Baron Art Mart, Inc.

Team 1BUS 302 #13159October 21, 2015

Case AnalysisBy

Aarti Khurana, Marlene Gonzalez, Alex Sanchez, Jose Morales, Marqus Robinson, Mohammed Salaam, and Miles Steele

(Jamie, 2012)

Questions will be answered at the end of the presentation.

If you are unable to hear the speaker, please raise your hand and the presenter will speak up.

uestionsQ

Miles 2

pecial AcknowledgementsS

“On the whole, human beings want to be good, but not too good, and not quite all

the time” –George Orwell

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T able of ContentsExecutive Summary……………………………………………………………….5 Main Body…………………………………………………………………………….6

Facts and Issues…………………………………………………………………………………..6Statistical Analysis……………………………………………….………………………………7Regression Analysis……………………………………………………….....................10 Future Income……………………………………………………………….....................15 Legal Analysis…………………………………………………………..……………………….16Assessing the Damages……………….……………………….……………….21

Ethical Considerations………………………………………………………...25Strategic Considerations …………………………………………………….33Recommendations ……………………………………………………………..42Thank you ………………………………………………………………………….43References………………………………………………………………………….44Appendix…………………………………………………………………………….46

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• Main Characters• Baron Art Mart, Inc.• Bruce Levin• Jimmy Lee• Susan Kim• Donald West• Jennifer Parker• Kimberly Youseff

xecutive SummaryE

• Analysis• Descriptive Statistics• Regression Analysis• Accounting• Economics• Legal• Ethics• Strategic

• Recommendations• Terminate Jimmie Lee’s

employment• Compensate Susan Kim

with the net real income

• Consider ethical training for employees

• Consider e-commerce model

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Susan Kim has asked Baron Art Mart Inc. to compensate her for injuries she sustained while on company property. Her injuries have left her permanently disabled and she seeks $765,000 for medical expenses and $500,000 lost in future income”(Efrat & Gunther, 2007).

acts and IssuesF

Alex 6

tatistical Analysis: Descriptive Statistics

S

➢Ms. Kim’s real income for the last fifteen years

What these numbers mean (Anderson, Sweeney, & Williams, 2011):

• Mean • Median• Standard deviation• Sample Variance

➢Can we use mean income to forecast future earnings?

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tatistical Analysis: Descriptive Analysis

S

Number Year Gross Income Price Index Adjusted Price Index Real Income1 1991 50,599 135.2 1.352 37425.302 1992 53,109 141.3 1.413 37585.993 1993 53,301 142.5 1.425 37404.214 1994 56,885 149.2 1.492 38126.685 1995 56,745 151.4 1.514 37480.186 1996 60,493 158.9 1.589 38069.867 1997 61,978 160.5 1.605 38615.588 1998 61,631 161.0 1.610 38280.129 1999 63,297 164.6 1.646 38455.04

10 2000 66,531 173.2 1.732 38412.8211 2001 67,600 178.1 1.781 37956.2012 2002 66,889 180.9 1.809 36975.6813 2003 70,024 182.0 1.820 38474.7314 2004 70,056 187.9 1.879 37283.6615 2005 71,857 197.3 1.973 36420.17

Variance: $403,900.03

Median: $37,956.20

Standard Deviation: $635.53

Mean: $37,797.75

Total Real Income: $566,966.21 Alex 8

efining A Price IndexD

What is a Price Index?

How is a Price Index constructed?1. Housing 2. Entertainment 3. Transportation4. Food 5. Medical Care6. Other Goods & Services (Schmidt, 2015)

Alex 9

egression Analysis (Anderson, Sweeney, & Williams, 2011)R

Adjusted Price Index

1.3521.4131.4251.4921.5141.5891.6051.6101.6461.7321.7811.8091.8201.8791.973

Dependent Y Variable

Independent X Variable

Year

199119921993199419951996199719981999200020012002200320042005 Aarti 10

egression FindingsR

Coefficient of Determination (R-square) = 0.982Graph 1. Regression Line

Aarti 11

egression FindingsR

P-value for Year

Null Hypotheses (Hₒ) = 0 Alternative Hypotheses (H₁) ≠ 0

Assuming α = 0.05

P Value = 7.395E-12

0.05 > 0.00000000000739Reject Null

No RelationshipSome Relationship

Aarti 12

egression FindingsR

Regression Coefficient for Year = 0.041❖ 4.1% yearly increase❖ Slope of regression function

Graph 1. Regression Line Aarti 13

y -80.33 0.041x

Price Index Intercept (Coefficient) x (Year)

egression FindingsR

Equation 1. Regression Equation

Aarti 14

Refer to Excel sheet.

uture IncomeF

Marlene 15

The merchant privilege would not relieve Baron Art Mart, Inc. from liability under the cause of action of false imprisonment.

egal AnalysisL

Mohammed 16

egal AnalysisL

What is Merchant’s Defense?• According to the Case Library, “ A peace officer, a merchant,

or a specifically authorized employee of a merchant, may use reasonable force to detain a person for questioning on the merchant’s premises, for a reasonable length of time, when he has reasonable cause to believe that the person has committed theft of goods held for sale by the merchant, regardless of the actual value of the goods. The detention shall not constitute false imprisonment”(Efrat & Gunther, 2007).

