All submitted work is to be your original work. You may not use any work from another student, the Internet or an online clearinghouse. You are expected to understand the Academic Dishonesty and
Purpose:
The purpose of this project is for you to use various management technique in running a small business to create a contingency management plan. This project requires you to draw on the course material and research to demonstrate how to manage a business in a way that will prevent failure. In doing so, you will explore different business functions and discuss how these functions and topics contribute to ensuring the stability of a company.
You will evaluate the need to grow versus the need to keep a company sustainable. You will develop research skills. To complete the assignment, you will develop writing proficiency and enhance critical thinking and communication skills.
Outcomes Met by Completing This Assignment:
demonstrate an understanding of the small business environment and how to manage in a global marketplace
develop critical managerial skills and processes to assess and analyze key elements of emerging enterprise organizations
evaluate and measure forward-thinking enterprise strategies relevant to sustainability and succession through innovation
NOTE: All submitted work is to be your original work. You may not use any work from another student, the Internet or an online clearinghouse. You are expected to understand the Academic Dishonesty and Plagiarism Policy, and know that it is your responsibility to learn about instructor and general academic expectations with regard to proper citation of sources as specified in the APA Publication Manual, 6th Ed. (Students are held accountable for in-text citations and an associated reference list only).
Read the following case scenario:
Paul and Patricia Poulet raise chickens on a farm outside Vineland, New Jersey. The farm has 95 employees and 2,000 acres of farmland, and contracts with about 5 family farms to grow rice on 12,000 acres throughout the coastal area of New Jersey. The farm sells four varieties of rice and over 15,000 chickens a year, producing a yearly revenue of about $2.25 million. Eighty-five percent of the farm’s revenues come from the sale of rice and related rice products.
The farm was founded by Paul’s dad in 1967 when he and Paul’s mother decided they wanted to live off the land. Using a small inheritance, Paul’s father Phil tended the chickens and began selling eggs and eventually chickens to local markets and butchers. Phil’s wife, Pauline, and their four sons added the rice line after Pauline took a co-op course at a local community college. The family grew the rice and sold it to the local co-op until the late 1980’s at which time they became part of the organic farming movement. They built a small rice mill and began selling organic short-grain brown and black rice.
The farm grew steadily at an average of 14 percent per year. The farm never needed outside investment. Chicken production was stable but because rice was more profitable, the family expanded the rice product line. In the early 2000’s, sales grew much faster than land could be acquired, so the family business decided to contract with other growers. The Poulet’s chose family farms that shared their idea of sustainable farming, an idea that Phil had always defined as “leaving the land better than you found it.”
In the late 1990s, leadership of the farm was turned over to Paul, Phil and Pauline’s youngest son, who recently became involved with the business after graduating from the University of Maryland College Park’s School of Agriculture.
Seventy percent of the farm’s sales are organic products and the other 30 percent are “eco-farmed” (i.e., meaning no fumigants are used and the business limits the use of herbicides and pesticides).
In mid-September, Consumer Reports published the results of independent lab tests that found inorganic arsenic, a carcinogen, in rice and many rice products. This came on the heels of a study by Dartmouth (released in February) that showed inorganic arsenic in brown rice syrup.
Because there is no federal safe standard for inorganic arsenic in food, the Poulet family struggled to make sense of the information for its customers who were panicked by the news.
Although the government regulates the amount of inorganic arsenic in drinking water, there are no standards for food. “The jury is still out on what levels may cause health problems,” Paul and Patricia explained to their customers, “but an analogous federal standard concerning drinking water is 10 parts per billion.” Consumer Reports’ tests found levels in rice ranging from about 24 to 214 parts per billion (i.e., between ~2 and ~20 times more arsenic than the federal maximum allowed level of arsenic in drinking water).
With its customers looking for answers, the business worried about what to communicate and how to communicate it. A local TV reporter asked to interview Paul who gave his consent. “One of our biggest challenges is that this is a very technical issue”, Paul explained to the reporter, “It’s not a 30-second conversation.”
The family’s first response was to play defense. Because many studies have documented the health benefits of eating rice, especially brown rice, Paul said, “We were thinking, if this was really causing problems in the population, wouldn’t it have shown up in data somewhere before this?”
