The paper must be in APA format and include the following:
1. Cover page
2. An abstract
3. An Introduction
4. Provide a overview of each case study below. Compare and contrast them. Follow the outline in the picture.
• Include discussions of succession planning, legal and regulatory environment, and risk management.
5. Conclusion
This assignment is a 8-page descriptive case study utilizing the cases below. Also use at least two academic or peer-reviewed sources. The title and references pages do not count towards the page count.
Case Study 1
United By Blue Can an Eco-Friendly Apparel Company Afford to Stay Mission Focused in the Face of High Costs? Brian Linton grew up in Singapore and Japan and, even as a child, was fascinated by water, particularly the ocean. "I was fortunate to travel the world and go to a lot of different beaches," he says. "I loved all things aquatic and had about 30 fish tanks in my room. These experiences put me in beautiful locations as well as places that were so littered with trash that you couldn't see the sand. Seeing trash and polluted oceans was especially discouraging for me."
In 2006, while still a student at Temple University, Linton started Sand Shack, a business that sells beach-themed jewelry to stores along the East Coast (and that he still owns). He donated a portion of the company's sales to nonprofit organizations dedicated to ocean conservation but wanted to "do something that was more concrete and tangible than giving money to nonprofits," he says. In 2010, Linton launched United By Blue, an eco-friendly apparel company, with the idea that this business would be different. The name Linton gave his company is inspired by his belief that water unites all of humankind. "The water of the world is what we all need to live," he says. "It's what unites everything, and it's often the most mistreated part of the world."
In fact, people dump an estimated 14 billion tons of trash into the earth's oceans each year, and Linton wanted to do something about it. Rather than merely give away money that may or may not accomplish worthy environmental goals, United By Blue, which is based in Philadelphia, would associate a tangible environmental action for every sale that it makes. Linton pledged to sponsor cleanups that would remove one pound of trash (which primarily is plastic) from the world's oceans and waterways for every product that United By Blue sells.
"Our cleanups are the bedrock of our company and allow us to engage with thousands of volunteers and inspire participation in the ‘blue' movement," he says. So far, the company has hosted nearly 100 beach or waterway cleanups and has removed more than 140,000 pounds of trash. Two years after starting United By Blue, Linton was analyzing the company's financial statements and noticed something alarming: Its wholesale gross profit margin had shrunk from 60 percent to just 15 percent, a pattern that was unsustainable.
T-shirts are the company's best-selling products, and customers who believe in the company's mission are buying them through retailers such as Urban Outfitters, Whole Foods, and other small, independent shops for a retail price of $29.50. United By Blue sells the shirts to retailers for $14.50, but some of the company's larger customers receive discounts and pay less. The environmentally friendly T-shirts, which are produced in India, cost more to make and package than standard T-shirts because Linton used softer, more expensive slub cotton rather than the traditional jersey cotton that most companies use to make T-shirts.
He also insisted on avoiding the use of plastic in any of the company's packaging because of its negative impact on the environment, choosing instead to use biodegradable packaging made from banana fiber and paper hangtags made from recycled elephant dung that is infused with bluebell flower seeds so that customers can actually plant the tags and grow flowers.
The banana fiber wrapping alone costs 50 cents each-50 times the cost of a plastic bag. In addition, each cleanup that United By Blue sponsored costs between $2,000 and $5,000, a significant expense for a small company with annual sales of less than $1 million. Linton turned to his spreadsheet and calculated that he would have to raise its wholesale price to $16.50, which in turn would mean that retailers applying the standard markup would charge customers a final price of $34 for United By Blue T-shirts. He realized that raising the wholesale price to $16.50 probably would cause two of the company's largest customers, Urban Outfitters and Whole Foods, which together account for 25 percent of United By Blue's sales, to drop the shirts.
"Large retailers want discounts to maintain [gross profit] margins around 60 percent," he says. Losing major retailers also would make selling to small, independent shops more difficult as well. "[Having big-name retailers as customers] helped us build legitimacy," says Linton. If he raised prices, the company's small retail shops might drop the line as well. If he did not raise prices, he estimated that United By Blue would run out of cash in less than six months.
