freshest herbs and spices in the area. We have an Asian Specialty Produce department where we carry the produce, herbs, and spices that are the staples of Asian cooking. We know that our customers are interested in maintaining a healthy lifestyle while also trying to live within their budgets. We address these concerns by offering most of our produce in both organic and non-organic varieties. The slogan for our Produce department is:
If you dont see it, let us know and we will special order the item for you!
7
Cheese and Dairy
Our stores carry a complete line of the finest dairy products including Irish butter and organic milk. We are known for our wide assortment of gourmet cheeses. We carry over 250 varieties of cheese from 21 countries. Our stores offer cheese made from cow, goat, and sheeps milk. We will also special order any cheese you may want that we do not carry in stock. The slogan for our Cheese and Dairy department is: Stp by any of our stores on a Saturday morning and experience a sampling of our cheese selections.
Wine
We have traveled the world to bring you an extensive collection of domestic and imported wines and spirits. Whether our customers want to mix the quintessential martini or find the perfect wine to serve at their next dinner party, Kudlers is the place to shop. They will find that our stores carry a wide variety of spirits and at prices that will meet any budget. While we are proud of our wide selection, we certainly dont want our customers to be intimidated, so each of our stores has a Wine Steward who will be more than happy to assist customers in making their selection. We also hold monthly wine appreciation classes so customers can learn the nuances of our wines.
8
SWOT
STRENGTHS WEAKNESSES
Our STRENGTHS are:
1. Small organization
2. No direct competition
3. Lots of choices for the consumer
4. Very customer oriented
5. Good store locations
6. Kathys personal relationship with the staff
7. Repeat customers Our WEAKNESSES are:
1. Deal in mainly perishable goods
2. Specialty shops with high pay-roll
3. Small management team with lots of responsibilities
4. The Del Mar location is not doing as well as expected
5. Geographic expansion limitations

OPPORTUNITIES THREATS
Our OPPORTUNITIES are:
1. Geographic expansion throughout California
2. Delegate purchasing process to someone with more time and experience
3. Offer more catering services
4. Add more product line as we grow
5. Spread our brand outside of California as we grow
6. Opportunity to be acquired Our THREATS are:
1. Competing gourmet shops
2. The economy declining

STRENGTHS
1. Small organization. We are able to control and monitor all activities on a daily and weekly basis.
2. No direct competition. There are no other gourmet stores in our geographic area. Specialty stores are limited and, with the exception of major grocery chains and smaller, independent wine stores, we have no direct competition.
3. Lots of choices for the consumer. We offer 16 different kinds of apples, wines from all over the world, 250 variety of cheeses, and 350 fresh fruits and vegetables. No one, including the major grocery chains, offers such a diverse product variety.
4. Very customer oriented. Whenever possible, Kathy works the counter and spends time out in the store interacting with customers. She encourages the clerks to be friendly and helpful to the customers and ask if they found everything they were looking for. If several customers request the same item, Kudler orders that item for the shelves or will even offer to special order it for the customer.
5. The locations of the stores are in mid- to upper-range economic regions where potential customers can afford to pay gourmet prices for the better quality and healthy products and the greater variety.
6. Kathy is able to interact with all of the staff each week.
7. Repeat customers. Once customers come into the store, they tend to return every 7 to 10 days to purchase more products. Kudler Fine Foods has a great reputation in our neighborhoods.

9
WEAKNESSES
1. Deal in mainly perishable goods. Because we do not use any preservatives, approximately 12% of our perishable goods are rotated out of inventory every two or three days, either by being thrown away or donated to local charities. Donated food is still in good condition, but not excellent condition so it is removed from the shelves on an ongoing basis.
2. Specialty shops with high pay-roll: Butcher, baker, wine steward, etc. Payroll of these specialty positions is higher than that of the clerks and stock personnel. It is also difficult to find qualified people for these positions when someone quits or when we open a new store. Our pay is a little bit below average so we allow all employees to take home some of the perishable goods to share with their family. While this does help put food on the table, it does not help some of our employees who have high living expenses.
3. Small management team with lots of responsibilities. When Kathy is sick or on vacation, no one is able to order replacement inventory or deal with major business issues.
4. The Del Mar location is not doing as well as expected. Although the area meets the economic demographics for a successful area, the town is too small to really support the store. Once the Carlsbad location is opened a few miles south, the Del Mar store will be phased out when the rental agreement expires.
5. Geographic expansion limitations. While there are many areas, just within California that would make great sites for future stores, it gets more and more difficult for Kathy to visit each store and maintain inventory and ordering. While we are planning to open the Carlsbad location and close down the Del Mar store, we are also considering San Francisco as our next out-of-the-area expansion, which will make it difficult for Kathy to use her current management approach.

OPPORTUNITIES
1. Geographic expansion throughout California. There are many more potential areas for new stores including San Diego, Palm Springs, San Francisco and Santa Barbara. Other areas will be considered with Carlsbad next on the list and then possible sites in the San Francisco area. The Asian Specialty Produce Department has been doing quite well and Kudler believes that the largest concentration of Asians in California is in the San Francisco area.
2. There is an opportunity to bring in outside management to help run the operation. With multiple locations, Kathy is quickly recognizing the fact that she is having a difficult time doing everything that needs to be done. She is thinking about hiring someone to help with purchasing and inventory tracking. These areas keep her in the back office of the stores instead of out front with the customers, which is the part that she enjoys.
3. There is an opportunity to offer more catering services. Kudler has provided some catering services upon request and in general, the customers have been very pleased with the service. Since Kathy handles the delivery, set-up, distribution, and clean-up for

10
the event, she is able to keep costs down and the profit margin is 25% better than product profit margin in the stores. In addition, Kathy has received tips on top of the profit that basically pays her expenses to travel and set up the event.
4. Opportunity to add more product line as we grow. Customers are always asking if we carry a specific item or product. If we receive several requests for the same product, we ask our wholesalers if they can provide the product on a trial basis. Recently, we had a few people request Hungarian Wax Peppers which are commonly found on the East Coast of the United States but difficult to find on the West Coast.
5. Opportunity to spread our brand outside of California as we grow. Most specialty stores are in the eastern half of the United States so the entire west coast offers great opportunities particularly for those who have moved from New York, New Jersey and Philadelphia who are used to the specialty gourmet stores. We believe there are some additional opportunities in Naples, FL and Greenwich, CT that will be explored in the future as well.
6. Opportunity to be acquired. As we continue to grow, there is always the possibility that we may be acquired by another company. Kathy could consider such a move in the future as part of her retirement plan.

THREATS
1. While we currently dont have any competition, another gourmet shop could open in our geographic area. If we offer fresh and healthy products at a reasonable price, hopefully we can keep competitors from entering the marketplace.
2. Economy could change and customers could stop buying gourmet foods. Gourmet foods (imported foods and organically grown food) cost just a little bit more than what you normally find in the grocery store. If the economy declines and peoples cash flow is decreased, customers may buy fewer gourmet items and purchase proucts at the local grocery store.

Risk Assessment and Mitigation Strategies
Risk Potential Impact Likelihood Detection Difficulty Value
5.1 Deal with perishable goods 7 7 3 147
5.2 Gourmet food concept may fail 10 6 3 180
5.3 Economic downturn 8.5 9 7 535.5
5.4 Competitors entering marketplace 8.5 8 8.5 578
5.5 Founder's health 10 7 10 700
5.6 Earthquake 7.5 7.5 10 562.5
5.7 Weather 8 7 7 392

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1. We deal in perishable goods. They have a short shelf-life and we often turn the inventory, either through sales or replacing product, to keep the inventory fresh. We have begun a program to track sales versus the time of year so we can more accurately order the correct quantities from year to year and location to location. We dont believe this is a significant risk.
2. There is always the possibility that the concept of a gourmet store might fail. The fact that Zabars in New York, Andros in Philadelphia and Provisions Gourmet Market in St. Louis, other well-known gourmet stores, have been in business sixty years or more indicates that this can be a very stable business once it is established. Many people living in Southern California have migrated from the East Coast and are unable to get some of the specialty foods they are accustomed to in the regular supermarket. We offer a viable alternative for them.
3. There is always the risk that the economy in Southern California could decline and not support gourmet stores. Right now, the economy is solid. Even though the area just went through a downturn due to the high-tech bubble, Northern California the San Francisco and Silicon Valley area absorbed most of the impact. While the economy is a concern, we cant control it so all we can do is watch our trends and order accordingly.
4. There is the risk of a major competitor entering the marketplace and taking market share away. Right now we dont see this happening. Trader Joes does have some stores in the area but we offer a more diverse and specialized product line for our select customers. We dont see anyone else opening a gourmet specialty store that would compete with us in the marketplace and try to take our market share away. We have repeat customers who are happy with our service.
5. Although Kathys health is great at the current time, there is always the possibility of something happening to her that would jeopardize the business. This is a concern as Kathy manages most of the financial aspects of the business, as well as making the final decisions on inventory and ordering. We plan to install an electronic, automated system in the future that will allow us to track these ordering.
6. There is always the possibility of an earthquake in Southern California that could alter the demographics and the economic stability of the region. We cant do anything about it and other competitors would be in a similar position.
7. There is the possibility that the weather could dramatically affect crop yields and our suppliers could dramatically increase the cost of perishable goods to us. This is another area that we cant control and the effect would be the same to our competitors.

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Stakeholder Analysis
We do have some stakeholders that we monitor. We view stakeholders as those entities, internal or external, who could affect our organization or be affected by our organization. The following list is not inclusive, but ones that we do keep in mind:
??Staff Our team of clerks and shelf-stock individuals are critical to our operation. Although Kathy visits each store, much of her time is spent doing back-office work so the staff members are really the ones having the day-to-day contact with the customers. While the work environment is not stressful, whenever someone quits or is fired, the whole store has to pick up the effort while a new person is hired and trained.
??Customers We try to take very good care of our customers. Clerks are encouraged to keep track of comments or requests, and share them with Kathy when she comes into the store. Some free samples of food are offered for tasting on a limited basis and we have monthly wine appreciation meetings. If a customer requests a product, we see if it is feasible for us to stock that item. If we cant, we offer to special order it. We take complaints about product or service very seriously and try to address any and all problems quickly.
??Wholesale Suppliers Our product comes to us from local, national and international suppliers. We purchase our fresh, organic fruits and vegetables locally from distributors who ensure that the product is of the highest quality. Our dairy products are offered locally and we receive our meats from all over the country. Some of our wine and cheese is imported through national and international wholesalers. We have good financial terms with suppliers and even though we order on a weekly basis, most allow us to pay in 30 days.
??Banks Our banks extend credit terms to Kathy when we are launching a new store and around the holiday season when we need to purchase more product than normal. Kathy also sometimes uses her credit line during the summer slow months to help carry the stores through. We have a great credit rating and relationship with our local banks.
??Competition Our competition locally is minimal and consists of a few specialty shops, major supermarket chains and some online gourmet shops. We think there is room for our stores in each of the marketplaces we are in and intend to move into.
??Kathy Kudler Kathy not only has the vision of the organization, she has established the culture and is the main management person. She hires new people, fires those not working out, finalizes the inventory numbers, places the weekly orders and controls the finances making sure all of the vendors get paid.