Dismissing the new information, however, was not consistent with the business’s culture or the family’s belief system. “We are a business that is always open to new information and ideas — like growing organic,” Paul said in the TV interview “That’s one of the reasons we’ve been successful.”
The farm’s leaders also considered not addressing the issue at all because the studies and tests were not targeted specifically at Fresh Farms. In the same TV interview, Paul said they discussed letting the industry take the lead and follow the research from organizations and industry groups like the USA Rice Federation. “This was a bigger issue than us, so we thought maybe we shouldn’t try to handle this as an individual business,” he said.
The family began intensively studying arsenic and its relationship to rice. They were quickly overwhelmed by the sheer volume of information, much of it contradictory. “We put all the papers and information we were reading online in real time for consumers so they could read what we were reading,” Paul told the reporter on his return for a follow up interview. “That proved to be a mistake — too much information and not enough analysis. Not every consumer wants that level of detail”, he said. “Many of them just want to know, will eating rice kill them?”
The business started posting on the company website short abstracts of the research it reviewed, with links to full articles and papers. The company also hired a consulting toxicologist and began collaborating with soil scientists at the USA Rice Federation and with other rice growers to determine from where the arsenic was coming. In their investigation, Patricia and the toxicologist uncovered two important facts: Poulet’s rice had less than .01 parts per billion of arsenic (i.e., 100 times lower than the 10 parts per billion limit set for drinking water by the federal standards) and there was less arsenic in the rice fields that are not flooded, like the Poulet’s, than those that are flooded.
Paul immediately posted this information on the website and notified customers in an e-mail blitz. That was great news for the Poulet’s but not something that reassured all the customers. Customers remained uneasy.
So far, the business’s sales remain on target to the forecast, but it is hard to predict what could happen if the business is unable to reassure consumers. “We haven’t even guessed at what we could lose”, Paul mentioned to Phil shortly after the e-mails went out, “I don’t want to even think about it.”
However, the next day, Paul, Phil, Pauline along with the rest of the farmers sat down to discuss the future of the business. Originally scheduled to have a discussion about future growth of the business? Should the Poulet’s proactively manage for a fall in sales if more problems arise regarding the arsenic?
Instructions:
Using the class material from weeks 4-7, you will explore ideas that will form the basis of a contingency plan for the Poulet’s in case declining sales hurts the health of the company. In the plan, you will explain some of the major considerations facing the Poulet’s and make recommendations as to actions they might take to preserve the health of the company should a fall in sales occur due to the arsenic issue. Considerations of the plan for discussion include:
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Asset Management - Identify and evaluate the best ways to manage the company’s cash, inventory and property assets to protect the company in the event of a decline in sales.
Debt Load - Should the company go into debt to remain stable until the arsenic controversy is resolved? Why or why not? Evaluate the impact of debt on the health of a company.
Financing – Discuss the different types of growth financing and select the best type for the Poulet’s to consider in case the arsenic controversy takes a while to resolve.
Human Resources – Identify and evaluate possible ways the company can deal with employees in the event that a sales decline promotes financial instability. Should the Poulet’s consider layoffs, pay cuts or other actions? Why or why not?
Community - The owners think the local rice growing community should be considered in the plan decisions. Do you agree or disagree? Why or why not? Make a recommendation and support the position taken.
Based on the answers to the questions above, make three to five action recommendations that should be included in the contingency plan and explain their importance.
In a final component to the plan using the heading, “Retrench or Grow,” discuss whether the contingency plan should be executed or if the family should instead go ahead with their growth planning. Include in your analysis the Fives Stages of Growth and Five Disciplines theories. Support the conclusion with the course material.
All discussion of the plan and final component should be supported by the class material and should be cited using APA in-text citations and reference list.
Additional Facts to Consider
The farm land is worth $750,000.
There is a small loan against the new mill with a remaining balance of $8,000.
The business owns 2 mills worth $20,000, 6 vehicles, various pieces of farm equipment worth $25,000, and packaging and processing equipment worth about $40,000.
The outstanding accounts receivable are $200,000; 60% of the receivables have 90 day payment terms.
The business account has $100,000 and earns 3% interest annually.
There is no outstanding debt besides the balance on the mills.
Business expenses including wages for the 95 employees run about $585,000.
