Entrepreneurial Small Business 4th Edition by Jerome Katz ,Richard Green

Exercise 6

G R GARDEN CENTER: LAWN CARE SERVICES DIVISION
Rick and Gloria Ash started a new business in 1986 on the outskirts of Columbus, Ohio. Their original retail store with greenhouse attachment featured fresh-cut flowers, annuals, vegetables, and perennials. The building is on the grounds of Gloria's family farm, which enables the Ashes to grow some of their retail products from scratch. Gloria's parents gave the couple several acres of commercially zoned land as a wedding gift in 1982. The building and greenhouse construction were completed by Rick with a little help from his brothers. This combination of land acquisition and building construction resulted in a very low overhead situation that contributed to their startup success.
An addition to the building was completed in 1991 and included several new and related product lines such as garden tools, soil and mulch products, gifts, seeds, and related accessories.
Gloria earned a horticulture degree at the local community college prior to the establishment of the business, and in 1997 she was able to fulfill a lifelong dream of starting a landscape design and installation service that became the company's next and newest product line. Gloria set up a small studio and office in the couple's nearby home and was able to acquire some new clients. Her timing was good, as the Columbus area experienced a housing boom during that period. New houses and new developments sprang up in every direction from the city. Their garden center was able to supply the plant materials that each new job required. Soon after, the Ashes expanded their product lines to include a new and wider variety of trees, shrubs, landscape terraces, patios, and walkways as a means to generate new sales and to complement Gloria's new service line.
The original start-up business and each expansion project (building addition, new products, design and installation service) have more than covered their costs but have only generated fair to moderate profit margins according to the Ashes. They attribute this mostly to the presence of their competition, which always seems to be growing.
As a result, they have been reluctant to raise prices even though some product costs have risen.
One year later, the Ashes completed the final phase of their original long-range business plan with the addition of another new service-Big Rick, The Lawn Garden Doctor. This new product line was added because of its very high profit projections coupled with the fact that the Ashes would (temporarily at least) have a monopoly on this market, as none of their competitors currently offer the service.
This new division specializes in the treatment and eradication of lawn and garden pests. There are many insects and diseases that affect plant life, some of which are fatal. In spite of the fact that the Ashes and other local garden centers offer high-quality plants to consumers, Mother Nature has a way of wreaking havoc on lawns, gardens, shrubs, and trees over time.
The start up of this division required a tremendous amount of time, effort, and expense as a result of the environmental and safety-related hazards of some of the products such as insecticides and fungicides.
The Ashes were required to train and license two of their employees as certified applications technicians. A custom built, high-security storage facility was required and built to house all hazardous materials. The building was secured with a locked, barbed-wire fence, an alarm system, and a hazardous material runoff-proof partition. A special liability insurance policy was purchased as well.
As expected, the new division turned out to be very profitable. Demand was strong, and the technicians' work was professional and effective. In fact, at the end of its first full year of existence, Big Rick, The Lawn Garden Doctor turned a profit that almost matched that of all other divisions combined. At the company's monthly staff meeting, it therefore came as quite a surprise to everyone when Rick announced that he was seriously considering dropping the division entirely.
Rick Ash is a local native of the area. He has very strong family and community values and has always felt responsible for the welfare and happiness of his friends, neighbors, and especially his customers. He was always nervous and apprehensive that something bad would happen as a result of the pesticide or fungicide applications.
And then it happened. A customer's dog died as a result of eating some grass from a recently treated lawn. Big Rick's technician had taken every precaution. The area was properly treated, marked, and roped off, and the customer was instructed as to the after-care safety precautions which included a well-written handout and a signed liability waiver form. While the company was clearly not negligent, Rick was clearly upset.
Two months later, a lawsuit was filed against the company, claiming that the water runoff from the property of one of their customers had tainted a neighbor's well. The Ashes were forced to hire an attorney, and following a full and costly investigation were found to be not guilty of that charge. In fact, the case never even made it to court.
Gloria feels that Rick is overreacting. She points out that the company is in full compliance with every regulation and that Rick has gone out of his way to ensure the safety of all. Gloria also noted that no business can control the behavior or responsibility of its customers or of the population in general and that incidents beyond their control will naturally and always occur. In addition, the high profitability of the division will allow the Ashes to embark upon an aggressive advertising campaign aimed at improving the sales and profits of their other divisions.
Rick is losing sleep over all of this and is not sure what to do. He is worried about the image and reputation of his family and their business. He feels that the conditions surrounding the lawn and garden doctor business are in conflict with his values and conscience.
Present an argument in favor of retaining the new division that considers and incorporates the ethical and moral conflicts that Mr. Ash is experiencing.