20ClassicCaseStudiesEvery

BusinessStudentShouldKnow

Althoughalmosteverybusinessisuniqueinitsownway,therearesome
universallessonsthatapplytojustaboutanykindofbusiness.Inthesecase
studies,we'lltakealookatemployeeperformanceandretention,supplychain
management,growth,adspending,andmore.Althoughthefollowingare
focusedonspecificbusinesses,allbusinessstudentscanlearnlessonsfrom
theirtriumphsandmistakes.Readon,andyou'llfind20classiccasestudies
you'ddowelltoknowasabusinessstudent.
WORKPLACE DRUG ABUSE
Managershopethey'llneverhavetodealwithemployeedrugabuse,butthefactisthatit
doeshappen.Inthiscase,Amber,anadministrativeassistantstartedoutwell,butbeganto
adoptstrangeandinconsistentbehavior.Herworkwasmaintainedprettywell,butshebegan
arrivinglateandcallinginsickoften,especiallyrightaroundthetimeshegotpaid.Shebegan
borrowingandfailingtorepaymoney,andthenstartedshowingashorttemperonthephone
withcustomers.Afterbeingfoundintheladiesroomsniffingwhitepowder,shewas
confrontedaboutacocaineproblem,andreactedbyquittingimmediately,leavingaholeinthe
organizationformonthsbeforeareplacementcouldbefoundandreplaced.Expertsbelieve
theemployer'sactionswerewrong,waitingtoolongtoconfrontAmber,andfocusingon
accusationsinsteadofcriticizingbehaviordirectlyrelatedtowork,suchaslatenessand
rudenesstoclients.TheyalsopointoutthatAmbershouldhavebeensentinforadrugtest
beforebeingoutrightaccusedofusingcocaine,openinguptheopportunityforrehabilitation
insteadofaseveredtie.

MALDEN MILLS

Sometimes,doingtherightthingismoreimportantthanprofits,alessonthatMaldenMills
learnedfirsthand.Whenthefactoryburneddownin1995justtwoweeksbeforeChristmas,
productionhaltedandemployeesassumedthey'dbeoutofworkuntilthefactorywasrebuilt.
ButCEOAaronFeuersteinextendedtheemployees90daysatfullpay,aswellas180days
withbenefitsatacostof$25milliontoMaldenMills.Afterthefactorywasrebuiltandallofthe
displacedworkerswererehired,cooperationandproductivityreachedanewhigh,with40%
morebusiness,95%customerandemployeeretention,andaproductionincreasefrom
130,000to200,000yardsperweek.However,sincethen,MaldenMillshasbeento
bankruptcycourtthreetimes,withmuchofthedebttiedtotherebuildofthefactory.
Feuersteinmadeemployeeshappy,tobesure,butbusinessstudentsshouldstudythiscase
toconsiderwhetherboldphilanthropicactionswillpayoffintheend.

A STARBUCKS ON EVERY CORNER

In2008,Starbucksannouncedthattheywouldbeclosing600USstores.Uptothatpoint,
Starbucksstoreshadaddednewofferings,includingwifiandmusicforsale,butstartedto
loseitswarm"neighborhoodstore"feelinginfavorofachainstorepersona.Harvard
BusinessReviewpointsoutthatinthissituation,"Starbucksisamassbrandattemptingto
commandapremiumpriceforanexperiencethatisnolongerspecial."Meaning,inorderto
keepup,Starbuckswouldeitherhavetocutprices,orcutdownonstorestorestoreitsbrand
exclusivity.HBR'scasestudysharesthreeproblemswiththegrowthofStarbucks:alienating
earlyadopters,toobroadofanappeal,andsuperficialgrowththroughnewstoresand
products.HarvardrecommendsthatStarbucksshouldhavestayedprivate,growingata
controlledpacetomaintainitsstatusasapremiumbrand.