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Competitive Analysis
All of the stores are surrounded by multiple locations of traditional supermarkets such as Ralphs, Vons and Albertsons. These stores sell many of the products that Kudlers sells and they are beginning to advertise specialized sections offering organic produce and free-range meat. However, Kudlers is positioned to attract a more narrowly focused customer. KFF appeals to the person who sees themselves as a discriminating gourmet. Such people are looking for more than organic foodstuffs. They want the best foods, excellent customer service and the utensils necessary to create gourmet meals. As such, KFF is not in direct competition with the traditional supermarkets. There are a number of health food stores located near each of Kudlers locations; stores such as Trader Joes and Whole Foods. These stores concentrate on the organic nature of their products. While KFF stresses organic produce and meats, we dont see these stores as our direct competition. Our customers are more focused on the cooking and dining experience rather than the health conscious lifestyle. Also, our customers are less price conscious than the typical health food store customer. Given the diversity of the population of Southern California, it is not surprising that there are a number of stores featuring international foodstuffs. The better known ones are the International Market & Grill, Aria International Market, Indian International Food and the Balboa International Market. These stores are focused on foreign foods and not on the gourmet experience. Our employees have heard many customers relate how they had come to Kudlers after frequenting one of the international food stores because, while they may have had a particular ingredient, they didnt have the selection, tools, expertise or service that we provide. While KFF doesnt have any direct competition, there are some businesses that are vying for the same customer base. One such store is Jonathans Market located in La Jolla. Jonathans is a specialty food store and restaurant. The main distinction between Jonathans and Kudlers is that Jonathans is more focused on its restaurant business and its wine department. They do have a large wine selection and a ful-time sommelier. They also hold regular wine tasting events. Their meat, seafood and produce selections are somewhat limited and their meat and seafood seem to be priced a little high. While KFF and Jonathans are both seeking to attract a wealthier clientele, the persons frequenting Jonathans are not gourmands, but people who are attracted to the restaurant and the wine shop. While Jonathans is not a direct threat, Kathy needs to recognize that many of Jonathans clients could be enticed to shop at KFF. Jonathans should be considered competition for the La Jolla store and, perhaps, the Del Mar location. At a distance of over 10 miles, it probably isnt significant competition for the Encinitas location.
The Kitchen Witch is a gourmet kitchen utensil store located in Encinitas. In addition to selling utensils, the store also holds cooking classes. Although it is physically located in Encinitas, it has a Web site where it sells its products and takes registrations for its cooking classes. Because of its e-commerce site, it has to be viewed as competition for all of the KFF locations. Because it
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only sells utensils, the Kitchen Witch can stock a much more extensive selection of cooking tools. While Kudlers carries many of the same brands as the Kitchen Witch, we cannot match the depth of the selection since most of our store space is devoted to the grocery items we carry. Harvest Ranch Market has stores located in Del Mar and Encinitas. The stores feature organic foods, an esoteric selection of wines and a deli. The stores are small and the prices seem a bit steep. We should recognize that we will have some competition from the Harvest Ranch Markets, but KFF should come out ahead based on our greater range of services (catering and classes), a larger selection and by paying close attention to prices. Our most serious competition is the Cardiff Seaside Market. The market has been in business since 1985. It offers produce, meats and seafood and caters to the gourmet market. It offers catering services. Located within 2 miles and 4 miles of the Encinitas and Del Mar locations respectively, the Cardiff Seaside Market does present competition to those locations. At a distance of over 12 miles from the La Jolla location, the Cardiff Market is not a serious concern. To date, the owners of the market have not been willing to expand. As Kudlers continues to expand into new markets and grows in size, the effect of the Cardiff Seaside Market should diminish.
Marketing
Kudlers has budgeted $368,200 for sales and marketing efforts for the year 2004. When Kathy started the first store in La Jolla, her sales and marketing efforts consisted of some internal and external signage. While she did some advertising in the local school yearbook and other small efforts, those ads were placed mainly to help other members of the community. As the store became a success and the second store was opened, she decided to take a more formal approach to sales and marketing. Based upon the businesses brief historical data, Kathy recognizes that it has two times a year when it receives the most sales. The first time of year, which is actually the second highest grossing period, is around the Easter holiday. Sales really spike beginning in October, through the Thanksgiving holiday all the way up through New Years. During these peak times of approximately 16 weeks, Kudler prints a flyer that is inserted into the local La Jolla Village News, the North County Times, and the Gay & Lesbian Times. Throughout the rest of the year Kudlers has a monthly flyer printed and distributed through the newspapers. Kudlers also occasionally advertises in local printed materials that advertise in mid- to upscale restaurants as well as some local radio station spots on an infrequent basis.
Kathy also has had printed up tri-fold brochures that advertise the catering business. These brochures are placed in the stores for customers to pick up if they wish and Kathy has them laying out at the events that she caters. She has also given out business cards at these events
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and has had others call her to cater their special event. Recently, she also has noticed that some of the attendees of the catered events have been coming into the stores as well. Flyers are often printed for the wine and cheese tasting and other special events as well.
In the future, Kudlers wants to place advertisements in the San Diego-area telephone directories. Kudlers also wants to design and launch a website that offers many of its products to consumers as well as marketing the catering side of the business. This will be discussed more in the section regarding growth.
Future Growth
We are currently assessing other geographic areas in Southern California to continue our growth. We are interested in the Carlsbad, California area and we are looking at a site on Carlsbad Village Drive between Interstate 5 and the highway leading up the coast. The only major stores in that area are a Vons, an Albertsons, a Prontos Gourmet Market and a few convenience stores. There is a Japanese restaurant in this block, Sushi Taisho, which has been there for many years and is usually quite busy. During the summertime, many people come to Carlsbad to go to the beach and we expect our summer sales to be quite high. This will be described in more detail below. If we continue to be successful, we hope to use our cash flow to expand into this market within the next few five years. We are also looking at expanding into the San Francisco area. Even though this is several hundred miles from our current locations, we believe our Asian Specialty Produce department would be very successful in that area. After we open the Carlsbad location we will begin to scout sites in San Francisco. Our ultimate goal is to compete in high-end areas in other cities as well. Our long-term plan includes possible sites in: Scottsdale, Arizona; Naples, Florida; and Greenwich, Connecticut.
Website
Most of the more well-established gourmet food stores have launched very extensive websites that not only let local customers know what is going on, but also allow for people outside the driving area to purchase product direct. Our goal is to launch our first version of the website in June 2004. We will start with a basic site and add e-commerce capabilities as we fully automate all of our inventory and ordering system so that we can track sales and order replacement product.
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New Locations
Our Del Mar location is not doing as well as expected due to the small population base of the area. Beginning in October 2006, we will begin the site selection process for a new location in Carlsbad, CA. Specifically; we are searching for a location that is on Carlsbad Village Drive between Interstate 5 and the ocean. The population in Carlsbad is around 90,000 and Oceanside (which is located next to Camp Pendleton) has a population of around 160,000 and is only five miles north of Carlsbad Village Drive. Because our Asian Produce Department does quite well, we believe those going to Sushi Taisho would be customers for our store. We also think our wine selection might be of interest to those who visit the wine tasting stores or micro-breweries in the area. We are hoping to have the new Carlsbad location open and operating by no later than June 2009. We also plan to close the Del Mar store and redirect those customers to the Carlsbad store. Since there are only a few exits on the I-5 freeway that separates Del Mar and Carlsbad, we feel sure that we will be able to service our current customers at the new store.
Telephone Directory Advertising
Since directory advertising costs hundreds of dollars a year, we have elected not to advertise in the local directories; however, we believe that once we have standardized our ordering procedures, we might be able to encourage potential customers from San Diego to occasionally make the 40 minute drive up the freeway to shop at our gourmet store.
Catering
So far, the catering side of the business has not really been promoted, but it has been proven to be a profitable vnture. Kathy handles all of the catering activities which usually require no on-site staff other than herself. She generally receives sizeable tips which helps add to the revenue stream as well. Although we do have some flyers posted in the stores advertising the catering service, we intend to promote this side of the business more, as we can charge more for the product as well as the service. We intend to have 10,000 multicolored flyers printed up. As customers check out, the clerks at each store will place the flyer into the bag until the 10,000 are distributed. Once the website is developed, a Catering link will be placed on the site with information on the service.
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Coffee & Tea
Most gourmet stores offer a wide selection of coffees and teas. This is one area that can be expanded within the store. Profit margins are high on these products and the shelf life is longer than that of the fresh fruits and vegetables. These are also great products to offer on the website and to potential customers outside of our geographic area.
Fish Counter
Some of the East Coast gourmet stores offer fresh seafood in their stores. Since we are so close to the Pacific Ocean, we intend to expand our offerings by installing a fish counter in each of our stores. Our local wholesale food distribution company carries fresh fish and can simply add this to our order each week. We are hoping that this will help with summer sales as people are doing outdoor activities.
Deli
Although we have a meat department and a cheese department, we really dont have a deli where people can come in and select a product and quantity and have it cut or sliced the way they like. As part of our growth we intend to install a deli counter in each store to offer some of our products prepared to order. We will even offer samples of product for customers to try.
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Develop the Catering side of the business
Hire someone with finance background to help Kathy baofficebonfire
Jan. 2004 Jun. 2004 Oct. 2004 Nov. 2004 Nov. 2005 Oct. 2008 June 2009 Dec. 2009

GANTT CHART
Open the Carlsbad store and close out Del Mar location
Automate inventory and ordering system
Finish site location for Carlsbad store Carlsbad Village Drive
Develop a website & ordering system
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Financials
2003 Income Statement
Net Sales $10,796,200
Less: Cost of Goods Sold $6,965,118
Gross Income $3,831,082
Operating Expenses
Advertising $263,000
Amortization $88,390
Bad Debts $2,300
Bank Charges $23,750
Charitable Contributions $10,975
Systems & Network Contract $10,975
Credit Card Fees $691,456
HR Payroll Outsource $8,499
Depreciation $127,234
Dues & Subscriptions $2,559
Insurance $65,000
Custodial Contract $49,200
Interest $41,747
Maintenance Contract $42,000
Misc. $37,560
Office Expenses $8,300
Operating Supplies $5,500
Software Licenses $8,200
Permits & Licenses $3,500
Bonuses - Discretionary $1,330
Postage $46,000
Office Lease $25,530
Telephone $575
Travel $4,000
Utilities $3,060
Vehicle Expenses $13,046
Wages $933,917
Total Expenses $2,520,228

