s 25 July Individual Performance Evaluation + Corporate Governance + Vertical Integration and Outsourcing Instructions Discussion Question 1: Mrs. Fields’ company has achieved great success locally and she is now planning to expand and open new units throughout the country. Mrs. Fields believes that expansion through franchising would turn her cookie company into just another fast-food company and that her company will then no longer be able to produce high quality products with love and care. Her point of view seems to ignore a few major problems that her company will face if she does not franchise units: Owning all the new units represents an almighty amount of risk.
Each unit is like a whole new business and having done all the hard work with her Salt Lake City unit already going through the whole process again is an unnecessary risk that Mrs. Fields is taking. These risks include: Capital: Owning each unit will require a lot of capital and although Mrs. Fields has made millions through her Salt Lake unit there is still a limit to how much she would be willing to reinvest in her business.
There is also no guarantee of success of the new units and therefore if a new unit fails to perform according to expectations Mrs. Fields will be the one losing money. Motivation: Even though Mrs. Fields likes to monitor the management of each of her company’s units by herself, as the units grow it will become more and more difficult for her to do so. Managers of company owned units have less on stake and therefore are less motivated that their franchisee counterparts to produce top results. Speed of growth: Franchising allows a business to grow using the resources of others.
Trying to grow with only her own resources is a major hurdle in growth for Mrs. Field’s company. A better solution in this case would be for Mrs. Fields to adopt the solution implemented by Ms. Ruth Fertel (Ericksen, Ernst & Young 47-64), owner of Ruth’s Chris Steak House, who faced a similar situation i. e. she wanted to expand but did not want her restaurants to lose the special environment she paid so much attention to. Ruth went ahead with the franchising but took the following steps to ensure that her restaurants did not lose their special appeal: 1.
She spent 3 weeks at each new restaurant teaching the cooking staff the recipes and training them in her distinctive ways of cooking. 2. She also sent her staffers to train the staffers of all the new units. This way she was able to enjoy all the benefits of franchising without having to undertake the additional risk of owning all the new units. Mrs. Fields should do the same.
Discussion Question 2: The biggest consideration for the Greg Norman Coal Co. is to ensure the longevity of their relationship with the Black Diamond Company. The length of the contract, therefore, has be 10 years minimum for this to be a profitable venture for the my company because building a coal processing plant requires a lot of capital investment and since there are no other mines in the area we must make sure at this very stage that the Black Diamond Company does not leave us high and dry. The next term I would like to get Black Diamond to agree to will be the maximum and minimum operating levels of the plant.
The levels will be set to ensure that the venture remains profitable through the term of contract and that it is not over or under worked because that would damage my company’s valuable machinery. Another important term will be about the desired quality of coal required by the Black Diamond Company. This term is important because of two reasons. 1. This will allow my company to set a benchmark for quality. 2. This will help in setting the tariff. The second point brings us to the most important point of all, the tariff.
In this case my company has just one supplier and the contract is a long term one. It is therefore essential for my company to agree with The Black Diamond Company on a schedule of rates for the next decade at this stage in order to ensure that the relationship remains cordial and harmonic. Works Cited: Ernst & Young, Gregory K. Ericksen. Women Entrepreneurs Only: 12 Women Entrepreneurs Tell the Stories of Their Success.
1st ed. NY: Wiley 1999.