- Jane should confront senior management to question the new policy of reducing inventory to rock bottom levels. - She understands the company's goals of expansion and attracting new investors but warns the policy could lead to lost sales and operations problems. - Jane offers to discuss alternative policies that ensure solid returns each year to attract investors while maintaining production and customer satisfaction.

1. How the Chips Fall
Solution of the case
 Jane should confront senior management and question the wisdom of the policy
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2. How the Chips Fall
Candidate: Rodrigo Fernández Vargas
St. Gallen University
MBA Programme
Admission´s Interview
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3. How the Chips Fall
Solution of the case - Summary
 Jane should confront senior management and question the wisdom of the
policy.
 She should make it clear that she understands the new objective of the
company (expansion) and therefore the reason of introducing the new
policy (attract investors).
 However, as production manager, she should express her point of view and
explain the consequences of introducing the new policy. She was hired to
improve production and help the company reach better results, so part of her
job is to advice and warn senior management about any changes in the areas
she is directly responsible for.
 Jane would have to show, as detailed and clear as possible, that the new policy
leads to lost in sales at year end and operations problems associated with
a low inventory situation. Furthermore, they could carry additional negative
consequences to the company.
 Jane would have to list the problems she has identified and suggest that the
new policy could be perhaps good in the short term but not beneficial in
the long term. The company should focus on the long term benefits.
 Jane should discuss with senior management other ideas for policies which
will lead to solid return on investments each year in order to attract new
investors.
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4. How the Chips Fall
Stakeholders
Shareholders/
Investors
Employees
Clients
Mr. Potato Chip
Company
Managers/
Suppliers
Board of directors
JANE
(DILEMMA)
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5. How the Chips Fall
The Company´s position
WHAT?
HOW?
HOW?
Expand into new
markets
Attract new investors
Produce solid returns
on investments
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6. How the Chips Fall
The new policy
Reduce inventory to a
rock bottom level by
end of the company´s
fiscal year.
With lower inventory,
less money will be tied
up
There will be more
money to pass on to
stockholders
THE INVESTORS
THE COMPANY
NEEDS
WANT
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7. How the Chips Fall
Assumptions
 I assume that Jane, as production manager and therefore an important part of
the company's management, knows that the company has decided to expand
into new markets to assure a competitive advantage. In this sense, I assume
she is also aware that in order to succeed, Mr. Potato Chip will need new
investors willing to support the expansion with their capital and
consequently, the company will need to show they are capable of producing a
solid return on investment.
 I assume that Jane understands the importance of attracting new investors
and that they will only come if they can make the most of their investments.
 On the other hand, as production manager, she knows the capacity of
production and its limits. Her current position and experience give her
the authority to suggest and express opinions when it comes about production
and inventory.
 I assume Jane cares about the future of the company and that she has it
clear that if the company succeeds, she would also do so. Therefore, she
wants to help in improving the business´ performance.
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8. How the Chips Fall
Jane´s appreciation of new policy
NEW POLICY
CONSECUENCES:
EFFECTS :
Reduce inventory to a
rock bottom level by end
of the company´s fiscal
year.
Inability to meet total
customer demand. It will
take long to get the
process back to normal.
1. Lost sales
2. Operations
problems
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9. How the Chips Fall
Jane´s appreciation of new policy
Lost sales
Operations problems
Inability to meet total customer
demand:
After
reduction
of
inventory,
production will have to grow very
fast to satisfy the demand:
 Clients (Supermarkets): they will
search for new chips suppliers.
 Suppliers: May not have enough
raw material in the moment of high
demand or may not be flexible
(special price may not be granted
due to unbalanced demand of raw
material).
 Final Customers: they could buy
from
another´s
company
or
substitute the product (instead chips
choose pop-corn)
 New competition: company's could
take advantage of the shortage and
offer their products.
 Investors: It will be difficult to have a
solid return on investments in the
upcoming year due to the loss in
sales.
Two main
problems
 Production: need to work overtime,
machines working above limits, not
reaching
deadlines,
limited
personnel, space, machines, etc.
 Inventory management: Extra work
(organization and planning) is
required to reduce inventory and
then get it back to normal
 Clients (Supermarkets): To whom
sell the available products when
demand is high and inventory low.
Unsatisfied/disappointed clients.
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10. How the Chips Fall
Jane's ideas to increase profitability which will lead to solid return on investments
Improve
inventory
management
Enhance
production
process
New marketing
campaign
 Reduce cost of inventory
 Reduce cost of production
 Increase sales volume
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