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Net Income Before Taxes $1,310,855
Plus: Interest Income $7,150
Less: Income Taxes $563,292
Less: Profit Sharing Bonus $75,470
Net Income After Taxes $679,243

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2004 Pro Forma Income Statement
Net Sales $12,955,440
Less: Cost of Goods Sold $7,174,072
Gross Income $5,781,368
Operating Expenses
Wages $971,274
Utilities $3152
Insurance $65,000
Advertising $368,200
Vehicle Expenses $13,700
All Other Expenses $1,279,471
Total Expenses $2,700,797
Net Income Before Taxes $3,080,571
Less: Income Taxes $591,457
Net Income After Taxes $2,489,114

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Cash Flow Pro Forma Statement
January 2004 - December 2004 (In Thousands)
12% 6% 6% 9% 4% 5% 5% 6% 6% 9% 15% 17% 100%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TOTAL
Revenues $719 $719 $719 $1,440 $719 $719 $719 $719 $719 $1,440 $2,159 $2,159 $12,955
Expenses
Cost of Goods Sold $399 $399 $399 $797 $399 $399 $399 $399 $399 $797 $1,196 $1,196 $7,174
Wages $81 $81 $81 $81 $81 $81 $81 $81 $81 $81 $81 $81 $971
Utilities $.158 $.158 $.158 $.158 $.236 $.315 $.394 $.473 $.394 $.315 $.236 $.157 $3
Insurance $0 $0 $16 $0 $0 $16 $0 $0 $16 $0 $0 $16 $65
Advertising $20 $20 $41 $20 $20 $20 $20 $20 $41 $61 $61 $20 $368
Vehicle Expenses $.913 $.913 $.913 $.913 $.913 $.913 $.913 $.913 $.913 $.913 $2 $3 $14
All Other Expenses $107 $107 $107 $107 $107 $107 $107 $107 $107 $107 $107 $107 $1,279
Total Cash Flow $112 $112 $75 $433 $112 $96 $112 $112 $75 $392 $713 $736 $3,081

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Contingency Plans and Exit Strategies
We try to carefully plan our operations and order product when we think our sales will be the highest. Because we deal quite a bit in perishable goods, we need to be aware of our buying patterns. Although we are in the process of automating the inventory and ordering process, we have been manually controlling and monitoring product as we go along. When our sales volume fluctuates more than 10% in either direction, that is a red flag, and we evaluate and try to determine why we missed our expectations. Sometimes we fail to recognize local community events that bring people into the community who then stop by the store. We conduct a lessons learned on all of these fluctuations and try to improve our performance for the next ordering cycle. If our sales are less than expected, we will make a note to do some extra promotional activity at that same time next year. If our sales exceed our expectations, we try to assess the reason why. Sometimes it is weather related, while other times it is related to special events or our marketing efforts. We try to monitor which products sell well and which ones we dont want to order anymore. The automated system will help us monitor this more but we still watch this closely, particularly as related to the perishable foods. Kathy Kudler is the vision behind the organization. She intends to grow and expand the business for 10 15 years, at which time she will reach retirement age. Her intent is to sell the entire organization at that time and no longer be involved in the operations.

idividual Assignment: Person Values Paper

Reflect on the Ethics Awareness inventory and personal values. Then consider what Kudler Fine Foods appears to value as an organization.

Write in no more than 1000 words, a paper identifying your values, how those values align with the values of Kudler Fine Foods, and how this would affect your performance if your were a manager at Kudler Fine Foods.

Results of of Ethics Awareness Inventory self-assessment.

Ethical Perspective
I tend to base your ethical perspective on what it is good to be, rather than what it is good to do. You believe that ethics should focus on ways to help people achieve moral excellence. When asked to judge whether an individual's actions are ethical, you look beyond the actions to examine the individual's character. Uprightness and intergrity are key factors in your assessment. You look for evidence of virtue in people, including such traits as honor, justice, and benevolence, believing that a virtue is not just an abstract principle. Rather virtue is reflected in the quality of an individual's character, and character is more important than an individuals actions. In your opinion, mere compliance with rules, no matter how well-inentioned, does not make anyone an ethical person without being accompanied by consistent voluntary striving to be morally good person. This category is most closely aligned in philosophy with virtue theeory.

Ethical Style
I believe that ethics relies on the ability of individuals to make sound moral judgements. You do not believe that it is enough to comply with some preset standards or principles of right and wrong to find the solution to a complex ethical dilemma. Ethics relies on exemplary character to make the difficult choices. You value such qualotoes as honesty, wisdom, and integrity, and you place greater emphasis on demonstrating these qualities than on following the rules. You believe that an individual would be incapable of choosing between conflicting rules or standards of right and wrong without already possessing good character. Your approach to ethics call for developing practical wisdom and sound judgement within individuals to guide them in their ethical decision making. Your ethical style compels you to strive to be a person of wisdom and intergrity.


Mission
Kudler Fine Foods is committed to providing our customers with the finest selection of the very best foods and wines so that your culinary visions can come true.
Vision
Kudler Fine Foods will be the premiere gourmet grocery store for those savvy shoppers who are searching for the finest meats, produce, cheeses, and wine.
Social Responsibility Statement
Kudler Fine Foods uses only the finest organic ingredients. Whenever possible, we purchase local produce from organic farmers. We use unbleached flour in our bakery goods and we dont add unnecessary preservatives to our products. Food is rotated from the shelves on an ongoing basis. Those items that are still in good condition are donated to local homeless shelters and food kitchens.
Background
Kudler Fine Foods was established in 1998 when Kathy Kudler fulfilled her vision of establishing her own gourmet food store. Kathy had a passion for gourmet foods but found that her particular neighborhood just did not have a wide selection of products to choose from. Although she had no experience in operating a gourmet food shop, she believed that a one-stop shopping experience at a place with lots of variety and reasonable prices would be successful.
Kathy opened her first store and then a second and recently a third. The La Jolla store continues to grow while the Del Mar store has been having some difficulties. The store in Encinitas has just opened, but sales seem brisk. Kathy works seven days a week, visiting and


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working at each store sometimes daily. Kathy has hired a manager and an assistant manger for each store to handle much of the day-to-day details, cashiers to check people out and some part-time, local college students to help with stocking the shelves and constantly tending to the inventory to make sure that fresh product is always on the shelf. She also has hired specialists who advise and assist clients with their culinary needs. These specialists are located in each store, usually during regular business hours. Since the beginning, Kathy has handled all of the buying for the stores. In order to get the best price possible for products, Kathy buys in bulk for all three stores. While this approach saves Kathy money, ordering for all three stores on a weekly basis takes so much of her time, that she hardly has time to interact with the customers anymore. Because customers expect a high-quality product, Kathy makes sure that the product is pulled from the shelf and replaced as soon as possible if the turnover rate is less than expected. Kathy intends to continue providing fine quality foods to the local area, while expanding and opening new stores in the process. While cash flow is good, buildings are leased and not purchased and thus far, Kudler Fine Foods (KFF) has been able to operate without any outside investors.
Current Locations
Kathy opened her first store in 1998 in La Jolla, California. La Jolla was selected because it is the area in which Kathys initial needs assessment illustrated that a gourmet market is needed. La Jollas population was 44,424 and growing at 1.9% per year. The average median house price is just over $2 million. Kathys assumption that La Jolla would be a great place to open a gourmet store was quickly proven to be correct as her sales were strong from the beginning and continues to grow. Since the doors opened, Kathy spends most of her time at the stores, selecting and ordering product, occasionally running the cash register, and sometimes even stocking the shelves after the store closes or before it opens in the morning. Kudler Fine Foods was a success since it launched. In La Jolla, locals would stop by the store on their way home from the tennis court or the golf course or the office and purchase fresh produce and other products. As sales continued to increase, Kathy began to think about opening another store using the same model.
The La Jolla location had not only generated sales, but produced enough cash flow so that two years later Kudler opened its second store in Del Mar, CA. Del Mar is just far enough north of La Jolla that residents of Del Mar dont want to fight the I-5 traffic to visit La Jolla so this offered a great opportunity for growth. The two stores are only about 35 minutes apart on the freeway


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and Kathy can easily visit both locations for control and monitoring and to finalize the weekly inventory list and order product. Del Mars median household income in 2000 was $98,257. The population was only 4,389 people but the area was considered to be economically strong enough and it has been able to support the second store, just above break-even. In early 2003, as part of her expansion plan, Kathy opened a third store in Encinitas. Although Encinitas is located just a little more in-land than the other two locations, the average age of its residents was 39.7 and is expected to be a very good target market for gourmet foods. The average household income is just over $75,000 and with a population base of just over 50,000 people, we think that the Carlsbad, CA area might be a good area for the next store. The Del Mar store would be consolidated into the Carlsbad store once it is open. This will be discussed later in the marketing plan section.
Store Departments
Each store consists of the following departments:
Bakery
Each of our stores has its own modern European-Style Bakery. In the wee hours of the morning, our bakers begin mixing their dough and creating fresh breads and pastries including fruit tarts, table loaves, flat bread, and the flakiest croissants in Southern California. Our breads and pastries are made from old world recipes and the finest ingredientsIrish butter, organic eggs, and unbleached flour. Kudlers bakery products do not contain peservatives. We use only the freshest ingredients and rotate our inventory daily. We donate day-old bakery products to local charities who feed the homeless. The slogan for our bakery department is: If you arent satisfied that our baked goods are among the best you have tasted, your purchase if free!
Meats


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Our meat and seafood are procured from certified organic producers. The meat and seafood products are fresh and prepared in the store to order. The butcher shop in each store carries:
? Dry, aged beef
? A variety of poultry including turkey, duck, pheasant, quail, and chicken
? Lamb
? Home-made sausagesmade without preservatives

< FONT size=3>The slogan for our Meat department is: We will be happy to handle any special requests you may have.
Produce
Our produce department offers over 350 fresh fruits, vegetables, herbs, and spices. We stock 16 different varieties of apples as well as a wide range of tropical fruits from around the world. Experienced cooks know that the right combinations of herbs and spices will turn a good meal into a great meal. Herbs and spices are most flavorful when they are fresh, and we carry the freshest herbs and spices in the area. We have an Asian Specialty Produce department where we carry the produce, herbs, and spices that are the staples of Asian cooking. We know that our customers are interested in maintaining a healthy lifestyle while also trying to live within their budgets. We address these concerns by offering most of our produce in both organic and non-organic varieties. The slogan for our Produce department is:
If you dont see it, let us know and we will special o rder the item for you!


