Juan Hernandez for many years had worked with Jensen Chemicals to supply plastic resins. However, Juan had recently accepted a bid from another supplier. Juan sent the following message to Nick Jensen:

Hi Nick:

Thank you for submitting your competitive bid to supply and deliver plastic resins for the upcoming year.

We reviewed the bids with three chief criteria in mind: price, delivery schedule, and inventory management.

We have accepted Hunter Chemicals bid to supply and deliver plastic resins for the upcoming year. Hunter Chemicals offered us slightly better pricing. Also, we were impressed with Hunter Chemicals ability to deliver product on shorter notice and link their online order system directly to our online inventory system.

Nick, we have always appreciated the dependable service your company has provided. We will continue purchasing lumber supplies from you, and I will notify you next year when we are ready to accept bids again for chemical supplies.

Best wishes, Juan

Nick Jensen shook his head in frustration as he read Juan Hernandezs email notifying him that his company had lost the bid to supply chemicals to Marble Home Makeovers for the upcoming year. Hed had a hunch that his uncles store, Jensen Chemicals and Hardware Depot, would not get the bid. However, it was still disappointing, and he was worried that unless the store changed its business model, it would be out of business within five years. The store had lost nearly 30 percent of its business in supplying chemicals in the past two years. It simply couldnt compete with larger regional companies.

Nick knew he needed to talk to his uncle, Mike Jensen, the owner. Mike owned five businesses but no longer got involved much in managing them. He spent about half of his time on vacations. Nick thought he should email Uncle Mike and tell him what he considered ominous signs for his company. He might recommend that they sell this portion of the business to a larger chemical manufacturer and supplier, and get out of chemicals altogether. They would probably take a loss to do so, but selling now could also help them cut their losses. Nick knew his uncle loved having a stake in chemicals. He was also embarrassed that while Mike had entrusted him with a management position, the chemical portion of the business was performing so poorly. The good news, however, was that business-to-business hardware sales were in great shape.

Nick dreaded several other pieces of bad news he needed to deliver right away. Over a decade ago, during their most profitable years, management at Jensen Chemicals and Hardware Depot had implemented many benefits. One program allowed employees to be reimbursed for their tuition for up to two classes per semester if they received grades of a B or higher. Currently, 20 employees consistently took advantage of the program. Nick needed to inform all employees that the program would be discontinued immediately, as it cost the company too much. Employees currently enrolled could be reimbursed for courses during the present semester. Employees who had fewer than four courses left to receive an undergraduate degree would continue receiving reimbursement until they graduated. This included just three employees.

Finally, Nick needed to inform customers that the Jensen Chemicals and Hardware Depot Elite Customers program would be discontinued after the current rewards cycle. Under the program, customers who spent more than $1,000 in a calendar year automatically qualified for a 10 percent discount on all purchases in the following year. The program had been quite popular, and Nick knew that many customers would be upset. However, he had done the math and felt it was a money loser for the company. To soften the disappointment to customers, in letters to all previous Elite Customers, he was including a 20 percent discount coupon on any single purchase. In addition, customers could still reach Elite Customer status for this year and qualify for discounts next year.

Writing a Bad-News Message about Jensen Chemicals and Hardware Depot

Assume the role of Nick and write an email to your uncle explaining why you think the company needs to get out of chemicals.

You think the chemicals division could be sold for around half a million dollars. You currently have about $740,000 in debt

related to the chemicals division. You would need to lay off ten employees, all of whom have been loyal to the company for

many years. However, you think it's necessary because the chemical division lost nearly $200,000 last year, and you expect

things to get worse