The English Bear Company was founded in 1991 by Alise Crossick, 29, and her husband Jonty, 28. They now have ten shops in cities including Bath, Cambridge and London and have recently opened in Tokyo. Their annual turnover is £4m. Jonty: ‘Alise and I met at Cambridge in 1988 when we were both impecunious students. We knew we wanted to be in business on our own and that whatever we did, we would have to start with nothing. Designing and selling T-shirts was the obvious choice because it didn’t need any capital, only an understanding supplier. The bear idea grew out of that. Our most popular T-shirt featured a bear which Alise had drawn, yet she’d never actually made one when we decided to launch the bear company.

‘Being a typical Antipodean, she just got on with it: advertised for bearmakers, and then sat down with a bear manual. Most of the applicants patiently watched her demonstrate, and then showed her how it could be done 100% better.

‘We always wanted to create a company that would communicate something from the heart, something magical. I think the bears do that because they express fun and cuddles. We make them out of distressed mohair which makes them look old and loved. Our customers don’t want something pristine, they’re looking for character. ‘We initially made mistakes in identifying our customers. Our first outlet was a kiosk in Whiteley’s which we thought was perfect as it gave us a start in London. The rent was so cheap that we didn’t bother to carry out market research. It wasn’t until we opened in Cambridge that we realised the tourist trade was much more lucrative. ‘Our sites are now picked with greater care. It’s about 50% strategic choice, 30% gut feeling and 20% scientific data.’

Alise: ‘It was never just about selling bears, our vision was the whole concept of people wearing bear clothes, eating bear marmalade and drinking bear tea. ‘When people love bears, they personify them and become absorbed in the lifestyle. We get young businessmen coming into our shops who look like they want to quickly buy a bear and run out again. The next minute they’re captivated and umming and ahhing over which face they like the best. Occasionally we get people bringing old bears in for repairs, like the chap who rushed in with something his dog had half-eaten. ‘There’s not enough people in retail trying to help their customers, it’s all take, take, take. We put our hearts into the business and believe passionately in the products. If you put enough energy and care into something it should work. ‘We’re not in business to suffer so we only work with people we like. Bears bring out the best in people because they cross gender and race and represent unconditional love. If we weren’t working together I wouldn’t find it so worthwhile. We generate so much love between us that it makes it wonderful for everyone around.’

Questions

1 Discuss how the English Bear Company may have used marketing research beneficially.

2 How might marketing research still prove a useful tool to the company?

A recent study by the Annenberg Public Policy Center investigated one major area of marketing decisions: pricing practices.6 Specifically, the study addressed consumer knowledge and attitudes about the practice of online retailers adjusting their prices according to customer characteristics, such as how frequently they buy from the retailer. For example, a website selling cameras charged different prices for the same model depending on whether the visitor to the site had previously visited sites that supply price comparisons. In general, charging different prices is called price discrimination and is legal unless it discriminates by race or sex or involves antitrust or price-fixing laws (such as two competitors agreeing to charge certain prices). The Annenberg study consisted of telephone interviews conducted with a sample of 1,500 adults, screened to find persons who had used the Internet in the preceding thirty days.The questionnaire gathered demographic data and data about Internet usage. In addition, the interviewer read seventeen statements about basic laws and practices related to price discrimination and the targeting of consumers according to their shopping behaviors. Respondents were asked whether each of these statements was true or false. Case Exhibits 25.1–1 through 25.1–4 summarize some of the results from this study.

1. The information provided here is not detailed enough for a formal report, but assume that you are making an informal report in a preliminary stage of the reporting process.Which of these findings do you want to emphasize as your main points? Why?

2. Prepare a written summary of the findings, using at least two tables or charts.

3. Prepare two tables or charts that would be suitable to accompany an oral presentation of these results.Are they different from the visual aids you prepared for question 2? Why or why not?

