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Business Policy

Case Study: Beach Nut Nutrition Corporation






EMBA
Section A



Submitted by
Naveed Akbar Shamim
M. Ammar Saeed
M. Qasim Nasir Butt



Submitted to
Prof. F.A Fareedy






Lahore School of Economics

Issue:
The case starts from the point where Beech Nuts CEO, Anderson, is informed that they are
being defrauded by their suppliers, Universal Juice Company which was involved in the
adulteration of concentrate for apple juice. This was a huge concern for the company since it
survived on its claim of 100 natural and the concept of nutrition which was also evident in its
name.
Core Problem:
Barriers to flow of information and communication:
The problem lied with the attitude and personality of T Storer, Vice President of Operations for
Beech Nut. Storer was responsible for the management of two plants, one in Canajoharie and the
other in San Jose. Storers personality fit the ONE MAN SHOW concept whereby he did not
like any interference from anyone regarding the plant matters. He was not open for suggestions
or opinions which lead to the problem of adulteration in the company. Storer had been informed
about the adulteration of concentrate by Universal Juice Company on two occasions. The first
report was prepared by SIRA, while the second was prepared by Nestle which clearly stated that
apple juice is false, cannot see any apple. This was also confirmed by the private detective who
mentioned that he could not find any invoice of apples in the trash bin of the Universal Juice
Company. However, Storer negated both the reports since he did not agree with any of them.
Even though the Quality Assurance Department was responsible for making that decision, Storer
took the lead in doing so. Despite, Mcintoshs, Director Quality Assurance, concerns regarding
their supplier, Storer did not take any firm action. He did send a note to Universal in order to
clarify their position but Universal never sent any response and Storer did not pursue the matter.
Interlinked Problem:
The financial problems faced by the company:
One of the major problems leading Storer to behave in such a way was the financial problems
faced by the company. His emphasis on financial objectives and designated goals obscured
important ethical and legal considerations which were important in a food industry. Storer
knew that the company had huge cash flow problems and if it continued on the same line it
would be a matter of days when Nestle would sell Beech Nut to some other investor. He believed
that it was solely his responsibility to turn the situation around. He was also aware of the fact that
Universal Juice Company was the cheapest suppliers that Beech Nut could get and they had been
serving the company for a long time therefore they were aware of the requirements of Beech
Nut. Given the financial profile of Beech Nut, Storer believed that Universal was the right
supplier for the company. For this very reason, he kept on ignoring the claims of SIRA, Nestle
and Mcintosh against Universal. However, Storer forgot that they were cheaper for a reason.
Minor Problems:
Competition from Heinz:
Beech-Nuts most severe competition was from Heinz. When Beech-Nut won new accounts or
managed to increase its shelf space, Heinz would respond with very attractive cash trade offers.
Defending against Heinz was costing the company too much.
Alternative 1: Take Universal Juice Company to court and stop the supply immediately
Call of the agreement with Universal Juice Company by taking them to court for breaching their
contract. Under this alternative, Beech Nut would have the added advantage of having Universal
sign the hold harmless agreement. Anderson should realize the fact that Beech Nut is operating
in food industry which has a direct impact on the health of people. Therefore, no nonsense from
anyone, let alone the supplier, should be tolerated. Additionally, Anderson should notify Storer
about his negligence regarding the suppliers and his wrongful bossy attitude. Anderson should
not take the risk of delivering the finished goods to the market because a single complaint can
damage the repute of the firm. According to Murphys Law, Anything that can go wrong will
go wrong.
Alternative 2: Bring the suppliers to cooperate until the company finds a new supplier
Under this alternative, the company should force the suppliers to cooperate by threatening them
about pursuing a legal charge. In addition, Beech Nut should hold its suppliers liable to adhere to
the terms agreed upon at the time of agreement. The company should set up a monitoring
committee to monitor the raw material supplied by Universal. This would be a tentative
agreement which would last with Beech Nut finding an alternative supplier. However, it should
stop the current batch from going into the market.
Alternative 3: Terminate the agreement with the suppliers immediately
Under this alternative, Beech Nut should severe all its ties with its suppliers. A person who can
deceive you once will not think twice to deceive you the second time. But this option would be
least viable since it would cause more financial problems to the company. Customers would not
get the products on time and this would bring a bad name to the company.
Decision:
Under the given circumstances, alternative 2 is the most viable since it would not affect the
financial position of the company in the short term and give the company enough time to find
alternative suppliers. This would not harm the image of the company since there would be a
change of suppliers. However, the company should erect a monitoring team to ensure that the
next suppliers are not the same as the previous suppliers. Stopping the batch would reduce the
risk that the companys image or repute would be at stake.

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