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Cheese and Dairy
Our stores carry a complete line of the finest dairy products including Irish butter and organic milk. We are known for our wide assortment of gourmet cheeses. We carry over 250 varieties of cheese from 21 countries. Our stores offer cheese made from cow, goat, and sheeps milk. We will also special order any cheese you may want that we do not carry in stock. The slogan for our Cheese and Dairy department is: Stop by any of our stores on a Saturday morning and experience a sampling of our cheese selections.
Wine
We have traveled the world to bring you an extensive collection of domestic and imported wines and spirits. Whether our customers want to mix the quintessential martini or find the perfect wine to serve at their next dinner party, Kudlers is the place to shop. They will find that our stores carry a wide variety of spirits and at prices that will meet any budget. While we are proud of our wide selection, we certainly dont want our customers to be intimidated, so each of our stores has a Wine Steward who will be more than happy to assist customers in making their selection. We also hold monthly wine appreciation classes so customers can learn the nuances of our wines.


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SWOT
STRENGTHS WEAKNESSES
Our STRENGTHS are:
1. Small organization
2. No direct competition
; 3. Lots of choices for the consumer
4. Very customer oriented
5. Good store locations
&n bsp; 6. Kathys personal relationship with the staff
7. Repeat customers
Our WEAKNESSES are:
1. Deal in mainly perishable goods
2. Specialty shops with high pay-roll
3. Small management team with lots of responsibilities
4. The Del Mar location is not doing as well as expected
5. Geographic expansion limitations

OPPORTUNITIES THREATS
Our OPPORTUNITIES are:
1. Geographic expansion throughout California
2. Delegate purchasing process to someone with more time and experience
3. Offer more catering services
4. Add more product line as we grow
5. Spread our brand outside of California as we grow
6. Opportunity to be acquired
Our THREATS are:
1. Competing gourmet shops
2. The economy declining



STRENGTHS
1. Small organization. We are able to control and monitor all activities on a daily and weekly basis.
2. No direct competition. There are no other gourmet stores in our geographic area. Specialty stores are limited and, with the exception of major grocery chains and smaller, independent wine stores, we have no direct competition.
3. Lots of choices for the consumer. We offer 16 different kinds of apples, wines from all over the world, 250 variety of cheeses, and 350 fresh fruits and vegetables. No one, including the major grocery chains, offers such a diverse product variety.
4. Very customer oriented. Whenever possible, Kathy works the counter and spends time out in the store interacting with customers. She encourages the clerks to be friendly and helpful to the customers and ask if they found ev erything they were looking for. If several customers request the same item, Kudler orders that item for the shelves or will even offer to special order it for the customer.
5. The locations of the stores are in mid- to upper-range economic regions where potential customers can afford to pay gourmet prices for the better quality and healthy products and the greater variety.
6. Kathy is able to interact with all of the staff each week.
7. Repeat customers. Once customers come into the store, they tend to return every 7 to 10 days to purchase more products. Kudler Fine Foods has a great reputation in our neighborhoods.


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WEAKNESSES
& nbsp; 1. Deal in mainly perishable goods. Because we do not use any preservatives, approximately 12% of our perishable goods are rotated out of inventory every two or three days, either by being thrown away or donated to local charities. Donated food is still in good condition, but not excellent condition so it is removed from the shelves on an ongoing basis.
2. Specialty shops with high pay-roll: Butcher, baker, wine steward, etc. Payroll of these specialty positions is higher than that of the clerks and stock personnel. It is also difficult to find qualified people for these positions when someone quits or when we open a new store. Our pay is a little bit below average so we allow all employees to take home some of the perishable goods to share with their family. While this does help put food on the table, it does not help some of our employees who have high living expenses.
3. Small management team with lots of responsibilities. When Kathy is sick or on vacation, no one is able to order replacement inventory or deal with major business issues.
4. The Del Mar location is not doing as well as expected. Although the area meets the economic demographics for a successful area, the town is too small to really support the store. Once the Carlsbad location is opened a few miles south, the Del Mar store will be phased out when the rental agreement expires.
5. Geographic expansion limitations. While there are many areas, just within California that would make great sites for future stores, it gets more and more difficult for Kathy to visit each store and maintain inventory and ordering. While we are planning to open the Carlsbad location and close down the Del Mar store, we are also considering San Francisco as our next out-of-the-area expansion, which will make it difficult for Kathy to use her current management approach.

OPPORTUNITIES
1. Geographic expansion througout California. There are many more potential areas for new stores including San Diego, Palm Springs, San Francisco and Santa Barbara. Other areas will be considered with Carlsbad next on the list and then possible sites in the San Francisco area. The Asian Specialty Produce Department has been doing quite well and Kudler believes that the largest concentration of Asians in California is in the San Francisco area.
2. There is an opportunity to bring in outside management to help run the operation. With multiple locations, Kathy is quickly recognizing the fact that she is having a difficult time doing everything that needs to be done. She is thinking about hiring someone to help with purchasing and inventory tracking. These areas keep her in the back office of the stores instead of out front with the customers, which is the part that she enjoys.
3. There is an opportunity to offer more catering services. Kudler has provided some catering services upon request and in general, the customers have been very pleased with the service. Since Kathy handles the delivery, set-up, distribution, and clean-up for


10
the event, she is able to keep costs down and the profit margin is 25% better than product profit margin in the stores. In addition, Kathy has received tips on top of the profit that basically pays her expenses to travel and set up the event.
&nb sp; 4. Opportunity to add more product line as we grow. Customers are always asking if we carry a specific item or product. If we receive several requests for the same product, we ask our wholesalers if they can provide the product on a trial basis. Recently, we had a few people request Hungarian Wax Peppers which are commonly found on the East Coast of the United States but difficult to find on the West Coast.
5. Opportunity to spread our brand outside of California as we grow. Most specialty stores are in the eastern half of the United State s so the entire west coast offers great opportunities particularly for those who have moved from New York, New Jersey and Philadelphia who are used to the specialty gourmet stores. We believe there are some additional opportunities in Naples, FL and Greenwich, CT that will be explored in the future as well.
6. Opportunity to be acquired. As we continue to grow, there is always the possibility that we may be acquired by another company. Kathy could consider such a move in the future as part of her retirement plan.

THREATS
1. While we currently dont have any competition, another gourmet shop could open in our geographic area. If we offer fresh and healthy products at a reasonable price, hopefully we can keep competitors from entering the marketplace.
2. Economy could change and customers could stop buying gourmet foods. Gourmet foods (imported foods and organically grown food) cost just a little bit more than what you normally find in the grocery store. If the economy declines and peoples cash flow is decreased, customers may buy fewer gourmet items and purchase products at the local grocery store.

All key elements of the assignment are covered in a substantive way.
? One-page Job Fair Brochure includes a description of the following information about the company the student created in a previous week:
o Structure
o Business model
o Culture
? The paper provides justification for each element presented in the brochure.
? The paper discusses how each element will impact their business.
? The paper is 500 to 750 words.
This is My company from previous week:
The SWOT analysis discussing the strengths, weaknesses, opportunities, and threats of the company I choose. The business plan I selected to conduct a SWOT analysis of is Half Time Sports Bar & Grill. Half Time Sports Bar & Grill is a sports-themed restaurant which provides quality food and service to customers while watching football, baseball, basketball, hockey and all professional sports on state-of-the-art high definition flat screen televisions. Menu will offer customers large portions and ?homemade quality? to food presentation. Customers will have the ability to listen to a television channel they select from the table-top audio system.
The strengths of this company are its loyal customer following, established local brand presence in the Madison area, profit of $2 million in sales for the first year of operation, and low food and beverage costs (food, 32% of revenue and beverage 21% of revenue). Weaknesses I have identified include a significant initial investment of $625,000 and aggressive expansion plans. The initial investment of $625,000 is a large sum of money to invest up front. Even with a net profit of $445,000, it does not cover the initial investment for a second restaurant.
My recommendation would be to hold off expansion plans for three years minimum. After three years with a consistent net profit, utilize a portion of those funds to open a second smaller location with even smaller overhead and operating expenses, which will require a smaller initial investment. Or a second option could be to offer franchise opportunities.
Some areas of weakness include the limited workforce available; hiring experienced bartenders, bussers, wait staff and cooks is a challenge. Currently, no one on staff is able to train the new employees since all the employees have less than four months employment and employees are also expected to add cleaning duties to their day-to-day functions. There is no money in the budget to pay for a trainer to exclusively train new employees on all facets of the restaurant. The training provided is limited to on-the-job and customer service is suffering as it relates to food quality, ticket times and cleanliness of restaurant.
Areas of opportunity include expanding the current menu to include items which have been requested by customers, such as oysters, lobster and filet mignon at a reasonable cost. In addition promoting the grill as not only a place for adults to view sports but also a family restaurant where families can come and enjoy a reasonable meal while children are entertained.
Our ability to expand our customer base continues to be an area of opportunity.
Some potential threats to Half Time Sports Bar & Grill includes competition from an ESPN Zone franchise which recently opened the past three months, a limited workforce in such a small town. In order to compete with ESPN Zone, Half Time Sports Bar & Grill has extended operating hours until 2 a.m. in the morning, the ability to have a full staff to cover the work schedule has been challenging.

In order to compete with ESPN Zone, specials have also been added. On Mondays, ?All you can eat Crab legs? night; Tuesday is ?Kids Eat Free?, Wednesday is ?Girls Night? with $2 Margarita?s, Martini?s and $5 on select appetizers, Thursday is ?Karaoke? with drink specials and beer specials, Friday is Happy Hour night from 5:00 p.m. until 7:00 p.m. buy one get one free on house margaritas, martinis and domestic beer. On Sundays, we are considering added a brunch menu from 11 a.m. until 3:00 p.m.
Two employees will be selected to provide training to new employees. These ?trainers? will receive an additional pay for all training time recorded. A separate budget will be created for ?cleaning personnel? to eliminate cleaning responsibilities from the full time day staff. A meeting is scheduled to expand the selection of meat and seafood menu offering. Expansion plans will be considered but only after three years of continued profit. The SWOT analysis has effective in bringing to light areas which need to be improved and threats which need to be addressed. After reviewing the strength, weaknesses, opportunities and threats of Half Time Sports Bar & Grill can thrive and be a profitable business for years to come.