Attacked by a Whale

A veteran SeaWorld trainer was rubbing a killer whale from a poolside platform when the 12,000-pound creature reached up, grabbed her ponytail in its mouth and dragged her underwater. Despite workers rushing to her, the trainer was killed. Horrified visitors who had stuck around after a noontime show watched the animal charge through the pool with the trainer in its jaws. Workers used nets as an alarm sounded, but it was too late. Dawn Brancheau had drowned. It marked the third time the animal had been involved in a human death. Brancheau’s interaction with the whale appeared leisurely and informal at first to audience member Eldon Skaggs. But then, the whale “pulled her under and started swimming around with her,” Skaggs told The Associated Press. Some workers hustled the audience out of the stadium while the others tried to save Brancheau, 40. Skaggs said he heard that during an earlier show the whale was not responding to directions. Others who attended the earlier show said the whale was behaving like an ornery child. But [Chuck] Tompkins [head of animal training at all SeaWorld parks] said the whale had performed well in the show and that Dawn was rubbing him down as a reward for doing a good job. “There wasn’t anything to indicate that there was a problem,” Tompkins told the CBS “Early Show.” Because of his size and the previous deaths, trainers were not supposed to get into the water with Tillicum, and only about a dozen of the park’s trainers worked with him. Brancheau had more experience with the 30-year-old whale than most. She was one of the park’s most experienced trainers overall. A SeaWorld spokesman said Tilikum was one of three orcas blamed for killing a trainer in 1991 after the woman lost her balance and fell in the pool at Sealand of the Pacific near Victoria, British Columbia. Steve Huxter, who was head of Sealand’s animal care and training department then, said he’s surprised it happened again. He says Tilikum was a well-behaved, balanced animal. Tilikum was also involved in a 1999 death, when the body of a man who had sneaked by SeaWorld security was found draped over him. The man either jumped, fell or was pulled into the frigid water and died of hypothermia, though he was also bruised and scratched by Tilikum. According to a profile of Brancheau in the Sentinel in 2006, she was one of SeaWorld Orlando’s leading trainers. Brancheau worked her way into a leadership role at Shamu Stadium during her career with SeaWorld, starting at the Sea Lion & Otter Stadium before spending 10 years working with killer whales, the newspaper said. Bill Hurley, chief animal officer at the Georgia Aqauarium—the world’s largest—said there are inherent dangers to working with orcas, just as there are with driving race cars or piloting jets. “In the case of a killer whale, if they want your attention or if they’re frustrated by something or if they’re confused by something, there’s only a few ways of handling that,” he said. “If you’re right near pool’s edge and they decide they want a closer interaction during this, certainly they can grab you.”And, he added, “At 12,000 pounds there’s not a lot of resisting you’re going to do.” SOURCE: Excerpted from Mike Schneider, “Whale Drags Trainer off Platform in Fatal Attack.”

Questions

1. React to Bill Hurley’s comment that some jobs, like race car driver, are inherently dangerous. Do some employees simply have to accept the risk of death? If so, what is the employer’s responsibility, if any, with

regard to the safety of such jobs?

2. How can human resource management contribute to a lower risk of death among trainers at a facility such as SeaWorld? Consider the various HR functions, such as employee selection and training, and how they might contribute to this goal.

3. Imagine that you worked in SeaWorld’s human resources department when this incident occurred. What are some actions that you would want your department to take at that time or in the months afterward?