Mohammed 17

egal AnalysisL

Requirements for authorized detention 1. The person effecting the detention must be a peace

officer, a merchant, or a specifically authorized employee of a merchant

2. The party making the detention must have reasonable cause to believe that the detained person has committed theft.

3. The detention was conducted in a reasonable manner. Determining facts:

4. The detention must occur on the merchant’s premises

5. The detention may not last longer than a reasonable period of time (Efrat & Gunther, 2007)

Mohammed 18

egal AnalysisL

Table. 1 Requirements for authorized detention Requirements Were the requirements met?

Peace office, merchant, or authorized employee

YES

Reasonable Cause YES

Reasonable Manner NO

Merchant’s Premise YES

Reasonable Time NO

Mohammed 19

ounterargumentC

Factors which may affect argument• Reasonable Detention

- Store’s policy

Mohammed 20

Marqus 21

ssessing the DamagesA

➢Compensatory Damages- actual damages awarded to the plaintiff due to a tort. Can include physical harm, medical expenses, lost wages, etc.(Mallor et al., 2001).

• “To make the person whole”

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ssessing the DamagesA

• Susan Kim is owed compensatory damages, but not the entire amount she’s asking for.

• To pay for the damages, we want to make sure we’re not paying more than we need to make her whole again.

Marqus 23

ssessing the DamagesA

➢Punitive Damages- Damages awarded in addition to compensatory remedy that are designed to punish a defendant for particularly reprehensible behavior and to deter the defendant and others from committing similar behavior in the future (Mallor et al., 2001).

• Punishing flagrant wrongdoing

Marqus 24

Tucker’s Five Questions Approach (Smith, 2015)

Is the decision profitable (shareholders)?

Is the decision legal (society at large)?

Is it fair?

What is the impact on the rights of stakeholders?

What is the impact on sustainable development (environment)?

thical ConsiderationsE

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Stakeholders Primary (Direct) Susan KimJimmie LeeJennifer ParkerKimberley YouseffCustomers Other employees

Secondary (Indirect)

Bruce LevinDonald WestSusan Kim’s familyCompetitorsSociety

thical ConsiderationsE

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1. Is the Decision Profitable?

Utilitarianism: Firing Jimmie Lee to prevent lawsuits pertaining to him in the futureConsidering settlement with Susan Kim

Corporate Social Responsibility (CSR):

Ethical/Customer service training

Considering shift to e-commerce

thical ConsiderationsE

Marqus 27

2. Is the Decision Legal?

Utilitarianism: Firing Jimmie is legal

Justice Theory: Settlement with Susan is legal because we would make her whole, without facing punitive damages

thical ConsiderationsE

Marqus 28

3. Is it fair? Utilitarianism: Firing Jimmie is fair because he committed a tortuous actSettlement with Susan to pay only her compensatory damages is fair

Deontology: Training employees is fair because we have an inherent duty to provide the best service

Corporate Social Responsibility (CSR):

E-commerce is fair, even if it means shutting down some of our stores

thical ConsiderationsE

Marqus 29

4. What is the impact on the rights of stakeholders?

Utilitarianism: Compensating Kim would be best consequence for stakeholders

Corporate Social Responsibility (CSR):

Ethical training will create better customer service

Rights Theory: Mrs. Kim has right to be treated equally

Nicomachean: Lee could have shown moral virtues by attending to Mrs. Kim’s injuries

thical ConsiderationsE

Aarti 30

5. What is the impact on sustainable development?

Utilitarianism: If Baron Art Mart settles, they could use the money saved from not entering lawsuit to create jobs

Corporate Social Responsibility (CSR):

Society would prefer employee’s to be put in ethical training

Deontology: Duty to make shopping safe for customers

thical ConsiderationsE

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Alternatives and Consequences

Jimmie could sue for wrongful termination

Susan Kim may not accept a settlement

Ethical Training may not improve employee’s customer service skills

E-Commerce may not take off

thical ConsiderationsE

Marqus 32

trategic ConsiderationsS

Using Michael Porter’s Five Forces Analysis (Porter, 2008)

Jose & Marlene 33

POWER OF

SUPPLIER

POWER OF

BUYER

THREAT OF ENTRY

THREAT OF SUBSTITUTES

RIVALRY AMONG

EXISTING FIRMS

Jose & Marlene 34

he Stationary Supplies IndustryT

Jose & Marlene 35

Industry at a GlanceOverview of the Incumbent: BARON ART MART

ower of SupplierP

Jose & Marlene 36

POWER OF SUPPLIER

• Solution posed

• Reason why?