Another option is to reduce the shirts' cost by using less expensive plastic bags and hangtags and traditional jersey cotton, which also has a negative impact on the environment. United By Blue has 50 cleanup events planned for the upcoming year, and eliminating them would save between $100,000 and $250,000.
However, all of these changes would go against the company's mission and the reason that Linton started United By Blue in the first place. "Our cleanups are the bedrock of our company," he says. "My grand vision is to use the power of business to leave a positive impact on this world."
CASE STUDY 2
Red Iguana
Should a Family-Owned Restaurant Open a Second Location Nearby to Accommodate the Crowds that Appeared after It Was Featured on the Food Network?
In 1965, Rámon and María Cardenas, immigrants from Mexico, left their jobs in a restaurant in San Francisco and moved to Salt Lake City, Utah, where they purchased a restaurant called Casa Grande. They served authentic Mexican dishes that they learned to make in their native state of Chihuahua, unlike the "Americanized" version of Mexican food that most restaurants serve. "People were not used to their kind of Mexican food," says Lucy Cardenas, the couple's daughter, who now runs the family business with her husband, Bill Coker. Initially, sales were slow, but over time, the restaurant built a loyal customer following, and in 1970 Rámon and Maria moved the restaurant to a downtown location.
By 1985, Casa Grande was struggling, prompting the Cardenases to shutter it and open a new restaurant named Red Iguana in Salt Lake City's working-class west side. With its moderate prices and enormous-and enormously varied-menu, Red Iguana thrived, generating $300,000 in sales in its first year. Red Iguana's sales have increased every year, reaching $1.9 million in 2003. María died in 2002, and an exhausted Rámon was ready to close the restaurant despite its success.
Lucy and Bill were eager to take over the family business, but Rámon's traditional views made him hesitant to turn the restaurant over to a woman, even if she was his daughter. "My father would have given my brother the business [simply] because he was a man," recalls Lucy, "but we bought it from my Dad. He wanted to sell the business to me, not to me and my husband, because it's part of the family. It was at times painful."
After they purchased Red Iguana for $560,000, Lucy and Bill embarked on a modernization initiative, introduced a computerized restaurant management system, upgraded the electrical system, and purchased the parking lot next door. To improve food consistency across shifts, Lucy had her father cook every dish on the menu in front of her and had the chefs write down every recipe, something that Rámon had never done.
By 2008, annual revenue at Red Iguana had reached $3.8 million. The colorful restaurant, with its green and red walls, mismatched furniture, and plastic floral-print tablecloths, had a distinct family vibe and drew a wide variety of customers, ranging from skiers straight off the slopes and families to businesspeople and hipsters. In 2008, Guy Fiero featured Red Iguana on his Food Network television show, Diners, Drive-Ins, and Dives, and sales accelerated.
Crowds pushed the restaurant, with room to seat just 100 people, beyond its capacity. Even in the winter off-season during the middle of the week, customers often wait for more than an hour to get a table. On winter weekends, the wait stretches to two hours. During the busy summer months, wait times are even longer. On a typical day, about 700 customers eat lunch or dinner at Red Iguana. Longtime local customers began telling Coker that they had stopped coming to the restaurant because of the long wait times and large number of out-of-town diners.
"My experience has taught me that that kind of popularity can flip and become a negative," says Bill. Lucy and Bill soon learned about another complication for Red Iguana: The city would soon be starting construction on a light rail line, and the bridge on the street on which the restaurant was located that connected the west side of Salt Lake City with the downtown district would be closed for about four months. Because many of their customers, especially businesspeople at lunch, came from downtown and used that bridge to get to the Red Iguana, they estimated that they would lose between 10 and 20 percent of their sales during the construction.
To Lucy and Bill, the solution to their problem was to open a second Red Iguana location. "Anecdotal evidence was that we had gotten too busy, too crowded, and too successful and that [customers] would indeed fill a new restaurant," says Bill. But where should the second Red Iguana be located? Conventional wisdom said that the couple should choose a site far enough away from the original Red Iguana so that the second location would not cannibalize sales at the original restaurant.
That would be relatively easy to do because officials in several nearby towns had approached Lucy and Bill within the last several years about opening locations within their city limits. Several mall owners also had been trying to convince them to open locations in their shopping malls. However, the copreneurs lived only a few blocks from Red Iguana and saw that as a significant advantage. "I love being able to get to my business so fast," says Lucy.
