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Company Background
Sonic Records, a market-leading recording studio and production house, had witnessed declining demand for music CD’s. Five years ago, Sonic experienced record-breaking revenues totaling over $ 15 billion. However, over the past few years, CD burning, international piracy, and a shift in consumer preferences had reduced revenues by more than 30 percent. A recent market survey at universities across the nation (a key demographic for Sonic Records) revealed the over 80 percent of student had not purchased a CD in the last seven years. According to the survey, student either burned friend’s copies of CDs, illegally, downloaded music from private websites, or purchased tracks legally from online music portals for download to digital music players.
Although the past few years’ declining sales have been disheartening, some positive advantages in the fight against international piracy recently bolstered music revenues across the industry. The RIAA (Recording Industry Association of America) initiated lawsuits against hundreds of individuals and pirate file-sharing websites. The results so far have been positive. Fear of litigation has deterred illegal download volume. Further, the exceptionally successful launch of a number of on-line sites selling legal music downloads had demonstrated strong consumer demand. In fact, a recent computer company’s on-line music store launch results in astounding sales. According to the computer firm’s CEO, “We has hoped to sell a million songs in the first six months, but we did that in the first six days.”
Sonic Records, having experienced tremendous success in the recording and music distribution industry over the past 30 years, realized that the rule of the game were changing. No longer would music be distributed solely through the traditional retail store channel. Consumers desired instant delivery of music online and expected a selection of thousands of artists’ work at their fingertips. Further, consumer expected this music to be portable. Today’s listeners didn’t want to be constrained to the physical limitations of a CD. They wanted digital files that could be easily and legally transferred from computer to portable music player to home receiver interchangeably. Although downloads accounted for only 2 percent of music sales in 2004, industry analysis predicted a fundamental change in music delivery methods. Some estimated that up to 80 percent of all music sold might be delivered online in the next decade. Sonic executives understood that their business model needed to adapt quickly, lest they be left behind by other firms who had correctly anticipated this market shift.
In response, Sonic Recorded formed a subsidiary company named e-sonic. E-sonic would be responsible for creating an online music store capable for competing with established players in the industry. Key executives for Sonic Records were chosen to lead the new company. E-Sonic’s mission was to create the world’s leading online music store; ensuring Sonic Records’ prominence in the record industry’s future.
FIRM OBJECTIVES
Backed financially by Sonic Records, a recording industry mogul, e-sonic possessed the resources and reputation necessary to build a world class company. The market recognized this. Just last month, e-sonic conducted a small, but very successful IPO. Although e-sonic had yet to even launch their outline music store, the reputation of its parent company, Sonic Records, bolstered demand for the new issue. E-sonic founders decided the firm should retain ownership of the majority of the shares, which could later be used as incentives for employees crucial to the organization’s long-term success.
E-sonic’s key business objective, as dictated by its parent company, Sonic Records, was to develop the world’s leading online music portal. Initially, e-sonic’s success would be measured by its ability to capture market share form competitors. Currently, two major players dominated the online music industry. These firms recognized the changing industry trends early and secured more than 85 percent of annual download market share, e-sonic needed to target there current customer while attracting newcomers to the world of online music.
Although the idea of offering digital music to millions of customer might initially seem complex, the formula for success in the industry has proven relatively simple. Superior marketing, a robust selection of artist, and a user friendly wed interface helped current firms establish their market leadership.
E-sonic executives, with decades of experiences in the recording industry, help established relationships with all of the major label and most of the smaller ones, affording them an advantage in the music offerings. However, as recording industry executives e-sonic’s management had little experience in software development. Further, although marketing expertise was important for success in the traditional music industry, company management had no experience with online marketing or marketing initiatives tailored to their new, tech savvy, customer base. Located in Los Angeles, e-sonic hoped to recruit the best and brightest of the music and software development industries. Further, they hoped to create a performance based culture where employees felt rewarded for their contributions.
Realizing the challenging task ahead of them, e-sonic executives had the foresight to recognize that despite their years of experience in the traditional recording business; outside consultants might offer them salient insights. Their new venture would require hiring employees I all business discipline, especially those with the marketing and technical skilled necessary to help establish e-sonic as the world’s pre-eminent online music store. In addition, e-sonic management understood well the importance of establishing a sound compensation system right from the firm’s inception. They knew that an internally equitable and market competitive compensation strategy could help e-sonci achieve their business objectives, but they had no expertise in this area. In response, the e-sonic’s management team has hired you as their compensation consulting staff. Congratulations and good luck with your new client!
Requirements of submission: Each section of the final project must follow these formatting guidelines: 5–7 pages, double spacing, 12-point Times New Roman font, one-inch margins, and discipline-appropriate citations.
