Read the following marketing case on GM: Downsizing the Hummer and answer the questions given at the end of the case.

MARKETING CASE

GM: Downsizing the Hummer

A Little Military History

Quickly. What is a "High Mobility Multi-Purpose Wheeled Vehicle"? Well, if you've kept up with Arnold Schwarzenegger films or studied the 1991 Gulf War, you may have recognized the formal military description of what soldiers describe using the acronym "Humvee." If you don't really know what a Humvee is, just stand by—General Motors is going to tell you.

This story starts in 1979, when AM General, a specialty vehicle manufacturer, earned a contract from the U.S. Army to design the Humvee. The Army wanted a new vehicle to replace the Jeep, the ever-present multipurpose vehicle that had transported generations of soldiers. The Army believed it needed a more modern, up-to-date vehicle to meet the needs of the modern soldier. AM General produced the big, boxy Humvee, which labored in relative obscurity until the Gulf War in 1991. In that war, the United States and its allies mounted a military operation against Iraq, which had just invaded Kuwait. Television coverage of the military buildup in advance of the short war and live broadcasts of the war itself introduced the public to the workhorse Humvee.

In 1992, AM General, responding to the Humvee's notoriety, decided to introduce the first civilian version of the Humvee—the Hummer. Weighing in at 7,100 pounds, the Hummer featured a huge, 6.5-liter V-8, turbo-diesel engine that produced 195 horsepower and propelled the Hummer from 0 to 60 miles per hour in a snail-like 18 seconds. But the Hummer's purpose was not speed. AM General designed it, like its military parent, to take people off the beaten path—way off. The Hummer could plow through water to a depth of 30 inches and climb almost vertical, rocky surfaces. It even had a central tire inflation system that allowed the driver to inflate or deflate the vehicle's tires while on the move.

The advertising tag line dubbed the Hummer "The world's most serious 4 × 4," and ad copy played up the vehicle's off-road capabilities and its military heritage. AM General targeted serious, elite road warriors who were willing to pay more than $100,000 to have the toughest vehicle in the car pool. These were people who also wanted to tell the world that they had been successful. To help buyers learn how to handle the Hummer in extreme off-road situations, AM General even offered a Hummer Driving Academy, where drivers learned to handle 22-inch vertical walls, high water, 40 percent side slopes, and 60 percent inclines.

GM's Market Research

In 1998, GM was conducting market research using a concept vehicle that it described as rugged and militaristic. When the vehicle bore the GMC brand name (GM's truck division), the company found that consumers had a lukewarm reaction. However, when GM put the Hummer name on the vehicle, researchers found that it had the highest and most widespread appeal of any vehicle GM had ever tested. Armed with this insight, GM turned to AM General, which had just abandoned acquisition discussions with Ford Motor Company. In December 1999, GM signed an agreement with AM General giving GM rights to the Hummer brand. AM General also signed a seven-year contract to produce the Hummer H2 sport utility vehicle for GM.

Based on its research, GM believed that the Hummer H2, a smaller version of the Hummer, would appeal to rugged individualists and wealthy baby-boomers who wanted the ability to go off-road and to "successful achievers," thirty- and forty-something wealthy consumers who had jobs in investment banking and the like. GM believed that it could introduce the H2 in the luxury SUV market and compete successfully with brands such as the Lincoln Navigator or GM's own Cadillac Escalade. The company charted production plans that called for AM General to build a new $200 million manufacturing facility in Indiana and for GM to launch the H2 in July 2002 at a base sticker price of about $49,000. It predicted that it could sell 19,000 H2s in 2002 (the 2003 model year) and then ramp up production to sell 40,000 units per year thereafter—a number that would make the H2 the largest seller in the luxury SUV market. Further, GM planned to introduce the H3, a still smaller and more affordable version of the Hummer in 2005. It believed it could sell 80,000 units of the H3 per year. These numbers compared with annual sales of only about 800 Hummers.

Softening Up the Market

During 2000, GM and AM General did not advertise the Hummer, but they mapped out a campaign for the year leading up to the H2's 2002 introduction that would raise awareness of the Hummer brand and serve as a bridge to the introduction. GM hired a marketing firm, Modernista, to develop the estimated $3 million campaign. Modernista found that the Hummer had about a 50 percent awareness level among buyers of full-size SUVs, mainly due to its appearance in movies. AM General had been spending less than $1 million a year on advertising and promotion. Further, 13 to 20 percent of these buyers had considered the Hummer.

In mid-2001, GM launched the Modernista campaign using the tag line "Hummer. Like nothing else." Placements in The Wall Street Journal, Barron's, Spin, Business Week, Cigar Aficionado, and Esquire used four different headlines:

"How did my soul get way out here?"

"What good is the world at your fingertips if you never actually touch it?"

"You can get fresh air lots of places, but this is the really good stuff."

"Out here you're nobody. Perfect."

Following each headline was the same copy: "Sometimes you find yourself in the middle of nowhere. And sometimes in the middle of nowhere you find yourself. The legendary H1." One agency official said the ads used journalistic-type photography to make them more believable and to play down the he-man imagery. "Authenticity is probably the most important word when it comes to branding," the official argued. Whereas previous Hummer ads had featured the tough SUV plowing through snow and streams, the new ads featured the Hummer with gorgeous Chilean vistas. The new ads, the agency suggested, were as much about the people who buy Hummers as they were about the vehicle. Hummer owners often believed they got a bum rap as show-offs, the representative suggested, but he argued that the new ads would show the buyer's other side.

The Launch

Right on schedule in July 2002, GM introduced the 2003 Hummer 2 SUT (Sport Utility Truck). GM and AM General designed and built the H2 in just 16 months, much more quickly than the three-to-four-year time normally required. GM built the H2 on GM's GMT 800 truck platform, and it shared a number of parts with other GM models. The H2 was about the same size as the Chevy Tahoe, five inches narrower than the Hummer and about 700 pounds lighter. However, it was about 1,400 pounds heavier than other SUVs. It had a 316-horsepower engine that slurped a gallon of gasoline every 12 miles. It also featured a nine-speaker Bose stereo system. Buyers could upgrade the base model with a $2,575 luxury package that added heated leather front seats and a six-disc CD changer or with a $2,215 Adventure package that added sir suspension, brush guards, and crossbars for the roof rack.

GM had about 150 dealers who would initially offer the H2. The dealers had to agree to build a special showroom and a test track.

For promotion, GM stayed with the Modernista firm. Late in the summer of 2002, TV ads broke on shows such as CSI: Miami and featured a well-dressed woman behind the H2's steering wheel. The Modernista representative indicated that the message was that the H2 is not about blowing things up. Twenty-four print ads showed the H2 not in action but sitting still. Modernista believed that people knew the H2 would be tough—it wanted people to see that the H2 looked good.

The On-Road Test

GM targeted buyers with an average age of 42 and annual household incomes above $125,000 versus H1 owners' averages of about 50 years old and household incomes above $200,000. The questions were, could GM position the H2 to appeal to its target market, and was that market large enough to ensure that GM could reach its sales and profitability targets?

One writer who had driven the H2 found it to be comfortable and surprisingly smooth on the highway. However, he criticized the interior and the lack of storage space. He noted that the H2 seated just six people versus eight or nine for other large SUVs.

Analysts argued that GM was pursuing a risky strategy. Would its having borrowed parts from other GM models to keep costs down and speed the time to market damage the H2's image? Would GM be able to justify the H2's high price when it had so much in common with other SUVs that cost thousands less? Would consumers really spend so much for an off-the-road vehicle that, studies showed, only 10 percent of image-conscious buyers would actually take off road? Finally, could GM make the Hummer 2 stand out in an increasingly crowded market? (See Exhibit 1.)

Arnold Schwarzenegger appeared in an H2 promotional video suggesting, "Don't call it the baby Hummer, you'll make it angry." Will the Hummer H2 be a hum-dinger and make GM happy, or will it get stuck in the rocky luxury SUV market?

Answer All Questions. Each Question carries 10 marks.

1. How are the segmentation decisions of GM for Hummer H2 different from AM General's target for the original Hummer? How has GM attempted to position the H2? ( 10 )
2. Why do you think some consumers will pay $40,000 or more for an off-road vehicle that 90 percent of them will never take off road? (10)
3. What segmentation, targeting, and positioning recommendations would you make to GM for the H2? (10)

Read the following marketing case on GM: Downsizing the Hummer and answer the questions given at the end of the case.

MARKETING CASE

GM: Downsizing the Hummer

A Little Military History

Quickly. What is a "High Mobility Multi-Purpose Wheeled Vehicle"? Well, if you've kept up with Arnold Schwarzenegger films or studied the 1991 Gulf War, you may have recognized the formal military description of what soldiers describe using the acronym "Humvee." If you don't really know what a Humvee is, just stand by—General Motors is going to tell you.

