Business management
over most of the residential, commercial and marine fuel market share in xxx. The only competition has just enough of the market to keep others from coming in to compete. We set up the local infrastructure such as storage tanks that enable us to get the cheapest fuel possible, warehouses to store resale items and maintenance facilities to keep everything running. Everything is as efficient as possible and there is no more room to grow so any further investment would be pointless. The larger organization can use the cash generated in xxx to invest in strategic business units where they have a high market growth rate and high market share which would be considered a star.
5. (20 points) Explain the phenomenon known as “heightened commitment” or “escalation of commitment.” Why does this occur and how might you as a senior manager avoid it in your company?
This is a situation where you become increasingly committed to a poor choice of action. This can occur if emotion becomes involved in your decision making or if a project is fundamentally flawed and it is not realized right away. You may have a project that is your “pet” and you want it to work so badly that you keep “pouring good money after bad” in an attempt to make it work. I saw a good example of this on TV the other day. A sex education instructor had what she thought was a great idea. She sewed a small pocket into a pair of underwear that was to contain a condom. She figured that if it was right there when it was needed it was more likely to be used. Her students thought it was a great idea and were supportive so she invested twenty thousand dollars into producing a bunch of this underwear. She got some interest from small clothing outlets but was rejected by large distributors because it was too risqué. (Possibly like this example!) She wanted it to work so badly that she ended up investing one hundred thousand dollars into it, but still not many people wanted to buy it. She poured good money after bad because her emotional involvement in wanting to increase condom use caused her to invest more money in a product that had little appeal to consumers.
If I were a senior manager I would avoid this in the following ways: First I would instruct my project leaders to keep emotions separate from decision making. Secondly, I would set goals for a project which if they are not met by a certain time the plug will automatically be pulled. Lastly, I would have one person start the project, then have another carry it from there, the second will be more likely to have an objective view of its success or failure. The woman in my example should have done more market research by contacting distributors [next page]