“PROJECT OUTLINE”
Strategic Analysis Outline:
1. Executive Summary (Concisely conveys the project objectives and main findings. The executive summary is completed last, but included first in the strategic analysis.)
· The executive summary begins the strategic analysis, offering a concise explanation of the key finding your consulting team discovered while researching e-sonics external market environment and internal capabilities. ( one to two pages)
2. Strategic Analysis
A. Identification of e-sonic’s industry based on the North American Industry Classification System (NAICS)
B. Analysis of e-sonic’s external market environment
· These web site should be helpful for this section. http://www.census.gov/epcd/naics02/ ( Section A)
· www.bls.gov www.cencus.gov www.Commerce.gov www.wsj.com www.hoover.com www.businessweek.com ( Section B)
C. Analysis of e-sonic’s external market environment
1. Industry Profile
· The industry profile assessment highlight basic industry characteristic such as sales volume, the impact of relevant government regulation on competitive strategies and the impact of recent technological advancement on business activity.
2. Competition
· The analysis of competition highlight e-sonic competitors, paying special attention to specific factors that make competitors successful.
3. Foreign Demand
· The foreign demand analysis reports levels of foreign demand e-sonic may experience for their products or services.
4. Long-Term Industry Prospects
· This profile describes projections related to the long-term outlook for e-sonic’s industry.
5. Labor-Market Assessment
· This profile describes key labor market characteristics such as current labor supply and future trends influencing the availability of qualified employees for e-sonic. Many government website will assist your team with the development of this profile. You will find BLS and the online Occupational Outlook Handbook especially useful for projecting long-term employment supply.
D. Analysis of Internal Capabilities
1. Functional Capabilities
· Functional capabilities for a firm include manufacturing, engineering, research and development, operations, management information systems, human resources and marketing. Your consulting team should consider what functional capabilities will prove most crucial to e-sonic’s success. This information will assist your team in developing compensation strategies in line with e-sonic;s business objectives.
2. Human Resource Capabilities
· This assessment highlights the current strengths and weaknesses of e-sonic’s labor force while focusing upon future recruitment and retention strategies. An understanding of e-sonics human resources capabilities will allow your team to design compensation strategies consistent with talent acquisition and retention initiatives.
Case Study Nike’s CSR Challenge
1. Discuss the challenges regarding corporate social responsibility that companies in the apparel industry face in their supply chains around the world.
2. Discuss the meaning and implications of the statement by a Nike representative that “ consumers are not rewarding us for investments in improved social performance in supply chains.”
3. What does it mean to have an industry open- systems approach to social responsibility? What parties are involved? Who are the stakeholders?
4. What is meant by “ leadership beyond borders”?
5. Is it possible to have “ a compatibility of profits with people and planet”? Whose responsibility is it to achieve that state?
6. Research Nike’s CSR actions since this time frame and why it has earned the reputation as one of the world’s foremost organizations in sustainability.
Complete your answers in a Microsoft Word Document and submit your case study to the Assignment 2 assignment area – Minimum 2 pages, Calibri 11 point, double spaced.
Reread The Domtar Case Study (P.1-3) From Chapter 1. Answer Case Analysis Question 1 On Page 207. profile raadee1490 Main
Domtar is the third largest producer of uncoated free sheet paper in North America. In the decade prior to 1996, Domtar had one of the worst financial records in the pulp and paper industry. At that time it was a bureaucratic and hierarchical organization with no clear goals. Half of its business 12was in “trouble areas.” Moreover, the company did not have the critical mass to compete with the larger names in the field. The balance sheet was in bad shape, and the company did not have investment-grade status on its long-term debt.
In July of 1996, Raymond Royer was named president and chief executive officer (CEO). This was quite a surprise because, although Royer had been successful at Bombardier, he had no knowledge of the pulp and paper industry. Many believed that to be successful at Domtar, you needed to know the industry.
Royer knew that to be effective in any competitive industry, an organization needed to have a strategic direction and specific goals. He decided to focus on two goals: return on investment and customer service. Royer told Domtar executives that to survive, they needed to participate in the consolidation of the industry and increase its critical mass. The goal was to become a preferred supplier. The competitive strategy had to focus on being innovative in product design, high in product quality, and unique in customer service. At the same time, however, it had to do everything to keep costs down.
When Royer took over at Domtar, he explained to the executive team that there were three pillars to the company: customers, shareholders, and ourselves. He noted that it is only “ourselves” who are able to have any impact on changing the company. He backed up his words with action by hiring the Kaizen guru from Bombardier. Kaizen, a process of getting employees involved by using their expertise in the development of new and more effective ways of doing things, had been very effective at Bombardier. Royer saw no reason why it would not be successful at Domtar. Royer also knew that for the new strategic direction and focus to be successful, everyone needed to both understand the changes being proposed and have the skills to achieve them. The success of any change process requires extensive training; therefore, training became a key part of Royer’s strategy for Domtar.