This story starts in 1979, when AM General, a specialty vehicle manufacturer, earned a contract from the U.S. Army to design the Humvee. The Army wanted a new vehicle to replace the Jeep, the ever-present multipurpose vehicle that had transported generations of soldiers. The Army believed it needed a more modern, up-to-date vehicle to meet the needs of the modern soldier. AM General produced the big, boxy Humvee, which labored in relative obscurity until the Gulf War in 1991. In that war, the United States and its allies mounted a military operation against Iraq, which had just invaded Kuwait. Television coverage of the military buildup in advance of the short war and live broadcasts of the war itself introduced the public to the workhorse Humvee.

In 1992, AM General, responding to the Humvee's notoriety, decided to introduce the first civilian version of the Humvee—the Hummer. Weighing in at 7,100 pounds, the Hummer featured a huge, 6.5-liter V-8, turbo-diesel engine that produced 195 horsepower and propelled the Hummer from 0 to 60 miles per hour in a snail-like 18 seconds. But the Hummer's purpose was not speed. AM General designed it, like its military parent, to take people off the beaten path—way off. The Hummer could plow through water to a depth of 30 inches and climb almost vertical, rocky surfaces. It even had a central tire inflation system that allowed the driver to inflate or deflate the vehicle's tires while on the move.

The advertising tag line dubbed the Hummer "The world's most serious 4 × 4," and ad copy played up the vehicle's off-road capabilities and its military heritage. AM General targeted serious, elite road warriors who were willing to pay more than $100,000 to have the toughest vehicle in the car pool. These were people who also wanted to tell the world that they had been successful. To help buyers learn how to handle the Hummer in extreme off-road situations, AM General even offered a Hummer Driving Academy, where drivers learned to handle 22-inch vertical walls, high water, 40 percent side slopes, and 60 percent inclines.

GM's Market Research

In 1998, GM was conducting market research using a concept vehicle that it described as rugged and militaristic. When the vehicle bore the GMC brand name (GM's truck division), the company found that consumers had a lukewarm reaction. However, when GM put the Hummer name on the vehicle, researchers found that it had the highest and most widespread appeal of any vehicle GM had ever tested. Armed with this insight, GM turned to AM General, which had just abandoned acquisition discussions with Ford Motor Company. In December 1999, GM signed an agreement with AM General giving GM rights to the Hummer brand. AM General also signed a seven-year contract to produce the Hummer H2 sport utility vehicle for GM.

Based on its research, GM believed that the Hummer H2, a smaller version of the Hummer, would appeal to rugged individualists and wealthy baby-boomers who wanted the ability to go off-road and to "successful achievers," thirty- and forty-something wealthy consumers who had jobs in investment banking and the like. GM believed that it could introduce the H2 in the luxury SUV market and compete successfully with brands such as the Lincoln Navigator or GM's own Cadillac Escalade. The company charted production plans that called for AM General to build a new $200 million manufacturing facility in Indiana and for GM to launch the H2 in July 2002 at a base sticker price of about $49,000. It predicted that it could sell 19,000 H2s in 2002 (the 2003 model year) and then ramp up production to sell 40,000 units per year thereafter—a number that would make the H2 the largest seller in the luxury SUV market. Further, GM planned to introduce the H3, a still smaller and more affordable version of the Hummer in 2005. It believed it could sell 80,000 units of the H3 per year. These numbers compared with annual sales of only about 800 Hummers.

Softening Up the Market

During 2000, GM and AM General did not advertise the Hummer, but they mapped out a campaign for the year leading up to the H2's 2002 introduction that would raise awareness of the Hummer brand and serve as a bridge to the introduction. GM hired a marketing firm, Modernista, to develop the estimated $3 million campaign. Modernista found that the Hummer had about a 50 percent awareness level among buyers of full-size SUVs, mainly due to its appearance in movies. AM General had been spending less than $1 million a year on advertising and promotion. Further, 13 to 20 percent of these buyers had considered the Hummer.

In mid-2001, GM launched the Modernista campaign using the tag line "Hummer. Like nothing else." Placements in The Wall Street Journal, Barron's, Spin, Business Week, Cigar Aficionado, and Esquire used four different headlines:

"How did my soul get way out here?"

"What good is the world at your fingertips if you never actually touch it?"

"You can get fresh air lots of places, but this is the really good stuff."

"Out here you're nobody. Perfect."

Following each headline was the same copy: "Sometimes you find yourself in the middle of nowhere. And sometimes in the middle of nowhere you find yourself. The legendary H1." One agency official said the ads used journalistic-type photography to make them more believable and to play down the he-man imagery. "Authenticity is probably the most important word when it comes to branding," the official argued. Whereas previous Hummer ads had featured the tough SUV plowing through snow and streams, the new ads featured the Hummer with gorgeous Chilean vistas. The new ads, the agency suggested, were as much about the people who buy Hummers as they were about the vehicle. Hummer owners often believed they got a bum rap as show-offs, the representative suggested, but he argued that the new ads would show the buyer's other side.

The Launch

Right on schedule in July 2002, GM introduced the 2003 Hummer 2 SUT (Sport Utility Truck). GM and AM General designed and built the H2 in just 16 months, much more quickly than the three-to-four-year time normally required. GM built the H2 on GM's GMT 800 truck platform, and it shared a number of parts with other GM models. The H2 was about the same size as the Chevy Tahoe, five inches narrower than the Hummer and about 700 pounds lighter. However, it was about 1,400 pounds heavier than other SUVs. It had a 316-horsepower engine that slurped a gallon of gasoline every 12 miles. It also featured a nine-speaker Bose stereo system. Buyers could upgrade the base model with a $2,575 luxury package that added heated leather front seats and a six-disc CD changer or with a $2,215 Adventure package that added sir suspension, brush guards, and crossbars for the roof rack.

GM had about 150 dealers who would initially offer the H2. The dealers had to agree to build a special showroom and a test track.

For promotion, GM stayed with the Modernista firm. Late in the summer of 2002, TV ads broke on shows such as CSI: Miami and featured a well-dressed woman behind the H2's steering wheel. The Modernista representative indicated that the message was that the H2 is not about blowing things up. Twenty-four print ads showed the H2 not in action but sitting still. Modernista believed that people knew the H2 would be tough—it wanted people to see that the H2 looked good.

The On-Road Test

GM targeted buyers with an average age of 42 and annual household incomes above $125,000 versus H1 owners' averages of about 50 years old and household incomes above $200,000. The questions were, could GM position the H2 to appeal to its target market, and was that market large enough to ensure that GM could reach its sales and profitability targets?

One writer who had driven the H2 found it to be comfortable and surprisingly smooth on the highway. However, he criticized the interior and the lack of storage space. He noted that the H2 seated just six people versus eight or nine for other large SUVs.

Analysts argued that GM was pursuing a risky strategy. Would its having borrowed parts from other GM models to keep costs down and speed the time to market damage the H2's image? Would GM be able to justify the H2's high price when it had so much in common with other SUVs that cost thousands less? Would consumers really spend so much for an off-the-road vehicle that, studies showed, only 10 percent of image-conscious buyers would actually take off road? Finally, could GM make the Hummer 2 stand out in an increasingly crowded market? (See Exhibit 1.)

Arnold Schwarzenegger appeared in an H2 promotional video suggesting, "Don't call it the baby Hummer, you'll make it angry." Will the Hummer H2 be a hum-dinger and make GM happy, or will it get stuck in the rocky luxury SUV market?

Required Question:

Question 01: Why do you think some consumers will pay $40,000 or more for an off-road vehicle that 90 percent of them will never take off road? (10)

Read the following marketing case on GM: Downsizing the Hummer and answer the questions given at the end of the case.

MARKETING CASE

GM: Downsizing the Hummer

A Little Military History

Quickly. What is a "High Mobility Multi-Purpose Wheeled Vehicle"? Well, if you've kept up with Arnold Schwarzenegger films or studied the 1991 Gulf War, you may have recognized the formal military description of what soldiers describe using the acronym "Humvee." If you don't really know what a Humvee is, just stand by—General Motors is going to tell you.

This story starts in 1979, when AM General, a specialty vehicle manufacturer, earned a contract from the U.S. Army to design the Humvee. The Army wanted a new vehicle to replace the Jeep, the ever-present multipurpose vehicle that had transported generations of soldiers. The Army believed it needed a more modern, up-to-date vehicle to meet the needs of the modern soldier. AM General produced the big, boxy Humvee, which labored in relative obscurity until the Gulf War in 1991. In that war, the United States and its allies mounted a military operation against Iraq, which had just invaded Kuwait. Television coverage of the military buildup in advance of the short war and live broadcasts of the war itself introduced the public to the workhorse Humvee.

In 1992, AM General, responding to the Humvee's notoriety, decided to introduce the first civilian version of the Humvee—the Hummer. Weighing in at 7,100 pounds, the Hummer featured a huge, 6.5-liter V-8, turbo-diesel engine that produced 195 horsepower and propelled the Hummer from 0 to 60 miles per hour in a snail-like 18 seconds. But the Hummer's purpose was not speed. AM General designed it, like its military parent, to take people off the beaten path—way off. The Hummer could plow through water to a depth of 30 inches and climb almost vertical, rocky surfaces. It even had a central tire inflation system that allowed the driver to inflate or deflate the vehicle's tires while on the move.

