Sabrina Hoffman is founder and CEO of Golden Care, Inc., which owns and operates several assisted-living facilities. The facilities are apartment-style buildings with 25 to 30 one- or two-bedroom apartments. While each apartment has its own complete kitchen, in every building Golden Care offers communal dining options and an on-site nurse who is available 24 hours a day. Residents can choose monthly meal options that include one or two meals per day in the dining room. Residents who require nursing services (e.g., blood pressure monitoring and injections) can receive those services from the nurse. However, Golden Care facilities are not nursing homes, all residents are ambulatory, and custodial care is not an option. In the five years it has been in operation, the company has expanded from one facility to five, located in southwestern cities. The income statement for last year follows.

Sabrina originally got into the business because she had trouble finding adequate facilities for her mother. The concept worked well, and income over the past five years had grown nicely at 20 percent per year. However, Sabrina sensed clouds on the horizon. She knew that the population was aging and that her current clients would be moving to more traditional forms of nursing care. As a result, Sabrina wanted to consider adding one or more nursing homes to Golden Care. These nursing homes would be staffed around the clock with RNs and LPNs. The residents would likely have more severe medical problems and would be confined to beds or wheelchairs. Sabrina knew that quality care of this type was needed. So, she contacted Peter Verdon, her marketing manager, and Bernadette Masters, her accountant, for a brainstorming session.

Peter: "Sabrina, I really like the concept. As you know, several of our facilities have faced seeing their long-term residents move out to local nursing homes. Not only are these homes of lower quality than what we could provide, but losing a resident is heartrending for the staff, as well as for the remaining residents. I like the idea of providing a transition from less care to more."

Bernadette: "I agree with you, Peter. But let's not forget the differences between assisted-living and full-time, nursing-home-type care. Our expenses will really increase."

Sabrina: "That's why I wanted to talk with both of you. As you know, Golden Care's mission statement emphasizes the need to make a profit. We can't continue to serve our residents and provide high-quality care if we don't make enough money to pay our staff a living wage and earn enough of a profit to smooth over the rough patches and continue to improve our business. Could the two of you look into this idea, and get back to me in a week or so?"

Throughout the following week, the three communicated by e-mail. By the end of the week, a number of possibilities had surfaced, and these were summarized in a message from Bernadette to the others.

TO: [email protected], [email protected]

FROM: [email protected]

MESSAGE:

I've compiled the ideas from all of our e-mails into the following list. This may be a good starting point for our meeting tomorrow.

Buy an existing nursing home in one of Golden Care's current locations.

Buy an existing nursing home in another city.

Build a new nursing home facility in one of Golden Care's current locations.

Build a new nursing home facility in another city.

Build a wing on to an existing Golden Care facility. The Apache Junction facility has sufficient open land for an addition.

The next day, Sabrina, Peter, and Bernadette met again in Sabrina's office.

Sabrina: "I didn't realize there were so many possibilities. Are we going to have to work up numbers on each of them?"

Bernadette: "No, I think we can eliminate a few of them pretty quickly. For example, building a new facility would cost more than the other options, and it would involve the most risk."

Peter: "I agree, and I also think we might eliminate the purchase of an existing nursing home for the same reasons. Also, existing homes would not give us the option of building a facility that is state of the art and meets our needs, and it would lock us into a preexisting patient mix."

Sabrina: "I like that thinking. Let's restrict our attention to Option 5."

Bernadette: "I thought you might like that option, so Peter and I sketched out two alternatives for an extension of the Apache Junction building. We call the alternatives Basic Care and Lifestyle Care."

Peter: "There are different markets for each type of care. If we want to concentrate on Medicare and Medicaid patients, the reimbursement is lower, and we would want to offer the Basic Care option. Private insurance and private-pay patients could afford more services; if we are marketing to these patients, we could offer the Lifestyle Care option. Both alternatives provide high-quality nursing care. Basic Care concentrates on the quality nursing and maintenance activities. For example, the addition would have 25 double rooms, two nursing stations, two recreation rooms, a treatment room, and an office. The Lifestyle Care option adds physical and recreational therapy with a specially equipped gym and pool. That addition would have 30 single rooms, two nursing stations, a recreation room, a swimming pool, a hydrotherapy spa and gym, a treatment room, and an office. In each case, there would be cable TV and telephone hookups in each room and a buffer area between the nursing home and the apartments."

Sabrina: "Why the buffer area? Won't that add unnecessary cost?"

Peter: "It adds cost, but it will be well worth it. Sabrina, you must remember that the nursing home patients are different from the apartment residents. Some of the patients will have advanced dementia. We'll lose apartment residents in a hurry if they have to be reminded every day of what might be in store for them later on."

Sabrina: "I see your point. Bernadette, what will these two plans cost? I'll tell you right now that I like the Lifestyle Care option better. It fits with our history of doing whatever we can to make life better for our residents."

