Week 3 Case Study Exercise MARKETS AND MORALITY Case 1: "Xavier Conglomerate 1" Text: Xavier Conglomerate and Yolanda’s Doodad Works both make doodads. (A doodad is a special kind of widget–one that normally produces a bit more utility for its owner than the standard widget.) With the best current technology available, it costs $8 to make a doodad (figuring all costs). Yolanda’s Doodad Works, which is a family-owned business that has been around for nearly 30 years, sells doodads for $10 each. Xavier Conglomerate is a multinational company that has just bought a small doodad company (Zeke’s Doodads) and made it into a subsidiary. Zeke’s Doodads had been losing market share to Yolanda’s Doodad Works, and was nearly bankrupt (so that it was a bargain for the acquisition-hungry international giant, Xavier Conglomerate). The reason that it was losing market share was that it was not sufficiently efficient to make the doodads for $8. Its technology was several years out of date. The best it could do was to make them for about $8.75, and more often closer to $9.25. It could then either sell them for $10 and have a much smaller profit margin than Yolanda’s Doodad Works (with all that this entails about access to capital, research and development, etc.), or it could sell the doodads at a higher price and risk losing market share to Yolanda’s. The former CEO of Zeke’s had tried both strategies, and each strategy seems to be an express elevator to bankruptcy. Xavier’s new VP of doodads–eager to earn prestige within the company–hits on a novel business plan, one that promises to make the doodad subsidiary profitable within 4 or 5 years. The subsidiary had been operating at a loss ever since it was bought. The former CEO of Zeke’s had been trying to stop operating at a loss. The new vice president of the Xavier’s doodad subsidiary (what used to be Zeke’s) has decided to think long-term. Instead of trying to return to profitability right away, she decides to lower the price for the doodads. She decides to CUT the price to $8.50. This would, of course, drive the subsidiary even further into the red. However, in order to keep up, it would force Yolanda’s to cut its price to the same level. Since Yolanda’s is a single-product company, its only source of profit would shrink dramatically. The Doodad Subsidiary of Xavier Conglomerate, however, had no problem with either access to capital or funds for research and development, since, while it was losing money, it was part of a very profitable conglomerate that could easily absorb the loss, provide any necessary capital, and fund a kick-ass research program. Even if Yolanda’s can hold on for the short term, in the long run, with no R & D budget and no access to capital, it will languish in the rapidly evolving world of doodad-production technology. Question: Has Xavier's acted unethically? Why or why not? Case 2: "Xavier Conglomerate 2" Text: Suppose we change the scenario a.

1. Week 3 Case Study Exercise
MARKETS AND MORALITY
Case 1: "Xavier Conglomerate 1"
Text: Xavier Conglomerate and Yolanda’s Doodad Works both
make doodads. (A doodad is a special kind of widget–one that
normally produces a bit more utility for its owner than the
standard widget.) With the best current technology available, it
costs $8 to make a doodad (figuring all costs). Yolanda’s
Doodad Works, which is a family-owned business that has been
around for nearly 30 years, sells doodads for $10 each. Xavier
Conglomerate is a multinational company that has just bought a
small doodad company (Zeke’s Doodads) and made it into a
subsidiary. Zeke’s Doodads had been losing market share to
Yolanda’s Doodad Works, and was nearly bankrupt (so that it
was a bargain for the acquisition-hungry international giant,
Xavier Conglomerate). The reason that it was losing market
share was that it was not sufficiently efficient to make the
doodads for $8. Its technology was several years out of date.
The best it could do was to make them for about $8.75, and
more often closer to $9.25. It could then either sell them for
$10 and have a much smaller profit margin than Yolanda’s
Doodad Works (with all that this entails about access to capital,
research and development, etc.), or it could sell the doodads at a
higher price and risk losing market share to Yolanda’s. The
former CEO of Zeke’s had tried both strategies, and each
strategy seems to be an express elevator to bankruptcy.
Xavier’s new VP of doodads–eager to earn prestige within
the company–hits on a novel business plan, one that promises to
make the doodad subsidiary profitable within 4 or 5 years. The
subsidiary had been operating at a loss ever since it was bought.
The former CEO of Zeke’s had been trying to stop operating at