In this SLP you will identify where the major transportation modes are used in the EESC from SLP3: rail, inland water, ocean steamer, and/or OTR.

There are five basic transportation modes: rail, inland water ways, ocean, over-the-road, and air. We will not be concerned about air transport in this SLP as it is the least used and most expensive in general supply chain transportation.

Review and read these resources on these three transportation modes: rail, inland water, and OTR. Ocean is not included in these readings since it is mainly used for importing and exporting. This will be covered in more detail in LOG502. But you are asked to identify where ocean transport is used, but not in detail.

RESOURCES - SEE SLP 3 RESOURCES IN BACKGROUND PAGE

Session Long Project

Review the EESC from SLP2. Identify in the EESC where each of the four modes of transportation are used: rail, inland water, ocean, and OTR. You can use topic headings for each mode. Identify the materials being transported from which industry to which industry. Discuss why this mode is being used and what the costs are on a per ton-mile basis.

SLP Assignment Expectations

The paper should include:
?Background: Briefly review and discuss the targeted product, company(Brinkmann-grill manufacturer), and industry
?Diagram: Include the diagram of the EESC
?Transportation Discussion: Discuss each of the four transportation modes (rail, inland water, ocean, OTR) in the EESC and where each one is used. Discuss why this mode is used and the costs of using.
?Clarity and Organization: The paper should be well organized and clearly discuss the various topics and issues in depth and breadth.
?Use of references and citations: at least six (6) proper references should be used correctly, cited in the text, and listed in the references using an appropriate style; It is not necessary to use APA format, but it is suggested that this format be used or another format similar.
?Length: The paper should be three to four pages ? the body of the paper excluding title page and references page.

NOTE: You can use the transportation resources. You should also do independent research and find at least two additional appropriate references, for a total of at least six.

Background information below:

Waterways

U.S. Army Corps of Engineers. (2010). The U.S. Waterway System, Transportation Facts & Information; Navigation Center, retrieved from http://www.ndc.iwr.usace.army.mil/factcard/factcard10.pdf

American Society of Civil Engineers. Report Card for America?s Infrastructure, retrieved from http://www.infrastructurereportcard.org/fact-sheet/inland-waterways

Ask.com ; Inland Waterways Transportation, retrieved from http://www.answers.com/topic/inland-waterways-transportation

Texas Transportation Institute. (2009). A Modal Comparison Of Domestic Freight Transportation Effects On The General Public, retrieved from http://www.americanwaterways.com/press_room/news_releases/NWFSTudy.pdf

Railroads

Wikipedia.com, retrieved from http://en.wikipedia.org/wiki/Rail_transportation_in_the_United_States

Nationalatlas.gov. 2002 Data: Overview of U.S. Freight Railroads, retrieved from http://www.nationalatlas.gov/articles/transportation/a_freightrr.html

American Association of Railroads. (www.aar.org)

American Association of Railroads. Railroad statistics, retrieved from https://www.aar.org/StatisticsAndPublications/Documents/AAR-Stats-2013-04-17.pdf

American Association of Railroads. Overview of America?s Freight Railroads, retrieved from https://www.aar.org/keyissues/Documents/Background-Papers/Overview-US-Freight-RRs.pdf


Over the Road Trucking (OTR)

American Trucking Association, retrieved from http://www.trucking.org/Pages/Home.aspx

American Trucking Association. Trucking Industry Facts, 2010, retrieved from http://www.cargotransporters.com/pdf/dyk201001.pdf

eHow.com. About Trucking Companies, retrieved from http://www.ehow.com/about_4586182_trucking-companies.html

All Modes - Provides Cost Comparisons by Mode and Other Comparisons

Center for Climate & Energy Solutions. Freight Transportation Comparison, retrieved from http://www.c2es.org/technology/factsheet/FreightTransportation

Use the Company below: Brinkmann

The company chosen for this project is Brinkmann, a grill manufacturer. As noted previously, the upstream supply chain consists of a variety of raw materials, including various plastics, porcelain, iron, stainless steel, paper, cardboard and other such materials. The raw materials are typically manufactured by suppliers according to Brinkmann's design. They are packaged by Brinkmann but the end consumer performs the assembly.
The extended enterprise supply chain consists of all suppliers back to the raw materials. The OEM manufacturers of the different parts must contract with raw materials suppliers in order to receive the materials that they need to create the different components of the Brinkmann grills. Thus, for Brinkmann to have a fully-optimized supply chain, it must know that its suppliers are going to have fully-optimized supply chains of their own (Lin, 2000).
The materials are produced by creating the final material, and then using moldings to create the necessary shape for the final part. This is the case both for the plastic and metal parts. Manufacturers that specialize in these moldings are utilized. For printed materials, printers are used both for the instruction sheets and the boxes in which the grills are stored for shipping. With these three categories of raw materials, there are basically three sources. Plastics and inks are usually derived from petroleum. Metals are mined. Paper products come from forestry by way of paper mills, which represent extensive chemical processing. In some cases, inks may be organically derived ? this is something the company might not even know and certainly is not going to be publicly-available knowledge. The company will also use paints. The raw material in the paint can vary, but latex paints are for example derived from benzene, a hydrocarbon found in crude oil. Acrylic paints are also derived from crude oil. Crude oil is processed all over the world. The reality is that many of the raw materials that go into a Brinkmann grill might not come from the US at all, nor may many of the constituent parts. The basic minerals and paper products are produced all over the world. There does not appear to be any bottlenecks ? no supply shortages have been identified and all inputs are fairly common.
Downstream, the company sells via a number of retail channels. It ships boxes containing finished but unassembled grills, which aside from display models are assembled by the end consumer. The grills are typically trucked to the retailer, as most of the retailers are fairly large and run their own logistics. There are some distributors used in the downstream supply chain as well.
The EESC diagram for Brinkmann grills is as follows:


For a distribution company, forecasting is important because the company wants to minimize inventory, as inventory is costly. Furthermore, any unsold inventory might have to be liquidated at a loss or severely reduced profit. Specifically, forecasting is to ensure that 100% of inventory is sold at a full price, and that there is a no excess inventory that is unsold. Forecasting is also used to reduce the inventory turnover. The more accurate the forecast, the better the company's performance on these two metrics will be. There is no specific answer to how accurate a forecast needs to be, but suffice to say that the more accurate the better ? the uppermost efficiency limit is 100%, so the forecast should aim to be as close to that target as possible. Each company will set its own measures for forecasting accuracy beyond that, based on the volatility of past demand, which is a key variable in the likelihood of developing an accurate forecast.
Forecasting for existing product lines is easier than for new lines because the forecast can be based on past performance. For new products, the forecast is based on market research and other forms of educated guesswork, rather than on adjustments to past performance. Volatility of sales projections is entirely unknown, so forecasting new products is much more challenging. Companies should invest in forecasting accuracy to the extent that they believe they will lower other costs such as inventory holding costs with better forecasts. An NPV cost-benefit analysis on most costly forecasting techniques should be done. A company can use different forecasting methods and later seek to integrate them, especially where past performance analysis of the different methods indicates particular strengths of different approaches.
Strategic plans should be sure to incorporate forecasts, but forecasts as well must take into account strategic plans. Forecasting demand to be used in ordering inventory should take into account things like expansion plans. A good example of this is Target's recent expansion into Canada. The company apparently did not account for this well enough and the stores there have a lot of empty shelves (Lutz, 2014). If the company has no idea what it will sell, it is hard to have the right amount of inventory on hand, so when making major strategic changes, those have to be accounted for in the forecasting.



References

Lin, G., Ettl, M., Buckley, S., Bagchi, S., Yao, D., Naccarato, B., Allan, R., Kim, K. & Koenig, L. (2000). Extended-enterprise supply-chain management at IBM personal systems group and other divisions. Interfaces. Vol. 30 (2000) 7-25.

Lutz, A. (2014). 12 photos that reveal why Target Canada is in big trouble. Financial Post. Retrieved June 10, 2014 from http://business.financialpost.com/2014/01/22/12-photos-that-reveal-why-target-canada-is-in-big-trouble/

ORGANIZATION STRUCTURE
APPLICATION CASE: BEST BUY


No schedules. No mandatory meetings. Inside Best Buy's radical reshaping of the workplace

One afternoon last year, Chap Achen, who oversees online orders at Best Buy Co. (BBY ), shut down his computer, stood up from his desk, and announced that he was leaving for the day. It was around 2 p.m., and most of Achen's staff were slumped over their keyboards, deep in a post-lunch, LCD-lit trance. "See you tomorrow," said Achen. "I'm going to a matinee."

Under normal circumstances, an early-afternoon departure would have been totally un-Achen. After all, this was a 37-year-old corporate comer whose wife laughs in his face when he utters the words "work-life balance." But at Best Buy's Minneapolis headquarters, similar incidents of strangeness were breaking out all over the ultramodern campus. In employee relations, Steve Hance had suddenly started going hunting on workdays, a Remington 12-gauge in one hand, a Verizon LG (VZ ) in the other. In the retail training department, e-learning specialist Mark Wells was spending his days bombing around the country following rocker Dave Matthews. Single mother Kelly McDevitt, an online promotions manager, started leaving at 2:30 p.m. to pick up her 11-year-old son Calvin from school. Scott Jauman, a Six Sigma black belt, began spending a third of his time at his Northwoods cabin.

At most companies, going AWOL during daylight hours would be grounds for a pink slip. Not at Best Buy. The nation's leading electronics retailer has embarked on a radical--if risky--experiment to transform a culture once known for killer hours and herd-riding bosses. The endeavor, called ROWE, for "results-only work environment," seeks to demolish decades-old business dogma that equates physical presence with productivity. The goal at Best Buy is to judge performance on output instead of hours.

Hence workers pulling into the company's amenity-packed headquarters at 2 p.m. aren't considered late. Nor are those pulling out at 2 p.m. seen as leaving early. There are no schedules. No mandatory meetings. No impression-management hustles. Work is no longer a place where you go, but something you do. It's O.K. to take conference calls while you hunt, collaborate from your lakeside cabin, or log on after dinner so you can spend the afternoon with your kid.

Best Buy did not invent the post-geographic office. Tech companies have been going bedouin for several years. At IBM (IBM ), 40% of the workforce has no official office; at AT&T, a third of managers are untethered. Sun Microsystems Inc. (SUNW ) calculates that it's saved $400 million over six years in real estate costs by allowing nearly half of all employees to work anywhere they want. And this trend seems to have legs. A recent Boston Consulting Group study found that 85% of executives expect a big rise in the number of unleashed workers over the next five years. In fact, at many companies the most innovative new product may be the structure of the workplace itself.

