The New Years Eve Crisis

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LETTER OF TRANSMITTAL

To Mike Valenti, President, Michaels Homestyle Pasta, Hartford, Connecticut.

Date: 31 December 2001

Subject: Report on the analysis of issue faced by Michaels Homestyle Pasta

With reference to your request for preparing a report suggesting immediate course of action to be taken regarding the Salmonella contamination at Southern Pasta Company, a report has been enclosed which analyses the situation, states the core problem, the appropriate options available to you and their criteria for evaluation, and final recommendation with proposed action plan. It is recommended that you call the clients and let them know about the contaminated batch.

Yours sincerely,

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EXECUTIVE SUMMARY

Mike Valenti has discovered that a salmonella contaminated batch has been delivered to an important client. The new venture has made Mikes company the only major player and thus it is important to keep that advantage by not losing important clients. He has to decide on a course of action which should not only solve the problem at hand, but also address the basic underlying problem of clash of cultures of the two companies. It is recommended that Mike should call the client restaurants as it is a step towards addressing the present issue as well as the root problem

Word Count [102]

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CONTENTS

SITUATION ANALYSIS
After knowing about delivery of Salmonella contaminated pasta to a major client of Southern Pasta Company (SPC), a company acquired by Michaels Homestlye Pasta(MHP) just three weeks ago, Mike Valenti has to decide his courses of action. He cannot incur heavy financial losses and trying to contain that would mean risking lives of innocent customers. The stuffed pasta is a specialty product and with the acquisition of SPC, MHP is the only major player in the market. Thus the customers are dependent to a large extent on these two companies. The customer dependency is validated by the fact that the client did not terminate contract with SPC after the May 2001 recall. In spite of holding an advantage over the restaurant chain, Mike has to worry about stuffed pasta being taken off the menu. The client was one of the major reasons for Mikes interest in SPC and accounts for 14% sales. Thus any action taken should take into account the importance of continuing this account. There has been no food poisoning report from the restaurants after the May recall, although the quality of product supplied by SPC is suspect. So it can be concluded that the restaurants have robust standards for cooking. Mike also hasnt been able to spend enough time at Tampa. Thus the process of welding the culture of two companies has been affected. This can be seen as reason why Jones came forward only after 3 weeks when he developed a little trust in the new management. The employees at SPC are used to following orders, ethical or not, and used to working under an authoritarian management. Thus the difference in two cultures can be seen as the underlying root problem, while the issue at hand being just a symptom of the problem. So whatever decision is to been taken has to solve the contaminated batch issue as well as address the basic problem of clash of the cultures.
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PROBLEM STATEMENT
What course of action would be consistent with MHPs working culture and lead to minimum financial, legal and reputation risk for Mike Valenti and his company?

OPTIONS
Do not call the client restaurants and trust their cooking standards Call the clients and let them know about the contamination so that the necessary cooking standards can be maintained

CRITERIA FOR EVALUATION

Financial Implications o Short term : Losses for the particular batch in question o Long term : Possibility of losing the client Legal implications The reputation of the company Ethical and social responsibility towards the clients as well as the final consumers. The decision should be consistent with the culture of MHP and address the underlying problem of difference and conflict of cultures in the two entities

EVALUATION OF OPTIONS
Do not call the clients The New Years Eve is among the largest sales day for the restaurants. It would be only conservative to assume that all the dishes might not get proper cooking time in spite of

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robust standards, due to high traffic. Thus the possibility of no outbreak in this situation is possible yet unlikely given the large number of restaurants serving the contaminated pasta. In case there is no outbreak, there are no financial, legal or reputation risk to be looked at. But in case there is an outbreak then SPC has to share the responsibility with the restaurants. The short term financial loss implies sharing the settlement amount to be paid in case of a lawsuit. The long term loss could be losing the client. If the client discovers that the Mike did not inform them even after having the knowledge of the contamination, they will terminate their contract with SPC. Legally, Mike has limited liability and if any one were to get sick, the liability can be placed upon the previous owner. But here again if anyone was to testify against Mike, say one of his managers, that he was aware of the contamination, he can have serious legal ramifications for his inaction in case of potential deaths. Also the reputation of Mike and MHP would go for a toss. Irrespective of an outbreak or not, not informing the client would affect Mikes effort to bring MHPs culture into SPC. It would send a signal to Jones (and others possibly aware of the situation) that Mike isnt different from his previous employer. Mike would never get the same appreciation from SPCs employees as he gets from the MHPs and thus will find it difficult to develop a similar healthy working culture. Call the clients Letting clients know about the contamination gives them a chance to make sure that they cook the food as per the required norms. But the restaurants may decide to not use the contaminated batch and ask for a refund for the same. There is a possibility of them taking the pasta out of their menu or looking for another supplier. But since they did not switch from SPC after the May 2001 recall, it can be assumed that they have no other potential suppliers. Also they would be willing to give Mike a chance given his track record.

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There wouldnt be any legal implications in this option. There would however be implication for Mikes and MHPs reputation, which is now integrated with that of SPC. Since this is a business to business service, the FDA will have limited intervention. Still there is possibility for local press releases, but this should not do permanent damage to the restaurants and SPCs image.

Most importantly it will set an example for everyone at SPC. By doing the ethical thing Mike will instill confidence among his managers and workers. He can differentiate himself from their previous employer and start welding MHPs culture with that of SPCs.

RECOMMENDATION
Based on the evaluation, Mike should call the client. There is possible financial risk in both options but Mikes moral stakes should outweigh other implications. His effort to mitigate the clash of cultures between his two companies is also best served by calling the clients.

ACTION PLAN

Call the client restaurants. Since time is running out it should be made sure that all restaurants are contacted before dinner time. Communicate to the client how this was brought to Mike only hours ago. Also ensure him that proper checks will be installed from now on. Check for contamination in stored batches and destroy the contaminated lot. Look for other possible causes of contamination and mechanize the process as in MHP as soon as possible to avoid complete shutdown in case of FDA inspection.

Word Count [1090]

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