Academic journal article Journal of the International Academy for Case Studies

Creating Customer Value at Rocky Mountain Fiberboard

Academic journal article Journal of the International Academy for Case Studies

Creating Customer Value at Rocky Mountain Fiberboard

Article excerpt

CASE DESCRIPTION

The primary subject matter of this case concerns strategic planning, strategy formulation, and the alignment of functional strategies with the overall business strategy. Secondary issues examined include the incorporation of societal & environmental needs into business decisions, the strategic issues associated with staying focused, and bankruptcy. The case has a difficulty level of five. It is best suited for use in graduate level or advanced undergraduate courses given the scope of the difficulties the company faces and the complexity of the situation described. It is ideally suited for use in a capstone strategic management class because it requires the student to deal with strategic marketing, production and financial issues in an integrated manner. The case could also be used in a capstone marketing course, a small business management course, or in an entrepreneurship course. The case has been designed to be taught in 75 to 90 minutes and is expected to require four to five hours of outside preparation given the detailed financial analysis that can be done.

CASE SYNOPSIS

Rocky Mountain Fiberboard (RMF) produced particleboard out of bluegrass straw. It was established in 1999 as a joint venture between a processor of bluegrass seed and a Northwest American Indian Tribe. RMF was created to help solve the problem of waste bluegrass straw and was also part of the Tribe's effort to diversify the economic base of its reservation. RMF, however, experienced significant difficulties. It had lost $1.9 million in 2001, had $4.5 million in debt, and had no real working capital. Its Tribal owners were putting $42,000/month into the company to keep it going. While a pending grant application with the U.S. Department of Agriculture offered hope of reducing its significant debt burden, the business was also experiencing difficulties attracting and retaining customers and was experiencing significant quality problems. Luke Waterman, a trusted Tribal member who was in the process of completing a business degree at a nearby university, had recently taken over as general manager and was faced with the task of overcoming the considerable financial, marketing, and production problems the business faced. Luke was considering three options: (i) identifying additional funds to undertake a focused marketing effort and to implement process improvements in production; (ii) acquiring equipment and licenses to produce another product--wall panels--that would use RMF's strawboard; or (iii) declaring bankruptcy.

INTRODUCTION

Luke Waterman stared at Rocky Mountain Fiberboard's (RMF) 2001 financials. The company had lost $1.9 million on sales of $1.7 million last year. It had over $4.5 million in debt, payables of over $800,000, and starting early this year required $42,000/month from its owners just to stay in business. RMF was experiencing significant difficulties.

The financials might hold the key to understanding what to do next, Luke thought, but he was distracted today. From the window of his office, Luke could see twenty wall panels that had just been unloaded into the plant. The wall panels came from Quickstart Building System's plant in southern Idaho where Luke and Frank Lewis, the president of RMF's board of directors, had just visited. They were considering partnering with Quickstart and had visited to learn more about the firm's product. Quickstart's wall panels were pre-fabricated walls made primarily from oriented strand board (OSB) and were used to speed up on-site construction of homes. The company had a market among developers that built many similar homes in the same development. Quickstart's owner was looking for a business interested in either producing wall panels under some type of license agreement or becoming a partner of the wall panel business. While there were a few challenges to overcome, Luke believed RMF's strawboard could replace OSB in the interior of the wall panels, thereby creating demand for strawboard. …

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