But arguably no big business has smashed the clock quite so resolutely as Best Buy. The official policy for this post-face-time, location-agnostic way of working is that people are free to work wherever they want, whenever they want, as long as they get their work done. "This is like TiVo (TIVO ) for your work," says the program's co-founder, Jody Thompson. By the end of 2007, all 4,000 staffers working at corporate will be on ROWE. Starting in February, the new work environment will become an official part of Best Buy's recruiting pitch as well as its orientation for new hires. And the company plans to take its clockless campaign to its stores--a high-stakes challenge that no company has tried before in a retail environment.

Another thing about this experiment: It wasn't imposed from the top down. It began as a covert guerrilla action that spread virally and eventually became a revolution. So secret was the operation that Chief Executive Brad Anderson only learned the details two years after it began transforming his company. Such bottom-up, stealth innovation is exactly the kind of thing Anderson encourages. The Best Buy chief aims to keep innovating even when something is ostensibly working. "ROWE was an idea born and nurtured by a handful of passionate employees," he says. "It wasn't created as the result of some edict."

So bullish are Anderson and his team on the idea that they have formed a subsidiary called CultureRx, set up to help other companies go clockless. CultureRx expects to sign up at least one large client in the coming months.

The CEO may have bought in, but there has been plenty of opposition inside the company. Many execs wondered if the program was simply flextime in a prettier bottle. Others felt that working off-site would lead to longer hours and destroy forever the demarcation between work and personal time. Cynics thought it was all a PR stunt dreamed up by Machiavellian operatives in human resources. And as ROWE infected one department after the other, its supporters ran into old-guard saboteurs, who continue to plot an overthrow and spread warnings of a coming paradise for slackers.

Then again, the new work structure's proponents say it's helping Best Buy overcome challenges. And thanks to early successes, some of the program's harshest critics have become true believers. With gross margins on electronics under pressure, and Wal-Mart Stores Inc. (WMT ) and Target Corp. (TGT ) shouldering into Best Buy territory, the company has been moving into services, including its Geek Squad and "customer centricity" program in which salespeople act as technology counselors. But Best Buy was afflicted by stress, burnout, and high turnover. The hope was that ROWE, by freeing employees to make their own work-life decisions, could boost morale and productivity and keep the service initiative on track.

It seems to be working. Since the program's implementation, average voluntary turnover has fallen drastically, CultureRx says. Meanwhile, Best Buy notes that productivity is up an average 35% in departments that have switched to ROWE. Employee engagement, which measures employee satisfaction and is often a barometer for retention, is way up too, according to the Gallup Organization, which audits corporate cultures.

ROWE may also help the company pay for the customer centricity campaign. The endeavor is hugely expensive because it involves tailoring stores to local markets and training employees to turn customer feedback into new business ideas. By letting people work off-campus, Best Buy figures it can reduce the need for corporate office space, perhaps rent out the empty cubicles to other companies, and plow the millions of dollars in savings into its services initiative.

Phyllis Moen, a University of Minnesota sociology professor who researches work-life issues, is studying the Best Buy experiment in a project sponsored by the National Institutes of Health. She says most companies are stuck in the 1930s when it comes to employees' and managers' relationships to time and work. "Our whole notion of paid work was developed within an assembly line culture," Moen says. "Showing up was work. Best Buy is recognizing that sitting in a chair is no longer working."

ONE GIANT WIRELESS KIBBUTZ
Jody Thompson and Cali Ressler are two HR people you actually don't hate. They groan over cultish corporate slogans like "Build Superior Organizational Capability." They disdain Outlook junkies who double-book and showboating PowerPointers. But it's flextime, or Big Business' answer to overwork, long commutes, and lack of work-family balance, that elicits the harshest verdict. "A con game," says Thompson. "A total joke," adds Ressler.

Flexible work schedules, they say, heap needless bureaucracy on managers instead of addressing the real issue: how to work more efficiently in an era of transcontinental teams and multiple time zones. They add that flextime also stigmatizes those who use it (the reason so few do) and keeps companies acting like the military (fixated on schedules) when they should behave more like MySpace (NWS ) (social networks where real-time innovation can flourish). Besides, they say, if people can virtually carry their office around in their pockets or pocketbooks, why should it matter where and when they work if they are crushing their goals?

Thompson, 49, and Ressler, 29, met three years ago. The boomer and the Gen Xer got each other right away. When they talk about their meeting, it sounds like something out of Plato for HR, or two like minds making a whole. At the time, Best Buy was still a ferociously face-time place. Workers arriving after 8 a.m. on sub-zero mornings stashed their parkas in their cars to foil detection as late arrivals. Early escapees crept down back stairwells. Cube-side, the living was equally uneasy. One manager required his MBAs to sign out for lunch, including listing their restaurant locations and ETAs. Another insisted his team track its work--every 15 minutes. As at many companies, the last one to turn out the lights won.

Outside the office, Thompson and Ressler couldn't help noticing how wireless broadband was turning the world into one giant work kibbutz. They talked about how managers were mired in analog-age inertia, often judging performance on how much they saw you, vs. how much you did. Ressler and Thompson recognized the dangerous, life-wrecking cocktail in the making: The always-on worker now also had to be always in.

The culture, not exactly Minnesota-nice, was threatening Best Buy's massive expansion plans. But Ressler and Thompson knew their solution was too radical to simply trot up to CEO Anderson. Nor, in the beginning, did they feel they could lobby their executive supervisors for official approval. Besides, they knew the usual corporate route of imposing something from the top down would bomb. So they met in private, stealthily strategizing about how to protect ROWE and then dribble it out under the radar in tiny pilot trials. Ressler and Thompson waited patiently for the right opportunity.

It came in 2003. Two managers--one in the properties division, the other in communications--were desperate. Top performers were complaining of unsustainable levels of stress, threatening business continuity just when Best Buy was rolling out its customer centricity campaign in hundreds of stores. They also knew from employee engagement data that workers were suffering from the classic work-life hex: jobs with high demands (always-on, transcontinental availability) and low control (always on-site, no personal life).

Ressler and Thompson saw their opening in these two vanguard managers. Would they be willing to partake in a private management experiment? The two outlined their vision. They explained how in the world of ROWE, there would be no mandatory meetings. No times when you had to physically be at work. Performance would be based on output, not hours. Managers would base assessments on data and evidence, not feelings and anecdotes. The executives liked what they heard and agreed.

The experiment quickly gained social networking heat. Waiting in line at Best Buy's on-site Caribou Coffee (CBOU ), in e-mails, and during drive-by's at friends' desks, employees in other parts of the company started hearing about this seeming antidote to megahour agita. A curious culture of haves and have-nots emerged on the Best Buy campus, with those in ROWE sporting special stickers on their laptops as though they were part of some cabal. Hance, the hunter, started taking conference calls in tree stands and exchanging e-mails from his fishing boat. When Wells wasn't following around Dave Matthews, chances were he was biking around Minneapolis' network of urban lakes, and digging into work only after night had fallen. Hourly workers were still putting in a full 40, but began doing so wherever and whenever they wanted.

At first, participants were loath to share anything about ROWE with higher-ups for fear the perk would be taken away or reversed. But by 2004, loftier and loftier levels of management began hearing about the experiment at about the time opposition to it grew more intense. Critics feared executives would lose control and co-workers would forfeit the collaboration born of proximity. If you can work anywhere, they asked, won't you always be working? Won't overbearing bosses start calling you in the middle of the night? Won't coasters see ROWE as a way to shirk work and force more dedicated colleagues to pick up the slack? And there were generational conflicts: Some boomers felt they'd been forced to choose between work and life during their careers. So everyone else should, too.

Shari Ballard, Best Buy's executive vice-president for human capital and leadership (an analog title if ever there was one), was originally skeptical, although she eventually bought in. At first she couldn't figure out why managers needed a new methodology to help solve the work-life conundrum. "It wasn't hugs and smiles," she says of Ressler's and Thompson's campaign. "Managers in the old mental model were totally irritated." In the e-learning division, many of Wells's older co-workers (read 40-year-olds; the average age at Best Buy is 36) expressed resentment over the change, insisting that work relationships are better face-to-face, not screen-to-screen. "We have people in our group who are like, `I'm not going to do it,'" says Wells, who likes to sleep in and doesn't own an alarm clock. "I'm like, `that's fine, but I'm outta here.'" In enemy circles, Ressler and Thompson are known to this day as "those two" and "the subversives."

Yet ROWE continues to spread through the company. If intrigued nonparticipants work for progressive superiors, they usually talk up the program and get their bosses to agree to trials. If they toil under clock-watchers, they form underground networks and quietly lobby for outside support until there is usually no choice but for their boss to switch. It was only this past summer that CEO Anderson got a full briefing, and total understanding, about what was happening. "We purposely waited until the tipping point before we took it to him," says Thompson. Until then he wasn't well-versed on the 13 ROWE commandments. No.1: People at all levels stop doing any activity that is a waste of their time, the customer's time, or the company's money. No.7: Nobody talks about how many hours they work. No.9: It's O.K. to take a nap on a Tuesday afternoon, grocery shop on Wednesday morning, or catch a movie on Thursday afternoon.

That's the commandment Achen was following when he took off that day to see Star Wars Episode III: Revenge of the Sith. Doing so felt abnormal and uncomfortable. Achen felt guilty. But Ressler and Thompson had told him to "model the behavior." So he did. It helped that Achen saw in ROWE the potential to solve a couple of nagging business problems. As the head of the unit that monitors everything that happens after someone places an order at BestBuy.com, including manually reviewing orders and flagging them for possible fraud, Achen wanted to expand the hours of operation without mandating that people show up in the office at 6 a.m. He had another issue. One of his top-performing managers lived in St. Cloud, Minn., and commuted two and a half hours each way to work. He and Achen had a gentleman's agreement that he could work from home on Fridays. But the rest of the staff didn't appreciate the favoritism. "It was creating a lot of tension on my team," says Achen.

RECORD JOB SATISFACTION
Ressler and Thompson had convinced Achen that ROWE would work. Now Achen would have to convince the general manager of BestBuy.com, senior vice-president John "J.T." Thompson. That wasn't going to be easy. Thompson, a former General Electric Co. (GE ) guy, was as old school as they come with his starched shirt, booming voice, and ramrod-straight posture. He came of age believing there were three 8-hour days in every 24 hours. He loved working in his office on weekends. At first, he pushed back hard. "I was not supportive," says Thompson, who was privately terrified about the loss of control. "He didn't want anything to do with it," says Achen. "He was all about measurement, and he kept asking me, `How are you going to measure this so you know you're getting the same productivity out of people?'"