The advertising tag line dubbed the Hummer "The world's most serious 4 × 4," and ad copy played up the vehicle's off-road capabilities and its military heritage. AM General targeted serious, elite road warriors who were willing to pay more than $100,000 to have the toughest vehicle in the car pool. These were people who also wanted to tell the world that they had been successful. To help buyers learn how to handle the Hummer in extreme off-road situations, AM General even offered a Hummer Driving Academy, where drivers learned to handle 22-inch vertical walls, high water, 40 percent side slopes, and 60 percent inclines.

GM's Market Research

In 1998, GM was conducting market research using a concept vehicle that it described as rugged and militaristic. When the vehicle bore the GMC brand name (GM's truck division), the company found that consumers had a lukewarm reaction. However, when GM put the Hummer name on the vehicle, researchers found that it had the highest and most widespread appeal of any vehicle GM had ever tested. Armed with this insight, GM turned to AM General, which had just abandoned acquisition discussions with Ford Motor Company. In December 1999, GM signed an agreement with AM General giving GM rights to the Hummer brand. AM General also signed a seven-year contract to produce the Hummer H2 sport utility vehicle for GM.

Based on its research, GM believed that the Hummer H2, a smaller version of the Hummer, would appeal to rugged individualists and wealthy baby-boomers who wanted the ability to go off-road and to "successful achievers," thirty- and forty-something wealthy consumers who had jobs in investment banking and the like. GM believed that it could introduce the H2 in the luxury SUV market and compete successfully with brands such as the Lincoln Navigator or GM's own Cadillac Escalade. The company charted production plans that called for AM General to build a new $200 million manufacturing facility in Indiana and for GM to launch the H2 in July 2002 at a base sticker price of about $49,000. It predicted that it could sell 19,000 H2s in 2002 (the 2003 model year) and then ramp up production to sell 40,000 units per year thereafter—a number that would make the H2 the largest seller in the luxury SUV market. Further, GM planned to introduce the H3, a still smaller and more affordable version of the Hummer in 2005. It believed it could sell 80,000 units of the H3 per year. These numbers compared with annual sales of only about 800 Hummers.

Softening Up the Market

During 2000, GM and AM General did not advertise the Hummer, but they mapped out a campaign for the year leading up to the H2's 2002 introduction that would raise awareness of the Hummer brand and serve as a bridge to the introduction. GM hired a marketing firm, Modernista, to develop the estimated $3 million campaign. Modernista found that the Hummer had about a 50 percent awareness level among buyers of full-size SUVs, mainly due to its appearance in movies. AM General had been spending less than $1 million a year on advertising and promotion. Further, 13 to 20 percent of these buyers had considered the Hummer.

In mid-2001, GM launched the Modernista campaign using the tag line "Hummer. Like nothing else." Placements in The Wall Street Journal, Barron's, Spin, Business Week, Cigar Aficionado, and Esquire used four different headlines:

"How did my soul get way out here?"

"What good is the world at your fingertips if you never actually touch it?"

"You can get fresh air lots of places, but this is the really good stuff."

"Out here you're nobody. Perfect."

Following each headline was the same copy: "Sometimes you find yourself in the middle of nowhere. And sometimes in the middle of nowhere you find yourself. The legendary H1." One agency official said the ads used journalistic-type photography to make them more believable and to play down the he-man imagery. "Authenticity is probably the most important word when it comes to branding," the official argued. Whereas previous Hummer ads had featured the tough SUV plowing through snow and streams, the new ads featured the Hummer with gorgeous Chilean vistas. The new ads, the agency suggested, were as much about the people who buy Hummers as they were about the vehicle. Hummer owners often believed they got a bum rap as show-offs, the representative suggested, but he argued that the new ads would show the buyer's other side.

The Launch

Right on schedule in July 2002, GM introduced the 2003 Hummer 2 SUT (Sport Utility Truck). GM and AM General designed and built the H2 in just 16 months, much more quickly than the three-to-four-year time normally required. GM built the H2 on GM's GMT 800 truck platform, and it shared a number of parts with other GM models. The H2 was about the same size as the Chevy Tahoe, five inches narrower than the Hummer and about 700 pounds lighter. However, it was about 1,400 pounds heavier than other SUVs. It had a 316-horsepower engine that slurped a gallon of gasoline every 12 miles. It also featured a nine-speaker Bose stereo system. Buyers could upgrade the base model with a $2,575 luxury package that added heated leather front seats and a six-disc CD changer or with a $2,215 Adventure package that added sir suspension, brush guards, and crossbars for the roof rack.

GM had about 150 dealers who would initially offer the H2. The dealers had to agree to build a special showroom and a test track.

For promotion, GM stayed with the Modernista firm. Late in the summer of 2002, TV ads broke on shows such as CSI: Miami and featured a well-dressed woman behind the H2's steering wheel. The Modernista representative indicated that the message was that the H2 is not about blowing things up. Twenty-four print ads showed the H2 not in action but sitting still. Modernista believed that people knew the H2 would be tough—it wanted people to see that the H2 looked good.

The On-Road Test

GM targeted buyers with an average age of 42 and annual household incomes above $125,000 versus H1 owners' averages of about 50 years old and household incomes above $200,000. The questions were, could GM position the H2 to appeal to its target market, and was that market large enough to ensure that GM could reach its sales and profitability targets?

One writer who had driven the H2 found it to be comfortable and surprisingly smooth on the highway. However, he criticized the interior and the lack of storage space. He noted that the H2 seated just six people versus eight or nine for other large SUVs.

Analysts argued that GM was pursuing a risky strategy. Would its having borrowed parts from other GM models to keep costs down and speed the time to market damage the H2's image? Would GM be able to justify the H2's high price when it had so much in common with other SUVs that cost thousands less? Would consumers really spend so much for an off-the-road vehicle that, studies showed, only 10 percent of image-conscious buyers would actually take off road? Finally, could GM make the Hummer 2 stand out in an increasingly crowded market? (See Exhibit 1.)

Arnold Schwarzenegger appeared in an H2 promotional video suggesting, "Don't call it the baby Hummer, you'll make it angry." Will the Hummer H2 be a hum-dinger and make GM happy, or will it get stuck in the rocky luxury SUV market?

Required Question:

Question 01: What segmentation, targeting, and positioning recommendations would you make to GM for the H2? (10)

Read the following marketing case on GM: Downsizing the Hummer and answer the questions given at the end of the case.

MARKETING CASE

GM: Downsizing the Hummer

A Little Military History

Quickly. What is a "High Mobility Multi-Purpose Wheeled Vehicle"? Well, if you've kept up with Arnold Schwarzenegger films or studied the 1991 Gulf War, you may have recognized the formal military description of what soldiers describe using the acronym "Humvee." If you don't really know what a Humvee is, just stand by—General Motors is going to tell you.

This story starts in 1979, when AM General, a specialty vehicle manufacturer, earned a contract from the U.S. Army to design the Humvee. The Army wanted a new vehicle to replace the Jeep, the ever-present multipurpose vehicle that had transported generations of soldiers. The Army believed it needed a more modern, up-to-date vehicle to meet the needs of the modern soldier. AM General produced the big, boxy Humvee, which labored in relative obscurity until the Gulf War in 1991. In that war, the United States and its allies mounted a military operation against Iraq, which had just invaded Kuwait. Television coverage of the military buildup in advance of the short war and live broadcasts of the war itself introduced the public to the workhorse Humvee.

In 1992, AM General, responding to the Humvee's notoriety, decided to introduce the first civilian version of the Humvee—the Hummer. Weighing in at 7,100 pounds, the Hummer featured a huge, 6.5-liter V-8, turbo-diesel engine that produced 195 horsepower and propelled the Hummer from 0 to 60 miles per hour in a snail-like 18 seconds. But the Hummer's purpose was not speed. AM General designed it, like its military parent, to take people off the beaten path—way off. The Hummer could plow through water to a depth of 30 inches and climb almost vertical, rocky surfaces. It even had a central tire inflation system that allowed the driver to inflate or deflate the vehicle's tires while on the move.

The advertising tag line dubbed the Hummer "The world's most serious 4 × 4," and ad copy played up the vehicle's off-road capabilities and its military heritage. AM General targeted serious, elite road warriors who were willing to pay more than $100,000 to have the toughest vehicle in the car pool. These were people who also wanted to tell the world that they had been successful. To help buyers learn how to handle the Hummer in extreme off-road situations, AM General even offered a Hummer Driving Academy, where drivers learned to handle 22-inch vertical walls, high water, 40 percent side slopes, and 60 percent inclines.