2. a loss. The new vice president of the Xavier’s doodad
subsidiary (what used to be Zeke’s) has decided to think long-
term. Instead of trying to return to profitability right away, she
decides to lower the price for the doodads. She decides to CUT
the price to $8.50. This would, of course, drive the subsidiary
even further into the red. However, in order to keep up, it
would force Yolanda’s to cut its price to the same level. Since
Yolanda’s is a single-product company, its only source of profit
would shrink dramatically. The Doodad Subsidiary of Xavier
Conglomerate, however, had no problem with either access to
capital or funds for research and development, since, while it
was losing money, it was part of a very profitable conglomerate
that could easily absorb the loss, provide any necessary capital,
and fund a kick-ass research program. Even if Yolanda’s can
hold on for the short term, in the long run, with no R & D
budget and no access to capital, it will languish in the rapidly
evolving world of doodad-production technology.
Question: Has Xavier's acted unethically? Why or why not?
Case 2: "Xavier Conglomerate 2"
Text: Suppose we change the scenario a bit. Suppose that
instead of immediately cutting the price for doodads, the CEO
of Xavier decided to continue selling the doodads at $10.
However, in this scenario, the CEO of Xavier decides to invest
heavily in research and development (far more than Zeke’s can
afford to) in search of a Better Way to Make Doodads. Suppose
that the scientists at Xavier came up with a technological
breakthrough that could lower the production cost for a doodad
to $6. Once they implement this technology, they now sell the
doodads for $8. Yolanda’s cannot keep up–it tries in vain to sell
them for $8, but ends up losing money AND losing market
share, and eventually goes under.

3. Question: Has Xavier's acted unethically? Why or why not?
Case 3: "Xavier Conglomerate 3"
Text: Same scenario as in case 2, but with this twist: After the
new technology comes on line, Xavier decides to hasten the
demise of Yolanda’s by selling its doodads for $6 rather than
$8.
Question: Has Xavier's acted unethically? Why or why not?
Case 4: "The Travel Agent's Question"
Text:You work for the assistant VP for new technology at a
small airline. You boss has told you to look into a new
software system that is supposed to allow travel agents to make
airline reservations more quickly by giving them up-to-the
minute pricing information. Since your airline is a low price
airline, she thinks that this would be to the company's
advantage. She wants to find out whether it would be a good
idea to participate in this new system. Here's how the new
system works:
(1) All of the airline fares will report their fares into the
central data bank each day. This data bank will be connected to
a system that will allow any travel agent to make reservations
with any participating airline instantly.
(2) Once reported, the fare information for each airline can be
accessed by the travel agents (and, incidentally, by any
participating airline).
(3) The system will also accept "projected" fares. That is, you
can send the system information about what fares are planned,
but these prices can be "held" for a certain period of time before

4. going into effect. So the airline can tell the system that it is
planning to offer a certain price for a given flight, but it can
instruct the system not to offer that price until, say 3 months
from now. For instance, you could tell the system that you will
offer a $200 round trip fare from Detroit to Miami, but not to
sell any tickets at that price until April 1.
(4) Even after the projected airfares have been reported to the
central database, they can still be changed by submitting a
request to the central system. Thus, if the airline decides to
cancel the 200 projected airfare to Miami, it can do so at any
time up until the end of the “holding period.” So long as this
change is made before the end of the “holding period,” the
original “projected” fair would never be offered to customers.
As you can see, this system offers a number of options that
seem to allow for a great deal of flexibility in pricing. Your
boss suspects that it could considerably increase your
company's profit picture. But before signing on, she wants your
opinion.
Question: What should you tell your boss?
Case 5: "Cut-Rate Widgets"
Text: The retail store you manage has a policy of not being
undersold. You sell, among other things, Brand X widgets.
They cost you 8 dollars each from the Brand X Widget
company. You sell them for 10. The local discount store,
which is part of a large chain that can negotiate better prices
from Brand X, runs a sale of Brand X widgets for 7 dollars.
Your advertised policy suggests that you should match that
price. However, doing so would mean that you would be selling
something for less than what it cost you.
Questions:

5. 1. Would this count as predatory pricing or "dumping"? (If the
answer is “it depends,” then on what does it depend?)
2. Would this be unethical? Why or why not?
Case 6: "Frida's Fabricating"
Text: Frida’s Fabricating is a small company that makes,
among other things, steel tubes that other companies use as
components in their own products. Frida’s supplies a lot of
these tubes to Oscar’s Office
Solution
s, a maker of office furniture, which uses them to make legs for
office chairs and desks. The crash of the dot-com bubble has
been a problem for Oscar’s, since it had done quite a bit of
business selling office furniture to small start-up companies.
Facing its fifth straight quarter of losses, and with the creditors
closing in, Oscars sends a sales rep to Frida’s. The rep meets
with the head of purchasing at Frida’s and says the following:
“Look, we’ve been a good customer to you, and now it is time
for you to repay the favor. We need some business, and as I
look around your office, it seems to me that you could use some
of what we sell.” The purchasing rep for Frida’s replies, “I’m
really sorry to hear about your troubles; as you know, we have

6. tried to be helpful in setting up favorable payment schedules for
you guys on the last few shipments of steel tubing. But I’m
afraid that we have our own budget problems, and we really just
do not need any new office furniture at this time.” When the
Oscars’s rep reports this to the CEO at Oscar’s, she fires off a
terse e-mail to the CEO at Frida’s. It says, “Look, if you we
don’t have an order for some office furniture from you by the
end of the week, I’m going to instruct my purchasing
department to find a new source for metal tubing.”
Question: Was it ethical for the CEO of Oscar's to do what she
did? Why or why not?
Case 7: "Handbags And The Power of The Price"
Text: Larson's Leather produces women's handbags and other
fashion accessories made of leather and suede. It sells its
merchandise to department stores and independent leather goods
specialty shops. The specialty shops account for about 30% of
Larson's total sales. Unfortunately, however, these shops have
been facing stiff competition from the department stores. Since
the department stores are bigger, their average overhead costs
are lower for any good that they sell, including the goods they

7. buy from Larson's. This gives them a competitive advantage. In
addition, a lot of the department stores are discount stores that
sell at much lower profit margins than the specialty stores. This
competition is one factor that has caused many of the specialty
stores to go out of business recently. Larson's has considered
trying to sell more of its products to department stores in order
to make up for the loss in sales volume, but Lars Larson,
founder and CEO of Larsons, refuses to go too far in this
direction. As Lars puts it, "Those specialty stores helped us get
our start. They were selling our stuff way before the department
stores would touch it. We're not going to just cut and run on
business partners that have been vital to our own success."
Lars prepares an email to the purchasing agents of all of the
discount department stores that carry his company's
merchandise. It reads, in part, "We are concerned that some of
the retailers who carry our products are charging prices that are
inconsistent with Larson's image as a maker of quality handbags
and other products. We are also concerned that these low prices
are having a detrimental effect on the specialty stores which
also carry our products. We believe that it is necessary to
continue to sell our products through these specialty stores in
order to maintain our products' image as high-end,
sophisticated, 'boutique' merchandise. Therefore, we have
enclosed a list of our merchandise which includes minimum
retail prices. Stores which fail to comply with these minimums

8. will no longer be eligible to purchase our merchandise."
Questions
1. What do you think of Lars Larson's motives? Are they
ethical?
2. Has Larson acted on those motives in an ethical way? Why or
why not?
3. Would there have been a better way for Lars to handle this
situation?
Case 8: "Supply, Demand, And Fluff Cakes"
Text: Curtis Adams couldn't figure out why his company wasn't
selling more of its hot new product. Its new snack food, Fluff
Cakes, were all the rage at the local coffee shops. They had
even been favorably mentioned in the local paper's "local
living" section. Curtis was in charge of the sales division of
Associated Bakeries, which produced pastry and other dessert
and snack items and sold them throughout the state. Many of the
company's products were sold by grocery stores; some were sold
in convenience stores and the "food pantries" of gas stations.
But the Fluff Cakes had gone upscale. They were a big hit with