Walmart’s Discrimination Difficulties

Perhaps it shouldn’t be a surprise, since it is the largest private employer in the United States, but Walmart periodically has made headlines because someone has accused the discount retailer of discrimination. For instance, the company not long ago reached a settlement in a federal lawsuit that charged the company with racial discrimination. According to the class-action lawsuit, thousands of black applicants were repeatedly denied jobs as truck drivers over a period of seven years. The settlement requires hiring some of these individuals and notifying others as positions become available. Walmart also promised that it would try harder to recruit minorities. A more recent settlement involved allegations of discrimination against women. The Equal Employment Opportunity Commission charged the company with turning down female applicants to fill orders in its distribution center in London, Kentucky, even though they were at least as well qualified as the male applicants who were hired. According to the lawsuit, those whose names on job applications were clearly female were not considered for the positions. The basis for the conclusion was that there was a statistically significant pattern of hiring males and turning down females. A female job applicant added details of her experience: Brenda Overby said an interviewer asked her if she could lift a 150-pound bag of potatoes over her head. She said no, and she recalled later that the interviewer responded that “women weren’t needed” to work in the warehouse. Overby went on to find a warehouse job at another company, performing work similar to what Walmart required. In this settlement, Walmart agreed to pay $11.7 million, most of it to be distributed among the plaintiffs, and to hire women for 50 of the warehouse’s order-filling positions, as well as every other position of the next 50 that become available. It also agreed to avoid discrimination, to make hiring decisions based on validated interview questions, and to give its employees training in how to avoid discrimination. As it faces these challenges among hourly employees, Walmart is also tackling the challenge of bringing more diversity to its management ranks. The company has assembled a women’s council consisting of 14 members from each of the retailer’s global markets, tasked with finding ways to bring in more female managers. So far, about one-fourth of Walmart’s senior managers are women. This statistic is surprising, considering that the company has said about 8 out of 10 Walmart shoppers are women. SOURCES: “Bias Suit Settlement,” MMR, July 13, 2009, Business & Company Resource Center,; Equal Employment Opportunity Commission, “Walmart to Pay More than $11.7 Million to Settle EEOC Sex Discrimination Suit,” news release, March 1, 2010, Bill Estep and Dori Hjalmarson, “Wal-Mart Will Pay Millions in Bias Case,” Lexington Herald-Leader, March 3, 2010, Business & Company Resource Center, and Matthew Boyle, “Wal-Mart Vows to Promote Women,” BusinessWeek, June 5, 2009, .

Questions

1. According to this case, which employment laws has Walmart been accused of violating? How might it have avoided those charges?

2. Which challenge do you think will be more difficult for Walmart: diversifying its top-management ranks or ending charges of discrimination? Why?

3. Do you think more diversity among its executives would help Walmart avoid problems with discrimination? If so, how? If not, why not?

A few years ago Vidal Sassoon, Inc., took legal action against Bristol-Myers over a series of TV commercials and print ads for a shampoo that had been named Body on Tap because of its beer content. 12 The prototype commercial featured a wellknown high fashion model saying,“In shampoo tests with over 900 women like me, Body on Tap got higher ratings than Prell for body. Higher than Flex for conditioning. Higher than Sassoon for strong, healthy-looking hair .” The evidence showed that several groups of approximately 200 women each tested just one shampoo.They rated it on a six-step qualitative scale, from “outstanding” to “poor,” for twenty-seven separate attributes, such as body and conditioning. It became clear that 900 women did not, after trying both shampoos, make product-to product comparisons between Body on Tap and Sassoon or between Body on Tap and any of the other brands mentioned. In fact, no woman in the tests tried more than one shampoo. The claim that the women preferred Body on Tap to Sassoon for “strong, healthy-looking hair”was based on combining the data for the “outstanding” and “excellent” ratings and discarding the lower four ratings on the scale.The figures then were 36 percent for Body on Tap and 24 percent (of a separate group of women) for Sassoon. When the “very good” and “good” ratings were combined with the “outstanding” and “excellent” ratings, however, there was only a difference of 1 percent between the two products in the category of “strong, healthy-looking hair.” The research was conducted for Bristol-Myers by Marketing Information Systems, Inc. (MISI), using a technique known as blind monadic testing.The president of MISI testified that this method typically is employed when what is wanted is an absolute response to a product “without reference to another specific product.”Although he testified that blind monadic testing was used in connection with comparative advertising, that was not the purpose for which Bristol- Myers retained MISI. Rather, Bristol-Myers wished to determine consumer reaction to the introduction of Body on Tap.And Sassoon’s in-house research expert stated flatly that blind monadic testing cannot support comparative advertising claims.

Comment on the professionalism of the procedures used to make the advertising claim.Why do you believe the researchers performed the data transformations described?