GM's Market Research

In 1998, GM was conducting market research using a concept vehicle that it described as rugged and militaristic. When the vehicle bore the GMC brand name (GM's truck division), the company found that consumers had a lukewarm reaction. However, when GM put the Hummer name on the vehicle, researchers found that it had the highest and most widespread appeal of any vehicle GM had ever tested. Armed with this insight, GM turned to AM General, which had just abandoned acquisition discussions with Ford Motor Company. In December 1999, GM signed an agreement with AM General giving GM rights to the Hummer brand. AM General also signed a seven-year contract to produce the Hummer H2 sport utility vehicle for GM.

Based on its research, GM believed that the Hummer H2, a smaller version of the Hummer, would appeal to rugged individualists and wealthy baby-boomers who wanted the ability to go off-road and to "successful achievers," thirty- and forty-something wealthy consumers who had jobs in investment banking and the like. GM believed that it could introduce the H2 in the luxury SUV market and compete successfully with brands such as the Lincoln Navigator or GM's own Cadillac Escalade. The company charted production plans that called for AM General to build a new $200 million manufacturing facility in Indiana and for GM to launch the H2 in July 2002 at a base sticker price of about $49,000. It predicted that it could sell 19,000 H2s in 2002 (the 2003 model year) and then ramp up production to sell 40,000 units per year thereafter—a number that would make the H2 the largest seller in the luxury SUV market. Further, GM planned to introduce the H3, a still smaller and more affordable version of the Hummer in 2005. It believed it could sell 80,000 units of the H3 per year. These numbers compared with annual sales of only about 800 Hummers.

Softening Up the Market

During 2000, GM and AM General did not advertise the Hummer, but they mapped out a campaign for the year leading up to the H2's 2002 introduction that would raise awareness of the Hummer brand and serve as a bridge to the introduction. GM hired a marketing firm, Modernista, to develop the estimated $3 million campaign. Modernista found that the Hummer had about a 50 percent awareness level among buyers of full-size SUVs, mainly due to its appearance in movies. AM General had been spending less than $1 million a year on advertising and promotion. Further, 13 to 20 percent of these buyers had considered the Hummer.

In mid-2001, GM launched the Modernista campaign using the tag line "Hummer. Like nothing else." Placements in The Wall Street Journal, Barron's, Spin, Business Week, Cigar Aficionado, and Esquire used four different headlines:

"How did my soul get way out here?"

"What good is the world at your fingertips if you never actually touch it?"

"You can get fresh air lots of places, but this is the really good stuff."

"Out here you're nobody. Perfect."

Following each headline was the same copy: "Sometimes you find yourself in the middle of nowhere. And sometimes in the middle of nowhere you find yourself. The legendary H1." One agency official said the ads used journalistic-type photography to make them more believable and to play down the he-man imagery. "Authenticity is probably the most important word when it comes to branding," the official argued. Whereas previous Hummer ads had featured the tough SUV plowing through snow and streams, the new ads featured the Hummer with gorgeous Chilean vistas. The new ads, the agency suggested, were as much about the people who buy Hummers as they were about the vehicle. Hummer owners often believed they got a bum rap as show-offs, the representative suggested, but he argued that the new ads would show the buyer's other side.

The Launch

Right on schedule in July 2002, GM introduced the 2003 Hummer 2 SUT (Sport Utility Truck). GM and AM General designed and built the H2 in just 16 months, much more quickly than the three-to-four-year time normally required. GM built the H2 on GM's GMT 800 truck platform, and it shared a number of parts with other GM models. The H2 was about the same size as the Chevy Tahoe, five inches narrower than the Hummer and about 700 pounds lighter. However, it was about 1,400 pounds heavier than other SUVs. It had a 316-horsepower engine that slurped a gallon of gasoline every 12 miles. It also featured a nine-speaker Bose stereo system. Buyers could upgrade the base model with a $2,575 luxury package that added heated leather front seats and a six-disc CD changer or with a $2,215 Adventure package that added sir suspension, brush guards, and crossbars for the roof rack.

GM had about 150 dealers who would initially offer the H2. The dealers had to agree to build a special showroom and a test track.

For promotion, GM stayed with the Modernista firm. Late in the summer of 2002, TV ads broke on shows such as CSI: Miami and featured a well-dressed woman behind the H2's steering wheel. The Modernista representative indicated that the message was that the H2 is not about blowing things up. Twenty-four print ads showed the H2 not in action but sitting still. Modernista believed that people knew the H2 would be tough—it wanted people to see that the H2 looked good.

The On-Road Test

GM targeted buyers with an average age of 42 and annual household incomes above $125,000 versus H1 owners' averages of about 50 years old and household incomes above $200,000. The questions were, could GM position the H2 to appeal to its target market, and was that market large enough to ensure that GM could reach its sales and profitability targets?

One writer who had driven the H2 found it to be comfortable and surprisingly smooth on the highway. However, he criticized the interior and the lack of storage space. He noted that the H2 seated just six people versus eight or nine for other large SUVs.

Analysts argued that GM was pursuing a risky strategy. Would its having borrowed parts from other GM models to keep costs down and speed the time to market damage the H2's image? Would GM be able to justify the H2's high price when it had so much in common with other SUVs that cost thousands less? Would consumers really spend so much for an off-the-road vehicle that, studies showed, only 10 percent of image-conscious buyers would actually take off road? Finally, could GM make the Hummer 2 stand out in an increasingly crowded market? (See Exhibit 1.)

Arnold Schwarzenegger appeared in an H2 promotional video suggesting, "Don't call it the baby Hummer, you'll make it angry." Will the Hummer H2 be a hum-dinger and make GM happy, or will it get stuck in the rocky luxury SUV market?

Required Question:

Question 01:How are the segmentation decisions of GM for Hummer H2 different from AM General's target for the original Hummer? How has GM attempted to position the H2? ( 10 )

There are two reflective essays from MED students during their third year internal medicine clerkship. One student sees each connection to a patient as like the individual brush strokes of an artist and the other sees gratitude in a patient with an incurable illness and is moved to gratitude in her own life. (WORD COUNT 500)

1. Reflect on both essays and then choose one and describe how the student grew from the experience.

2. Then explain what you learned as a result of your reflection and how the lesson(s) will influence your future patient physician relationships.

Reflection #1

Georges Seurat’s A Sunday on La Grande Jatte is one of the most iconic paintings of the nineteenth century. His chromoluminarism and pointillist technique is lost from the distance; only when you look closely can the details of each brush stroke be admired. I caught myself admiring this work when visiting The Art Institute of Chicago just prior to the start of our clinical years. The excitement, perspective, and chaos of the various exhibits foreshadowed what the upcoming year would bring. Early into my medicine clerkship, I was assigned to follow Miss Jones, the patient in room 601. While she had a history of leaving against medical advice (AMA) on prior admissions, these three letters were not limited to her discharge summary. She was found to have a positive antimitochondrial antibody in the workup of her abdominal pain and pruritus. On my first day of meeting Miss Jones, her room was as chaotic as the art exhibit. The interview seemed never-ending--filled with interruptions from consults to vital checks to breakfast orders. While both our general appearances would be deemed as “mild distress” for various reasons, we each took a sigh of relief as we made it to the conclusion of the interview. I was disappointed in myself, having felt like I did not truly connect with this patient. When she mentioned her dog in passing, I got excited and asked his name. “Let’s just get on with it,” she replied. Certainly not the patient-physician relationship I was hoping to foster. Day-by-day, her labs started to come back, providing us with more pieces of the puzzle to solve her case. Cholestatic liver patterns, elevated cholesterol, and a +AMA found in a fortysomething year old female? This classic test question was now being played out in real life. UWorld prepared me for recognizing patterns in labs; but it does not tell you how it will change the world of the patient with the diagnosis. Each new result or team update was a chance to solve the puzzle of getting to know Miss Jones. No longer was she “the patient with suspected PBC,” she was the tea-drinking, yoga-loving bookworm who happened to have been diagnosed with primary biliary cholangitis. When our team officially told the news, she nodded her head and we parted ways to finish rounds. When I went back to see her, she was scared, tearful, and frustrated. I re-explained our findings and plan. We tried the teach-back method but she remained overwhelmed and confused. One could argue that a 50,000 foot view of medicine is pattern recognition of illness scripts; but I believe it's the details that keep people’s passion sustained despite years of practicing. It is understanding your patient in the context of their disease. Just as Seurat thoughtfully juxtaposed dabs of color to create his optical masterpiece, we as physicians must learn to carefully juxtapose the art and science--the patient and the disease--to truly appreciate the wonders of our craft. Seraut believed in dividing colors into its components-- a concept called chromoluminarism. The thought being you can never perfectly recreate the same shade of purple by mixing red and blue. In medicine, the same principle holds true- despite the same disease process, no two hospital stays are alike. The explanation given to Miss Jones about her diagnosis might have been acceptable to the next patient but it did not accommodate her learning style. That night I pondered about how to convey what was going on. No longer did I feel like a student- I was the teacher. The next day I went to 601 with markers and paper in hand. I started drawing pictures of the anatomy of the biliary system. Her face lit up as she conveyed to me that she was a visual learner. Miss Jones and I spent the afternoon going over everything from the different measurements in a liver function panel to the metabolism of bilirubin. Finally, the day came when my progress note read “disposition: home.” As I entered room 601 for the final time, I saw my friend Miss Jones. She took my hand-- thanking me for everything I had done, which pales in comparison to how much she did for me. We discussed her relief after months of pain and uncertainty of not having a diagnosis. Instinctively I said, “You’re a trooper.” “Trooper,” she paused and smiled. With a glisten in her eyes, looked up, and said, “Trooper--that’s my dog’s name.”

