Question

Green Mountain Coffee run up of 2011. Hedge fund manager David Einhorn asserted that the likely cause of the hype and band-wagoning was Green Mountain's reporting, or representation, of their fundamentals. He coined the term “GAAP-uccino”. Using he concepts in Chapter 2, what should Green Mountain's management have done to avoid this crisis?

Answer 1

Whenever a state becomes powerful in the international relations system the other states have two options according to structural realists. Put simply, they can choose either to bandwagon or to balance its power.

Band wagoning refers to a situation where a state forms an alliance with the power in hope that this would benefit its own national interests. Balancing, on the other hand, suggests that the rest of the states would act in a way which is aimed at preventing the power from becoming a hegemon and at limiting its advantages in the international relations system.

What is the Bandwagon Effect?

The bandwagon effect is a psychological phenomenon in which people do something primarily because other people are doing it, regardless of their own beliefs, which they may ignore or override. The bandwagon effect has wide implications but is commonly seen in politics and consumer behavior. This phenomenon can also be seen during bull markets and the growth of asset bubbles.

Green Mountain's management may avoid this crisis by following the business strategy which are fundamental of the business. Such as;

• By Implementing core business strategy considering all level(viz. Top, Middle and Lower)
• By Managing fund from all available resources
• By Providing quality product & services to its customer and must focus on attracting new customers
• By following regulatory compliance continuously.
• By maintaining its market share through advertisement and quality best services