Bernadette: "I've checked into the costs of putting on a new wing and operating both alternatives. Here's a listing."

* Other includes supplies, utilities, food, and so on.

"In both cases, total administrative costs for Golden Care would increase by $30,000 per year. This seems high, but the increased legal and insurance requirements will add significantly more paperwork and accounting."

Sabrina: "All this sounds reasonable, but why is reimbursement such an important factor?"

Peter: "Well, if you admit Medicaid patients, the state will reimburse at most $30,000 per year. Private insurance policies will pay roughly $46,000 per year. We can charge up to about $65,000 for private patients, but this type of care is so expensive that many of these patients exhaust their funds and go on Medicaid. The nice aspect of Medicaid is that we can be virtually assured that we will operate at capacity."

Sabrina: "Can we cross that bridge when we come to it?"

Peter: "No, not really. Once the patient is a resident of our facility, it is hard to evict him or her. Also, while it is legal to force patients out before they go on Medicaid and to refuse to accept Medicaid patients, once we do accept Medicaid patients, we are prevented by law from evicting them—no matter how high our costs go."

Sabrina: "OK, it looks as if we have some hard work ahead of us to decide whether or not to get into this line of business."

Required:

1. Indicate the order in which these steps will be performed in the tactical decision making model.

Michele Diaz is the founder of Diaz Manufacturing.  Michele plans to expand her business. Company’s expansion plans require a significant investment, which she plans to finance with a combination of additional funds from outsiders plus some money borrowed from banks. Company’s financial records are not well maintained. Naturally, the new investors and creditors require organized and detailed financial statements than Michele has previously prepared.  Ms. Diaz has assembled the following information:     

($ millions)

Michele Diaz is ready to meet with Austin Mark, the loan officer for Wells Fargo. She is asking to borrow $30 million.The meeting is to discuss the mortgage options available to the company to finance the new facility.

Austin begins the meeting by discussing a 30-year mortgage. The loan would be repaid in equal monthly installments. Because of the previous relationship between Diaz Manufacturing and the bank, there would be no closing costs for the loan. Austin states that the APR of the loan would be 6.00 percent. Ms. Diaz asks if a shorter mortgage loan is available. Austin says that the bank does have a 20-year mortgage available at the same APR.

Michele decides to ask Austin about a “smart loan” she discussed with a mortgage broker when she was refinancing her home loan. A smart loan works as follows: every two week a mortgage payment is made that is exactly one-half of the traditional monthly mortgage payment. (Hint: To determine how much is bi-weekly payment >>>calculate PMT as if it is 30-year mortgage and then divide by 2). The APR of the smart loan would be the same as the APR of the traditional loan.  

Austin also suggests a bullet loan, or balloon payment, which would result in the greatest interest savings. At Michele’s prompting, he goes on to explain a bullet loan. The monthly payments of a bullet loan would be calculated using a 30-year traditional mortgage. In this case, there would be a 5-year bullet. This would mean that the company would make the mortgage payments for the traditional 30-year mortgage for the first five years, but immediately after the company makes the 60^th payment, the bullet payment would be due. The bullet payment is remaining principal of the loan. Ms. Diaz then asks how the bullet payment is calculated. Austin tells her that the remaining principal can be calculated using an amortization table, but it is also the present value of the remaining 25 years of mortgage payments for the 30-year mortgage.

Michele has also heard of an interest-only loan and asks if this loan is available and what the terms would be. Austin says that the bank offers an interest-only loan with a term of 10 years and an APR of 3.9 percent. He goes on to further explain the terms. The company would be responsible for making interest payments each month on the amount borrowed. No principal payments are required. At the end of the 10-year term, the company would repay the $30 million. However, the company can make principal payments at any time. The principal payments would work just like those on a traditional mortgage. Principal payments would reduce the principal of the loan and reduce the interest due on the next payment.

Tony is still unsure of which loan she should choose. She has asked you to answer the following questions to help her choose the correct mortgage.

1. What are the monthly payments for a 30-year traditional mortgage?

2. What are the payments for a 20-year tradition mortgage?

3. Prepare an amortization table for the first six months of the traditional 30-year loan. How much of the second payment is interest?

4. Assume Diaz Manufacturing takes out a bullet loan under the terms described. What are the payments on the loan?  What is the amount of the last payment of the loan?

5. What are the payments for the interest-only loan?  

6. Which mortgage is the best for the company? Are there any potential risks in this action?

Sabrina Hoffman is founder and CEO of Golden Care, Inc., which owns and operates several assisted-living facilities. The facilities are apartment-style buildings with 25 to 30 one- or two-bedroom apartments. While each apartment has its own complete kitchen, in every building Golden Care offers communal dining options and an on-site nurse who is available 24 hours a day. Residents can choose monthly meal options that include one or two meals per day in the dining room. Residents who require nursing services (e.g., blood pressure monitoring and injections) can receive those services from the nurse. However, Golden Care facilities are not nursing homes, all residents are ambulatory, and custodial care is not an option. In the five years it has been in operation, the company has expanded from one facility to five, located in southwestern cities. The income statement for last year follows.