Reflection #2

Gratitude is an interesting thing – just as lighting a candle from another previously lit one gives rise to a second bright flame without diminishing the original one, gratitude is an emotion – no an attitude towards life – that seems to give a person the capacity to continually pour from their cup while also simultaneously filling it. This is quite paradoxical. And yet, as future doctors, it is the quintessential question for us – how can we give and give to others while continuing to draw meaning and becoming recharged through our interactions without burning out? Just this last week, I had a patient, let’s call her Mrs. Smith. She is an 82 year old female, very thin and frail in appearance who was diagnosed with acute myeloid leukemia. This was a lifechanging diagnosis our team presented all treatment option. She listened intently, asking all the pertinent questions about prognosis, treatment, and recovery. Finally after explaining that she and her husband had talked about these kinds of issues she said, “I’m 82 years old and I just want to enjoy what time has been given to me with my family… “If I make it through the holidays, then great. If my time is up sooner, then I will still be grateful for all that I’ve been blessed with in this life – my husband, my beautiful children, and a lifetime of teaching little kids not only math but that they have the potential to do whatever they set their mind to.” The team wrapped up the conversation appropriately and left, but I lingered to talk more with her. I was astounded by the grace with which this woman just accepted a terminal diagnosis and the fact that she only had weeks to live. The longer I spoke with her, the more I realized that her acceptance came not from denial or shock but from the knowledge that she had lived life to the fullest, loved and been loved deeply, and made a positive impact in the world around her. As her husband crumpled with the weight of this news and I listened to her bolster his spirits, I realized that she poured from a very full cup of gratitude. It wasn’t that she had an easy life by any means; it’s just that she chose to be grateful for the positive people, events, and opportunities that she had along the way. As I walked home after that conversation, deliberately taking a roundabout route to process what had just happened, I realized a few things: What a sacred privilege we have been afforded to glimpse into the most intimate corners of our patient’s lives. How fortunate are we that through our chosen profession, we have the opportunity to help when we can medically, comfort them when we reach the end of our rope, and through it all be humbled by the strength and wisdom that many show in the face of something insurmountable. And finally, that while grades and test scores matter to some extent, ultimately, we are all on a path to be healers and caretakers in our society with all the position and ability to be the positive change we want to see in this world. I think Mrs. Smith answers that quintessential question for us. We give and give to others without burning out by first filling our own cup, to the brim with gratitude for all the opportunities, support, friendship, and love we have been fortunate to receive. It is this mindset that then allows us to pour freely – pour time, attention, and kindness into patient care and our community, simply because we have already acknowledged what a rich store we have in our personal vault. The beautiful thing about such an attitude is that this personal store is eternally refilled by family and friends who love us, at times by strangers who are kind to us, and by the knowledge that “yes, we are doing something meaningful.” So, I just want to end by expressing gratitude. Gratitude to Mrs. Smith and all the patients like her who imparted such wisdom in our interactions. Gratitude to family that loves unconditionally even when we are not the best versions of ourselves; to mentors who believe in us and help us find our way, even when we stumble and don’t believe in ourselves. Gratitude to the classmates who share the super-efficient pre-rounding data sheet they spent hours creating and friends who bring you a home-cooked meal when coming up to Jacksonville because they know you’ve been there for three weeks and there is only so much dining hall food anyone can handle. And finally, gratitude to this crazy, challenging, rewarding, hilarious, and unique journey that is medical school, for equipping us to be people who can spend our lives serving others. As one of my other patients remarked to me this week: “There are a lot of smart doctors out there who just treat the disease in the body, and then there are those who treat not just our disease but are also are like ministers who heal our soul. It’s these ones who truly care and have compassion for us that end up meaning the most.” Here is to always striving to be the latter.

Do not offer solutions! Write about how you might approach the intervention.

1. Research and identify appropriate interventions, strategies for implementation, and methods for evaluation to resolve organizational problems and take advantage of opportunities.

2. Apply management principles to support organizational transformation and change.

Pigs R Us is a second generation, family-owned Richmond-based company with about 400 employees. It slaughters, manufactures, and sells pork food products. Pigs R Us (PRU) is a low-tech, hands-on, “bricks and mortar” type of company with solid brand recognition, an impeccable reputation for high quality and ethical standards. The processes used in manufacturing are with the highest ISO20002 standards, and the plant is maintained immaculately. The personnel are comprised of an older work force (average employee age is late 40s). There is little staff turnover, though lately there have been a diverse group of younger workers joining the company. There has been an impressive record of speedy state and federal new-product approvals, and solid working relationships with their large and small customers.

The company prides itself on the close "southern family," culture of the business. The company logo features a pig with a smile on its face surrounded by small pictures of some of its oldest serving employees. The organization's structure is “old-fashioned”. It is hierarchical with rigid management divisions and reporting policies. Research, manufacturing, and sales and marketing operate in traditional fashion, with employees reporting to supervisors or mid-level managers. By the 1990s, sales and distribution grew from Richmond into a regional market, establishing a competitive advantage throughout the US South. Despite downward economic times in the US and the South, the pork business does well. This is due largely to the fact that Pork is one of the cheaper meat products and there is a variety of ways it can be prepared.

Owned by the Morris family for the last 60 years, Pigs R Us is a key player in the Richmond based food industry. Various Morris family members sit on the board of charities throughout the city and it is not unusual to see the name at society events. Further, the Company sponsors its own Little League Team and has built a recreation center and assisted living facility for the elderly, guaranteeing space for all former 20+ year veteran workers of the company for free. So, it was no surprise, that the whole community was devastated when it was announced by the Morris family that Vance Morris the CEO of Pigs R Us was killed while driving back from a Pigs R US board meeting. The plant closed for a week to show respect and to determine how it would function until the family could make its succession decisions.

Vance Morris was the only son of James and Kathleen Morris. Vance took over the business 10 years before when his father had a heart attack and died. Fresh out of graduate school when his father died. He took over the business that he had known well much to the pleasure and keen eye of the workers. Vance made some marketing changes that allowed for the growth of the company and with the help of the employees brought the plant into its current state. Vance had just gotten married the year before to a young Richmond artist he had met at one of his charity benefits. He had no heirs and no plans for succession as he was in his mid-thirties and had just gotten married. While Vance had cousins in the area they were all professional people who knew nothing about business or pork. The workers could only surmise that the company would be sold, but speculation as to whom it might be did not include someone from out of the city.

Before the deal was announced publicly, John’s widow, Arleen, reported to the workers that a Chinese company, Shanghou (SHU), would be buying Pigs R US. Mrs. Morris assured the workers that the SHU promised not to cut workers' wages and benefits, and to keep the current management team in place. She said that SHU also promised to keep Pork R US headquarters in Richmond. Arleen assured the workers that SHU promised that there would be no changes for the first year and that almost everything would remain the same. From her talks with SHU, Arleen is a bit worried about future changes that SHU may implement.

SHU is a large manufacturer and distributor of food and beverages with, headquarters in Hong Kong. Manufacturing plants operate in mainland China, and the company has additional offices in Europe and Australia. By acquiring the smaller, well-respected Pork R US, SHU aims to diversify and expand its consumer base by including tailor-made pork products globally to meet market projections of a customer upsurge in sustainable, non-beef meats in the next decade. Given SHU’s current availability of telecommunications software and hardware, the deployment of the Pigs R US refrigeration trucks should not be an insurmountable issue.

Many PRU employees, especially the older workers and some of the older managers, are dispirited about the acquisition, and anxious about working for foreigners, downsizing, less face-to-face interaction, language differences, and more electronic systems that are to be put in place. Some of the of the more experienced workers are considering to move or consider an early retirement due to the ongoing rumors about the acquisition. To make matters worse, recent news media have printed stories about tainted food made by other companies in China. Employees fear loss of product quality and damage to PRU’s reputation as well as the loss of the family southern culture that was their pride and joy.

SHU has told PRU workers that for now, most employees will be retained. However, all employees will be evaluated, and reassigned to teams as the new flat structure is put in place. The new CEO is Harvard-educated Daniel Chinn. He supports increasing the company's competitive edge by discovering and developing existing individual potential through group collaboration and team synergy. Ever since his days as a brilliant, hard-driving MBA student; he has been known to be an enthusiastic supporter of job training and career growth. Like many of SHU’s employees, David is in his early thirties. He speaks four languages and is ambitious, self-directed, tech-savvy, accustomed to working remotely, and experienced with a culturally diverse staff. David is eager to make his newest acquisition a success. He wants to move forward on the integration of "Pork R US’ workers into SHU because Chinn believes they are the “greatest asset have a rich knowledge base and experience can be tapped into to bring the company success." Chinn is concerned about the mix of culture and how his ideas of incorporating artificial intelligence and more robotics into the manufacturing processes will be received by management and the workers at the newly acquired plant.

