In early $2010$s$,$ Batteries for Everyone $($BFE$)$ was mired in mediocrity. Despite reasonable and steady

growth in the battery market, BFE$$s profits were stagnant and it appeared it was rapidly losing market

share to Energizer. Unfortunately, things continued to deteriorate. Costco, which previously had a

policy of letting each country negotiate its own contracts with its own suppliers, decided to centralize

all of its purchasing. In addition, Costco would also be abandoning its policy of splitting its business

between the two biggest companies in a given category. This meant that it would be sending out bid

requests to all the major players in each product category and the winner would be awarded a five$-$year

contract to supply Costco$$s worldwide demand. Given the no frills, bulk$-$buying concept of warehouse

stores like Costco, everyone knew that Costco wouldn$$t be looking for any value$-$added support such as

cooperative advertising, consumer promotions, and so on$.$ It would all come down to price, and the

cheapest supplier would win. Unfortunately for BFE, Energizer$$s price was the lowest. This was a severe

blow to an already dismal outlook for BFE since not getting the contract meant much more than the

loss of incremental sales; it also meant the loss of about $510\%$ of BFE$$s sales in any country in which

Costco operated, given that Costco was only using one supplier.

While the existing senior management team had proved successful in the past, their performance in

the last five years had gone from bad to worse, which had sadly devolved into a substantial amount of

name$-$calling and finger$-$pointing. To say there was a lack of cohesion at the senior management level

would have been a severe understatement! Decision making was non$-$existent, as no one wanted to

make a move for fear of political reprisals, which were often vicious, came quickly, and sometimes

came from previous $$allies$.$ Inevitably, this $$tone at the top$$ in the United States began trickling down

to lower levels in the organization and around the globe, such that a culture of distrust and despair

began to rot the organization from the inside out. The board of directors realized that BFE was close to

heading into a death spiral and decided to take action in $2011.$

Over the next few months, there were a number of $$retirements$$ from the senior management team.

While they were replaced mostly by insiders, these new senior managers seemingly weren$$t tainted by

the negative culture that had been rife throughout BFE for the last few years. In fact, it was quite the

opposite, as exemplified by one of the first statements made by the new Director of Logistics, Ed

Stokely, to his colleagues: $$The way I see it$,$ my responsibility to you is to get you the materials you

need when you need them while continually looking for ways to drive costs out of the logistics

operation. It will be my pleasure to assist you and your direct reports in any way I can to make this

happen.$$

The first order of business was to revisit BFE$$s mission and vision statement at the senior management

level in head office. This was then used to establish a frame of reference for all the worldwide affiliates

in establishing their own vision and mission to get companywide buy$-$in of the new direction. In

conjunction with this initiative, a formal benchmarking review was undertaken to assess where BFE was

relative to business in general, and consumer packaged$-$goods companies in particular. While it was

anticipated that the results wouldn$$t be favourable, it was somewhat stunning to see the depths to

which BFE had slipped. In virtually every category, $($receivables turnover, inventory turnover, asset

management, customer satisfaction, and so on$)$ they were close to$,$ if not at$,$ the bottom. Rather than

dwell on the negative and the past, the new senior management team took the opportunity to point

out that there was essentially no place to go but up$.$ Armed with the benchmarking study, BFE decided

that it was going to revamp its incentive structure as it was blatantly clear that emphasizing short$-$term

profitability, and in some cases just yearly sales without regard to profitability, had been a terrible

mistake.

In reviewing the financial results for several international affiliates, senior management noted that

some countries, Canada among them, were barely making any kind of profit. Upon further analysis, it

was determined that exorbitant $($yet legal$)$ transfer$-$pricing policies were significantly distorting the real

contribution these international affiliates were making to BFE. For example, based on its legal financial

results, Canada ranked $38$th in profitability. However, once transfer$-$pricing effects were removed from

the results of all the affiliates, Canada$$s profitability increased so much that it moved up to $6$th place.

Obviously an international market that is $6$th in terms of the profitability it provides should get much

more attention than a market that is $38$th$.$ It was as a result of this analysis