This last point reflects the belief that it is the employees’ competencies that make the difference. The Domtar Difference, as it is called, is reflected in the statement, “tapping the intelligence of the experts, our employees.” Employees must be motivated to become involved in developing new ways of doing things. Thus, Domtar needed to provide employees with incentives for change, new skills, and a different attitude toward work. The introduction of Kaizen was one tactic used to achieve these goals.
Training at Domtar went beyond the traditional job training necessary to do the job effectively and included training in customer service and Kaizen. This is reflected in Domtar’s mission, which is to
- • meet the ever-changing needs of our customers,
- • provide shareholders with attractive returns, and
- • create an environment in which shared human values and personal commitment prevail.
In this regard, a performance management system was put in place to provide a mechanism for employees to receive feedback about their effectiveness. This process laid the groundwork for successfully attaining such objectives as improving employee performance, communicating the Domtar values, clarifying individual roles, and fostering better communication between employees and managers. Tied to this were performance incentives that rewarded employees with opportunities to share in the profits of the company.
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Has Royer been successful with his approach? First-quarter net earnings in 1998 were $17 million, compared with a net loss of $12 million for the same time period in 1997, his first year in office. In 2002, third-quarter earnings were $59 million and totaled $141 million for the year. That is not all. Recall his goal of return on equity for shareholders. Domtar has once again been included on the Dow Jones sustainability index. Domtar has been on this list since its inception in 1999 and is the only pulp and paper company in North America to be part of this index. To be on the list, a company must demonstrate an approach that “aims to create long-term shareholder value by embracing opportunities and managing risks that arise from economic, environmental, and social developments.” On the basis of this, it could be said that Royer has been successful. In 2003, Paperloop, the pulp and paper industry’s international research and information service, named Royer Global CEO of the year.
It was Royer’s sound management policies and shrewd joint ventures and acquisitions that helped Domtar become more competitive and return their long-term debt rating to investment grade. However, joint ventures and acquisitions bring additional challenges of integrating the new companies into the “Domtar way.” Again, this requires training.
For example, when Domtar purchased the Ashdown Mill in Arkansas, the management team met with employees to set the climate for change. The plan was that within 14 months, all mill employees would complete a two-day training program designed to help them understand the Domtar culture and how to service customers. A manager always started the oneday customer focus training, thus emphasizing the importance of the training. This manager returned again at lunch to answer any questions as the training proceeded. In addition, for supervisor training, each supervisor received skill training on how to effectively address employee issues. How successful has all this training been? Employee Randy Gerber says the training “allows us to realize that to be successful, we must share human values and integrate them into our daily activities.” The training shows that “the company is committed to the program.” Tammy Waters, a communications coordinator, said that the training impacted the mill in many ways and for Ashdown employees it has become a way of life.
The same process takes place in Domtar’s joint ventures. In northern Ontario, Domtar owns a 45 percent interest in a mill, with the Cree of James Bay owning the remaining 55 percent. Although Domtar has minority interest in the joint venture, training is an important part of its involvement. Skills training still takes place on site, but all management and teamwork training is done at Domtar’s headquarters in Montreal.
Royer’s ability to get employees to buy into this new way of doing business was necessary for the organization to succeed. Paperloop’s editorial director for news products, Will Mies, in describing why Royer was chosen for the award, indicated that they polled a large number of respected security analysts, investment officers, and portfolio managers as well as their own staff of editors, analysts, and economists to determine a worthy winner this year. Raymond Royer emerged a clear favorite, with voters citing, in particular, his talent for turnaround, outstanding financial management, and consistently excellent merger, acquisition, and consolidation moves as well as his ability to integrate acquired businesses through a management system that engages employees. Of course, that last part, “a management system that engages employees,” could be said to be the key without which most of the rest would not work very well. That requires training.
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Swift, A. “Royer’s Domtar turnaround.” Financial Post (October 6 2003), FP3. Allen, B. 2003. The Domtar difference. www.pimaweb.org/conferences/june2003/BuddyAllen.pdf. Anonymous (January 2001) Partnership between Domtar and Cree First Nations brings results. www.diversityupdate.com. Richard Descarries, Manager, Corporate Communications and External Relations, Domtar, personal communication (2004).
Review the Domtar case from Chapter 1, and answer the following questions:
- a. In the implementation of Kaizen, what groups of employees are likely to need training? How should the trainees be organized? Think of this issue from a training design perspective and from a training content perspective.
- b. For the type of training envisioned, what are the learning objectives? Write these objectives in complete form.
- c. For each group of employees that will need training, what are the organizational constraints that need to be addressed in the design of the training? What design features should be used to address these constraints? Be sure to address both the learning and transfer of training issue