Scenario

The student will use the following situation that has evolved because of the buy out to complete each section of the project. Additional facts will be added to phase two and three of the project to allow students to complete a typical OD process analysis.

Daniel Chinn is anxious to keep the “southern family” culture of Pigs R Us but at the same time wants to use the most modern of manufacturing techniques. He decided that the best way to do this was to start a pilot change operation in the packaging area to demonstrate to the workers the effectiveness of technology. He bought and set up for use 3D printers in the packaging room. The printers were able to create reusable shipping materials and operate in conjunction with the product conveyor for fast and easy. packaging. He brought in two trained 3D printer operators from China to handle the work along with two robots that would move the package material and create shrink-wrapped pallets for loading on to the trucks.

The current packaging department employs 5 workers on day shift and 3 newer workers on the night shift. All day shift workers are in their early fifties and have been working for Pigs R Us all their lives. John Mellon, the lead line man, exemplifies the group. He is 53 years old. He has a family of three children most all are grown. One works in the business with him as the manager of accounting department having gotten a college degree unlike his father. John rarely travels out of state and has never been abroad. He is not terribly familiar with technology. He has a Smart TV but his children have set it up for him to use Netflix.

When the new employees arrived, the packaging staff tried to get to know them but had little in common and found it hard to communicate with them. The new workers ate together at lunch and always with food they brought with them despite offers of food brought in by the older employees to show their “southern roots”. Things are strained between the groups because the older employees thought they were being snubbed and many are uncertain as to the customs and language unable to communicate their real feelings. This all operated to create a schism among the workers which escalated into job performance and employment commitment issues when the six-month results from the 3D/Robot pilot showed the following success in favor of new technology.

The results showed such a marked process improvement with the added benefit of creating materials that were sustainable. The immediate reaction among the older workers was fear for their jobs. The new workers suddenly were the enemy. Chinn was pleased with the new process and indicated that the 3D printing approach would be continued. The word of the decision spread among the families in the company and the “southern family” culture was now closing ranks on the newcomers both in the packaging room and in the other departments thus confirming their fears when news of the buyout surfaced.

Read the scenario below and answer the questions that follow in your role as a member of the senior management team at Oakwood. You are reviewing budgets and actual results for the month of April for the various business activities and today, you are focusing on Golf Cart Rentals. In the recent past, there has been some tension between the management of Golf Cart Rentals and Golf Course Operations, so some information about Golf Course Operations is included below.

About Oakwood

Oakwood is a resort hotel with tennis courts, swimming pools, three golf courses, restaurants, and many other fine amenities. The resort’s management structure is highly decentralized because each business activity is quite different and requires a different set of managerial skills, experience, and staffing. For example, being a good hotel dining room manager requires a completely different set of skills and experiences than being a good golf course pro shop manager. Oakwood believes that the decentralized structure is a key success factor in its strategy and tries to operate every one of its business activities as a profit center unless the activity does not have a measurable revenue stream. Those activities are managed as cost centers. Two of the most important activities in Golf Division are Golf Course Operations and Golf Cart Rentals. Each of these activities are managed as profit centers because each has an identifiable revenue stream and each requires a specific set of managerial skills to be successful.

Golf Cart Rentals

Oakwood customers who wish to play golf may either rent a cart or walk the course. They only pay a cart rental fee if they rent a cart. The Golf Cart Rentals profit center’s revenue each month is the total of the cart rental fees. Jay MacDonald (“Mac”) is the manager of the Golf Cart Rentals profit center and he supervises all business activities related to rentals of motorized golf carts at Oakwood. The carts are leased from various vendors and Mac negotiates these leases. Most vendors like to lease for two or three years, but one of Mac’s valuable skills is his ability to make good deals with golf cart suppliers. His crafty negotiations have given Oakwood a portfolio of lease rental terms ranging from three months to three years at very good rates.

Mac manages the golf cart maintenance crew that keeps the 200-cart fleet clean, properly fueled with oil and gas, and that makes minor repairs on the carts. The carts are solidly built and rarely need major repairs as long as they are properly maintained, and Mac does a good job of hiring and keeping skilled mechanics who excel at maintenance and minor repairs. He always says that paying a little more is worth it to get hard-working, competent workers, and the golf cart maintenance crew does have a higher average pay rate than most of the other Golf Division employees. As a result of this excellent maintenance program, the few carts that do need major repairs are usually old and about to go off-lease anyway. So, instead of repairing them, Mac just takes them out of service and replaces them in the next round of leasing. The accounting department records the salaries and related costs (payroll taxes and benefits) in the Labor account.

Two years ago, Mac installed large underground tanks (one for gas and one for oil) so Oakwood could buy in bulk and get quantity discounts. This has worked out well and has reduced oil and gas costs so much that the cost of the tanks and installation will be recaptured at the end of this year. The distributor’s tanker trucks, one for oil and one for gas, stop by every three or four weeks to refill the tanks. The accounting department records these costs in the Gas and oil expense account when they get the invoice for each delivery, usually a few days after the delivery.

Golf Course Operations

Sandra Bunker (“Sandy”) is the manager of Golf Course Operations. A major part of her job is supervising golf course maintenance and repair. A resort golf course must be in excellent condition to draw resort guests and others to the course. Thus, the condition of the course is an important part of the entire resort’s reputation. Oakwood has had several marketing research studies done over the years and all of them confirm that when a resort’s golf course falls into poor condition, everything from dining room revenue to room rental revenue suffers.

Golf Course Operations is a profit center and its revenue is the total of greens fees collected from resort guests and others to play on the golf courses. Costs charged to Golf Course Operations include grounds crew salaries and benefits, the cost of outsourced services such as planting and trimming the trees and bushes that line the fairways, and the cost of supplies such as fertilizer, grass seed, bedding flowers, sand, and various kinds of mulch. The grounds crew workers are mostly unskilled laborers who are generally paid just a little more than the minimum wage.

Weather conditions are an important factor in the overall profitability of any golf course. Rainy or cold weather will reduce the number of golfers who play the course, but even more important is that the condition of the course can be affected by how it is used when it has become wet. If rain continues for several days or the rain amounts are unusually high, the course can become waterlogged. Operating golf carts on a waterlogged course can do serious and permanent damage to the turf. To prevent permanent turf damage, Sandy can choose to close the course to golf carts entirely, or she can have the grounds crew restrict golf cart use by placing rope fences around the wet areas. A course that is closed to carts can still generate greens fees paid by golfers who are willing to walk the course. On rare occasions, the course will become so wet that Sandy will close the course to all golfers. Sandy determines whether each course will be open or closed due to weather conditions on any particular day. She also determines whether players can use golf carts. As you might imagine, Sandy does hear from Mac on days when she prohibits golf carts, but Sandy does have the final say in that decision since the condition of the golf courses is, ultimately, her responsibility. Sandy is on the courses each morning at dawn supervising the maintenance crews, so she is in a good position to decide whether to rope off just the wettest parts of the course and allow carts, prohibit carts, or close the course entirely.

A Rainy April at Oakwood

This April, golf cart operating profits were extremely low, amounting to a mere 49% of budgeted profits. When you discussed this matter with Mac, he explained that the poor results were caused by the unusually heavy rains in April. He complained that Sandy had closed entire courses to carts on several days when only parts of the courses were too wet to tolerate the carts safely. He argued that, on those days, guests could play the courses (and generate revenue for Sandy), but they could not drive carts, which shut his revenue off completely. Note: Guests are not permitted to drive carts in roped off areas of a golf course; but they can rent carts and drive them elsewhere on the course. If an entire course is roped off, guests cannot rent carts at all when playing that course on that day.

Mac said he had overheard Sandy’s grounds crew members talking among themselves on the days that entire courses were closed to carts. He had heard the crew members saying that they were too busy to rope off just the wet areas and that they had gone ahead and closed entire courses to cart traffic instead because it was easier to do that than to spend time roping off the wet areas. You could see that Mac was not happy about this. In your conversation with Mac, for example, he compared the grounds crew unfavorably to his golf cart maintenance crew, noting that his crew were all hard working employees and not “lazy” like the grounds crew.

When you met with both Mac and Sandy, you learned that they communicate regularly and often share the same opinions about the operation of Oakwood as a whole. Your impression is that they generally work together in a positive and cooperative manner to resolve issues that arise. But you do see that the decisions Sandy makes about roping off the courses (or parts of the courses) are a consistent source of concern for Mac.

The resort’s controller, Ampzilla Forkwort, developed a flexible budget analysis for April that she says will help you better analyze Mac’s results. Her analysis for the month appears below (F indicates a favorable variance, U indicates an unfavorable variance):

Requirements:

Your solution should be written in single-spaced text, included in one Microsoft Word or RTF document, and should address specifically the following four questions (you do not need to reprint the questions in your solution, but do number your answers):

1. Most accountants would argue that a flexible budget is good to use when calculating variances on variable costs (such as gas and oil). In 100 words or less, using the knowledge about accounting you have gained in this course and the facts presented in the case narrative, identify and describe the most likely cause of the $900 unfavorable variance on gas and oil expense and explain the basis for your belief.

