References
Hisrich, R.D., Peters, M.P., & Shepherd, D.A. (2013). Entrepreneurship (Laureate Custom Education). New York: McGraw-Hill Irwin.
THE CASE METHOD
What Are Cases?
Cases, such as the ones used in this course, are written descriptions of actual events, circumstances, or situations, which confront decision-makers in organizations. The cases have been developed from information gathered from both government agencies and private industry. The facts presented in these cases are based on real-life situations. They are as complete as is reasonable with no essential fact deliberately omitted. The case method stimulates interest through realism and is designed to make the learning process one of active participation rather than passive observation.
Objectives of the Case Method
In effect, the essence of the case method is that “wisdom cannot be told.” The learning process if it is to be effective does not depend on the process of “telling”. Rather, it calls for something dynamic to occur for the learner.
The case method does not require students to find well-known answers to problems, nor does it require students to develop “yes” or “no” answers to situations. Instead, it encourages participants to think independently; to recognize unfamiliar problems and points of view; and to value resolving individual and personal differences and conflicts in the interest of the overall goals of a group or organization.
Other General Objectives of the Case Method
1. To increase each individual's capacity to work effectively with superiors, colleagues on the same level, and subordinates.
2. To develop effective skills of cooperation.
3. To develop a point of view, outlook, or frame of mind that helps one become a more understanding, useful, and responsible member of an organization.
4. To develop awareness that, in a particular problem situation, the general principles, rules, and axioms of management cannot always be followed. Emphasis, instead, is placed on developing the capacity to discern and evaluate relevant facts and relationships in a complex problem situation.
5. To learn that there may be several effective strategies for the same situation; there's more than one answer.
The participant becomes a sharper observer, asks searching questions, probes for the real issues, evaluates the effects which various courses of action would set in motion, overcomes communication barriers, and comes to grips with the problem by making and altering his/her own decisions as the case progresses. Making decisions, analyzing, comparing, and making recommendations are critical tasks.
Finally, the case method approach helps a person see the value in becoming more articulate and fluent: It also emphasizes the value in standing one's ground in defending one's views in analysis of management situations.
Preparing a Case
The first step in preparing a case is to master the facts. As in real life, irrelevant descriptive material is often pre ...
1. References
Hisrich, R.D., Peters, M.P., & Shepherd, D.A. (2013).
Entrepreneurship (Laureate Custom Education). New York:
McGraw-Hill Irwin.
THE CASE METHOD
What Are Cases?
Cases, such as the ones used in this course, are written
descriptions of actual events, circumstances, or situations,
which confront decision-makers in organizations. The cases
have been developed from information gathered from both
government agencies and private industry. The facts presented
in these cases are based on real-life situations. They are as
complete as is reasonable with no essential fact deliberately
omitted. The case method stimulates interest through realism
and is designed to make the learning process one of active
participation rather than passive observation.
Objectives of the Case Method
In effect, the essence of the case method is that “wisdom cannot
be told.” The learning process if it is to be effective does not
depend on the process of “telling”. Rather, it calls for
something dynamic to occur for the learner.
The case method does not require students to find well-known
answers to problems, nor does it require students to develop
“yes” or “no” answers to situations. Instead, it encourages
participants to think independently; to recognize unfamiliar
problems and points of view; and to value resolving individual
and personal differences and conflicts in the interest of the
overall goals of a group or organization.
2. Other General Objectives of the Case Method
1. To increase each individual's capacity to work effectively
with superiors, colleagues on the same level, and subordinates.
2. To develop effective skills of cooperation.
3. To develop a point of view, outlook, or frame of mind that
helps one become a more understanding, useful, and responsible
member of an organization.
4. To develop awareness that, in a particular problem situation,
the general principles, rules, and axioms of management cannot
always be followed. Emphasis, instead, is placed on developing
the capacity to discern and evaluate relevant facts and
relationships in a complex problem situation.
5. To learn that there may be several effective strategies for the
same situation; there's more than one answer.
The participant becomes a sharper observer, asks searching
questions, probes for the real issues, evaluates the effects which
various courses of action would set in motion, overcomes
communication barriers, and comes to grips with the problem by
making and altering his/her own decisions as the case
progresses. Making decisions, analyzing, comparing, and
making recommendations are critical tasks.
