Exhibit 2 Microcomtec’s Balance Sheet as of December 2000

(Actual US$)

ASSETS
Cash	44,190
Accounts receivable:
Trade	209,540
Other	41,800
Inventories:
raw materials packaging work in progress finished goods	98,070 24,504 3,230 107,440
Prepaid expenses	10,756
TOTAL CURRENT ASSETS	539,530
Fixed assets less depreciation	12,462 (4,790)
Net fixed assets	7,672
Other noncurrent	190
TOTAL ASSETS	547,392
LIABILITIES
Notes payable	54,182
Accounts payable: trade current intercompany accrued expenses accrued taxes TOTAL CURRENT LIABILITIES	269,904 82,591 23,693 97,330 527,700
Reserves	1,561
Share capital (privately held)	18,131
TOTAL LIABILITIES	547,392

Discussion questions:

1. Exhibits 1 and 2 show Microcomtec’s financial situation. Judging from these figures, is Corporation in serious trouble? Support your answer with specific references to the exhibits.

2. Does exhibit 2 suggest that Stanley’s recommendations will be adopted by Dixon? Why or why not?

3. Create a graph using Exhibit 1, expressing the domestic and international sales trends for the third and fourth quarters of 2000.

4. Write a brief summary of the balance sheet using Exhibit 2. Your analyses should include a comparison between assets and liabilities. Note that while the total assets and total liabilities are exactly the same (and must be if a balance sheet is to “balance”), there are a number of points to compare: total current assets versus total current liabilities, accounts receivable versus accounts payable, cash versus notes payable, etc. From your comparison, how would you rate the financial position in the company?

Step 3

a) Consider the memo from H. Dixon to D. Robinson:

Interoffice Memorandum

To: D. Robinson

Fm: H. Dixon

Re: Direct Mail

Date: Jan. 22, 2001

With underwritten be advised that I contacted the people at Industrial Collaborative today in an effort to purchase direct mail lists. They claim to have very vertical lists of primary purchases both in the U.S. and abroad for materials-testing automation. They are going to sell one list for $1,200 or two for $2,100 (over 1,000 names in each). Names and titles are included into the lists. I strongly suggest that we should obtain the lists, as it was recommended by Ms. Stanley. We should also create a direct mail piece to accompany existing product leaflets. Harvey, from International Communications Department, promises he can have design and copy in a matter of some days for a three-page brochure describing our automation packages. Harvey will phone back later to confirm. Let’s discuss the matter this afternoon.

b) Create a dialogue between Robinson and Dixon regarding the above Memo:

R. Henry, it seems as if you’re missing the basic points of Ms. Stanley’s recommendations.

D. _____________________________________________________

R. I say that because her report explicitly states that we should abandon these markets and change our direction.

D. _____________________________________________________

R. I know you believe we should give it more time. But, evidently, we don’t have more time.

D. _____________________________________________________

R. Well, maybe I am making a mistake. But we have to try to get a product that actually sells.

D. _____________________________________________________

Step 4. Prepare a report on the case. Use the instructions in Unit 1.

Role Play

Some Points to Keep in Mind

You should keep in mind that business strategies, by their very nature, are permanently subject to change. Regardless of a company’s previous performance, innovative ideas are absolutely essential if the company is eager to increase or just maintain its market share. As business isn’t a science, it’s impossible to determine exactly how long a particular strategy should be employed before it’s changed. Premature shifts in marketing strategy often have negative results. At the same time, in order to minimize losses, it’s vital to recognize when a strategy isn’t a success so that it may be altered.

Situation

In case of Microcomtec, the problem is precisely that described above. Microcomtec’s strategy initially was to produce microcomputers for general industrial use. When it wasn’t successful, Microcomtec targeted two specific areas: material-testing automation and chromatography automation. But that strategy seems to be failing. Is it the case, as Mr. Dixon believes, that simply more time is needed to penetrate these special targets, both domestically and overseas? Or is an absolutely new direction needed? Finally, is the sweeping reform proposed by Ms. Stanley the right direction if Microcomtec make a decision to alter its strategy?

Cast

Mr. David Robinson, President, Microcomtec Corporation

Mr. Henry Dixon, Vice-President, Microcomtec Corporation

Ms. Pauline Stanley, Computer Industry Consultant

The three are discussing Ms. Stanley’s report in Mr. Robinson’s office at Microcomtec.