2. Categorize Mac’s performance for April using this rating scheme: “Really Great,” “Pretty Much OK,” or “Really Awful.” In 100-200 words, explain why you ranked him as you did.

3. Assume you decide to start measuring Mac’s performance using the flexible budget (experienced businesspersons with MBAs would call that “flexing out the volume effect”). In 100-200 words, describe the most likely effects (intended and unintended) of using this measure on the quality of the cart rental fleet and the profitability of the cart rental operation in the future. In your answer, describe any assumptions you make and be sure to state clear, logical arguments that lead to your conclusions.

4. A conflict between the interests of Mac and Sandy might exist in this situation. One might argue that having each of these managers achieve their goals separately might not lead to the best results for Oakwood as a whole. In 100-200 words, describe any conflict that exists here and suggest possible solutions that would better align the goals of these managers with the overall goals of Oakwood. Remember that Sandy and Mac communicate regularly and work out most issues in a friendly way, (other than the issue of closing courses to carts because of weather-related conditions) so suggesting they communicate better is not going to be a solution here. Also, remember that Oakwood has a strong policy of decentralization and that Mac and Sandy each have valuable knowledge about their specific operations that Oakwood wants to make sure they use effectively in managing their respective operations.

Discuss in detail (keeping the artical in mind), the various business environments that Hungry Lion operates in as they have an impact on these successful operations of the business. 20 Marks

The Continent’s Progressive QSR Player

Stellenbosch-based fast food specialist Hungry Lion has found ideal footing for expansion over the coming years, owed to optimised operations and an admirable outlook

Writer: Jonathan Dyble | Project Manager: Josh Hyland

Adrian Basson is a self-described Afro-optimistic. “There’s no hiding from the fact that there are a lot of challenges in Africa, but retail is a promising sector when it comes to facilitating opportunities, creating employment and generally building a business that can have a widespread impact,” he says.

“When you reach a remote town with an empty plot, the local people don’t often have much. But as we’ve built new stores and helped to launch new shopping centres, we’ve been able to not only witness, but also facilitate the construction of new, thriving ecosystems. We’re proud to be a business that contributes to the success of these societies – I guess you could say we’re a capitalist business with a socialist outlook.”

Basson, now CEO, became part of the Hungry Lion story in 2001 and has seen the company come a long way over the past two decades to be the responsible, esteemed organisation it is today.

Having opened its first restaurant in South Africa in 1997, the business today proudly operates a network constituting over 200 stores across South Africa, Lesotho, Swaziland, Botswana, Namibia, Zambia and Angola, with over 4,000 Hungry Lion employees. Looking at the bigger picture, however, such statistics only touch the surface of what the brand is bringing to the region.

“In many ways I like to think that our product is an afterthought in what we’re looking to achieve,” explains Basson. “Yes, serving bigger portions, more chips and more smiles is key to our operations, but it’s just one part of our overriding goal – providing joy to our employees, customers and local communities through food, served with passion.”

This ethos is relatively new to the firm, becoming more of a core focus during the company’s major rebranding process that kickstarted in 2014. Having originally been part of the Shoprite Group, Africa’s largest food supermarket chain, Hungry Lion is now a totally independent company in its own right with a unique brand and character.

“In the beginning, we weren’t really building a brand,” reveals Basson. “We purely sold chicken and chips at an affordable price on a somewhat ad-hoc basis. However, we eventually found ourselves with 100-plus stores, and with the economic challenges that came around in 2008/09, we realised that stores without a brand, a story, and an experience would fail to deliver in the long term. It was a case of changing with the times and we invested a lot into the design of our stores, our product quality and consistency, together with the development of the brand itself.”

Since transitioning from being a business-centric to a customer-centric brand, Hungry Lion has reaped the rewards with the business undergoing stratospheric growth over the past few years.

Adding a modern twist

Moving in this re-energised direction, strategy changes quickly followed for Hungry Lion, evidence of which can be found in the firm’s increasing use and the implementation of revolutionary technologies.

Fast forward to today, the company now benefits from artificial intelligence, automated system checks, cloud computing and live dashboards – technologies which serve multiple purposes in the way of driving the business forward. This together with an always connected workforce, makes executing operationally so much more efficient.

“I’ve always had a connection with technology,” Basson reveals. “I used to work in the technology division of Compaq in London and also formerly as the Chief Digital Officer of Shoprite for a period. We live in an era where we can augment the people with technology to do the repetitive stuff, so that they can focus on the more human touches.”

In a space where most others in the fast food industry are franchised and owner-managed, Hungry Lion is unique in the African landscape, with almost all stores being fully-owned and managed from its Head Office. This is where automated systems and clever use of technology comes to the forefront in managing the business over vast distances and across borders.

“With technology comes data and with data comes insight,” Basson continues. “Using our systems, we’re able to see the performance of each of our stores in real time, have an overview of customer experience, and execute plans to fix problems at speed and scale. These capabilities would never have been possible if we didn’t have the right technologies in place.” With full visibility of information comes accountability, since everyone can see what needs to be done and if it was done. Transparency is a crucial merit of these technologies, a cultural trait of Hungry Lion that is accentuated in other ways.

Basson adds: “We have a network of area, country and regional managers who act as an extension of our Head office in Stellenbosch. Head office employees pay regular visits to different regions to keep a finger on the pulse of local operations. Our area and country managers, in turn, come to Head Office regularly for updates to business processes, training, and meetings. This constant exposure in both directions ensures that best practises are shared and implemented to all stores quickly.”

Prosperous career planning

Combined with both these expansive technologies and a transparent, remodelled structure, Hungry Lion recognises that its staff are key to achieving the firm’s ongoing ambitions.

To this end, the company ensures that it provides extensive benefits to its employees, bolstering its position as an employer of choice and equally its talent retention capabilities.

Such initiatives include the introduction of E-learning materials in five languages and the company’s live in-house training platform from LessonDesk, a comprehensive new employee assistance programme, access to affordable healthcare for employees and more specialised and tailored training programmes.

What’s more, Hungry Lion has a strong focus on career planning, testament to its culture of internal promotion.

“Typically speaking, joining a fast food business as the lowest level of employee, the pay isn’t fantastic and it’s not uncommon for these workers to have bigger aspirations,” explains Basson. “What we’ve realised is you can either listen to and facilitate these ambitions, or your workers will leave and look for opportunities elsewhere. We like to pursue the former, providing clear career paths for our inspirational and aspirational workers. From cashiers to controllers to junior managers to regional managers, and so on, this personal growth structure is in place at Hungry Lion.”

A core part of the company’s ethos, providing key opportunities to reward loyalty and ambition, Hungry Lion offers not just a job but an all-encompassing opportunity to build a prosperous career.

A sound, responsible outlook

Such a humble and grounded approach is not only applied internally, but equally externally through a number of corporate social responsibility initiatives.

These are built around Hungry Lion’s three-pillar CSR strategy, with the organisation contributing towards hunger alleviation, championing change in local communities and promoting skills development.

Between February and March of this year alone, for example, the company provided food for the attendees of a seminar addressing the issue of domestic violence, pupils of an underprivileged primary school during a field trip and fire fighters in the Western Cape, while also supporting a Soweto children’s home and a local police station’s cricket tournament for rural schools.

“It’s an element to our business that we take pride in,” reveals Basson. “We like to show that we care for our communities, customers and especially our employees and their families. There’s a lot of need in Africa from a poverty standpoint and being in the food business we’re able to help local communities in addressing such issues. I wouldn’t say we have a set agenda – ad hoc opportunities arise, and we react accordingly in each of the locations that we’re based, helping to give people a sense of purpose and promote skills of local communities.”

Asked about a particular such initiative that springs to mind, Basson is quick to highlight the company’s efforts in supporting the Zambian people during a cholera outbreak at the beginning of 2017.

He continues: “We immediately lowered the prices of our food, ensuring people could get nutritious, safe and affordable food, we donated money to the government that was used to help with the clean-up process. We even provided sanitation kits to our staff, helping them clean their own living environments to ensure their family’s health.”

Having developed a culture that is firmly centred around providing benefit to all people, whether it’s supporting local communities or providing unrivalled, progressive career opportunities, Hungry Lion’s outlook is unique and admirable.

Opportunity is a word that is creating an atmosphere of excitement within the company at the moment, with continued expansion firmly on the table for Hungry Lion after experiencing double digit percent organic growth over the past two years.

“We’ve set 20 new stores as a benchmark, but realistically this is a ball-park figure on the conservative side,” reveals Basson. “If we can open 50 stores then we’ll do it – if we find a good site where we can profitably trade, we will open. There aren’t any specific limitations.”