Finally, the case method approach helps a person see the value
in becoming more articulate and fluent: It also emphasizes the
value in standing one's ground in defending one's views in
analysis of management situations.
Preparing a Case
3. The first step in preparing a case is to master the facts. As in
real life, irrelevant descriptive material is often present and one
must sift through the data to determine the useful information.
The case method offers another similarity with reality:
sometimes crucial information is missing. In this instance,
personal experience and knowledge may need to be used or
additional information upon which to base the analysis may
need to be found. One then makes and explains assumptions
and perhaps defends these assumptions in front of others.
Outline of an Approach to the Case Method
1. Define the central issue (s).
2. Select pertinent areas for consideration.
3. Analyze the considerations and determine their relative
importance.
4. Investigate other possibilities.
5. Critique what was done, draw final conclusions, and make
recommendations.
Participating in a Case Discussion
The key to learning through participation in a case discussion is
to have reviewed and analyzed the case before the discussion
session. Assuming that all the participants are prepared, the
give-and-take discussion generated by the case method requires
the participant to be alert to the real, often hidden, issues in a
case.
To be successful, the case method requires the utmost in
personal and group participation. Students usually have
different backgrounds and bring different points of view to bear
4. on the problem or situation. By expressing different viewpoints
or by disagreeing with other students, the entire group can learn
and benefit from the discussion. Participants are encouraged to
speak freely with the understanding that individual opinions
must be respected. So students feel free to express their
opinions, the issues discussed in this course are “privileged.”
The Answer to the Case
It is unlikely that a student will be in a situation identical to the
one posed in a case. For this reason, there is no singular way to
approach the answer and the “answer” to a case problem is
usually only of academic interest.
Cases that illustrate concepts and principles that may help
students with problems encountered in the future have been
chosen. In this sense, the issues and ideas discussed by the
group are the only true answers. This is of far more value than
learning what happened to the person or organization after the
fact, or having the faculty member venture an opinion as to
what should have been done. Therefore, answers to the
problems in the cases are not provided. However, the faculty
member may occasionally find it helpful to summarize briefly
and review the main issues or conclusions reached at the end of
a case discussion.
Hisrich, R.D., Pete's. _ Entrepreneurship (Laureate Custom
Ed - ~ -_- ~ -- _ -~w-Hill In in.
Custom Create Edition
5. LAUREATE
EDUCATION INC
516
l
I Entrepreneursh ip _t ______ --·- ---- ·- ---------· ----------------
---- ------ ------ ---- -- --- ----------- --------------
CASE 7 GOURMET TO GO
CASE 7
GOURMET TO GO
INTRODUCTION
Today, many households have two incomes. At the end o:
the day the questions arise, "Who will cook?" or ''What do
I cook?" Time is limited. After a long day at work, fev
people want to face the lines at the grocery store. Often tre
choice is to eat out. But the expense of dining out or the
boredom of fast food soon becomes unappealing. Pizzz
or fast-food delivery solves the problem of going out b
does not always satisfy the need for nutritious, high-
quality meals. Some people prefer a home-cooked meal
especially without the hassle of grocery shopping, men-::
planning, and time-consuming preparation.
Jan Jones is one of those people. She is a hardwork-
ing professional who would like to come home to
home-cooked meal. She would not mind fixing it herself
but, once at home, making an extra trip to the store is a
major hassle. Jones thought it would be great to have the
meal planned and all the ingredients at her fingertips.
6. '"'"'""'""h;p, E;gh<h Ed;tioo I 517 -- ·- --- -- -·-----·-·-------·--·-
--·- ----- ---------·--- -~---- - ~---- ---- ---+·----· ..
496 PART 6 CASES
She thought of other people in her situation and realized
there might be a market need for this kind of service.
After thinking about the types of meals that could be
marketed, Jones discussed the plan with her colleagues
at work. The enthusiastic response led her to believe she
had a good idea. After months of marketing research,
menu planning, and financial projections, Jones was
ready to launch her new business . The following is the
business plan for Gourmet to Go.
