WILLARD PUBLISHING COMPANY

Willard Publishing Company is a successful and highly respected publisher of college-level

textbooks in the social sciences and humanities and, to a somewhat lesser extent, in the natural
sciences. In addition, the company publishes trade books (books or more general interest) that
nevertheless are used often in college English, Psychology, and Sociology courses.

Founded in the early 1900s, the company was for years headed by its owner, Bill Willard.
Primarily a publisher of novels, Mr. Willard entered into the publication of textbooks only after his
company's novels began to be used regularly in college literature courses. Over the years, Willard
has managed to gain strong hold on certain segments of the social sciences textbook market
where its books are respected because of the reputation of their authors, their content, and their
readability.

Willard is a small company (less than 50 employees), and it has a very rigid definition of its
product-market domain. Ronald Fox, the current president, says simply: "Why fool with a good
thing? We'll consider publishing almost any book, but it must fit into our publishing program ." As
an example, Mr. Fox picked up a copy of a book that was currently on the best-sellers list. "We had
an opportunity to bid for the rights to this manuscript. Two of my editors were extremely
enthusiastic about the project, but I ended up rejecting it. We would have had to begin publishing
all sorts of books in this area, and this just would not have been consistent with our image."

The production process at Willard is quite stable. Manuscripts have been transformed into
final form ready for printing and binding in basically the same way for years . Turnover in the
production employee ranks is low, and each field editor knows from experience which artists,
designers, and copy editors are best suited for reworking a particular type of manuscript. This
stable pool of expertise, combined with the small size of the organization, allows editors to conduct
informal "negotiations" with production employees in order to speed up a book's production or to
switch emphasis to another project temporarily.

The top-management group at Willard has been stable and operates on a collegial basis.
the president, college division director, national sales manager, and the senior editors have been
with the company for years, and each individual's expertise and opinions are respected throughout
the managerial hierarchy. Moreover, turnover in the organization as a whole is among the lowest
in the industry.

Owing to its small size and success, Willard Publishing would appear to be a prime
candidate for acquisition by a larger publishing house. However, according to Mr. Fox, this is not
likely to occur. He points out that the firm has its particular market segment well covered. Further,
management has no plans for dramatic growth, and all senior managers live comfortably due to the
company's high salaries and private stock earnings. The company, therefore, sees little threat--
either internal or external to the organization--to its present and future position within the industry.
 STAR ELECTRONICS

Star Electronics is a large manufacturer of precision electronics equipment which it sells in both
consumer and industrial markets. This equipment includes small computers, electronic calculators,
digital volt meters, electrical testing equipment, etc. The firm has approximately 30,000 employees
organized into 20 divisions.

The company is noted for its research and development capabilities. Top management
has fostered within each of the divisions an atmosphere conducive to product and market
innovation. "We go for the new products first and then organize around them; that's why we have
so many divisions," says one general manager. Star's practice is to create a new division
whenever any of its present divisions reaches approximately 2,500 employees.

Prices generally have been falling in electronics, and price competition is very keen in
most o the market segments served by Star. However, though the firm has many formidable
competitors, it typically does not attempt to compete actively on a price basis. Instead, Star tries
to be the first to bring out a new product and then relies on its marketing departments to sell
prospective buyers on the high quality built into each model. "We are a first-to-market company,
and we take the price declines as they come, " says President David Ortman. "By the time prices
have declined substantially, our production departments will have begun making the product
cheaper, and, more often than not, we'll have a new product ready to replace the old one." At any
one time, the company is engaged in two to three hundred research and development projects
which result , on the average, in new products every 2 to 3 years.

New general managers at Star Electronics must possess at least one college degree in
electrical engineering, and they should have both marketing and research and development
experience. The company believes that this particular blend of education and managerial
experience is what gives Star its solid R&D marketing punch, one that allows the firm to cash in on
its new products even though they are introduced to the market at higher prices. Moreover, the
general manager has the technical background to understand problems of production, which follow
R&D and marketing in terms of strategic importance. Each of the major divisions reflects the
company's basic orientation, and other functions such as accounting, finance, and personnel are
considered to be ancillary services.

The technological process at Star operates on a 2-to-3-year cycle. Teams of six to eight
engineers and scientists work on an R&D project for approximately 2 years before the product is
ready to be manufactured. However, marketing also enters at this point, and an aggressive
campaign is developed to sell the new product when it comes out of production. Timing is crucial
here, since profits adequate to cover R&D costs must be obtained before competition forces prices
down. This cycle is then repeated for each new generation of products.