New systems and optimised procedures in place, last year’s corporate action, focus on organic growth, and consolidation allowed Hungry Lion to not only transition into independence, but equally provided the platform for the company to gear up for full throttle expansion over the coming years.

“We’re realistic at the same time,” Basson continues. “We understand that we cannot conquer the whole continent in 2019 or 2020, but the plan is to grow as fast as possible. Africa has around 1.2 billon people but in the next three decades this number will double. Further, there are 54 countries across Africa, countries that we know we’ll have a good chance of being able to expand into, whether it be through franchises, joint ventures, or other kinds of partnerships. The opportunities are immense, and I feel our business is a prime example as to why it’s a great time to be investing on the continent right now. I just hope that others will come and join us in the fun!”

Despite all the significant benefits that arise of the practice of marketing, it remains a human activity. Marketing has flaws which have been highly publicised in recent times. " Despite the social criticisms of marketing that Hungry Lion should be cognisant of." Your answer should include the impact of those criticisms on the operations of Hungry Lion. 25 ma

The Continent’s Progressive QSR Player

Stellenbosch-based fast food specialist Hungry Lion has found ideal footing for expansion over the coming years, owed to optimised operations and an admirable outlook

Writer: Jonathan Dyble | Project Manager: Josh Hyland

MARKETING MANAGEMENT

Adrian Basson is a self-described Afro-optimistic. “There’s no hiding from the fact that there are a lot of challenges in Africa, but retail is a promising sector when it comes to facilitating opportunities, creating employment and generally building a business that can have a widespread impact,” he says.

“When you reach a remote town with an empty plot, the local people don’t often have much. But as we’ve built new stores and helped to launch new shopping centres, we’ve been able to not only witness, but also facilitate the construction of new, thriving ecosystems. We’re proud to be a business that contributes to the success of these societies – I guess you could say we’re a capitalist business with a socialist outlook.”

Basson, now CEO, became part of the Hungry Lion story in 2001 and has seen the company come a long way over the past two decades to be the responsible, esteemed organisation it is today.

Having opened its first restaurant in South Africa in 1997, the business today proudly operates a network constituting over 200 stores across South Africa, Lesotho, Swaziland, Botswana, Namibia, Zambia and Angola, with over 4,000 Hungry Lion employees. Looking at the bigger picture, however, such statistics only touch the surface of what the brand is bringing to the region.

“In many ways I like to think that our product is an afterthought in what we’re looking to achieve,” explains Basson. “Yes, serving bigger portions, more chips and more smiles is key to our operations, but it’s just one part of our overriding goal – providing joy to our employees, customers and local communities through food, served with passion.”

This ethos is relatively new to the firm, becoming more of a core focus during the company’s major rebranding process that kickstarted in 2014. Having originally been part of the Shoprite Group, Africa’s largest food supermarket chain, Hungry Lion is now a totally independent company in its own right with a unique brand and character.

“In the beginning, we weren’t really building a brand,” reveals Basson. “We purely sold chicken and chips at an affordable price on a somewhat ad-hoc basis. However, we eventually found ourselves with 100-plus stores, and with the economic challenges that came around in 2008/09, we realised that stores without a brand, a story, and an experience would fail to deliver in the long term. It was a case of changing with the times and we invested a lot into the design of our stores, our product quality and consistency, together with the development of the brand itself.”

Since transitioning from being a business-centric to a customer-centric brand, Hungry Lion has reaped the rewards with the business undergoing stratospheric growth over the past few years.

Adding a modern twist

Moving in this re-energised direction, strategy changes quickly followed for Hungry Lion, evidence of which can be found in the firm’s increasing use and the implementation of revolutionary technologies.

Fast forward to today, the company now benefits from artificial intelligence, automated system checks, cloud computing and live dashboards – technologies which serve multiple purposes in the way of driving the business forward. This together with an always connected workforce, makes executing operationally so much more efficient.

“I’ve always had a connection with technology,” Basson reveals. “I used to work in the technology division of Compaq in London and also formerly as the Chief Digital Officer of Shoprite for a period. We live in an era where we can augment the people with technology to do the repetitive stuff, so that they can focus on the more human touches.”

In a space where most others in the fast food industry are franchised and owner-managed, Hungry Lion is unique in the African landscape, with almost all stores being fully-owned and managed from its Head Office. This is where automated systems and clever use of technology comes to the forefront in managing the business over vast distances and across borders.

“With technology comes data and with data comes insight,” Basson continues. “Using our systems, we’re able to see the performance of each of our stores in real time, have an overview of customer experience, and execute plans to fix problems at speed and scale. These capabilities would never have been possible if we didn’t have the right technologies in place.” With full visibility of information comes accountability, since everyone can see what needs to be done and if it was done. Transparency is a crucial merit of these technologies, a cultural trait of Hungry Lion that is accentuated in other ways.

Basson adds: “We have a network of area, country and regional managers who act as an extension of our Head office in Stellenbosch. Head office employees pay regular visits to different regions to keep a finger on the pulse of local operations. Our area and country managers, in turn, come to Head Office regularly for updates to business processes, training, and meetings. This constant exposure in both directions ensures that best practises are shared and implemented to all stores quickly.”

Prosperous career planning

Combined with both these expansive technologies and a transparent, remodelled structure, Hungry Lion recognises that its staff are key to achieving the firm’s ongoing ambitions.

To this end, the company ensures that it provides extensive benefits to its employees, bolstering its position as an employer of choice and equally its talent retention capabilities.

Such initiatives include the introduction of E-learning materials in five languages and the company’s live in-house training platform from LessonDesk, a comprehensive new employee assistance programme, access to affordable healthcare for employees and more specialised and tailored training programmes.

What’s more, Hungry Lion has a strong focus on career planning, testament to its culture of internal promotion.

“Typically speaking, joining a fast food business as the lowest level of employee, the pay isn’t fantastic and it’s not uncommon for these workers to have bigger aspirations,” explains Basson. “What we’ve realised is you can either listen to and facilitate these ambitions, or your workers will leave and look for opportunities elsewhere. We like to pursue the former, providing clear career paths for our inspirational and aspirational workers. From cashiers to controllers to junior managers to regional managers, and so on, this personal growth structure is in place at Hungry Lion.”

A core part of the company’s ethos, providing key opportunities to reward loyalty and ambition, Hungry Lion offers not just a job but an all-encompassing opportunity to build a prosperous career.

A sound, responsible outlook

Such a humble and grounded approach is not only applied internally, but equally externally through a number of corporate social responsibility initiatives.

These are built around Hungry Lion’s three-pillar CSR strategy, with the organisation contributing towards hunger alleviation, championing change in local communities and promoting skills development.

Between February and March of this year alone, for example, the company provided food for the attendees of a seminar addressing the issue of domestic violence, pupils of an underprivileged primary school during a field trip and fire fighters in the Western Cape, while also supporting a Soweto children’s home and a local police station’s cricket tournament for rural schools.

“It’s an element to our business that we take pride in,” reveals Basson. “We like to show that we care for our communities, customers and especially our employees and their families. There’s a lot of need in Africa from a poverty standpoint and being in the food business we’re able to help local communities in addressing such issues. I wouldn’t say we have a set agenda – ad hoc opportunities arise, and we react accordingly in each of the locations that we’re based, helping to give people a sense of purpose and promote skills of local communities.”

Asked about a particular such initiative that springs to mind, Basson is quick to highlight the company’s efforts in supporting the Zambian people during a cholera outbreak at the beginning of 2017.

He continues: “We immediately lowered the prices of our food, ensuring people could get nutritious, safe and affordable food, we donated money to the government that was used to help with the clean-up process. We even provided sanitation kits to our staff, helping them clean their own living environments to ensure their family’s health.”

Having developed a culture that is firmly centred around providing benefit to all people, whether it’s supporting local communities or providing unrivalled, progressive career opportunities, Hungry Lion’s outlook is unique and admirable.

Opportunity is a word that is creating an atmosphere of excitement within the company at the moment, with continued expansion firmly on the table for Hungry Lion after experiencing double digit percent organic growth over the past two years.

“We’ve set 20 new stores as a benchmark, but realistically this is a ball-park figure on the conservative side,” reveals Basson. “If we can open 50 stores then we’ll do it – if we find a good site where we can profitably trade, we will open. There aren’t any specific limitations.”

New systems and optimised procedures in place, last year’s corporate action, focus on organic growth, and consolidation allowed Hungry Lion to not only transition into independence, but equally provided the platform for the company to gear up for full throttle expansion over the coming years.

“We’re realistic at the same time,” Basson continues. “We understand that we cannot conquer the whole continent in 2019 or 2020, but the plan is to grow as fast as possible. Africa has around 1.2 billon people but in the next three decades this number will double. Further, there are 54 countries across Africa, countries that we know we’ll have a good chance of being able to expand into, whether it be through franchises, joint ventures, or other kinds of partnerships. The opportunities are immense, and I feel our business is a prime example as to why it’s a great time to be investing on the continent right now. I just hope that others will come and join us in the fun!”