EXECUTIVE SUMMARY
Gourmet to Go is a new concept in grocery marketing.
The product is a combination of menu planning and gro-
cery delivery; a complete package of groceries and recipes
for a week's meals is delivered to a customer's door. The
target market consists of young urban professionals living
in two-income households in which individuals have
limited leisure time, high disposable income, and a will-
ingness to pay for services.
The objective is to develop a customer base of 400
households by the end of the third year after start-up.
This level of operation will produce a new income of
about $120,000 per year and provide a solid base for
market penetration in the future.
The objective will be achieved by creating an
awareness of the product through an intense promo-
tional campaign at start -up and by providing customers
with first-class service and premium-quality goods.
7. The capital required to achieve objectives is $258,000.
Jones will invest $183,000 and will manage and own the
business. The remainder of the capital will be financed
through bank loans.
PRODUCT
The product consists of meal-planning and grocery shop-
ping services. It offers a limited selection of preplanned
five-dinner packages delivered directly to the customer.
The criteria for the meal packages will be balanced
nutrition, easy preparation, and premium quality. To en-
sure the nutritional requirements , Gourmet to Go will
hire a nutritionist as a consultant. Nutritional informa-
tion will be included with each order. The most efficient
method for preparing the overall meal will be presented.
Meals will be limited to recipes requiring no more than
20 minutes to prepare. Premium-quality ingredients will
be a selling feature. The customer should feel that he or
she is getting better-quality ingredients than could be
obtained from the grocery store.
MANUFACTURING AND PACKAGING
Since the customer will not be shopping on the prem-
ises, Gourmet to Go will require only a warehouse-type
space for the groceries. The store location or decor will
be unimportant in attracting business. There will be fewer
inventory expenses since the customer will not be choos-
ing among various brands. Only premium brands will be
offered.
It will be important to establish a reliable connection
with a distributor for high-quality produce and to main-
tain freshness for delivery to the customer.
8. As orders are processed, the dinners will be assembled.
Meats will be wrapped and ready for the home freezer. All
ingredients will be labeled according to the dinner to
which they belong. The groceries will be sorted and
bagged according to storage requirements: freezer, refrig-
erator, and shelf. Everything possible will be done to min-
imize the customer's task. Included in the packaging will
be the nutritional information and preparation instructions.
Customers will be given the option of selecting their
own meals from the monthly menu list or opting for a
weekly selection from the company.
FUTURE GROWTH
Various options will be explored in order to expand the
business. Some customers may prefer a three- or four-
meal plan if they eat out more often or travel frequently.
Another possibility might be the "last-minute gourmet";
that is, they can call any evening for one meal only.
Increasing the customer base will increase future
sales. Expansion of Gourmet to Go can include branches
in other locations or even future franchising in other
cities. With expansion and success, Gourmet to Go
might be a prime target for a larger food company to
buy out.
INDUSTRY
The Gourmet to Go concept is a new idea with its own
market niche. The closest competitors would be grocery
stores and restaurants with delivery services.
Of the 660 grocery stores in the Thlsa!Tulsa County
region, only two offer delivery service. They are higher-
priced stores and will deliver for $4, regardless of order
size. However, they offer no assistance in meal planning.
9. A number of pizza chains will deliver pizza as well as
fried chicken. There is also a new service that will pick
up and deliver orders from various restaurants . However,
518 I '""'P""'""h;p ~--~----~·--- --·------- ---- ·- -·-·- -·--·-----·--
----
Gourmet to Go would not be in direct competition with
these services because the meals available from them are
either of a fast-food type or far more expensive than a
Gourmet to Go meal.
SALES PREDICTION
The market segment will be households with an in-
come of at least $65,000 per year. In Tulsa/Tulsa
County, this will cover an area including over 16,600
households that meet the target requirements of income
EXHIBIT 1 Start-Up Expenses
Ad campaign
Ad agency*
Brochurest
Radio spots•
Newspaper ads§
Total
Pre-start-up salaries**
10. Nutritionist consulting
Misce llaneous consulting (legal, etc.)
Pre-start-up rent and deposits
Pre-start-up utilities and miscellaneous supplies
*40 hrs. @ $75/hr.
