A new CEO who is determined to recover the fixed costs of his units, so he reduces the Period 1 bid to make sure they run.

1. What does this say about the wisdom of bidding below marginal cost in order to make sure units operate? (2 mark)

2. Do you agree with the new CEO’s view of how generating units recover their fixed costs in the market over time? What is your view of how generating units recover their fixed costs? (2 mark)

Fatima Hopkins, the CEO of Central Adventures, is having difficulties with all three of her top management level employees. With one manager making questionable decisions, another threatening to leave, and the third likely ‘in the red’, Fatima is hoping there is a simple answer to all her difficulties. She is asking you (her accountant) for some advice on how to proceed.

Central Adventures owns and operates three amusement parks in Michigan: Funland, Waterworld, and Treetops. Central Adventures has a decentralized organizational structure, where each park is run as an investment center. Park managers meet with the CEO at least once annually to review their performance, where each park manager’s performance is measured by their park’s return on investment (ROI). The park manager then receives a bonus equal to 10% of their base salary for every ROI percentage point above the cost of capital.

Fatima’s first difficulty is with the Funland park. Funland is an outdoor theme park, with twelve roller coaster rides and several other attractions. This park has first opened 1965, and most of the rides have been in operation for 20+ years. Attendance at this park has been relatively stable over the past ten years. The park manager of Funland, Janet Lieberman, recently shared with Fatima a proposal to replace one of their older rides with a new roller coaster, a hybrid steel and wood roller coaster with a 90 degree, 200 foot drop and three inversions. The proposal indicated that the ride would cost $8,000,000 with an estimated life of 20 years. In addition, this new style of coaster would require additional maintenance and insurance, costing $125,000 each year. However, it projected that this new attraction would boost attendance, earning the park an additional $1,190,000 per year in revenues. Janet ultimately decided not to invest in this new attraction. Fatima (doing a quick mental calculation) saw that the investment had a payback period of eight years—much shorter than the life of the roller coaster—and is perplexed at Janet’s decision.

The second dilemma concerns the Waterworld park. Waterworld is an indoor water park, operating year-round. Run by park manager David Copperfield, Waterworld was built in 2016 and has increased attendance by 20% every year since. David recently sent you an email complaining that, based on the current bonus payout schedule, Janet Lieberman’s bonus last year was significantly higher than his. He points to the increasing attendance, and says that his park is being punished for having opened so recently (his park assets are much more recent than the roller coasters at Funland). He currently has an employment offer from another company at the same base pay rate, which he says he will accept if his performance is not appropriately acknowledged. Fatima needs to look at the relative performance across parks to determine how to proceed with David.

Central Treetops includes a high ropes course and has a series of ziplines that criss-cross over the Chippewa River. For many years, it was a popular venue for corporate team-building activities, so it is equipped with a main indoor facility with cafeteria and overnight guest rooms. This park has lost popularity in recent years, and has been ‘in the red’ for the past two years. If the park is not profitable this year, you will need to decide whether to close it - permanently. Included in the ‘Fixed COGS’ for Treetops is a $86,000 mortgage payment on the land and buildings for the park, which would still need to be paid by Central Adventures if the park is closed. Incidentally, you recently had a conversation with the regional head of the YMCA, who would like to open a summer camp in the central Michigan region. If you decided to close Treetops, you are fairly certain that you could lease that land to the YMCA for $250,000 annually.

A partial report of this year’s financial results for Central Adventures shows the following:

The ‘Selling and administrative costs’ are all incurred directly by each park, and are determined at the beginning of each year (that is, they do not change with the number of tickets sold). In addition to the information above, there are $2,542,920 in corporate costs, which are currently allocated evenly between the three parks. These costs are primarily due to employee benefits costs, which are billed at the corporate level. If the Treetops park is closed, the allocated corporate costs would decrease by $12,000. Central Adventures has a cost of capital of 12 percent (and Fatima uses the cost of capital as their required rate of return) and are subject to 18% income taxes.

