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Sowjanya Kodidala – Reflection – Making a deal

by on October 23, 2007

In one of the video clips, we could see the issue faced by CEO of CRESCO Company. In this issue, he explained his experience on making a deal with other organization. I really liked the way the CEO solved the case.

Case Scenario – The CEO was looking for buying a store in California. The store was located at a prime location and it was the only store in that area. So when the store was out for sale, the CEO was very excited and looked forward to buying the store, and in this excitement he did not do his home work.

The results of his not doing the home work were –
1. He soon realized that the products quality at the store was bad and the customers were coming only because they had no other stores at that location.
2. The seller had promised to the CEO that he would sell all his products to him. But instead the seller was selling the products outside at a wholesale rate.
3. The CEO went to the store to review and asked employees at the store why they were using 300,000 worth security system. The employees replied that the security system dealer was store owner’s friend. The CEO was surprised to see that the employees knew this issue.

The CEO was in a dilemma whether to make a deal or not to make a deal. The CEO had the following options –
1. Not to make a deal – As the seller was having all products with bad quality. The seller was not honest. So the CEO was thinking not to make a deal as it is not feasible to make a deal with dishonest people.
2. Make a deal. After making a deal the steps would be
2.1 Renovate the store – The problems with renovating the store would be – 1. While renovation, the store would be closed. Seeing the store closed the customers would be moved to next available store. That is the home depot which is a good option. So there is a high risk of losing customers.
2.2 Trying to replace all the current employees – this is not a good option as the employees were working from a long time and they are local people. Also to get new people and training the employees would be a long process.
2.3 Marketing – Try to tell people that it is under new management. But the risk in this would be that though it is under new management, the people’s mind set wouldn’t change.

Class discussion
Based on the video clip, many of our classmates suggested –
1. He should not make the deal –
1.1 He might have a great loss. As in this case, most of the customers already started to go to home depot. He does not have a good strength of the customers.
1.2 The quality of the products was bad. It would be tough to change people mind set about this. Even though he changes the quality it would be tough to make people understand about the change in product quality.
1.3 It is a tough call as cultural issues also are involved. To deal with cultural issues would not be an easy task.

2. He can make the deal
2.1 Try to change the quality of the product.
2.2 He can also close the store and start again, making it look as a new store with new management.
2.3 Try to communicate and change customer’s behavior. Also make employees work in new terms or ask them to leave.

CEO final decision
The CEO sat with all his executives and had discussions. The CEO finally made the deal. For 90 days he spent most of the time at the store and helped the employees as well as customers. He started from scratch, giving training to employees, clearing all questions asked by customers, making them feel important. He finally made it a hit. J

My Analysis
The CEO did a good job by making the deal. As we know doing any sort of business is a risk. So I like the way CEO made the deal and took that very challenging. If the CEO did not make a deal, his competitor might have made the deal. So making the deal is a good choice. He could use marketing strategies and communicate with people about the improvement in the quality of the products and the change in management.
But the CEO should have done his home work before even thinking about making a deal. In this case CEO did not do his homework at the initial stages. As mentioned in heart of change, homework is one of the important steps to take before making a deal. He should try to know the people with whom he is trying to make the deal. HE should have done some research on the people he would be making a deal with? Also as Kevin mentioned the CEO should think about how much he is going to compromise when making a deal?

The CEO did make a deal with lot of gut feeling but in many cases it might fail. But in this case it had a happy ending.

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