Recently, Star electronics has been looking for possible acquisitions, but the stated
corporate policy is not to move into areas so diverse that the firm cannot make a substantial
technical contribution.
 SILICON SYSTEMS

Silicon systems is a medium sized and a very profitable company in the electronics industry.
Founded in the mid sixties, Silicon has approx. a thousand employees who make calculators and
related products to the consumer market and a variety of electronic components for industrial
customers.

"Outsiders are usually surprised at how little long range planning we do" says President
John Doig. "But why should we? We need to be able to react quickly when a new product design
appears on the market, not develop elaborate plans that might have to be junked later on. We do
some careful planning but only for our industrial business". Instead, Silicon invests heavily in both
marketing and applied Engineering so that it can rapidly manufacture and sell any new product it
chooses.

Silicon is a matrix organization that includes both product and functional divisions. There
are three major functional units (manufacturing, marketing and engineering and a few smaller
ones. In addition, there are four product divisions, each of which is composed of a product
manager and small staffs in marketing and R&D. Three of these divisions serve industrial markets
while the fourth division serve the consumer market. Product Managers have more power than
their functional counterparts who must adjust their production or marketing schedules to fit the
needs of the four product divisions.

As indicated above, Silicon attempts to achieve a balance between its investments in

marketing and engineering. This practice came about as a result of the company's entry into the
consumer market a few years ago. Silicon had been known as a product innovator for the first
several years of its existence, but management decided that the firm could operate strongly from a
stable industrial products base while experimenting with the more lucrative consumer market .
therefore, management cut overall R&D activities drastically, leaving only small R&D groups in
each of the four product divisions. These groups now simply monitor product innovations
engendered by Silicon's major competitors and select those designs that are most successful . At
the same time management rapidly built up the engineering group so that Silicon could quickly
follow the introduction of new product into the market with its own version of that product. This
capability is particularly importance in the consumer market where the product life cycles are
shorter.

Turnover in the position of the Product Manager tends to be high, for Silicon does not like
its new products to fail, even in the short run. "We are walking a narrow line here" , says President
Doig. We are no longer the innovator we used to be, but we have never been as efficient as some
of the other firms. But so far, no one has been able to move as fast as we do when it comes to
getting a new design through engineering and production on to the market."
 EXOTIC FOODS

Exotic Foods is a partially, integrated food-processing company that produces a fairly broad line of
dried fruit, nut and fish products. During the past 30 years, the company has grown to moderate
size in an industry dominated by several large firms.

For many years, Exotic was an industry pioneer in both the processing and marketing of
dried fruits and nuts. However, in the face of rising labour costs and increased competition, the
company's earlier dominance in these markets has declined. "Current markets are almost
saturated", says President Jalk Milks, "so we are considering moving into several lines of canned
vegetables. But before we introduce a new product, we have to be absolutely certain we are not
taking on a loser".

The president's concern with profitability may result from Exotic's tenuous cash flow
position, low profit margins in fish products and fruits coupled with high overhead costs of
maintaining large harvesting and processing operations, have created almost continuous cash flow
problems of Exotic Foods in recent years, despite the fact that the company's extreme cost
consciousness has led to the appointment of a controller in each of its four major decisions.
"Somehow we have got to expand into more profitable markets", Mr. Milks continues "but we can't
sacrifice efficiency to do it".

In an attempt to broaden the firm's base in 1972, Exotic bought a chain of "quick-stop"
retain grocery stores. This decision was taken following nearly 18 months of agonizing analysis
that frequently led to sharp dissension among members of the top executive group. Last year, due
to the chains increasingly lack luster performance. Exotic seriously began to consider selling the
stores, though it seemed certain that divestment would result in sizeable loss.

Avram Goldman, Vice President for marketing of the primary proponent of the acquisition,
commented sardonically, "Our timing was terrible. When I first suggested buying those stores, all
of the important indicators were good. But by the time people who had almost no grasp of the
factors involved in retail sales had aired everyone of their apprehensions, the situation was
completely different. This company is so phobic about losses that we plan and argue and re-plan
until we are unable to take decisive action".

Exotic Food is divided into four functionally organised units: field operations, grocery
products, manufacturing and merchandising (non-food lines), and administration. Each of these
divisions is highly specialized with responsibility for coordination and control resting at the
corporate level. However, in recent years, top management found it necessary to rely heavily on
ad hoc committees to provide coordination across the four divisions. These committees are
"expediting" groups rather than permanent departments, and their composition changes
periodically. Our product lines, production process and organization structure have been
established for years, says Mr. Milks: but we are making much greater use of Committees now to
resolve disagreements that arise between divisions. Frankly, these committees have not increased
efficiency very much and if we add more product lines, I don't think we will be able to continue
operating this way.