SMALL CUSTOMERS, BIG PROFITS

Bigbusinessisattractive,withhugeprofitsforsome.Butthere'ssomethingtobesaidabout
smallbusinessaswell,withlowerriskandthepotentialforcreativity.DarrenRobbinsofBig
DCustomScreenPrintinginAustin,TXfoundsuccessinhisbusinessbypursuing
customerswithordersbothlargeandsmall.AlthoughBigDstartedoutcateringonlytolarge
orders,theshopsatidleinbetweenorders,andthrougheffectiveschedulingandtransparent
pricing,wasabletofillindeadtimeswithsmallerorders.BigDfoundaprofitinamarket
segmentthatotherlocalscreenprintersweren'tclamoringtofill.Expertsbelievethiswasa
smartstrategy,allowingBigDtospreadoutriskintheirbusinessandoffercustomized
products.Butatleastonepersoniscriticaloftheoffering,pointingoutthatthenichehaslittle
upsidepotential,andmayhurtthecompany'sefficiency.

SUCCESSION PLANNING
Familybusinessestypicallyhavetheluxuryofpassingthetorchdowntochildrenafter

parentsretire,butinsomecases,therearenocandidates,orthecandidatesmaynotberight
fortherole.Thispresentsachallengewhenit'stimetofindasuccessor,especiallyifexisting
employeeshaveassumedthattoplevelpromotionswouldcomefromwithinthefamily.Sothe
Carlsoncompanieshadtoputingreatefforttofindareplacement,lookingbothinternallyand
outsideofthecompany,ultimatelyfindinganinternalcandidatewhowouldworkwellwiththe
familybutalsoofferedplentyofexperienceasanexecutiveindifferentindustries.According
toBeverlyBehanofHay'sGroup,Carlsonshouldbecommendedfornotonlymakingthe
rightdecisioninnothiringtheheirapparent,butforhandlingthejobsearchinacalm,effective
way.

RETIRING EMPLOYEES, LOST KNOWLEDGE

Anotherimportantretirementissueisoneoflostknowledge.Whathappenswhenretirees
leavetheoffice,takingyearsofexperienceandknowhowrightalongwiththem?Businesses
loseallofthatknowledge,butaccordingtoAmericanExpress,itdoesn'thavetobethatway.
Throughapilotprogram,AMEXcreatedaworkforcetransformationgroupthatwouldallow
retiringparticipantstograduallygiveupsomeoftheirdaytodayresponsibilities.Inreturn,the
employeeswouldspendsomeofthistimementoringandteachingclassestosuccessors.
Thisresultedinaphasedretirement,allowingemployeestoleavegraduallyandenjoymore
timewhilestillenjoyingaportionoftheirprevioussalary,andregularbenefits.Thisalsomeant
thatsomeemployeesstayedayearormorepasttraditionalretirementage.AMEXbelieves
thisprogramisasuccess,allowingsenioremployeestoenjoytheirlastyearsofworkina
reducedcapacity,aswellaseducatingtheexistingworkforceforfuturesuccess.Consultant
DavidDeLongagrees,citingthisprogramasanexampleofhowjobhandoffsshouldreally
work.

STRATEGIC AD SPENDING
Advertisingcostsmoney,whichmanybusinessesfindthemselvesshortofthesedays.But
forgoingadspendinginfavorofbetterprofitscanbeamistake.Expertssaythatinaslump,
oneofthebestthingsyoucandoisadoptorincreaseyouradvertisingstrategytoattract
customers.Duringarecession,thisisespeciallytrue,asotherbusinessesmaybecutting
backontheiradspending,makingyourvoiceevenmoreprominenttocustomers.Afterseven
yearsofgrowth,bulidingfrom30to300locations,FirehouseSubs'growthfizzled,and
companyleadersrealizedtheyhadtodosomethingaboutit.Sotheyreturnedlocal
advertisingfeescollectedfromfranchisees,nottoputintheirpockets,buttotakeholdoftheir
ownlocalmarketing.Salesfellevenmore,revealingthatthiswasnotagoodstrategyatthe
time.Instead,Firehousereclaimedtheirlocalmarketingfee,andthengavefranchiseesthe
optiontotakepartinanewmarketingcampaign,requiringthemtopaydoubleforlocal
marketing,butinreturn,becomingpartofan$8millionadvertisingcampaignpoisedfor
success.ExpertscommendFirehouseforhavingthecouragetoaskfranchiseesformore
moneywhereitwasneeded,evenwhentimesweretough.