A shampoo, code named “9–10”was given to women for trial use.4 The respondents were asked what they liked and disliked about the product. There were two separate sets of codes: The headings identify fields in the data matrix and the different attributes of shampoo.The specific codes are listed under each attribute.The coding instructions were first to look for the correct heading, and then to locate the correct comment under that heading and use that number as the code. For example, if, in response to a “like” question, a respondent had said,“The shampoo was gentle and mild,” a coder would look in field 10, the “gentleness” field, and find the comment “Gentle/mild/not harsh”; then the coder would write “11” next to the comment. If, under “dislikes,” someone had said,“I would rather have a shampoo with a crème rinse,” the coder would look in field 16 for comparison to other shampoos and write “74” (“Prefer one with a crême rinse”) beside that response.

1. Code each of the three questionnaires.

2. Evaluate this coding scheme.

The rule has been controversial. Arguments have been constructed against shelf registration:

1. The costs of new issues might go up because underwriters might not be able to provide as much current information to potential investors as they would otherwise, so investors would pay less. The expense of selling the issue piece by piece might therefore be higher than that of selling it all at once.

2. Some investment bankers have argued that shelf registration will cause a “market overhang” that will depress market prices. In other words, the possibility that the company may increase the supply of stock at any time will have a negative impact on the current stock price. Shelf registration is much more common with bonds than stocks, but some equity shelf sales do occur. For example, in late 1998, Ford Motor filed a shelf registration to issue 10 million shares of common stock. It planned to use the shares to buy dealer ships to expand its Ford Retail Network. Under the plan, Ford would acquire dealerships in selected cities to create a more cohesive sales network. Of the 5,300 Ford dealerships in the United States, Ford itself owns only a fraction. The shelf offering allows Ford to issue the stock only when needed for an acquisition. In August of 2001, Corning, maker of fiber optic cable and other photonic products, announced that it would sell 14,222,500 shares of its common stock, raising over $200 million, under its existing $5 billion shelf registration statement. The money was needed to help fund Corning’s purchase of several fiber optic manufacturers from cash-strapped Lucent.

CONCEPT QUESTIONS

a What is shelf registration?

b What are the arguments against shelf registration?

An entity issues shares as consideration for the purchase of inventory. The shares were issued on January 1, 20X4. The inventory is eventually sold on December 31, 20X5. The value of the inventory on January 1, 20X4, was $3 million. This value was unchanged up to the date of sale. The sale proceeds were $5 million. The shares issued have a market value of $3.2 million. Which of the following statements correctly describes the accounting treatment of this share-based payment transaction?

(a) Equity is increased by $3 million, inventory is increased by $3 million; the inventory value is expensed on sale on December 31, 20X5.

(b) Equity is increased by $3.2 million, inventory is increased by $3.2 million; the inventory value is expensed on sale on December 31, 20X5.

(c) Equity is increased by $3 million, inventory is increased by $3 million; the inventory value is expensed over the two years to December 31, 20X5.

(d) Equity is increased by $3.2 million, inventory is increased by $3.2 million; the inventory value is expensed over the two years to December 31, 20X5.

Capital Budgeting for Project

X Based on the following information for Project X, should we undertake the venture? To answer, first prepare a pro forma income statement for each year. Next, calculate operating cash flow. Finish the problem by determining total cash flow and then calculating NPV assuming a 28 percent required return. Use a 34 percent tax rate throughout. For help, look back at our shark attractant and power mulcher examples. Project X involves a new type of graphite composite in-line skate wheel. We think we can sell 6,000 units per year at a price of $1,000 each. Variable costs will run about $400 per unit, and the product should have a four-year life. Fixed costs for the project will run $450,000 per year. Further, we will need to invest a total of $1,250,000 in manufacturing equipment. This equipment is seven-year MACRS property for tax purposes. In four years, the equipment will be worth about half of what we paid for it. We will have to invest $1,150,000 in net working capital at the start. After that, net working capital requirements will be 25 percent of sales.