Sabrina originally got into the business because she had trouble finding adequate facilities for her mother. The concept worked well, and income over the past five years had grown nicely at 20 percent per year. However, Sabrina sensed clouds on the horizon. She knew that the population was aging and that her current clients would be moving to more traditional forms of nursing care. As a result, Sabrina wanted to consider adding one or more nursing homes to Golden Care. These nursing homes would be staffed around the clock with RNs and LPNs. The residents would likely have more severe medical problems and would be confined to beds or wheelchairs. Sabrina knew that quality care of this type was needed. So, she contacted Peter Verdon, her marketing manager, and Bernadette Masters, her accountant, for a brainstorming session.

Peter: "Sabrina, I really like the concept. As you know, several of our facilities have faced seeing their long-term residents move out to local nursing homes. Not only are these homes of lower quality than what we could provide, but losing a resident is heartrending for the staff, as well as for the remaining residents. I like the idea of providing a transition from less care to more."

Bernadette: "I agree with you, Peter. But let's not forget the differences between assisted-living and full-time, nursing-home-type care. Our expenses will really increase."

Sabrina: "That's why I wanted to talk with both of you. As you know, Golden Care's mission statement emphasizes the need to make a profit. We can't continue to serve our residents and provide high-quality care if we don't make enough money to pay our staff a living wage and earn enough of a profit to smooth over the rough patches and continue to improve our business. Could the two of you look into this idea, and get back to me in a week or so?"

Throughout the following week, the three communicated by e-mail. By the end of the week, a number of possibilities had surfaced, and these were summarized in a message from Bernadette to the others.

TO: [email protected], [email protected]

FROM: [email protected]

MESSAGE:

I've compiled the ideas from all of our e-mails into the following list. This may be a good starting point for our meeting tomorrow.

Buy an existing nursing home in one of Golden Care's current locations.

Buy an existing nursing home in another city.

Build a new nursing home facility in one of Golden Care's current locations.

Build a new nursing home facility in another city.

Build a wing on to an existing Golden Care facility. The Apache Junction facility has sufficient open land for an addition.

The next day, Sabrina, Peter, and Bernadette met again in Sabrina's office.

Sabrina: "I didn't realize there were so many possibilities. Are we going to have to work up numbers on each of them?"

Bernadette: "No, I think we can eliminate a few of them pretty quickly. For example, building a new facility would cost more than the other options, and it would involve the most risk."

Peter: "I agree, and I also think we might eliminate the purchase of an existing nursing home for the same reasons. Also, existing homes would not give us the option of building a facility that is state of the art and meets our needs, and it would lock us into a preexisting patient mix."

Sabrina: "I like that thinking. Let's restrict our attention to Option 5."

Bernadette: "I thought you might like that option, so Peter and I sketched out two alternatives for an extension of the Apache Junction building. We call the alternatives Basic Care and Lifestyle Care."

Peter: "There are different markets for each type of care. If we want to concentrate on Medicare and Medicaid patients, the reimbursement is lower, and we would want to offer the Basic Care option. Private insurance and private-pay patients could afford more services; if we are marketing to these patients, we could offer the Lifestyle Care option. Both alternatives provide high-quality nursing care. Basic Care concentrates on the quality nursing and maintenance activities. For example, the addition would have 25 double rooms, two nursing stations, two recreation rooms, a treatment room, and an office. The Lifestyle Care option adds physical and recreational therapy with a specially equipped gym and pool. That addition would have 30 single rooms, two nursing stations, a recreation room, a swimming pool, a hydrotherapy spa and gym, a treatment room, and an office. In each case, there would be cable TV and telephone hookups in each room and a buffer area between the nursing home and the apartments."

Sabrina: "Why the buffer area? Won't that add unnecessary cost?"

Peter: "It adds cost, but it will be well worth it. Sabrina, you must remember that the nursing home patients are different from the apartment residents. Some of the patients will have advanced dementia. We'll lose apartment residents in a hurry if they have to be reminded every day of what might be in store for them later on."

Sabrina: "I see your point. Bernadette, what will these two plans cost? I'll tell you right now that I like the Lifestyle Care option better. It fits with our history of doing whatever we can to make life better for our residents."

Bernadette: "I've checked into the costs of putting on a new wing and operating both alternatives. Here's a listing."

* Other includes supplies, utilities, food, and so on.

"In both cases, total administrative costs for Golden Care would increase by $30,000 per year. This seems high, but the increased legal and insurance requirements will add significantly more paperwork and accounting."

Sabrina: "All this sounds reasonable, but why is reimbursement such an important factor?"

