A report on prevailing situations (New Year Eve Crisis) at “Michael’s Homestyle Pasta” Company
Rahul Kumar Mishra, Section-B, Roll.No.-90
1.
Executive Summary:
Michael Home Style pasta company has acquired the Florida based Southern Pasta Company on 10/12/2001.On the eve of the new year, they came to know that the sea-food stuffed pasta shells, supplied by southern pasta company to restaurant chains were tainted with salmonella. This report is intended to assist the Michaels’s Pasta Company in exploring the various options available to them in the current context. After careful analysis of various options, it is evident that the best strategy at the moment is to elicit the sense of cooperation in the mind of restaurant owners. 2.
About Michael’s Homestyle Pasta:
Michale’s Home Style pasta company is a specialized stuffed pasta shell supplier, based out of Connecticut. As on 2001, the company had around 100 employees and sales have reached $17 million. Southern Pasta company (based out of Florida) was the only company other than Michael's, that made pasta shells stuffed with seafood. Mike Valenti, CEO of Michael’s pasta company has succeeded to acquire the Southern pasta company (after the initial refusal by Fredrich Walz (Owner of Southern) for two years) on 20 December 2001 and was expecting a good business during the upcoming festive season. Owing to the family commitments, Mr. Mike was not able to be physically present at Florida plant, however, his top two executives spent almost half of their week at the Florida plant. 3.
Problems/Challenges:
On the morning of New Year's Eve day, Mike and other top executives of Michael's came to know that the seafood -stuffed pasta shells that Southern had just shipped to its biggest customer, were tainted with salmonella. Salmonella bacteria was responsible for about 600 deaths a year. New year eve was one of the biggest night for the restaurants where stuffed seafood pasta was a featured menu item. Since the infected pasta shells have been already shipped out from the Southern Plant and reached restaurants, main challenge here is: “How to stop the reach of these infected pasta shells to consumers” or ensure that the consumers have the access of unadulterated pasta. 4.
Analysis of the problem:
Acquisition of Sothern Pasta Company by Michael’s happened after the first salmonella contamination of seafood stuffed pasta shells made by former in the May 2001. During the first episode of contamination, recall and decontamination led to a huge loss to the Sothern pasta company (more than half a million dollar). There was little information divulged by top management of Southern pasta company during the acquisition process. There were deliberate and successful attempts by top management of Southern, to falsify the laboratory test results. Present episode of salmonella contamination has the potential to shut down Michael's pasta company completely or loss of at least fifty percent of their revenue stream which came from restaurant owners. After careful evaluation of current scenario, following options seem to available for Mr. Mike Valenti. I.
Recall and destroy the contaminated batches of stuffed shells shipped during the month of November and early December before they could reach to consumer (FDA will act only if contaminated batches reach to the consumers).
II.
As the current batches of stuffed shells were produced prior to the acquisition of Southern pasta company and Mr. Fred has the record of all failed test results, the liability of current situation could be placed on the previous owners of Southern Pasta Company. III. Cooking standards require to cook the stuffed shells at a temperature more than 1600 F to kill any contaminants, Mr. Mike can very well place the liability on restaurants owners also if tainted shells are undercooked. IV. Mr. Mike can trust on his instinct that restaurants chains will follow the cooking standards and hence should take no action. V. Inform the restaurant chains regarding current the restaurant owners regarding the current situation and elicit some sense of cooperation by offering them alternate supply during this high revenue period. Later, recall the tainted product and assist in the decontamination of restaurants. 5. Evaluation of the options: Immediate concern at this critical time is to somehow prevent the reach of the contaminated shells to the consumer. At the same time, Mr. Mike cannot afford to lose the faith of the restaurant chains which constitute approximately fifty percent of revenue generation. Option-I is time-consuming and it may not be possible to recall all the shipped products before the end of the day. There won't be any incentive for restaurant chains during this high earning period. Liability can very well be placed on the previous owners of Southern Pasta Company as well as on restaurant chains (Option-II and III) but this will mean that there is a fair possibility that tainted product will reach to end consumers. This will essentially be the escaping from the business ethics and not following the social responsibility. Option-IV is like doing nothing and hoping that problem will get resolved on its own. If restaurant owners come to know about this contamination on their own, then this will be a severe breach of trust. Option-V is most appropriate in the current scenario. Mr. Mike can explain the criticality of the situation with them and offer them an alternate product for this new year eve if possible. He can further elaborate that the cooperation is the best way to survival in the current situation. 6.
Recommendation:
It is recommended that Mr. Mike should start the effective communication (if possible visit of company representatives to different restaurant chains) with restaurant owners as early as possible and shall explain to them very clearly that shipped seafood stuffed pasta shells are contaminated with salmonella. He should inform them that these batches were produced before the acquisition of Southern pasta company and falsified test reports were the main reason for the shipment of these contaminated pasta shells, yet he is not escaping from his responsibility towards restaurants chains and the society. Best strategy for both the stakeholders at the present situation shall be to “Collaborate”. Of course, restaurant chains would also not want to turn a loss during this profit maximizing festive period, hence they might accept the offer of substitution of tainted pasta shells. With the empathic communication, restaurants chains would either agree to follow the strict cooking standards or accept the offer of replacement of contaminated pasta shells.