(Make use of the information given in Case Study, Some Points to Keep in Mind, Situation).

P. Stanley realizes that her recommendations may seem very bold, but given the present financial situation at Microcomtec she thinks bold measures are needed. She tells Mr. Dixon she understands their position, but she doesn’t feel that they’ve received enough inquiries to warrant optimism. She considers that an order isn’t an order until they get a P.O. (purchase order) number. As for the European sales office Ms. Stanley can’t see that it’s worth keeping. She reminds that it doesn’t even pay for itself. Ms. Stanley finalizes the matter: she was hired by them to do a study and make some recommendations. She did that. It’s their choice whether to accept the recommendations or not. She happens to think her recommendations are sound, but it’s up to them to decide. She says that the reasons she thinks they are sound are detailed in the report. She mentions some facts in her speech. First, in three months of active effort the company have only six orders. Second, the competition, particularly in chromatography, is keen. Third, the European sales office is costing more than it’s producing. Fourth, their microcomputer is too expensive, given the fact that an IBM PC costs one-fourth as much as the Microcomtec and is an industry standard. Granted, it may not do as much, but it is basically all most researches need, given the right software. She supposes if they convert their software so that it will run on the IBM PC, they’ll be in a position to do just that. She also tries to assure Mr. Robinson and Mr. Dixon that if they are more horizontal than vertical in their approach to the market, they’ll have a larger target. Fifth, she is sure that their advertising and sales promotion measures are not getting to the right people. She recommends them to buy some lists and then do a direct mail shot. She advises to go to every trade show they can and demonstrate their product. She explains that the audience they are trying to reach doesn’t take journal advertising seriously. The audience wants more information than it can get in an ad. She is sure that direct mail can give that to the interested party. In Ms. Stanley’s opinion a demo can do even more.

Make use of the helpful phrases:

• Let me just say at the beginning …

• In the circumstances …

• I want to press the point …

• As far as I can gather …

• What with one thing and another …

• Gentlemen, let me make a couple of things clear …

• But let me just reiterate a few facts here …

• In the first place …

• If you ask me …

• I suppose …

• I take it for granted that …

• What do you think of … ?

• I’ll tell you what.

• Make the best of it.

• The long and the short of it is …

H. Dixon agrees and wants to know whether these are the right measures. He says that his feeling is simply that they haven’t been aggressive enough in their marketing. Also, he considers that the new targeted fields - materials-testing automation and chromatography automation - are not quick sells. It takes some time to build up orders. He adds they launched their new campaign in the early fall. It’s just January now. He thinks that Ms. Stanley is premature in her assessment that this is not the right market. He has to admit that orders aren’t coming in in the necessary quantity, but they are getting more and more inquiries, and with proper action they should be able to turn them into orders. He isn’t that optimistic at all about it. But he feels they have to give this market, this product, some chance. Their sales manager in Rotterdam, Nick Govern, is right now working on an order for ten Microcomtecs, plus software. That amounts to $200,000. Henry tries to assure Ms. Stanley that Nick feels confident he’ll get an order for ten Microcomtecs. At the same time he accepts Ms. Stanley’s arguments concerning the European sales office. He reminds that it hasn’t paid for itself in four months. But he still doesn’t feel that means they should shut it down. He believes the potential is there. Nick is a good sales rep, and things are beginning to turn.

Make use of the helpful phrases:

• Right on both counts …

• The question is …

• I dare say …

• I am inclined to think …

• The way things are …

• Looks like that …

• I won’t deny …

• In a way yes …

• I don’t mind telling you … but …

• Primarily …

• As far as … is concerned …

• On the surface (of it) …

• What matters is …

D. Robinson thinks that Henry is right to some extent. But the orders just aren’t coming in fast enough. David understands that they can’t play a long-term waiting game. They don’t have the capital to last. D. Robinson wants to know what Henry is basing his sales projections on. Robinson supposes that they should consider the problem concerning the European sales office. D. Robinson expresses his disagreement with Ms. Stanley’s opinion that it isn’t worth keeping the European Sales office. But he has to agree that it barely pays for itself.

Make use of the helpful phrases:

• I mean to say …

• Actually …

• But the truth is …

• In the circumstances …

• As far as I can see …

• Could you possibly …, please?

• That brings up the whole matter of …

• I disagree with you (on that point) …

• I differ from you …

• There’s something in what you say, but …

• I must admit …