TYLENOL'S 1982 SCANDAL

In1982,sevenpeopleinChicagodiedaftertakingTylenolduetoanunknownsuspectlacing
thecapsuleswithcyanideaftertheproductsreachedtheshelves.Intheimmediateaftermath,
Tylenol'scommanding37%marketsharedroppedtojust7%nationwide,despitetheproblem
beingcontainedtotheChicagoarea.Tylenolwasnotresponsibleforthetamperingofthe
product,buttomaintaintheproduct'sreputation,Johnson&JohnsonpulledalloftheTylenol
fromtheshelves,absorbingalossofmorethan$100milliondollars.Tylenolwassuccessfully
reintroducedwithtamperresistantpackaging,discounts,andsalespresentationstothe
medicalcommunity.Thebrandsurvivedduetoswiftactionandeffectivepublicrelationsfrom
Johnson&Johnson.

DAVID VS. GOLIATH

It'stoughtobethelittleguy,especiallywhenoneofthebigguysbecomesyourdirect
competition.ButatHangersCleaners,anoffbeatimageandgoodcustomerservicehelped
thempullthroughwhenP&Gopenedanecofriendlydrycleanersinthesametown.Hangers
differentiateditselfthroughvandeliveryservice,funnytshirtsandhangers,aswellassocial
networking.Thecompanyalsospenttimeconnectingwiththecommunitybypartneringwith
localbusinessesandcharities.InsteadofoutpricingoroutspendingP&G,Hangers
embraceditspersonalityandadoptedacultureofexcellentservicethatcustomersfound
valuein.Asaresult,Hangershasexperiencedgrowthwhileotherlocaldrycleanershave
reportedflatordecliningrevenues.

MARKET EXPANSION THROUGH PARTNERSHIP

Tosupportnewgrowth,businesseshavetoexpandpasttheirinitialcustomerbase,anoften
dauntingtaskforsmallbusinesses.However,partneringwithanothersuccessfulcompany
canhelpbusinessesreachanewlevel.DiagnosticHybrids,specializinginmedical
diagnostics,didjustthat,partneringwithQuidel,amarketleaderinrapiddiagnostictests.This
partnershipallowedDiagnosticHybridstoenjoyalargermarketpresence,aswellastake
advantageofbetterresearchanddevelopmentresources.AlthoughDiagnosticHybridswas
acquiredbyQuidel,keyelementsoftheorganizationremain,withthesamecompany
president,andoperationasaseparatesubsidiary.

TESCO'S INTERNATIONAL EXPANSION

Tesco'smoveintoKoreaoffersaclassiccasestudyofbuildingmarketshareinternationally.
ThecompanymadesomesmartmovesintheirKoreanexpansion,mostnotablypartnering
withSamsung,theleadingKoreanconglomerate,andembracingtheKoreanwayoflifeby
operatingstoresaslocalbusinessesandcommunitycenters.Tescoalsomadeasmartmove

byemployingnearly100%Koreansonstaff,withonly4Britishemployeesoutof23,000.
ReportsindicatethatTesco'sintelligentstrategyhaswonovershoppersinSeoul,with25%of
Koreanssignedupforloyaltycardsandsalesinthebillions,findingsuccessin"crack[ing]the
Asiantiger,"wherecompetitorssuchasCarrefourandWalMarthavefailed.