Peter: "Well, if you admit Medicaid patients, the state will reimburse at most $30,000 per year. Private insurance policies will pay roughly $46,000 per year. We can charge up to about $65,000 for private patients, but this type of care is so expensive that many of these patients exhaust their funds and go on Medicaid. The nice aspect of Medicaid is that we can be virtually assured that we will operate at capacity."

Sabrina: "Can we cross that bridge when we come to it?"

Peter: "No, not really. Once the patient is a resident of our facility, it is hard to evict him or her. Also, while it is legal to force patients out before they go on Medicaid and to refuse to accept Medicaid patients, once we do accept Medicaid patients, we are prevented by law from evicting them—no matter how high our costs go."

Sabrina: "OK, it looks as if we have some hard work ahead of us to decide whether or not to get into this line of business."

Required:

4. What would the price per month for a Basic Care patient be if the same markup were used? For a Lifestyle Care patient? (Assume in both cases that occupancy is at 80 percent of capacity.) Round your intermediate calculation to 3 decimal places and final answers to the nearest dollar amount.

John Ranton, president and founder of Running Mate, could hardly contain his excitement over the operating results for his company's second year of operations. Running Mate is an online retailer of a GPS running watch that records distance, time, speed, heart rate, and a number of other statistics. Ranton's company does not manufacture the watches, but instead purchases them directly from the manufacturer based in China and resells them through its online shopping site.

During the first two years of operation, Ranton decided to hold the selling price of the watch constant at $100 per unit in an effort to attract business. He was also able to negotiate a deal with the supplier to hold Running Mates cost per watch constant at $80 per unit for the two years.

Operating expenses for each of the first two years of operation consist only of advertising expenses and the salaries paid to the website designer/administrator and the company's book keeper. Because Ranton is busy with his numerous other business ventures, the bookkeeper also looks after the day-to-day operations of Running Mate and has sole signing authority to make expenditures on the company's behalf. To motivate his website designer to create a web site that is easy to use and appealing to customers, Ranton decided to pay her a commission equal to 1% of annual sales in both 2015 and 2016. The salaries paid to the website administra tor and the bookkeeper were the same in both years and totalled $92,000. Annual advertising expenses of $8,000 were also the same in both years.

After reviewing the operating results for 2015 (shown below). Ranton roughly calculated the expected sales and expenses for 2016 based on anticipated sales of 10.000 watches at a price of $100 per unit and a cost of $80 per unit. He calculated expected operating expenses in 2016 based on the 2015 cost per unit of $13.75 ($ 1100008000 Based on his calculations (shown below). Ranton expected a 25% improvement in 2016 operating income, in keeping with the increase in unit sales. So, when Running Mate's bookkeeper provided Ranton with the actual results shown below for 2016, he was thrilled. Operating income had improved 50% compared to 2015 on sales growth of 25%.

Sales (units)..

Sales.....

Cost of goods sold.......

Gross margin.

Operating expenses............

Operating income..................................................

2015

8,000 $800.000 640,000

160000 $

50.000

2016

Expected

10,000 $1,000.000 800.000 200.000 137,500 $ 62,500

Actual

10.000 $1.000.000 800.000 125,000 $ 75,000

Ranton has always been an entrepreneur at heart but has no formal training in financial accounting or management accounting. He has always had the bookkeeper prepare annual financial statements.

Required:

1.

2.

Explain the nature of the error made by Ranton when calculating expected operating income for 2016.

Based on the information provided in the case, recalculate the expected results for 2016.

For Ranton's benefit. provide details on the specific items included in operating expenses (advertising, salaries, and commissions). Based on your calculations of the expected results for 2016, are the actual results for 2016 as good as Ranton originally thought? Explain.

Reading:

Steve Jobs was Apple’s founder and icon CEO. Much of Apple’s phenomenal success, especially after 2000, was attributed to Steve Job’s “genius” and leadership. Because of this and Tim Cook having a significantly different style from Jobs, he was given little chance for success. Yet, in 2014, several years after Cook assumed the CEO position, Apple had what Tim Cook referred to as an unbelievable year. Apple sold 200 million iPhones and had $200 billion in revenue. Apple’s stock price increased by 65 percent, and the company’s market value reached more than $700 billion, the largest ever of any U.S. firm. The $700 billion in market value is more than twice as much as either Microsoft or Exxon Mobil. Cook’s primary experience has been as manager of operations; he was Apple’s COO prior to assuming the CEO role. And, much of Apple’s sales are based on products developed and introduced to the market under Job’s lead- ership. So, the jury is still out on Cook, especially with regard to developing new products and making them a success in the marketplace. Steve Jobs was a master at this process. Cook’s style of lead- ership is much different from the approach used by Jobs. Some consid- ered Jobs to be ruthless and impulsive and almost maniacal in developing new products and ensur- ing a high quality product desirable in the market. Cook’s knowledge and skills do not make him an expert in product development, design, or marketing. So, he delegates those respon- sibilities but remains as the leader and decision maker. Cook tries to buffer and maintain Apple’s corporate culture developed largely by Jobs. Thus, the emphasis remains on innovation that is valued in the marketplace. Cook has learned the importance of hiring other top managers with talent but who also fit into Apple’s culture. He has made some very good hires, such as Angela Ahrendts who now heads Apple’s very important retail stores. Cook takes a much less emotional approach than Jobs. Some refer to it as a “measured emotional approach to leadership.” He empowers his team to manage their functional areas and emphasizes the need to take a long-run perspective. Observers have been able to highlight other differences between Cook’s and Job’s strategic leadership approaches. Cook shares the limelight with his leadership team, whereas Jobs kept the light on himself. In fact, one analyst suggested that Cook is a good leader who builds an effective team around him. Cook is leading Apple to be more philanthropic than in the past. His strategy has entailed a major acquisition (an audio company for $3 billion) and developing enterprise solutions for corporate IT units, both strategic actions that Jobs eschewed. Apple has formed an alliance with IBM to develop enterprise applications many of which will be designed for the iPad, especially the new and larger versions. Innovations developed during Cook’s leadership include the Apple watch, introduced to the market in April 2015. Many are waiting to learn its rate of success. Initial reports suggest that demand is exceeding supply, causing Apple to increase production. In addition, hints provided by Cook suggest that Apple may be planning to enter the television market. Most importantly, Cook claims that Apple’s goal is to change the way people work and will target the development of future products for that purpose.

Question:

What do you think of Jim Cook’s strategic leadership for Apple’s recent success after Jobs passed away?

The Way I Work: Blake Mycoskie of Toms Shoes

Blake Mycoskie, founder of Toms Shoes, built a lifestyle business based on social entrepreneurship.

Blake Mycoskie doesn't like to sit still. A serial entrepreneur, Mycoskie got the idea for his latest company, Toms Shoes, while on vacation in Argentina. After spending time in several villages in which children didn't own shoes, he created a company -- originally dubbed Shoes for Tomorrow -- in which helping those kids, and others like them, is part of the business plan. For every pair of shoes Toms sells, it donates a new pair to a child in a developing country. In the four years since its founding, the Los Angeles-based company, which has 72 employees, has given away 600,000 pairs of shoes. The company's canvas slip-on shoes -- the same type it often donates -- now sell for $45 to $85 a pair in upscale retailers such as Nordstrom and Bergdorf Goodman.

The more Toms grows, the less time Mycoskie seems to spend in the office. He delegates the day-to-day operation of the company to his management team. That frees him up to spend much of his time traveling -- spreading the Toms gospel, delivering shoes to children in Africa and South America, and taking fairly lengthy vacations. When he is not on the road, Mycoskie, 33, reconnects with employees in quick, focused meetings and in relaxed afternoons on his sailboat.

My schedule varies depending on what city I wake up in. These days, I'm home in L.A. about five or six days a month, and the rest of the time I'm on the road.

I live on a boat in Marina del Rey. When I wake up on the boat, it's very relaxed. I usually get up at 8:30, have a Clif Bar for breakfast, and spend a few hours thinking and writing before going in to the office. Almost every morning I write in my journal. I've been keeping it for a long time -- I've filled more than 50 books. I write about what's going on in my personal and spiritual life or what's going on at work. It helps me keep things in perspective, especially when things get crazy or I get stressed or we have obstacles. When I go back a month later and read what I was feeling, I realize that it wasn't that big of a deal -- we got through it. And that helps me prepare for the next time that I deal with difficult stuff.

Lately, my wake-up call has been around 4:45 a.m., so that I can catch early flights. Often, I'm traveling around the country to speak at companies and universities about our business model. I love teaching people about what we do. My goal is to inspire the next generation of entrepreneurs and company leaders to think differently about how they incorporate giving into their business models. Plus, many of the people who hear me speak eventually purchase a pair of Toms, share the story with others, or support our campaigns like One Day Without Shoes, which has people go barefoot for one day a year to raise awareness about the children we serve. I also travel to meet with organizations like CARE and the World Health Organization. Then I'll go to Ethiopia for three weeks to give away 3,000 pairs of shoes to kids.

I don't get jet lagged that much. I'm so used to traveling and being in different places every day that I can sleep anywhere. I read quite a bit when I'm on the road. I've read a lot of business biographies. I dropped out of college when I was a sophomore, so those were my education in business. I've probably read 40 to 50 of them -- on Michael Eisner, David Geffen, Howard Schultz. Ted Turner's autobiography is really interesting, and so is Sam Walton's. I read that one very early in my career. The great thing about biographies is the subjects have already been successful, so they're not insecure about their failures. Howard Schultz doesn't mind talking about all the dumb things he did when he started Starbucks. Reading about those mistakes taught me a lot.