Fatima needs to evaluate this year’s performance results before she can make any decisions. Is David’s complaint about the performance evaluation metrics valid? Is that also affecting management decisions in the form of Janet’s rejection of the proposed new rollercoaster? And is the company better off without Treetops? She sets off to the company accountant’s office to help get some answers.

a.     Create a segmented income statement for Central Adventures.

b.     Calculate the current annual ROI, residual income and EVA for the three parks.

c.    why it was/was not in Central Adventure’s overall best interest for Funland to reject the new rollercoaster.

d.     is David Copperfield’s (the Waterworld park manager) complaint valid? Explain why it is (or is not valid), and what further information would be necessary.

e.     why should they close/ not close treetops.

f.      what should you recommend she do to improve the evaluation of park manager performance measurement at Central Adventures.

The CEO of Ferguson Inc. wants its executives to make the organization more environmentally friendly by encouraging employees to reduce waste in the workplace. Government legislation is coming that will require all companies of this size to have a program in place and the company’s customers also expect it. The CEO wants to significantly reduce paper usage, garbage and other waste throughout the company’s many widespread offices. Unfortunately, a survey indicates that employees do not value environmental objectives and do not know how to “reduce, reuse, recycle.” As the executive responsible for this change, you have been asked to develop a strategy that might bring about meaningful behavioural change towards this environmental goal. What would you do?

Questions

1. Based on the case above, and according to Lewin’s Model for Managing Change - what are 2 Forces for the status quo (or restraining forces)?

2. Using Lewin’s Model for Managing Change, how would you go about implementing and managing the change at Ferguson Inc. – answer a. and b.

a.Explain each phase – Unfreezing, Moving and Refreezing

b.and list one action that you would implement for each phase to accomplish your change.

Case Quetion: You are the CEO of a 500- employee organization, which manufactures coats and jackets (winter fleece, dress wool and light rain wear for U.S.market. what organizational structure( functional,product,geographic, customer or hybrid)will you select, and why

1-Explain 4 reason

2-how will you utilize or integrate the matrix structure into you organization design?Explain.(1-point)

You are the CEO of United Airlines and you have had a pretty difficult month. First, you kicked young women off of a plane because they were wearing yoga pants, then you forcefully dragged a doctor off a plane against his will. While your stock price has mostly rebounded, you a loss of value of $1 billion the day after the incident with the doctor. You know your organization needs a culture change. Apply Kotter’s 8-step model of change,to the United organization – what would be your strategy for remaking the organization? Be as specific as you can.

Scenario: You are the CEO of MegaGlobe Business Solutions, a financial consulting corporation based in Chicago that has just recently opened new offices in São Paulo, Brazil and Shenzhen, Guangdong, China. As part of this transition, your employees will now be working collaboratively with employees at these locations to provide financial consulting services in these new markets. To assist with the transition, you will develop an internal leadership blog for your employees that addresses the implications of leading within a culturally-diverse and changing global business environment. This blog should focus on the need to positively adapt to a variety of leadership styles and individual differences within these cultures.

View the videos listed in this week's classroom materials for ideas about how to effectively lead, motivate, and communicate with your employees about the need to adapt within this changing business environment.

Write a 700- to 1,050-word internal leadership blog using the Leadership Blog template, and include the following:

Explain the implications of leading within a changing global business environment.

Describe the Team Leadership Model and how this relates to your current business practices.

Outline positive aspects of gender, diversity, culture, and teamwork that can improve overall business performance.

Apply principles of motivational leadership within a variety of diverse cultures.

Use at least one image, photo, chart, or graph to deliver a key concept within your blog.

--------Fatima Hopkins, the CEO of Central Adventures, is having difficulties with all three of her top management level employees. With one manager making questionable decisions, another threatening to leave, and the third likely ‘in the red’, Fatima is hoping there is a simple answer to all her difficulties, and needs some advice from her accountant on how to proceed.

Central Adventures owns and operates three amusement parks in Michigan: Central Funland, Central Waterworld, and Central Treetops. Central Adventures has a decentralized organizational structure, where each park is run as an investment center. Each park manager meets with the CEO at least once annually to review their performance, as measured by their park’s ROI. The park manager then receives a bonus equal to 10% of their base salary for every ROI percentage point above the required rate.