TRIUMPH IN NICHE EXPORTS

AnotherexcellentinternationalcasestudycomesfrombikemanufacturerTriumph,whichlost
steaminitsBritishhomebasethreedecadesago,butfoundnewlifebyheadingoverseas.In
2010,Triumphsoldjust7,562bikesintheUK,but50,000worldwide,indicatingthatan
internationalinterestpaidoffforthecompany.Triumph'sfamousfactoryinWarwickshire
closedupshopin1983,buttheIndianfactoryremained,andthesedays,themotorcycles
havebecomethecountry'sHarleyDavidson.Thecompanystrugglestomeetdemandin
India,withasixmonthwaitinglistandanewfactorybeingbuilt.India'smiddleclasshas
embracedthevehicleasanaffordablecommodity,evengivingthemasdowriesinweddings.

BACKGROUND CHECKS FOR JOB CANDIDATES

Backgroundchecksareanissuefacedbymanycompanies,assensitiveinformationisnow
morepublicthanever.OfficeDropisnoexception,asthecompanyscanspaperintodigital
files,includingpatientrecordsandministersermons,mostofwhichrequiretrustworthy
employeeswhocanhandledocumentsdiscreetly.Manycompaniesofferquick,superficial
checks,butforOfficeDropownerPrasadThammineni,moreinformationwasrequired.He
foundacompanythatwouldallowresearchtodelveintoanumberofdifferentsourcesand
performamorecomprehensivesearch.Otherbusinessownersofferedsomewhatcritical
opinionsofThammineni'schoice,pointingoutthatinsteadofGooglingtofindabackground
checkcompany,heshouldhaveaskedhisbusinessnetworkwhotheywereusing.Theyalso
recommendedthathetakeadvantageoffreeresources,includingonlinesearchesand
checkingoutsocialmediasitestolearnmoreaboutjobcandidates.

EMPLOYEE ENGAGEMENT IN TOUGH TIMES

WhenGamalAzizsteppedinaspresidentoftheMGMGrandHotel&Casino,hedidn'tjust
takeona$400millionspruceupofthehotel,heworkedontheemployeesaswell.Heasked
rankandfileemployeestosharetheirinsightthroughahotel,discoveringthattherewasa
disconnectbetweenwhatwasgoingonatthehotelandtheknowledgeofstaff.He
implementedaneasyfix,creatingshortmeetingsatthestartofeveryshifttoinform
employeesofdailyhappeningssothatstaffcouldoffermoretoguests,improvingcustomer
loyalty,returnvisits,andspending.ExpertslaudAzizfordifferentiatingtheMGMgrandwith
topqualityservicefromtheemployees.

SOCIAL MEDIA SERVES UP CREME BRULEE

Marketingiskey,whetheryou'reamultibilliondollarcompany,orjustaguywithacartfullof
cremebrulee.Butjustdoingitisn'tenough:youhavetomarketeffectively.CurtisKimball,the
manbehindtheCremeBruleeCart,putTwittertoworkforhimamassingthousandsof
followersandgrowinghisbusinessbyallowingpeopletofollowthecartthroughtheonline
service.Kimballengageswithcustomersanddevelopsapersonalrelationshipwithfollowers
online,askingforsuggestionsonflavorsandcartlocations.Perhapsthemostimpressivepart
ofthisstoryisthefactthatKimballhasnomarketingbudget(Twitterisafreeservice),yet
enjoysanincrediblypopularstatusandhighratingsonYelp.