CASE 7 GOURMET TO GO 4:
with an age range of 24 to 50 years. By the end of.-..
third year, a customer base of 400 households will
developed (2.3 percent of the target market). A: •
growth rate of 2. 73 percent a year, the target m
of households should increase over three years
18,000.
FINANCIAL
Various financial statements are included in Exhibb
through 8.
$3,000
7,000
8,000
7,000
$25,000
16,000
11. 6,000
1,500
4,000
2,000
$54,500
120,000 brochures; printing, development, etc. @ $0.35/ea.
*4-week intense campaign: 20 spots/week (30 seconds);
$100/spot.
150 ads at an average of $1 00/ad.
**Jan Jones @ 3 months; clerks, [email protected] 2 weeks.
EXHIBIT 2 Capital Equipment List
Computers:
Apple, Macintosh Office System
3 Mac systems
Laser printer HP2300 series
Networking
Software
Total
Delivery vans, Chevrolet Astro
12. Food lockers and freezers
Phone system (AT&n
Furniture and fixtures
$3,000
1,000
2,000
3,000
$ 9,000
66,000
15,000
1,500
3,500
$95,000
I
'"'~'~'"C"""~, E;ghth ";"'"- ~ j - 5 JL
498 PART 6 CASES
EXHIBIT 3 Pro Forma Income Statement
14. Utilities 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
1,000 1,000 1,000
Insurance 600 600 600 600 600 600 600 600 600 600 600 600
General office 150 150 150 150 150 150 150 150 150 150 150
150
Licenses 200 0 0 0 0 0 0 0 0 0 0 0
lnterest6 310 310 310 310 310 310 530 530 530 530 530 530
Depreciation 7 ____ldl1 ____1,_ll1 ____1,_ll1 1,271 1,271
___1lli ___!dZ_! 1,271 1,271 1,271 1,271 1,271
Total operating
expenses 13,378 13,243 13,373 13,698 14,023 14,218 16,968
17,098 17,228 17,358 17,488 17,618
Profit (loss)
before taxes (12,478) (11,893) (11,123) (9,198) (7,273) (6,118}
(7,968) (7, 198} (6,428} (5,658} (4,888) (4, 118)
Less: Taxes 0 0 0 0 0 0 0 0 0 0 0 0 ----- ----- ----- ---- ----- ---- -
---- ---- ---- ---- ---- ----
Net profit (loss) (12,478) (11,893) (11, 123) (9, 198) (7,273) (6,
118) (7,968) (7,198} (6.428) (5,658) (4,888} (4,118)
<1lAverage unit sale for groceries is about $43 ,00, plus $10 .00
per week for delivery (Exhibit 1), making the monthly unit sales
per household (2 people) about
S2 12,00.
12lCost of goods sold-80% of retail grocery price, or $32.00 per
15. household per week ($170.00/month household) . (80% an
average margin on groceries .)
<3lSalaries and wages-Ms . Jones's salary will be $5
,000/month. Order clerks will be paid $1 ,300/month, and
delivery clerks will be paid $1 ,100/month. One
additional order clerk and delivery clerk each will be added
once sales reach I 00 households, and again at 200 households.
Salaries will escalate at 6%/year.
<•> Advertising and promotion-The grocery industry standard is
I% of sales. However, Gourmet to Go, being a new business,
will require more than that level;
5% of sales is used in this plan. (Special pre-start-up
advertising is covered with other start-up expenses.)
5lRent- 2,000/ft2 @ $10.00/ft? ; $1,667/month; escalate at
6%/year.
6l!:nterest-Loans on computer ($10,000) and delivery vehicles
($22,000 ea.) at 12.0%/year. (Delivery vehicles will be added
with delivery clerks.) (Debt service-
based on three-year amortization of loans with payments of y, at
the end of each of three years.)
'7lDepreciation-All equipment will be depreciated per ACRS
schedules: vehicles and computers-3 years; furniture and
fixmres-10 years.