That's where Achen's performance metrics came in handy. He could measure how many orders per hour his team was processing no matter where they were. He told Thompson he'd reel everyone back to campus the minute he noticed a dip. Within a month, Achen could see that not only was his team's productivity up, but engagement scores, or measuring job satisfaction and retention, were the highest in the dot-com division's history.

For years, engagement had been a sore spot for Thompson. "I showed J.T. these scores, and his eyes lit up," says Achen. Thompson rushed to roll out ROWE to his entire department. Voluntary turnover among men dropped from 16.11% to 0. "For years I had been focused on the wrong currency," says Thompson. "I was always looking to see if people were here. I should have been looking at what they were getting done."

Today, Achen's commuting employee usually comes in once a week. Nearly three-quarters of his staff spend most of their time out of the office. Doesn't he worry that he loses some of the interoffice magic when they don't gather together all day, every day? What about the value in riffing on one another's ideas? What about teamwork and camaraderie? "You absolutely lose some of that," he says. "But what we get back far outweighs anything we've lost."

Achen says he would never go back. Orders processed by people who are not working in the office are up 13% to 18% over those who are. ROWE'ers are posting higher metrics for quality, too. Achen says he believes that's due to the new office paradox: Given the constant distractions, it sometimes feels impossible to get any work done at work.

Ressler and Thompson say all the Best Buy groups that have switched to the freer structurereport similar results. Meanwhile, the two have other big plans for the company. Last month they launched a new pilot called Cube-Free. Ressler and Thompson believe offices encourage the wrong kinds of habits, keeping people wrapped up in a paper, prewireless mentality as opposed to pushing employees to use technology in the efficiency-enhancing way it was intended. Offices also waste space and time in an age when workers are becoming more and more place-neutral. "This also sets up Best Buy to be able to completely operate if disaster hits," says Thompson. Work groups that go cube-free will be able to redesign their spaces to better accommodate collaboration instead of working alone.

Next year Ressler and Thompson plan to pilot their boldest move yet, testing ROWE in retail stores among both managers and workers. How exactly they will do this in an environment where salespeople presumably need to put in regular hours, they won't say. And they acknowledge it won't be easy. Still, they are eager to try just about anything to help the company slash its 65% turnover rates in stores, where disgruntlement is common and workers form groups on MySpace with names like "Best Buy Losers Club!"

Best Buy has transformed its workplace culture in a remarkably short time. Isn't it also true that ROWE could unravel just as quickly? What happens if the company hits a speed bump? Competition isn't getting any less intense, after all. Best Buy sells a lot of extended warranties, an area where both Wal-Mart and Target are eager to undercut the electronics retailer on price. What's more, the current boom in flat-panel, digital TVs will peak in a few years.

If Best Buy's business goes south, human nature dictates that the people who always believed the clockless office was a flaky New Age idea will see an opportunity to try to force a hasty retreat. Some at the company complain that productivity is up only because many Best Buyers are now working longer hours. And some die-hard ROWE opponents still privately roll their eyes when they see Ressler and Thompson in the hallway.

But it's worth remembering that most big companies fail to grow at the rate of inflation. That's true in part because the bigger the company gets, the harder it is to get the best out of each and every employee. ROWE is one of Best Buy's answers to avoiding that fate. "The old way of managing and looking at work isn't going to work anymore," says Ressler. "We want to revolutionize the way work gets done." Admit it, you're rooting for them, too.


By Michelle Conlin
P.S. Answer those two questions. and also I would like the same person who did my second paper to do that one.

1-What is the driving force behind Best Buy?s shift to the new way of organizing work? Does the new structure match the strategy?

2-What effect does the new structure have on spans of control. Define the concept. What is the optimal span of control?

You are to write a 3-page paper. State the Question First and then continue to answer. Read the Case Study, and at the end of the Case Study Answer the Discussion Questions. *Do Not Use Outside Sources.*

Qualcomm in China

Company and Industry Background

QUALCOMM was founded in 1985 by Dr. Irwin Jacobs, a former engineer professor. Under Jacobs, leadership, the company developed a digital communications technology for wireless phones known as code division multiple access (CDMA). Introduced in 1989, CDMA became one of the three main technologies used in digital wireless phones. CDMA and the two other digital wireless communication technologies, TDMA (which stands for Time division multiple access) and GSM (which is a form of TDMA and stands for global system for mobile communications), are the digital technologies used to transmit a wireless phone users voice or data over radio waves using the wireless phone operators network. CDMA works by converting speech into digital information, which is being transmitted in the form of a radio signal over the phone network. These digital wireless phone networks are complete phone systems comprised primarily of base stations, or cells, which are geographically placed throughout the service more coverage area. Once communication between a wireless phone user and a base station is established, the system detects the movement of the wireless phone user and the communications is handed off to another base station, or cell, as the wireless phone user moves throughout the service area.
QUALCOMM has more than 800 patents on CDMA, and essentially owns this standard for digital wireless phones. The company licenses its technology to equipment manufacturers in return for royalties on the cell of any equipment, such as base stations and handsets. The equipment manufacturers sell the equipment and service providers. Thus, for example, QUALCOMM might license its technology to Motorola, which then makes base stations and handsets that are based on CDMA technology. In turn, Motorola might sell the CDMA equipment to a service provider, such as Verizon, which offers wireless phone service to consumers in the United States. Every time Motorola makes a sale, QUALCOMM collects a royalty based on a percentage of the price of that equipment (QUALCOMM has not reported that figure, but it is believed to be 4 percent of the value of the equipment). QUALCOMM also makes and sells chipsets based on CDMA technology to equipment manufacturers who then place those chipsets into base stations and handsets. Some 90% of CDMA phones contain chipsets manufactured by QUALCOMM. In 2004, QUALCOMM generated record revenues of $4.88 billion and net profits of $1.72 billion.
The great advantage claimed for CDMA over competing standard is that it uses radio spectrum more efficiently than GSM or TDMA. QUALCOMM states that CDMA equipment has three times the capacity of comparable GSM or TDMA equipment, thereby enabling service operators to attain the same capacity with a lower investment in network equipment such as base stations. Because the wireless service and dish tree is very price competitive, and technology that promises to lower-cost service operation should gain an advantage in the marketplace. However, CDMA was a latecomer to the digital communication market and by 2004 still in third place behind TDMA and GSM with 26 percent of the world market a big reason for this was that in the early 1990s, the European Union backed GSM as the standard for digital communication technology. At the time, Europe led the world in the adoption of wireless phone technology. Since European firms such as Ericsson and Nokia were major suppliers of GSM equipment, this decision benefited them.
Although CDMA equipment can, in theory, handle more data traffic than comparable TDMA or GSM equipment, the larger installed base of TDMA and GSM subscribers mean that a company making this equipment benefit from substantial economies of scale, which to some extent nullifies a cost advantage associated with CDMA technology and helps explain the continued dominance of the standards. Also, since far more GSMA handsets are so than CDMA handsets, economies of scale mean that GSM handsets are less expensive than CDMA handsets. By the end of 2004 there were over 1.6 million wireless subscribers worldwide, some 340 million of which used CDMA technology. Forecasts called for the total number of wireless subscribers to grow to 2.5 billion by 2009. Among the wireless technologies, CDMA was mentioning the fastest growing rate. CDMA is now the most widely used technology and United States, where 47% of the nation's 160 million wireless phone subscribers in 2004 used CDMA equipment. CDMA also has a large and growing presence in Latin America and the Asian Pacific region. The laggard in CDMA penetration is Europe, where GSM dominates and CDMA technology had less than 10 million subscribers in 2002.
Looking forward, the success of the QUALCOMM will be driven by two related factors. First, there is a shift to a new generation of technology, known in the industry as 3G or third-generation wireless technology. This new generation of digital wireless technology is designed to handle much greater amounts of data at rapid download speeds, enabling subscribers to download multimedia applications, such as streamline video or audio, on to their wireless phones, effectively turning the handsets into small computers that are able to access the Internet from any place any time. Two versions of CDMA technology have been developed for 3G, CDMA 2000 and WCDMA. While QUALCOMM developed CDMA 2000, WCDMA was developed by rival telecommunications firms Nokia and Ericsson. However, QUALCOMM's patents cover both versions of technology and the firm will earn royalties no matter which version is used by a particular service carrier, although QUALCOMM favors CDMA 2000 and reportedly makes greater royalties from it. Both CDMA 3G technologies will have to compete with a 3G version of the popular GSM technology, known as GPRS, which was introduced in 2002.
The second factor driving QUALCOMM's success is the penetration of CDMA technology into developing markets where there's still a large potential for new subscriber adoptions, particularly in the Asia-Pacific region. Industry forecasts suggest a number of wireless phones drivers in this region will grow from 232 million in 2000 to 780 million in 2005. Top among these expanding developing markets are China, with its 1.2 billion people, and India, with nearly 1 billion. In both nations, wireless penetration is currently low but growing rapidly. Forecasts suggest by 2009 there will be 550 million wireless subscribers in China, up from 250 million in 2003, and 117 million India, from less than 30 million in 2003. Given the large population base in these markets, the standard that dominates there may be the standard that dominates worldwide. China and India have thus become the main battlegrounds for the future of digital wireless technology, and QUALCOMM's future depends critically upon the outcome of this battle.