I also use plane rides to catch up on e-mail. I go through these periods when I won't respond to e-mail for three or four days, and then I'll get on a plane and write 300 e-mails. People who work with me have gotten used to it. And they know when I've landed, because suddenly they'll get a bunch of e-mails from me on a Friday at 10 p.m. My staff members call it the "Toms bomb."

When I'm traveling, I usually send one e-mail a week to the whole staff. I try to stay connected to everyone through letters. Some people call them little manifestoes. I'm a very open person, so I really tell the staff what I'm struggling with and what I'm happy about. I tell them what I think the future of Toms is. I want them to understand what I'm thinking. It's like I'm writing to a best friend.

Anything that really inspires me and that I think is relevant to our overall mission, I try to share with them. Sometimes, I'll tell them about an amazing article I read in a magazine -- about an issue we should challenge ourselves to think about. When I was gone a few months ago, I was reading a lot of Emerson, so I started sending the staff a lot of my favorite Emerson quotes and poems. When I got back, I printed all of the Emerson e-mails and put them in a binder, so everyone could read it throughout the year.

Several times a year, I lead shoe drops in different parts of the world. I'll go with a group of 10 to 15 people -- Toms staff members and volunteers -- to hand out shoes. After an employee is with us for a year, he or she gets to go on a shoe drop. We're giving away shoes in 28 countries now. The shoes not only help kids go to school, but they prevent life-threatening diseases. We're helping to prevent hookworm in Guatemala. In Ethiopia, we're preventing podoconiosis, a disease that can cause the feet and legs to swell to dangerous proportions. Kids get it from walking barefoot on volcanic soil. We're getting more involved in getting the best doctors and clinics there, so we can take it to the next level of prevention.

When I go on shoe drops, I meet with our partners: nonprofits and other organizations involved in public health. They help us give away shoes all year long. We partner with organizations that are already in the community, because they really know what the kids need. They tell me what's working, what they need more help with.

When we're in these countries, we are in the field at least once a day hand-placing shoes on kids' feet. It's really important for us to go back and do that. It's a renewable energy source for me. Seeing the smiles on those kids' faces makes me excited to continue on.

When I'm traveling, I check in with the office occasionally, but I'm not the day-to-day manager. The reason I can travel so much is that I've put together a strong team of about 10 people who pretty much lead the company while I am gone. Candice Wolfswinkel is my chief of staff and the keeper of the culture. Candice has been with me from the beginning, and she tells me what the vibe is like in the office. That's really important to me, because when I'm gone, I can write a letter, but I don't get the feeling of the office.

I'm on the phone a lot with my assistant Megan Memmott, who handles my schedule and requests for meetings. She will even respond to my e-mails for me if something's a high priority. I have an amazing CFO, Jeff Watts, and I'll check in with him twice a week. I talk to my sales managers on a weekly basis. I also call my younger brother Tyler a lot -- he's head of corporate sales. We're eight years apart, so we weren't that close growing up. But when he came out to L.A. in 2006, he started interning at Toms, and since then, we've grown a lot closer. Since I'm gone so much, it's nice having family in the office. I can just call Tyler up and say, "OK, what's the real deal?" and he'll tell me.

When I return to the office, I make sure to hold an all-staff meeting. We all gather on one side of our warehouse. It's a chance for me to tell everyone what I've been doing, where I've been, and usually I have something pretty exciting to share. It's nice to come home and reconnect with my Toms family that way.

When I am in the office, there's a certain energy. Maybe because I'm such an anomaly now. There's all this excitement, and everyone wants to grab me. I have very focused meetings and sign off on things. I like making decisions, but I'm not big on sitting around and talking about ideas. I get bored really quickly in brainstorming meetings. I like it when the creative team has already thought of 10 ideas, and then we can just pick one. I prefer to be involved in the first meeting -- to put my thumbprint on, say, a big marketing initiative or a new design -- and the last meeting.

June and July are slow travel months for me, so I'm in L.A. working in the office four or five days a week. It's a very open office environment. I sit next to the customer service people in a cubicle, just like everyone else. I like to stand up, walk over to people, and find out what they're working on. I bounce around from department to department. Sometimes it's disruptive, I think, but it's just the way I build things.

I usually work until 7 or 8 p.m. In the summertime, I leave early and go sailing almost every day. A lot of times, I'll invite employees to go with me, or I'll bring friends. It's my way of staying connected with my social group in L.A. I'm out there sailing and entertaining people and having a good time.

I'm a pretty social person, so almost every night when I'm in town, I also have some type of dinner or event scheduled. A lot of times, I'll have dinner with one of my employees. For instance, if I haven't had the chance to catch up with my CFO that day, we'll go to dinner. I'm not a late-night person. After 10 p.m., I'm falling asleep. If I'm out at that time, I'll be the one falling asleep at dinner.