Opening a second location farther away meant giving up some control over its operations. While investigating potential sites for a second location, Lucy and Bill heard about an old warehouse located just two blocks away from the original Red Iguana that was for sale for $259,000.
They saw a great deal of potential in the old barrel-roofed building, which had a large concrete pad that they could use for patio dining in the warmer months. Preliminary plans indicated that a restaurant in the renovated warehouse could seat 119 diners, slightly more than the original restaurant. However, to purchase the building and renovate it, they would have to convince the Salt Lake City Office of Economic Development and the loan officers at Zions Bank that opening a second location just two blocks from their original restaurant would work. In the initial meeting, the lenders were skeptical.
CASE STUDY 3
Easy Lunchboxes How Should an Entrepreneur Use Social Media to Market Her Home-Based Business that Sells Lunch Boxes?
Kelly Lester is a talented singer, actress, wife, mother to three daughters, and entrepreneur. Lester started her first company, a business that sold decorative light switch covers, in 1996 when the Web was in its infancy. Even then, Lester saw the power and the marketing potential that the Web provided businesses, particularly small businesses that lack the massive marketing budgets that their larger rivals have.
In addition to selling switch plates through retail shops and museum gift stores, she built a Web site, switchplates.com, and began selling online. In those days, competition in e-commerce was slim; when users typed the phrase "switch plate" into a search engine, Lester's Web site was listed first, a benefit that generated significant online sales for her company.
Lester sold the business, and in 2009, with growing daughters, she was inspired to start a second company. "I'm sad when I see what a lot of kids bring to school for lunch," she says. "I'm even sadder when I see what school districts offer our kids for ‘school lunch.'" All three of her daughters were in school, and Lester always packed healthy lunches for them but found herself spending too much time preparing and packing lunches. "I'm very concerned about my family's health and nutrition, but as a busy mom, I like to spend as little time as possible in the kitchen," says Lester. "I'm all about fresh, healthy, and fast."
When Lester was in school herself, she often packed lunches for her brothers, but that involved tossing a few cheese sandwiches, potato chips, and Oreo cookies into brown paper bags. Lester wanted something better for her children and to pack the same lunch for all three girls "so I didn't have to think so hard," she says.
She soon found that washing, filling, and packing nine separate containers (three for each girl) with food every weekday was driving her "absolutely insane." She began searching store shelves for lunchboxes that made organizing easy but found nothing. Web searches proved no more fruitful. "That's why I created the EasyLunchbox System," she says.
She began calling plastics manufacturers in the United States, none of whom showed much interest in her idea. Finally, one manufacturer told her that his company could produce a single-lid bento-style (with compartments) plastic lunchbox, but he would first have to create a mold, which would cost $75,000. Lester formed a company, EasyLunchboxes, and found an international broker, who began contacting plastic manufacturers in China. There she found a company that would produce the lunchbox she had designed for far less than any of the domestic companies could. "I'm a thrifty shopper," she explains.
Transactions with the foreign supplier did not always go smoothly, however. Lester had to send one of the first shipments back three times because of quality issues and failure to meet the Food and Drug Administration's standards. Today, Lester has an independent company test samples of every shipment to make sure they meet all safety standards. The polypropylene plastic used to manufacture the
EasyLunchboxes are BPA free, and the cooler bags that keep items in the lunchboxes cold are tested for lead. Because of the time required to ship products from China and unpredictable interruptions in the supply chain, Lester has learned to keep a large inventory of EasyLunchboxes in a warehouse in the United States. On one occasion, the company that manufactures the lunchboxes was closed for three months. "They just shut the power grid off," says Lester. No one knew when the power would come back on so that the factory could get finish her order. "It was very stressful," she says.
Lester decided to use the Web as the primary marketing tool for her company. When Lester launched the Web site for EasyLunchboxes, she quickly discovered that the world of e-commerce had changed dramatically. Her company's Web site did not appear near the top of any of the major search engines. "If computers had crickets," she says, "we had crickets."