I
-·" 52Li Entrepreneurship I -------~·------ ------ ------ ------------
--
CASE 7 GOURMET TOG
17. General office 450 450 450 450 450 450 450
lnterest6 1,280 1,940 1,720 1,720 1,410 1,190 970
Depreciation 7 6,910 6,910 ~ 6,910 7,493 7,493 7,493 7,.!E:
Total operating
expenses 58,680 67,947 69,662 71,627 75,520 76,275 77,030
78,o:=
Profit (loss)
before taxes (11,430) (13,947) (2,267) 9,373 12,230 18,225
24,220 29.9==
Less: Taxes 0 - -- --- --- --- --- ---
Net profit (loss) (11,430) (13,947) (2,267) 9,373 12,230 18,225
24,220
L____
<1lAverage unit sale for groceries is about $43 ,00, plus $10.00
per week for delivery (Exhibit I), making the monthly unit sales
per household (2 people)
$212,00.
<2lCost of goods sold-80% of retail grocery price, or $32.00 per
household per week ($138.00/month household). (80% an
average margin on groceries-
Progressive Grocer; April 1984; p. 94.)
<3lSalaries and wages-Ms. Jones's salary will be $5 ,000/month
. Order clerks will be paid $1,300/month, and delivery clerks
will be paid $1,100/month. O.Z
additional order clerk and delivery clerk each will be added
once sales reach 100 households , and again at 200 households.
18. Salaries will escalate at 6%/y=.
<4l Advertising and promotion-The grocery industry standard is
I % of sales. However, Gourmet to Go, being a new business ,
will require more than that I=
5% of sales is used in this plan. (Special pre-start-up
advertising is covered with other start-up expenses.)
<5lRent-2,000/ft.2 @ $8.00/ft.Z; 1,333 $! /month; escalate at
6%/year.
<6Jinterest-Loans on computer ($10,000) and delivery vehicles
($12,000 ea.) at 12.5% year. (Delivery vehicles will be added
with delivery clerks.) (Debt
service-based on three-year amortization of loans with payments
of II at the end of each of three years.)
<7lDepreciation-All equipment will be depreciated per ACRS
schedules: vehicles and computers-3 years; furniture and
fixtures-10 years .
EXHIBIT 5 Pro Forma Cash Flow Statement
Year 1
Mo.1 Mo.2 Mo.3 Mo.4 Mo.S Mo.6 Mo. 7 Mo.S Mo.9 Mo.10
Mo.11 Mo.12 Total
Cash receipts
Sales 2,600 3,900 6,500 13,000 19,500 23,400 26,000 28,600
31,200 33,800 36,400 39,000 263,900
20. I
General office 150 150 150 150 150 150 150 150 150 150 150
150 1,800
Licenses 200 0 0 0 0 0 0 0 0 0 0 0 200
m
;a
310 310 310 310 310 310 530 530 530 530 530 530 5,040
ii) Interest -o
ii)
Debt service ::J
' 11> .
(principal) 10,333 10,333
I C:
! (;;
Total cash disbursements 13,807 14,522 16,352 20,927 25,502
28,247 32,697 ~ 36,357 38,187 40,017 52,180 353,322 1-5-lg
Net cash flow (11,207) (10,622) (9,852) (7,927) (6,002} (4,847)
(6,697) (5,927) (5, 157) (4,387) (3,617) (13, 180) (89,422) l ::r
I g.
, m
I a.