• IBISWorld (IBISWorld, 2015)

• Porter's reasoning

ower of BuyersP

Jose & Marlene 37

• Solution posed

• Reason why?

• IBISWorld

• Porter's reasoning

POWER OF BUYERS

hreat of EntrantsT

Jose & Marlene 38

THREAT OF ENTRANTS

• Solution posed • Medium threat (IBISWorld,

2015) • Strong/High barriers • And, their use in strategy • Low/weak barriers • And, their use in strategy • Porter's reasoning

hreat of SubstituteT

Jose & Marlene 39

THREAT OF SUBSTITUTE

• Solutions• Online sellers in the

industry• Discount stores• Any store willing to sell at

a profitable price with a valuation that is high by the customer for a product originally purchased at Baron

ivalry Among Existing FirmsR

Jose & Marlene 40

• Rivalry and competition is HIGH• Improved staff training, reorganization of

operations for efficiency in order to compete in the industry with little growth and small margin of profit

• CEO should promote more interaction between Marketing, Operations, and Finance to form Strategical Planning and Thinking (Stevenson, 2007)

• Retraining of strategical formulation to avoid the use of Price and instead use Strategies that promote Higher Quality, Better Service, cleanliness, and Flexibility among all employees--sense of urgency and zeal in everything.

• Firms competing online and offline

RIVALRY AMONG

EXISTING FIRMS

trategic ConsiderationsS

Jose & Marlene 41

Further Considerations

ecommendationsR

• Legal Recommendations• By Jimmy being an employee of the company, his employers are also

liable.• Settlement highly recommended, going to court possible PR nightmare.• Also recommend terminating Jimmy’s employment.

• Statistical Analysis• A regression equation was created that calculated the real value of Ms.

Kim’s income and projected her income for the next 10 years.• In truth, Ms. Kim is only actually owed $416,203.34 rather than $500,000

in lost wages• Ethical recommendations

• The injury caused to Ms. Kim by Jimmy was an ethical violation and a massive overstepping of boundaries on Jimmy’s part.

• From a utilitarian perspective, firing Jimmy prevents him from harming other customers in the future.

• Highly recommend training Jimmy’s replacement/peers in ethical practices and restraint.

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hank You!T

We are grateful for the opportunity to work for you on this case. Thank you for your time.

SukriaArigato

ShukranGracias

Merci Kiitos

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Thank you

eferencesRAnderson, D. R., Sweeney, D. J., & Williams, T. A. (2011). Hypothesis Tests. Essentials of Statistics for Business and Economics (pp. 88-100, 485-551). Ohio: South-Western Cengage Learning.Efrat, R., & Gunther, R. (2007). Baron Art Mart, Inc. Csun. Retrieved October 15, 2015, from http://ocw.smithw.org/2015fall/bus302-13159/outline.htmlIBISWorld. (2015). Office Supply Store in the US April 2015. Retrieved from file://http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=1098Investopedia LLC. (n.d.). Consumer Price Index - CPI. Retrieved October 18, 2015,

from Investopedia: http://www.investopedia.com/terms/c/consumerpriceindex.aspJamie. (2012). When I Write. Retrieved October 20, 2015, from Through Two Blue Eyes: https://throughtwoblueeyes.wordpress.com/2012/05/21/when-i-write/Mallor, J. P. (2001). Understand the Differences Between Compensatory and Punitive Damages. Business Law and the Regulatory Environment. McGraw-Hill Higher Education. 44

eferencesR

Parrino, R. (2014). Level Cash Flows Annuites and Perpuites. In Fundamentals of corporate finance (3nd ed., p. 165). Danvers, MA: John Wiley and Sons Australia.

Porter, Michael E.(January 2008) . "The Five Competitive Forces ThatShape Strategy." Special Issue on HBS Centennial. Harvard BusinessReview 86, no. 1 : 78–93.

Schmidt, P. (2015). Consumer Price Index See Biggest Drop In Six Years. World Report Now. Retrieved October 18, 2015, from http://www.worldreportnow.com/consumer-price-index-see-biggest-drop-in-six-years/113/Smith, W. (2015). Ethical Thinking WS [PowerPoint slides]. Retrieved from http://ocw.smithw.org/2015fall/bus302-13159/outline.htmlStevenson, W. (2007). Competitiveness, Strategy, and Productivity. In Operations

management (Twelfth ed., Vol. 9E, pp. 27-56). New York, New York: McGraw-Hill/Irwin.

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ppendixA

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