Central Funland is an outdoor theme park, with twelve roller coaster rides and several other attractions. This park has first opened 1965, and most of the rides have been in operation for 20+ years. Attendance at this park has been relatively stable over the past ten years. The park manager of Funland, Janet Lieberman, recently shared with Fatima a proposal to replace one of their older rides with a new roller coaster, a hybrid steel and wood rollercoaster with a 90 degree, 200 foot drop and three inversions. The proposal indicated that the ride would cost $8,000,000 with an estimated life of 20 years. In addition, this new style of coaster would require additional maintenance, costing $125,000 each year. However, it projected that this new attraction would boost attendance, earning the park an additional $1,190,000 per year in revenues. Janet ultimately decided not to invest in this new attraction.

Central Waterworld is an indoor water park, operating year-round. Run by park manager David Copperfield, Waterworld was built in 2016 and has increased attendance by 20% every year since. David recently sent you an email complaining that, based on the current bonus payout schedule, Janet Lieberman’s bonus last year was significantly higher than his. He points to the increasing attendance, and says that his park is being punished for having opened so recently (his park assets are much more recent than the roller coasters at Funland). He currently has an employment offer from another company at the same pay rate, which he says he will accept if his performance is not appropriately acknowledged.

Central Treetops includes a high ropes course and has a series of ziplines that criss-cross over the Chippewa River. For many years, it was a popular venue for corporate team-building activities, so it is equipped with a main indoor facility with cafeteria and overnight guest rooms. This park has lost popularity in recent years, and has been ‘in the red’ for the past two years. If the park is not profitable this year, you will need to decide whether to close it - permanently. Central Adventures has a $86,000 mortgage payment on the land and buildings for Treetops, which would still need to be paid if the park is closed. Incidentally, you recently had a conversation with the regional head of the YMCA, who would like to open a summer camp in the central Michigan region. If you decided to close Treetops, you are fairly certain that you could lease that land to the YMCA for $250,000 annually.

A partial report of this year’s financial results for Central Adventures shows the following:

In addition to the information above, there are $2,542,920 in corporate costs, which are currently allocated evenly between the three parks. These costs are primarily due to employee benefits costs, which are billed at the corporate level. If the Treetops park is closed, the allocated corporate costs would decrease by $12,000. Central Adventures has a required rate of return of 12 percent (set at the company’s weighted-average cost of capital) and are subject to 18% income taxes.  

Fatima needs to see this year’s performance results before she can make any decisions. Is David’s complaint about the performance evaluation metrics valid? Is that also affecting management decisions in the form of Janet’s rejection of the proposed new rollercoaster? And is the company better off without Treetops? She sets off to the company accountant’s office to help get some answers.

Required:

a.   Create a multilevel income statement for Central Adventures.

b.   Calculate the current annual ROI, residual income and EVA for the three parks.

c.   Did Janet Lieberman (the Funland park manager) make the ‘right’ decision (i.e., was it in Central Adventure’s overall best interest for Funland to reject the new rollercoaster)? Explain your answer. Provide the appropriate financial analysis(es) to support your conclusion.

d.   Is David Copperfield’s (the Waterworld park manager) complaint valid? Or would a different performance metric tell the same story?

e.   Provide a recommendation on whether to close Treetops. Provide the appropriate financial analysis to support your conclusion.

f.    Provide a recommendation on a different allocation base for corporate overhead.  

After reading the article, answer the below questions:

Carlos Ghosn, CEO of Nissan and Renault, is not standing still. He talks fast. He may be thinking even faster. On his appearance at the student-run "View From The Top" leadership speakers series November 16, his rapid-fire thoughts on cars, global alliances, and looking for mistakes upheld his style as a man who is looking ahead and not wasting tim Ghosn's intensity and his track record — pulling Nissan back from the edge of bankruptcy — certainly put him in the running for the business salvation stratosphere already occupied by Lee Iacocca. A longer view of automotive history will make that call. For now, even with Nissan-Renault's recent somewhat off the mark sales performance making analysts raise their eyebrows, Ghosn is confident, pressing ahead, and thinking big. And not necessarily about selling cars in the United States. Vehicle sales in the United States, Europe, and Japan are either stable or declining, said Ghosn, who is looking to new markets such as India, Russia, China, Brazil, and Africa — where sales are expanding an average 20 percent annually. For perspective, Nissan's U.S. sales so far in 2007 have risen just 5.5 percent. People in these rapidly developing markets want all kinds of cars, he said, but the biggest demand is for the most economically accessible model — a $3,000 car. Nissan-Renault is partnering with two major automotive manufacturers (Ashok Leyland and Bajaj Auto Ltd.) to make light trucks and an affordable entry-level car. Ashok Leyland will build light trucks, and Bajaj Auto will focus on that $3,000 car, planned for a late 2011 rollout. It's another cross-cultural, global alliance that Ghosn thinks is absolutely necessary now for any company. He's a perfect example of how it can work. He's a polyglot born in Brazil to Lebanese parents, educated in Beirut and Paris, and the first non Japanese to head a major Japanese corporation. And recently it looked as though he might add an American company to his jobs, although talks ultimately failed for a possible top management position at General Motors. Ghosn was asked about that and answered with an analogy that would have done him well in a stand-up comedy competition. "Suppose you want to marry somebody and the father is very favorable, but not the bride." Relationships based on that set of circumstances, he said, "you'd better not pursue because that relationship will never be happy if there is no mutual appetite." When Ghosn arrived at Nissan in 1999, a mostly welcomed chief, he began to look at relationships and culture within the company and made changes — not all of them to be found in a typical management handbook. The thing to do, he said, is to find mistakes when they're small. "Small is solvable." The worst thing a manager can do is to hide a problem and let an organization "deviate from the course too much before you make the correction." Failure is important to good management, he said. If you create an environment where people are looking for mistakes, looking for dysfunction, that's very powerful." The best management lessons, he said, "are coming from real life. If you don't know what to do, look around you." Ghosn's path continues hurtling toward the future of cars. Renault announced this week that it's talking to Shai Agassi, whose bold promise to put an electric car in every driveway has already produced big investors. At Stanford, Ghosn talked about what's on the road now — vehicles that consume too much energy and too much fuel and soon will be obsolete. In his vision, the barrier is cost. He estimated that less than one vehicle out of a thousand today is a hybrid or an electric. And while buyers want their "green" vehicles affordable, he said, economies of technology investment must be achieved. "The more car manufacturers join forces, the more you can afford the expense required," he noted. He's listening more and more to consumers, no matter what. "We used to do cars we liked. It's good that you love the car, but an engineer in the United States will imagine a very different car than the one that will be driven in Mumbai." Ask who is the target customer and design a car for that person, he said. Example: In Mexico, Nissan will continue to manufacture a particular model of car that's ancient by current standards but has become a cherished icon in the Mexican taxi trade. And he talked about working with companies such as Google, Apple, and Microsoft to add something else to the technology packages available to drivers. He figured many spend at least two hours a day commuting "where there's nothing you can do but listen to music or talk on the phone." If carmakers try to create those new products on their own, "we're not going to get very far on our own." For all consumers' talk about fuel efficiency, however, he made sure he told this story of what happened recently at a Tokyo auto industry show. On display were a tiny, low-carbon footprint concept car and the 480 horsepower — non-energy-saving — Nissan GTR. Which one drew the biggest crowds? With perfect timing, he paused, then said: "The GTR."

A Brief background Case summary

Explain the Major Issues/Problems that need to be addressed in case (Questions that are often brought up within the case itself)

CEO pay is a 'hot button' issue in many countries today. The average CEO's pay is 183 times that of the average employee. In 1965 this average was 20 times. Your book indicates this ratio is 135 in Australia and 73 for the Netherlands. Some companies have frozen executive pay and are migrating to tying pay to performance and awarding performance stock awards and bonuses.   Based on the presumption that there is a pay imbalance between CEO's and workers, how might this imbalance be addressed (made more reasonable)?