I a-:
lg
r-
~~~2J Entrepreneurship
I
21. CASE 7 GOURMET TO GO
EXHIBIT 6 Pro Forma Cash Flow Statement
Year 2 Year 3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Cash receipts
Sales 136,500 156,000 194,698 234,000 253,500 273,000
292,500 312,000
Other
Total cash receipts 136,500 156,000 194,698 234,000 253,500
273,000 292,500 312,000
Cash disbursements
Cost of goods sold 89,250 102,000 127,302 153,000 165,750
178,500 191,250 204,000
Salaries and wages 31,164 38,796 38,796 38,796 41,124 41,124
41,124 41,124
Operating supplies 900 900 900 900 900 900 900 900
Repairs and maintenance 750 750 750 750 750 750 750 750
Advertising and promotion 6,825 7,800 9,735 11,700 12,675
13,650 14,625 15,600
Bad debts 300 300 300 300 300 300 300 300
22. Rent 5,301 5,301 5,301 5,301 5,619 5,619 5,619 5,619
Utilities 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000
Insurance 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800
General office 450 450 450 450 450 450 450 450
Licenses 0 0 0 0 0 0 0 0
Interest 1,280 1,940 1,720 1,720 1,410 1,190 970 970
Debt service (principal) 7,333 10,333 7,333 7,333 10,333
Total cash disbursements 141,020 170,370 190,054 228,050
241,111 254,616 260,788 284,846
Net cash flow (4,520) (14,370) 4,643 5,950 12,389 18,384
31,712 27,154
EXHIBIT 7 Pro Forma Balance Sheets
End of: Year 1 Year 2 Year 3 Year 1 Year 2 Year 3
Assets Liabilities
Current assets Accounts payable 12,750 21,217 31,875
Cash 3,000 5,000 7,000 Notes payable 0 0 0
Accounts receivable 19,500 32,450 48,750 Total current
liabilities 12,750 21,217 31,875
Inventory 12,750 21,217 31,875 Long-term liabilities
Supplies 300 _1Q.Q 300 Bank loans payable 42,667 47,000
23. 22,000
Prepaid expenses 1,667 1,767 1,873 Personal loans payable 0 0
0
Total current assets 37,217 60,734 89,798 Total long-term
liabilities 42,667 47,000 22,000
Fixed assets Total liabilities 55,417 68,217 53,875
Furniture and fixtures 18,000 16,000 14,000 Owner's equity
Vehicles 33,000 32,780 8,140 Paid-in capital 133,889 62,897
28,068
Equipment 6,750 3,330 0 Retained earnings (94,339) (18,271)
29,995
Tota l fixed assets 57,750 52,110 22,140 Total owner's equity
39,550 44,627 58,063
Total assets 94,967 112,844 111,938 Total liabilities and equity
94,967 112,844 111,938
502 PART 6 CASES
Sources of Funds
Jan Jones (personal funds)
Bank loans for computer and vehicles
Total sources
24. Uses of Funds
Computer, peripherals, and software
Food lockers and freezers
Delivery vehicles*
Phone system
Miscellaneous furniture and fixtures
Start-up expenses
Working capita lt
Total uses*
*See detail, following.
$182,913
75,000
$257,913
$9,000
15,000
66,000
1,500
3,500
25. 54,600
108,313
$257,913
tTo cover negative cash flow over first I V2 years of operation.
(See pro forma
cash flow statements.)
*Total for initial 3-year period. Computer and one delivery van
will be
acquired prior to start-up, one delivery van will be added 6
months after start-
up, and another will be added 15 months after start-up.
Financing will be
handled simultaneously with procurement
MARKETING
Distribution
The product will be delivered directly to the customer.
Sales Strategy
Advertising will include newspaper ads , radio spots, an
Internet Web page, and direct-mail brochures. All four
will be used during normal operations, but an intense
campaign will precede start-up. A series of "teaser"
newspaper ads will be run prior to start-up, announcing
a revolution in grocery shopping. At start-up, the news-
paper ads will have evolved into actually introducing the
product, and radio spots will begin as well. A heavy ad-
vertising schedule will be used during the first four
weeks of business. After start-up, a direct mailing will
detail the description of the service and a menu plan.
Newspaper ads aimed at the target markets will be
26. placed in entertainment and business sections. Radio
spots will be geared to stations most appealing to the tar-
get market. Since the product is new, it may be possible to
do interviews with newspapers and obtain free publicity.
'"'"'""'""";p, E;gh'h Ed;,;'" I 523
·- -- .. -- ----- -·· -· -·-·- ·- ·----- - - . - -------- - - . ---~-------~
Sales promotions will offer large discounts to first-
time customers . These promotions will continue for the
first six months of operations.
The service will be priced at $10 per week for deliv-
ery and planning, with the groceries priced at full retail
level. According to the phone survey, most people who
were interested in the service would be willing to pay the
weekly service charge.
MANAGEMENT
The management will consist of the owner/manager.
Other employees will be delivery clerks and order
clerks. It is anticipated that after the business grows, an
operations manager might be added to supervise the
employees .