OVERREACHING PRODUCTS, SUFFERING SALES

Youcan'tbeeverythingtoeveryone,asHickoryFarmsfoundout.Acompanythatstartedout
withholidaygiftbasketsincludingsausage,ham,andcheeseatonepointhadanofferingof
2,500differentproducts,sprawlingthecompanyandresultinginalossoffavorwith
customers.Recognizingthisissue,HickoryFarmsstreamlineditself,slashingtheirnumberof
productsfrom2,500to300withmoremodernvisuals,descriptions,andotherfeatures,
includinglesspackagingandmorerecycledcontent.Thecompanyalsooverhauledtheir
website,makingiteasiertoshoponline.Allofthisstreamliningresultedinapricereductionof
13%thatHickoryFarmswasabletopassontotheircustomers.BrandstrategistJennifer
Woodberybelievesthatthiswasasmartmove,makingthemostofHickoryFarms'trusted
nameandimagewithaneffectiverebrandingofofferings.

MAINTAINING CONSISTENTLY GOOD EMPLOYEES

Ithappensallthetime:goodemployeesgetapromotion,andsuddenly,they'renotsogood
anymore.SuchisthecaseforcatshelterPawsNeedFamilies,asDella,acleanerturned
assistantmanager,thenmanagerstartedarrivinglate,lettingapplicationssit,andslippedon
inoculations,allseriousoffenses.InsteadofconfrontingDelladirectly,generalmeetingswere
held,andanassistantmanagerwashiredtocompensateforDella'sshortcomings.Ultimately,
Dellanevercleanedupheract,andwasfired.KenBlanchard,coauthorofTheOneMinute
Managerbelievesthissituationcouldhavebeenavoidedwithfrequentmeetingsandsupport
withasystemofreview,bothofwhichcanidentifyissuesbeforetheybecomerealproblems.

RECALL CRISIS MANAGEMENT

In2009,MaclarenissuedarecallforeverystrollerithadsoldintheUSforadecade,which
cameto1millionunits.Thestrollerswererecalledsothatacovercouldbeinstalledto
preventamputationofababy'sfingers,whichcouldhappenifthebabyweretobeinthe
strollerinthewrongspot.Asaluxurybrand,thisincidentwasdamagingeventhoughitwasa
misuseoftheproductandnotadefect.ExpertsbelievethatMaclarendidtherightthinginthe

aftermathoftherecall,askingforafasttrackrecallfromtheConsumerProductSafety
Commission,andgotoutinfrontoftherecallasitstartedspreadingthroughthepress,saving
faceandfurtherembracingamissionofchildsafety.

DEALING WITH LATE PAYING CLIENTS

Weallhopethatclientswillpayontime,butthefactisthatmostbusinesseshavetodealwith
latenessatsomepointoranother.Howyoudealwithitcanmakeallthedifference,andthis
casestudyrevealsasmartstrategy.Whenaclientwrotetocheckinontheprogressofwork,
awebdeveloperrepliedthatshewashesitanttoworkquicklyforthatclientbecauseshewas
stillwaitingonpaymentsformontholdwork.Thisimmediatelygottheattentionoftheclients,
whocontactedheranddiscoveredthattheircheckswerenotgoingtotherightaddress.The
problemwassolvedalmostinstantaneously,enforcingbothleverageandrewardingpositive
behavior.However,itwasrisky,andtheclientcriticizedherfornotsharingawarningbefore
comingtoadifficultpoint.

SUPPLY CHAIN DISRUPTION

In2000,afireatthePhilipsmicrochipplantaffectedphonemanufacturersNokiaAnd
Ericsson.Thecompaniesreactedindifferentways,andultimately,Ericssondidnotdowell,
quittingthemobilephonebusinessandallowingNokiatowinovertheEuropeanmarket.
WhileEricssonhadtiedupallofitskeycomponentsinasinglesourceandplannedtowait
outtheproblemwiththefire,Nokiaworkedtosnatchupsparechipsfromotherplantsand
suppliers,aswellasreengineeredsomeoftheirphonestoadapttodifferentchipsfromnew
suppliers.It'snothardtoimaginewhathappenedafterthat.Nokiakepttruckingalong,while
Ericssonsufferedfrommonthsoflostproductionandsales,allowingthemarkettobe
dominatedbyNokia.Thisincidentandfalloutisaclassiclessoninsupplychainrisk
management.