For two or three months of the year, I kind of do my own thing. That's one of my dirty little secrets: I take a lot of time off. I went surfing for a month in Costa Rica last November. I went to Uruguay and spent some time there. I'm going to Colorado for three weeks to go fly-fishing. Getting away from work helps me sustain my passion. And I do my best thinking when I'm on vacation. I'm not just sitting on the beach drinking piña coladas. I'm exploring and meeting new people. I'm getting inspired.

Traveling as much as I do, I get lonely sometimes. I have friends now in cities all over the world, so I get to be social, but it's hard to have the deep meaningful relationships, especially an intimate one. With my guy friends, I can show up once a month and go to dinner with them and they're happy. But that doesn't work so well with a girlfriend. Right now, that's a sacrifice I'm making. I do want to have a family -- I'm from a big family. In a year, I think I'll make some different life choices, but I'm just not ready yet.

Contemporary Management McGraw Hill Education 11th ed.

1. How would you describe Blake Mycoskie's leadership style?
2. Would you say that he's a charismatic leader? Why?
3. What sources of power does he have?
4. How does he motivate his followers?

Case Study 2 Construction

Fred’s Sheds

Fred Smith, the founder and chief executive of Fred’s Sheds, received a phone call one afternoon from a local farmer, Mr Jones, requesting a quote to design and build a large storage shed on his property. Fred asked Mr Jones what size and type of shed he would like, when he wanted work to commence, and when he wanted it completed.

Mr Jones told him that he required a large shed, big enough to store his tractor and utility vehicle, and spaces for a workbench, tools and fertilisers.  

He also specified that the shed must have power, water and a toilet. He requested that the shed be made of high quality materials, because twice in the previous ten years some of the other sheds on his property had been damaged by inclement weather, costing him many thousands of dollars in repairs.

Mr Jones wanted work to commence in 6 week’s time and would like the job completed no more than 3 weeks after that so he would have a place to store his vehicles before the winter rains came.

Mr Jones asked Fred to come up with a design and quote to build his shed and asked him to present them to him at a meeting at his house in a week’s time.

He told Fred that he was obtaining three quotes from three different builders, and that he would select his preferred builder based on four criteria.

These were quality, the ability to start and finish on time, and cost.

Mr Jones said he would like to spend no more than $40,000 on the shed, but would consider alternate proposals that were a little higher in price if they could exceed his minimum evaluation criteria.

As soon as Fred hung up the phone his mind started to think of all the different tasks he would need to do to win and complete the job. Having built many sheds before, he was confident he had the project management skills to build a shed that met Mr Jones’s extensive criteria. He jotted down some of his thoughts on a notepad so that he would not forget anything.

First of all, Fred knew he would have to come up with a winning design, so he would need to put his designer, Karen, on the job of coming up with some innovative designs.

Fred would also have to source higher quality building materials than he usually used because, although Fred always used good materials, he thought he would try to use the best possible materials, if it was cost effective, to give him the edge in meeting Mr Jones’s stringent evaluation criteria over his two competitors.

Fred also knew that he would need to plan the human resources necessary to complete the job in the timeframe required. Some of his other construction projects were nearing completion, so it would not be too much of a problem getting some of his construction workers to start in 6 weeks’ time. However, Fred was not sure about the availability of his subcontractors, Eddie the electrician, Bob the plumber, Gary the glazier and Tony his fencing contractor and odd job man, because business was booming and they were all very busy.

If he was successful in winning the contract, Fred knew that there would still be lots of work to be done. After signing the contract, he would need to submit a Development Application and construction certificate to the local council and await their approval.

Mr Jones’s final selections for colour and style of shed materials would need to be finalised and a deposit received prior to commencing work.

Once all that had been accomplished, Fred and his team of four would have to prepare the site for construction. This would involve performing underground cable service checks, and perhaps contracting a surveyor to locate existing boundaries as the shed was going to be built close to the boundary with Mrs Mitchell’s neighbouring property.

The site would need to be cleared, temporary site facilities such as a toilet, site fencing, power and water would have to be established, the site set out and the formwork built. Following this, the site would be excavated.

While the excavation was taking place, Fred would need to remember to book a council inspection for the formwork prior to concreting, as well as booking the concrete truck, a date for the shed to be delivered, a date for the shed installation team to put the shed into place, and dates for his subcontractors to come and install power and water.

After pouring the concrete and finish, his team would need to strip the formwork. At this time Fred could invoice Mr Jones for a progress payment as this represented a milestone in the project. Following this the shed could be delivered and installed,

Eddie the electrician could be called in to connect the mains power, Bob the plumber could connect the water and install the toilet and Gary the glazier could install the windows. While they were busy doing that, Fred and his team could start clearing the site, removing any rubbish and the temporary site amenities.