If you're not on page one of search engines, you don't exist. Lester, who bills herself as "Mom and CEO" on the site, is determined to generate "buzz" for her company and believes that social media is one of the best tools for accomplishing that. Her primary target customer is a busy mom with children who are in school. She also wants to build a recognizable brand for EasyLunchboxes. The question in her mind is "How do I go about doing that?"
CASE STUDY 4
Jacquii LLC Should a Young Entrepreneur Accept a Potential Investor's Terms that Require Her to Give Up Control of Her Business?
Jacqui Rosshandler grew up in Australia but was drawn to New York City, where she worked as legal counsel for an interior design company. She put in long hours at her job, but her goal was to one day own a business of her own, just like her father did back in Australia. "If I am going to work this hard, I want to do it for myself," she recalls thinking. One New Year's Day, with her mouth feeling less than fresh, Rosshandler recalled Odor-Go, a breath mint sold in Australia that really worked. She had never seen a similar product in the United States and decided to start a company to produce and market one.
She realized that the best way to eliminate bad breath was to treat the source of the problem, the stomach, rather than its symptoms, which appear in the mouth, as most breath mints do. Rosshandler decided to launch a company, Jacquii LLC, and began working with a contract manufacturer to develop a unique breath-freshening product.
"Parsley has been used for generations to freshen breath," she says, "but freshening the mouth only, especially after consuming pungent foods, doesn't get rid of the smell that comes from the stomach. We found that a combination of concentrated peppermint and parsley oils, when dissolved in the stomach, provides this fresh feeling from within. Your breath actually smells good from deep inside, not just superficially from the mouth."
The result of several months of work was a two-step breath-freshening product that Rosshandler named Eatwhatever to give her product a trendy, fun image. Customers swallow a gel cap filled with an all-natural concentration of peppermint and parsley oils and then pop one of the package's small white mints into their mouths for instantly fresh breath. Rosshandler came up with a clever tagline, "2 Steps to Kissable Breath," aimed squarely at her target audience-young people-and hired a package designer to create a clever package. She began marketing her new breath freshener herself, walking boldly into the flagship C.O. Bigelow apothecary store in Manhattan and asking, "Who does the buying here?" She actually met with a buyer and left the store with her first sale. "I had no idea what I was doing," she recalls with a laugh.
A month later, a friend who worked in public relations convinced DailyCandy, a popular Web site that focuses on fashion, food, and fun, to mention Eatwhatever, generating $20,000 in orders on her Web site in just 12 hours. With a distributor's help, Rosshandler was able to get Eatwhatever in retail stores such as Zitomer, Ricky's, and Joe Coffee in New York City; Collette in Paris; Terry White Chemists in Sydney; and online at Amazon, Victoria Health, an Shopmasc. Sales volume for the company's first three years of operation was small, never exceeding $40,000.
Rosshandler had used her own money to create her product and bring it to market, but getting widespread distribution and generating significant sales would require a lot more money than she could invest in her small business. The promising business was about to run out of cash, and Rosshandler was considering shutting it down and getting another job.
Then, through her network of contacts, Rosshandler met Arthur Shorin, who had recently sold his business, the Topps Company, which is famous for selling bubble gum packaged with collectible baseball cards. Shorin had extensive knowledge and experience in a similar industry and had an impressive network of contacts.
Shorin was impressed with Rosshandler and Eatwhatever and offered to invest a minimum of $250,000 (more if necessary) to propel the company's growth. There was a catch, however, and it was a big one. In return for his investment, Shorin would own 75 percent of Jacquii LLC leaving Rosshandler with minority ownership of just 25 percent. He also offered terms that would allow her to regain 15 percent of the company, bringing her total ownership to 40 percent, if Eatwhatever met certain financial and performance benchmarks.
The offer also included a job for Rosshandler at Artuitive, Shorin's business incubator for start-up companies. Rosshandler talked to several friends about the deal, and they advised her to reject Shorin's offer, citing what one friend called "draconian terms"; even if the company met the performance benchmarks, she would still own just 40 percent of what was once "her company."
Another pointed out that by giving up 75 percent of her company for an investment of $250,000, she was saying that her company was worth just $333,333 ($250,000 ÷ 75%). Rosshandler listened to her friends' advice but kept thinking, "Isn't owning 25 percent of something better than owning 100 percent of nothing?"