After reading the article, answer the below questions: Carlos Ghosn, CEO of Nissan and Renault, is not standing still. He talks fast. He may be thinking even faster. On his appearance at the student-run "View From The Top" leadership speakers series November 16, his rapid-fire thoughts on cars, global alliances, and looking for mistakes upheld his style as a man who is looking ahead and not wasting tim Ghosn's intensity and his track record — pulling Nissan back from the edge of bankruptcy — certainly put him in the running for the business salvation stratosphere already occupied by Lee Iacocca. A longer view of automotive history will make that call. For now, even with Nissan-Renault's recent somewhat off the mark sales performance making analysts raise their eyebrows, Ghosn is confident, pressing ahead, and thinking big. And not necessarily about selling cars in the United States. Vehicle sales in the United States, Europe, and Japan are either stable or declining, said Ghosn, who is looking to new markets such as India, Russia, China, Brazil, and Africa — where sales are expanding an average 20 percent annually. For perspective, Nissan's U.S. sales so far in 2007 have risen just 5.5 percent. People in these rapidly developing markets want all kinds of cars, he said, but the biggest demand is for the most economically accessible model — a $3,000 car. Nissan-Renault is partnering with two major automotive manufacturers (Ashok Leyland and Bajaj Auto Ltd.) to make light trucks and an affordable entry-level car. Ashok Leyland will build light trucks, and Bajaj Auto will focus on that $3,000 car, planned for a late 2011 rollout. It's another cross-cultural, global alliance that Ghosn thinks is absolutely necessary now for any company. He's a perfect example of how it can work. He's a polyglot born in Brazil to Lebanese parents, educated in Beirut and Paris, and the first non Japanese to head a major Japanese corporation. And recently it looked as though he might add an American company to his jobs, although talks ultimately failed for a possible top management position at General Motors. Ghosn was asked about that and answered with an analogy that would have done him well in a stand-up comedy competition. "Suppose you want to marry somebody and the father is very favorable, but not the bride." Relationships based on that set of circumstances, he said, "you'd better not pursue because that relationship will never be happy if there is no mutual appetite." When Ghosn arrived at Nissan in 1999, a mostly welcomed chief, he began to look at relationships and culture within the company and made changes — not all of them to be found in a typical management handbook. The thing to do, he said, is to find mistakes when they're small. "Small is solvable." The worst thing a manager can do is to hide a problem and let an organization "deviate from the course too much before you make the correction." Failure is important to good management, he said. If you create an environment where people are looking for mistakes, looking for dysfunction, that's very powerful." The best management lessons, he said, "are coming from real life. If you don't know what to do, look around you." Ghosn's path continues hurtling toward the future of cars. Renault announced this week that it's talking to Shai Agassi, whose bold promise to put an electric car in every driveway has already produced big investors. At Stanford, Ghosn talked about what's on the road now — vehicles that consume too much energy and too much fuel and soon will be obsolete. In his vision, the barrier is cost. He estimated that less than one vehicle out of a thousand today is a hybrid or an electric. And while buyers want their "green" vehicles affordable, he said, economies of technology investment must be achieved. "The more car manufacturers join forces, the more you can afford the expense required," he noted. He's listening more and more to consumers, no matter what. "We used to do cars we liked. It's good that you love the car, but an engineer in the United States will imagine a very different car than the one that will be driven in Mumbai." Ask who is the target customer and design a car for that person, he said. Example: In Mexico, Nissan will continue to manufacture a particular model of car that's ancient by current standards but has become a cherished icon in the Mexican taxi trade. And he talked about working with companies such as Google, Apple, and Microsoft to add something else to the technology packages available to drivers. He figured many spend at least two hours a day commuting "where there's nothing you can do but listen to music or talk on the phone." If carmakers try to create those new products on their own, "we're not going to get very far on our own." For all consumers' talk about fuel efficiency, however, he made sure he told this story of what happened recently at a Tokyo auto industry show. On display were a tiny, low-carbon footprint concept car and the 480 horsepower — non-energy-saving — Nissan GTR. Which one drew the biggest crowds? With perfect timing, he paused, then said: "The GTR."

Two or Three main points that you found most useful to know and understand?

What did you learn from this case/chapter that could help you to lead Organizational Change?