The Early Days: Great Wall
QUALCOMM's Irwin Jacobs was quick to recognize the importance of China and QUALCOMM's future. He began making business trips to China in 1992 to try to persuade China's fledgling telecommunication provider to adopt CDMA technology. In 1994 and it began to look as if he might make some headway. At the time, China's army was keen to develop a secure communication network. CDMA is well-suited to the application because it was adapted from a technology developed for secure military transmissions. The Chinese army also owned a spectrum that CDMA uses, the 800 MHz band. By building a commercial CDMA network with its spare spectrum, the army believed it could dominate the nascent mobile phone market in China, and use the profits and expertise gained from that business to modernize its own communications network. When the army announced in 1994 that it would deploy a CDMA network, China's top telephone official, Wu Jichuan, the mnister of Posts and Telecommunications, was caught somewhat off guard. Wu Jichuan saw telecommunications as a national priority and favored state-owned China telecommunication Corp. He had allowed the company to charge high long-distance rates, and in hand forced into use the profits to bring telecommunication services to remote villages. He had little use for competition that might sap China Telecommunications profits and derail his plans. To deal with the threat, the canny Wu invited the army into his camp, proposing that form 50/50 joint venture with China Telecommunications to build a CDMA network. Called Great Wall, the venture won a license to run an experimental CDMA network in four cities; creating a potential boom in demand for CDMA equipment and a royalty stream for QUALCOMM. However, Wu ordered China Telecommunications to roll out as fast as possible a separate, nationwide digital network based on GSM. The Ministry of Post and Telecommunications happened to own the 900 MHz radio spectrum used by the GSM technology. Wu refused to issue permits to the army to allow it to expand its network beyond four cities. By 1998 it was clear that the Great Walls expansion plan has been stymied by Wu, with a corresponding loss of opportunity for QUALCOMM.
China Unicom
However, the story was far from over. In the late 1990s, China separated out to wireless phone operators from China telecommunications, China mobile and China Unicom. Although both were initially state owned, the idea was still some team to private investors and set two entities up as competitors in China's wireless phone market. While China mobile inherited from bulk of existing networks and subscribers, China Unicom was left to choose its own technology, opening the door for QUALCOMM to get back into China. Irwin Jacobs had also been working the political angle in the interim. China's leader decided in the late 1990s that it needed to become a member of the World Trade Organization (WTO) if it wants to participate in the global economy of the 21st-century. If China was to enter the World Trade Organization, it would have to win the support of major trading nations who were already members, including the United States. Behind the scenes, Jacobs lobbied the US government, urging it to pressure China to adopt CDMA technology as one of the conditions for US support of China's entry into the World Trade Organization. For a while the efforts were fruitless, but in March 1999 the Chinese Premier Zhu Rongji decided to the United States commitment to use CDMA technology in return for US support in China's entry into the World Trade Organization. Zu propose that China Unicom work with QUALCOMM and others to roll out a CDMA network in China.
However, before this deal could be finalized, QUALCOMM and negotiate a licensing framework with Wus ministry, which had been renamed the Ministry of information. But the negotiations dragged on, with QUALCOMM demanding a higher royalty rate on sales of CDMA equipment than Wu ordered Unicom to negotiate directly with QUALCOMM. Unicom was trying to become profitable so that it can start selling at team to private investors and gain a listing on the Hong Kong and New York stock exchanges. It had already started to roll out a wireless network based on GSM and was not happy about being ordered to make duplicate investments in a CDMA network. Reports suggest that like Wu, Unicom insisted that QUALCOMM lower its royalty rates or nothing would happen. QUALCOMM relented (the royalty agreement has not been made public), and in February 2000 Unicom announced that a deal had been reached and it would soon start construction on a CDMA network for 10 million subscribers.
The issue was far from resolved, however. At the signing ceremony it was clear that something was wrong Wu and other Cabinet officials declined to attend. In a private meeting between Wu Jichuan and Jacobs it became clear why Wu Jichuan was insisting that QUALCOMM must transfer the design for the chips that run the CDMA system to a Chinese firm. QUALCOMM had never done this and was unlikely to do so. Jacobs said the request could not be met. A few days later China Unicom withdrew its request for bids on a CDMA network, but denied that the project was on hold. In June 2000, after the US House of Representatives approved a bill enabling China to enter the World Trade Organization, China Unicom confirmed it would continue to use a GSM network, the Company held out the possibility that it would use 3G equipment based on CDMA.
According to news reports, while politics played a part in the Unicom decision, Soviet pressure from the local equipment manufacturers, many of whom were joint ventures between Chinese companies and foreigners, such as Ericsson, Nokia, and Motorola. Many of these joint ventures had already made investments to produce GSM equipment and were not ready to produce CDMA equipment. Some of these manufactures reportedly pressuring Unicom to stick with GSM or, the very least, slow down the rollout of CDMA networks. After so many years trying to break into China, Jacobs was not about to give up. In October 2000 and Jacobs visited Premier Zu Rongji in Beijing. What went on in that meeting is not known, but it is speculated that QUALCOMM lowered the royalty rate and Chinese women manufacturers would have to pay the company to 2.65 percent of handset sales, substantially lower than the 4 percent rate reportedly paid QUALCOMM elsewhere in the world. Soon after the meeting, China Unicom reversed course, announcing that it will build a CDMA network to support 10 million subscribers although it would now be mid-2002 before the network started to generate significant handset sales, and thus royalties for QUALCOMM, not 2001 as originally hoped. Analysts speculated that the small size of the network would make it hard for QUALCOMM to get its favored 3G technology, CDMA 2000, widely adopted in China. My 2001 looked as if QUALCOMM had finally cracked the Chinese market. Then, one day before China Unicom was due to sign contracts with equipment suppliers to supply its planned CDMA network, the deal was delayed again. No reason was given. Some speculated that a rising political tension between United States and China was to blame. As US surveillance plane had been forced down by Chinese air force, which accused United States spying on China. Thrown into the mix were heightened tensions between United States and China over the future of Taiwan. A month later Chinese President Jiang Zemin appeared to give the green light to the deal when he told a gathering of foreign business leaders that CDMA could increase competition in China. Shortly after, Unicom sign contracts to build a CDMA network with a capacity of 15.15 million subscribers.
The Rollout of CDMA In China
After years of stop and go, China Unicom turned on its CDMA network in January 2002 following a $2.5 billion investment in equipment. It year-end target for 2002 was 7 million subscribers, but by June 2002 the number stood as a meager 700,000, while China overall and 160 million wireless subscribers, the majority using GSM equipment. Critics were quick to claim that slow rollout demonstrated Unicom's lack of commitment to CDMA, which some view as being forced on them by Chinese politicians. Unicom executives disagreed, and claimed the decision was a sound business decision made because CDMA network equipment is cheaper than GSM equipment. Unicom and QUALCOMM executives did concede that they had priced CDMA phones to high in an attempt to recoup the higher cost of CDMA handsets, which cost $350 each, some $100 more than GSM phones. By the second half of 2002, however, the rollout of CDMA service accelerated. In October 2002, China Unicom reported that it had more than 4 million CDMA subscribers, and that it was encountering rapid growth and should hit 7 million by year end. By February 2005, China Unicom in almost 20 9 million CDMA subscribers. In the same time, subscriptions to its GSM networks were also growing. At the end of 2004, China Unico hand 112 million subscribers in China. Meanwhile, QUALCOMM continue to show its commitment to China. The company opened a 43,000 square-foot research Center in China in 2002 to focus on the development of 3G CDMA technology and applications for the Chinese market, and in June 2003 the company announced it would invest $100 million in Chinese equipment companies to help them develop CDMA equipment. Jacobs also predicted that looking forward to 3G rollout in China, China Unicom would move its network to CDMA 2000, while China mobile would adopt WCDMA technology. Either way, QUALCOMM would benefit.

Discussion Questions

1.Why does GSM have a larger share of wireless subscribers worldwide?

2.To what extent do political decisions explain the global leadership of GSM?

3.To what extent do economic factors?

4.Are the economic and political factors independent of each other?

1. Financial Ratios

In at least 200 words, fully answer question 3 from that case. Be sure to fully and carefully explain your answer.

RATIOS AND FINANCIAL PLANNING AT EAST COAST YACHTS

After Dan?s analysis of East Coast Yachts? cash flow (at the end of our previous chapter), Larissa approached Dan about the company?s performance and future growth plans. First, Larissa wants to find out how East Coast Yachts is performing relative to its peers. Additionally, she wants to find out the future financing necessary to fund the company?s growth. In the past, East Coast Yachts experienced difficulty in financing its growth plan, in large part because of poor planning. In fact, the company had to turn down several large jobs because its facilities were unable to handle the additional demand. Larissa hoped that Dan would be able to estimate the amount of capital the company would have to raise next year so that East Coast Yachts would be better prepared to fund its expansion plans.

To get Dan started with his analyses, Larissa provided the following financial statements. Dan then gathered the industry ratios for the yacht manufacturing industry.

EAST COST YACHTS
2010 INCOME STATMENT
Sales $617,760,000
Cos of goods sold $435,360,000
Selling, general and administrative $ 73,824,000
Depreciation $ 20,160,000
EBIT $ 88,416,000
Interest expense $ 11,112,000
EBT $ 77,304,000
Taxes $ 30,921,600
Net income $ 46,382,400
Dividends $ 17,550,960
Retained earnings $ 28,831,440

EAST COAST YACHTS
2010 BALANCE SHEET
Current assets Current liabilities
Cash and equivalents $11,232,000 Account payable $24,546,000
Account receivable $20,208,000 Notes payable $18,725,000
Inventories $22,656,000 Accrued expenses $ 6,185,000
Other $ 1,184,000 Total current liabilities $49,456,000
Total current assets $55,280,000
Fixed assets Long-term debt $146,560,000
Property, plant, and equipment $462,030,000 Total long-term liabilities $146,456,000
Less accumulated depreciation ($114,996,000)
Net property, plant and equipment $347,034,000
Intangible assets and others $ 6,840,000 Stockholders? equity
Total fixed assets $353,874,000 Preferred stock $ 3,000,000
Common stock $ 40,800,000
Capital surplus $ 31,200,000
Accumulated retained earnings $186,138,000
Less treasury stock ($48,000,000)
Total equity $213,138,000
Total assets $409,154,000 Total liabilities and shareholder?s equity $409,154,000

YACHT INDUSTRY RATIOS
LOWER QUARTILE MEDIAN UPPER QUARTILE
Current ratio 0.86 1.51 1.97
Quick ratio 0.43 0.75 1.01
Total asset turnover 1.10 1.27 1.46
Inventory turnover 12.18 14.38 16.43
Receivables turnover 10.25 17.65 22.43
Debt ratio 0.32 0.49 0.61
Debt-equity ratio 0.51 0.83 1.03
Equity multiplier 1.51 1.83 2.03
Interest coverage 5.72 8.21 10.83
Profit margin 5.02% 7.48% 9.05%
Return on assets 7.05% 10.67% 14.16%
Return on equity 9.06% 14.32% 22.41%

3. Compare the performance of East Coast Yachts to the industry as a whole. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How would you interpret this ratio? How does East Coast Yachts compare to the industry average for this ratio?


2. Efficient Market Hypothesis

In at least 200 words, fully answer Concept Questions 5, 7, or 9. Support your answer.

5. Efficient Market Hypothesis
A stock market analyst is able to identify mispriced stocks by comparing the average price for the last 10 days to the average price for the last 60 days. If this is true, what do you know about the market?

7. Efficient Market Hypothesis
What are the implications of the efficient market hypothesis for investors who buy and sell stocks in an attempt to ?beat the market??

9. Efficient Market Hypothesis
There are several celebrated investors and stock pickers frequently mentioned in the financial press who have recorded huge returns on their investments over the past two decades. Is the success of these particular investors an invalidation of the EMH? Explain.

Reference:
Ross, S., Westerfield, R., Jaffe, J., & Jordan, B. (2011). Corporate Finance: Core Principles & Application (3rd ed.). New York, NY: McGraw-Hill/Irwin