9. the cappuccino and espresso demographic, and were mostly sold
at trendy cafes and coffee shops. But as popular as the Fluff
Cakes seemed to be, Curtis was surprised to see that the overall
sales were a lot lower than he had expected. This was especially
disappointing because the company, hoping to cash in on what
seemed to be a boom in interest in the Fluff Cakes, had geared
up to double its production to meet the demand that it had
anticipated. But while the demand for the cakes has increased,
it was still far short of the capacity to supply it.
Although Curtis was not a big fan of fancy coffee, he decided to
stop in at a local Café Bueno to have one of the cakes and a cup
of coffee and just think about the situation. When he looked at
the price list, he had to do a double-take. The café was charging
what seemed to Curtis to be an outrageous price for the Fluff
Cakes. He saved his receipt for future reference (after laughing
off the idea of claiming his snack as a "research expense") and
headed back to the office.
Curtis realized that the coffee shops had a lot of overhead
relative to sales volume, so it made sense that the markup on the
Fluff Cakes was going to be larger than it would have been if
they were being sold in grocery stores. (The company had
decided to sell Fluff Cakes only to cafes and similar
establishments rather than to grocery stores, so as to encourage
the perception of Fluff Cakes as a more sophisticated desert
rather than “just a snack.” This decision did not please the

10. grocery stores, who wanted in on the Fluff Cake craze.) But
even taking that into account, the markup just seemed too high.
After a bit of checking (and several more Fluff Cakes), Curtis
determined that all of the cafes in town were charging similar
prices for the Fluff Cakes. He suspected that, given all the hype
about them, the demand was sufficiently strong for them that
they could sell a lot more if the price were lower. After
obtaining a list of all of the stores selling Fluff Cakes, Curtis
wrote them a letter in which he told them, "We are happy that
our Fluff Cakes have proven so popular among your customers.
We attribute at least part of this popularity to the trendy image
they have gained as a result of being sold in coffee shops rather
than grocery stores. However, we must insist that you cut your
prices on Fluff Cakes to a more reasonable level. We understand
that you need to make a reasonable profit, but we need to
increase our sales volume and we cannot do that if businesses
dealing in our products keep the retail prices so high. We will
cease to sell Fluff Cakes to any business that continues to
charge the public more than $2.00 for a Fluff Cake."
Questions
1. Is there anything ethically problematic about Curtis's letter?
If so, what?

11. 2. Can you think of other alternatives that Curtis might want to
consider?
Case 9: "Gas Gouging?"
Text: (This case is based on an actual experience of Dr. Noggle
in the summer of 2003.) On the Nevada leg of a road-trip from
Michigan to California, the car needed fuel. Sara checked the
map to locate the next town on the highway through this
sparsely populated, semi-desert section of Nevada. In the next
60 miles, Elko was the only place to get gas. When they reached
this town of 17,000, Robert took the exit. At the intersection of
the exit ramp and the main street, they saw a Chevron station.
Although its proximity to the exit ramp made it very tempting,
the price of gas there was more than a 33% more expensive than
it was at their last fill-up. This seemed high, even for the high
desert. No other gas station was in sight, though they could see
that there were many businesses about half a mile down the
main street. They drove toward them and found several other
gas stations, among them a Conoco station where they filled
their tank for only about 5% more than they had paid at their
last fill-up (and about 20% less than the Chevron station by the

12. exit). (The grade and octane of the fuels were identical, by the
way.)
Questions
1. Was the Chevron station engaging in price-gouging? Why or
why not? Was its pricing unethical?
From Computer Security Basics...
Chapter 3: critique the “Hints for Picking Passwords” and
explain why most users wouldn’t follow the listed guidelines.
Chapter 3: List the pros and cons of federated identity
management.
(Document must contain 1 and ½ page length. Submit it on time
and plagiarize free document please.)
APA Format and References must be in APA format.