Once all these tasks were accomplished, the job would be at practical completion. Fred would then meet with Mr Jones, present him with a final bill and handover the keys to the shed. Fred smiled to himself feeling confident that he would beat his two competitors to the job and thinking that he would soon have another satisfied customer.

Complete the project budget in the resources and cost template.

******** I need just a simple example

Resource and Cost Template

Case Study 2 Construction

Fred’s Sheds

Fred Smith, the founder and chief executive of Fred’s Sheds, received a phone call one afternoon from a local farmer, Mr Jones, requesting a quote to design and build a large storage shed on his property. Fred asked Mr Jones what size and type of shed he would like, when he wanted work to commence, and when he wanted it completed.

Mr Jones told him that he required a large shed, big enough to store his tractor and utility vehicle, and spaces for a workbench, tools and fertilisers.  

He also specified that the shed must have power, water and a toilet. He requested that the shed be made of high quality materials, because twice in the previous ten years some of the other sheds on his property had been damaged by inclement weather, costing him many thousands of dollars in repairs.

Mr Jones wanted work to commence in 6 week’s time and would like the job completed no more than 3 weeks after that so he would have a place to store his vehicles before the winter rains came.

Mr Jones asked Fred to come up with a design and quote to build his shed and asked him to present them to him at a meeting at his house in a week’s time.

He told Fred that he was obtaining three quotes from three different builders, and that he would select his preferred builder based on four criteria.

These were quality, the ability to start and finish on time, and cost.

Mr Jones said he would like to spend no more than $40,000 on the shed, but would consider alternate proposals that were a little higher in price if they could exceed his minimum evaluation criteria.

As soon as Fred hung up the phone his mind started to think of all the different tasks he would need to do to win and complete the job. Having built many sheds before, he was confident he had the project management skills to build a shed that met Mr Jones’s extensive criteria. He jotted down some of his thoughts on a notepad so that he would not forget anything.

First of all, Fred knew he would have to come up with a winning design, so he would need to put his designer, Karen, on the job of coming up with some innovative designs.

Fred would also have to source higher quality building materials than he usually used because, although Fred always used good materials, he thought he would try to use the best possible materials, if it was cost effective, to give him the edge in meeting Mr Jones’s stringent evaluation criteria over his two competitors.

Fred also knew that he would need to plan the human resources necessary to complete the job in the timeframe required. Some of his other construction projects were nearing completion, so it would not be too much of a problem getting some of his construction workers to start in 6 weeks’ time. However, Fred was not sure about the availability of his subcontractors, Eddie the electrician, Bob the plumber, Gary the glazier and Tony his fencing contractor and odd job man, because business was booming and they were all very busy.

If he was successful in winning the contract, Fred knew that there would still be lots of work to be done. After signing the contract, he would need to submit a Development Application and construction certificate to the local council and await their approval.

Mr Jones’s final selections for colour and style of shed materials would need to be finalised and a deposit received prior to commencing work.

Once all that had been accomplished, Fred and his team of four would have to prepare the site for construction. This would involve performing underground cable service checks, and perhaps contracting a surveyor to locate existing boundaries as the shed was going to be built close to the boundary with Mrs Mitchell’s neighbouring property.

The site would need to be cleared, temporary site facilities such as a toilet, site fencing, power and water would have to be established, the site set out and the formwork built. Following this, the site would be excavated.

While the excavation was taking place, Fred would need to remember to book a council inspection for the formwork prior to concreting, as well as booking the concrete truck, a date for the shed to be delivered, a date for the shed installation team to put the shed into place, and dates for his subcontractors to come and install power and water.

After pouring the concrete and finish, his team would need to strip the formwork. At this time Fred could invoice Mr Jones for a progress payment as this represented a milestone in the project. Following this the shed could be delivered and installed,

Eddie the electrician could be called in to connect the mains power, Bob the plumber could connect the water and install the toilet and Gary the glazier could install the windows. While they were busy doing that, Fred and his team could start clearing the site, removing any rubbish and the temporary site amenities.

Once all these tasks were accomplished, the job would be at practical completion. Fred would then meet with Mr Jones, present him with a final bill and handover the keys to the shed. Fred smiled to himself feeling confident that he would beat his two competitors to the job and thinking that he would soon have another satisfied customer.

Complete the work breakdown structure (WBS) template.

Work Breakdown Structure Template

Question 4 (Total marks 30) Nguyen and Nugyen (2020) studied the audit expectation gap in Vietnam. Read their study and answer the following questions. a. Describe the audit expectation gap? b. The research methodology section of the paper states ‘qualitative research is combined with quantitative research’. What information do the authors provide about how they undertook the qualitative part of the research? c. What additional information could be added to the ‘data collection’ section of the paper to provide useful information to readers? d. What extra information could be added to make Table 1 and its discussion more understandable? e. What are three improvements/additions that could be made to the conclusion section of the study? Appropriate use of in text referencing and a reference list that follows Harvard referencing.