MGMT 520 Final Exam 1
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MGMT 520 FINAL EXAM Week 8
1. (TCOs G and I) In the 1930s, after immigrating to the U.S. from a region in central Europe threatened by the onset of World War II, Luigi and Maria Spongee opened a bakery in Chicago. They specialized in snack cakes. Spongee Cup Cakes became so popular in the area that the family stopped being actual bakers and became manufacturers/ food processors of the snack cakes on a regional basis. After returning from the war, their son Steve completed college and began working in television advertising in the early 1950s. Steve approached his parents and his older brother Tom, who was now running the business, about the possibilities of advertising and “going national.” The family liked the idea and began advertising and expanding. In addition, to fuel the expansion, they offered retailers price discounts and other incentives if they prominently positioned the displays set-up by Spongee rack jobbers. By the 1960s, they were a national brand, controlling over 80 percent of the snack food industry. In the 1970s, with the advent of the hippie counter-culture and the back-to-Earth movement, a new competitor made an impact on the Spongee business. The company, Herbal Snacks, began advertising that their products only used natural ingredients. They even began running a commercial in which a mother and child compared their Herbal Snacks with a lampooned product named “Cup Cake Spungies,” stating that it tasted like poison and dog food! Very-Large-Tom, a counter-culture pop star with a late night UHF and cable show, joined in on the controversy created by the commercial and stated that he did not understand how people, “could buy such poisonous dog food and serve it to their children as snacks!” Market studies showed that Spongee Cup Cakes sales suffered. As a result, Spongee began a more aggressive shelf space and display marketing campaign to combat Herbal Snacks’s television advertising. Spongee’s marketing efforts were successful. By also offering volume discount incentives, they had prevailed upon retailers in their traditional East Coast and Midwest markets to prominently display their products. To counter this strategy, Herbal Snacks offered a deep discount to TargetMart, a Southwest and West Coast discount chain, in exchange for an agreement to exclusively sell only their snack foods. In reality, Spongee Cup Cakes used only FDA approved ingredients and preservatives and were made in American plants that always passed inspections. In contrast, although Herbal Snacks’s pilot plant was in Montana, it had subcontracted the bulk of its production to a plant in Canada. As a result, to maintain a level of quality, Herbal Snacks used the maximum amount of preservatives allowed under Canadian law for the imported product. The level was so high, reactions to the food were often reported. The levels were higher than those allowed by FDA regulations, but allowed per an agricultural import/export treaty between the United States and Canada. Several people who ate these Herbal Snacks required emergency room visits. A child in Idaho, with food allergy problems, even died. Her parents served her the snack, relying on the advertising, not knowing that some of the natural ingredients used in the Canadian-made product were dangerous to her. The Spongee family seeks your advice and opinion regarding: (1) Herbal Snacks’s advertising campaign. (2) The marketing and distribution campaigns both companies have engaged in. (3) The liability issues Herbal Snacks faces regarding their use of food manufactured outside of the United States. (Points : 30)
2. (TCOs A, E, F) John and Janet Fonda, siblings and actors, decide to retire after years on the road. They remember a town in New Jersey they were familiar with from their travels. From the internet, they learn of a farm a few miles outside of town that seems ideal. There is a great house and lots of land. The Fondas wish to convert the farm to a restaurant-hotel with a dinner theater. They contact the realtor by phone, and make arrangements to buy the parcel. The Fondas plan on travelling to New Jersey prior to the closing to look things over, but are unable to do so due to their touring schedule. The realtor, whose commission is technically paid by the proceeds to the seller, and who has a listing contract with the seller, advises the Fondas that she will handle everything. New Jersey custom, law, and practice does not require a purchaser of land to have an attorney.