Question 1

Case A

Marty Ofori worked for a card company specializing in invitations and announcements. Every day for 25 years, he went to an office, sat at a desk, and took orders over the phone. He hated it. He was bored out of his mind. He didnt know what to do. So he began skimming the business opportunities section of The Mirror. He wasnt sure what he was looking for. At almost 50 years of age, he had few business skills. Accounting was a foreign language to him. He figured that if he ever bought a business, it would have to be one that didnt require much specialized knowledgesomething that would be relatively easy to manage. He considered a franchise, but he found that the good ones were very expensive. Then he came across an pastries and bread route for sale. He thought How difficult could it be to run a delivery route? He called the phone number in the ad and spoke with the business broker who was handling the sale.

It turned out that the route was on the Kumasi-Obuasi route, where Ofori and his wife, Annabelle, lived. It was a one-person operation. The individual who owned it had had the route for 20 years and took home about $65,000 a year. He wanted $200,000 for the business, but he was willing to help finance the deal.

If Ofori would put $60,000 down, he could pay the balance over five years at 10 percent interest, or about $35,000 a year. That would leave Ofori with an annual income of $30,000 until the debt was paid. Combined with Annabelles salary, it would be enough to make ends meet. If he worked hard, moreover, he could expect his sales, and his income, to grow by 10 to 15 percent a year.

It seemed perfect. Ofori went to meet with the owner and returned sounding even more enthusiastic. This is a cant-miss deal, he told his wife. The guy has signed contracts with all the places he delivers to, and none of them is more than 25 miles from here. I could do the entire route in seven hours.

However, Annabelle wasnt buying. Youre not quitting your job until you talk to an expert, she said. Ofori agreed to meet with a broker.On the date of the meeting, Ofori brought all his paperwork along. He laid out the terms of the deal in great detail. What do you think? he asked. The broker said, Tell me something, Marty. Do you like this business?

He shrugged. I cant really say. I havent tried it yet. Whats involved in it besides picking up the bread and pastries delivering it to the stores and hawkers?

Im not sure, he said. Whatever it is, it cant be that complicated. What happens if the truck breaks down? I dont know, he said. I guess Ill just work it out.

After asking Ofori a series of questions along those lines, the broker finally said, Listen, Marty. You want to know if this deal makes sense from a financial standpoint. Thats easy to check. The guy has an income tax return, and his sales are verifiable.

This isnt a cash business, after all. He sells to hawkers and supermarkets. They pay by cheque or mobile money. We can go over his expense figures and make sure theyre realistic, but my guess is that the deal is OK. If youre asking me whether I could negotiate him down a little, the answer is probably yes.

Ofori turned to his wife: See, I told you hed approve. The broker said, I didnt approve anything. Only you can do that, and youre not ready to.

What do you mean? he asked.You havent done your homework, the broker said.

You dont know what youre actually going to do in this business, and you dont know if youll be happy doing it. How am I going to find that out? Ofori asked.

(Adapted from Longenecker et al., 2013)

Answer the following questions based on the above case

i)How would you suggest that Ofori find out if he would be happy in this business?

ii)Would you recommend that Ofori buy the business, given the asking price and terms of the deal?

iii)Is Ofori relying too much on nonquantitative factors? If yes, what are the shortfall involved? If no, what factors is Ofori basing this decision on?

Case B

Amy Lartey is the owner of Fit Wright Shoes, a manufacturer of footwear located in Accra. Her

company has pledged that all customers will have a lifetime replacement guarantee on all footwear bought from the company. This guarantee applies to the entire shoe, even though another company makes parts of the product.However, customers must prove that they followed care instructions strictly.

Answer the following questions based on the above case.

i)Do you think a lifetime guarantee is too generous for this kind of product? Why or why not?

ii)What impact will this policy have on quality standards in the company? Be specific.

iii)What alternative customer service policies would you suggest?

Case C

Jay Sorenson of Portland, Oregon, created a product called the Java Jacket, which is a patented honey-combed insulating sleeve that slides over a paper cup containing a hot beverage to make it comfortable to hold. Having introduced the new product to the market, Sorenson already has cut deals with coffeehouses, specialty stores, and convenience stores nationwide. He started the business with $15,000 in 1993, but Java Jacket has grown tremendously since then. In fact, the company has already sold more than one billion cup sleeves! Sorenson is now in a position where he would like to continue expanding his business, but he is concerned that large and established competitors could introduce their own variations of the same product.

Sources: Don Debelak, Send in the Clones, Entrepreneur, September 2003,

pp. 128132; and About Java Jacket, http://www.javajacket.com/company.php, accessed December 6, 2006.( Source: Longenecker et al. 2013)

i)Will the market for Sorensons product continue to grow in the years ahead?

ii)If he is successful, what sources of competition should he expect?

iii)What steps would you recommend that he take to protect his company from the onslaught of competition that is likely to come?