Project 5: Managing a Global Business

Norms and Nations

Notice: Contains Confidential Information

Colossal Corporation maintains a subsidiary in Serafini, a small country in Eastern Europe.

This subsidiary is incorporated in the state of Delaware as New Brand Design, Inc. (NBD),

a company that designs, brands, and manufactures innovative electronic products and

markets and distributes them for resale across the globe. NBD has been admitted to

conduct business in Serafini.

NBD’s executive board is composed of ten members from three different countries,

including a vice president of design, a vice president of marketing, and a vice president of

manufacturing. Due to recent conflicts among the board members, communication among

them has been less than efficient, and they are regularly blaming each other for mistakes

made by NBD.

The design vice president's staff originally proposed two alternative materials for laptop

cases that are packaged and sold with certain high-end laptops manufactured by NBD,

such as its best-selling product, the Dualplex 360: real leather (pig skin) and faux leather

made from a synthetic material (polyurethane). Both laptop cases were very similar in

appearance, although the real leather case was a little heavier than the faux leather case.

Both cases could be sourced from an established supplier in China, with whom the design

VP had a long-term relationship. The marketing VP evaluated the cost of the two cases

from this Chinese supplier and decided that he would go with the faux leather case

because it was available at a 20 percent lower cost in comparison to the real leather case.

An initial order of 500,000 faux leather cases was placed with the Chinese supplier, and

within about a month, the shipment of cases arrived at NBD's South African facility,

where the laptops were assembled and packaged for sale all over the world. When the

Course Resource

newly delivered cases were inspected by NBD's product team in South Africa, they

discovered that more than two-thirds of the cases were actually made of real leather.

After NBD's VP of manufacturing contacted the Chinese supplier to complain about the

cases being "out of spec," he was told that it was not an error—the supplier was aware of

the fact that over 300,000 cases in the shipment were made out of real leather. After

some persistent questioning, the supplier revealed that as a result of an order cancellation

from another customer, they had suddenly found themselves overstocked with an

inventory of pig leather. Rather than let this extra inventory go to waste, the Chinese

supplier decided to use up that inventory toward fulfilling a major part of NBD's order!

The Chinese supplier was not willing to apologize for their decision to ship over 300,000

real leather cases to NBD without first obtaining approval for the switch. In fact, the

supplier did not feel that NBD had any grounds to complain because the supplier was

willing to accept the lower payment as per NBD's original order of faux leather cases.

Instead of insisting that the supplier take back the 300,000 or so cases that were out of

spec, the manufacturing VP accepted the entire shipment and then conveyed this news to

the marketing VP in an internal company memo.

Upon receiving the memo, the marketing VP realized it was too late for the real leather

cases to be returned to the supplier in China, and he would have to make the best of out

of an undesirable situation. He made a decision that the faux leather cases would be

packaged for laptops shipped to Europe and North America, given that they were lighter in

weight. The real leather cases would be used for laptops packaged and sold in Africa and

Asia. Previous marketing surveys conducted by NBD had revealed that consumers in the

West preferred lighter laptop cases, while consumers in Africa and Asia equated heavier

cases with better quality and longer life. Of course, the marketing VP forgot that the

advertising materials and product inserts for the laptop had already been printed in

multiple languages and all of this product literature stated that the laptop case was made

of synthetic material.

The laptop cases were shipped to retail outlets, and within a couple of weeks, the

marketing VP had a potential crisis on his hands. Tech writers and product reviewers from

two well-known South African and Kenyan newspapers had called and emailed to inquire

about what they rightly suspected was a pig leather case and not the synthetic material

that was specified in NBD's product literature. They informed the marketing VP that if

they revealed the truth about the origins of the case material in their reviews, it would

have a tremendously negative impact on NBD's sales in Africa and Asia, where a

significant number of consumers opposed the use of pigskin in products on religious

grounds. They wanted to know how the company was going to resolve this issue before

they went to press.

The marketing VP contacted the manufacturing and design VPs to find out what they

should do to get the company out of this potential crisis. After a lot of finger-pointing and

talking past each other, the three individuals arranged a conference call with Colossal’s

CEO and brought the CEO up to date. The CEO promised the three VPs that her

international task force would research and address the issue.

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