Trouble at the Mill

Contents

  1. The Case
  2. Nouns and Mind Map 1
  3. Text with Analysis, Vocabulary and Grammar
  4. Nouns and Adjectives and Mind Map 2
  5. Changes and Relationships
  6. Changes in Nouns and Adjectives
  7. Changes in Relationships
  8. Verbs and Adverbs
  9. Strategies
  10. Further Exercises


1. The Case

Trouble at the Mill

Bowing to environmentalists' demands could drive a paper maker to extinction.

Dilemma

Eco-friendly plant is expensive, and the environmental manager's position on the board is weak.

The letter from the environmental pressure group leaves no room for doubt: it is threatening to cause the Venlo Paper Company a lot of unspecified trouble unless immediate steps are taken to use recycled pulp in its paper manufacture, and to stop using chlorine to bleach it.

Martyn Lievaart, manager responsible for environmental affairs, stares at it in horror: he has only just been promoted to the management board, and does not yet feel his colleagues' support to be strong enough to face a challenge of this size.

The company has made high-quality writing and business papers in the southern Dutch town for more than 80 years.  It has a reputation for making prestige products, but in truth, margins are slim and the paper mill, although reasonably modern, is below the standards now imposed upon such operations by the Dutch government and the European Commission.

The management board is not insensitive to the environmentalists' demands - as Lievaart's appointment suggests.  The company has tried to conform to leglislation and buy its pulp from sustainable sources in North America, but the quality required cannot be achieved with ordinary recycled pulp using its existing equipment. Meanwhile, public pressure is growing for the industry to use more of the paper waste being collected for recycling, and to clean up its effluent.

At the moment, as Lievaart is aware, Venlo has no chance of being awarded am 'eco-label' for its stationery, and sales are starting to suffer as a result.

The investment in plant that will enable recycled pulp to be used for high-quality papers and the bleaching process to be modified will, he calculates, amount to more than FL 3 milion (ECU 1.4 million) - at least two years' profits, with no additional turnover.  Lievaart's colleagues on the board are mostly traditional paper makers, whose long experience of the struggle to survive commercially has given them a robust view of investment, pressure groups, public opinion - and of enthusiastic young environmental managers.

He knows that if he tries to push his colleagues too hard, particularly in a recession, he risks hardening their attitudes to the environmental issue and, indeed, to his job.  On the other hand, he realizes the letter is a straw in the wind of public opinion. If the company does nothing, sales, and its reputation, will be damaged, and the gradual tightening of regulations will in the end threaten its very existence.  Meanwhile, what to do about that letter?


2. Nouns and Mind Map 1

Make a list of all the objects discussed in the case.  This can be done during the reading, beginning with the main persons, the organisational units and physical objects.  Later the minor participants and abstract objects can be added, perhaps during discussion.

These items can be placed and linked together on the mind map. Note that some items have been (intentionally) forgotten, and the diagram will be further improved.

The same information can be presented in list form, nesting with sublists. But keep just one "latest" version - throw away each previous version when you have taken all its information.
	the environmentalists
	the board - Lievaart and his colleagues
	the resources
		hard wood
		soft wood
		recycled paper
	the plant and processes
	the Dutch government
	the European Union
	the products

At any time you can add more points and rearrange - but paper is more flexible. Some editors can deal with lists - for instance in Power Point - but there are always problems with items which belong in two or more locations, and when you want to make links between items
	the plant and processes
		the bleaching
			chlorine
			no bleach
		the effluent

Pencil and paper is by far the most user-friendly tool! The map above was created using a simple graphic editor - which has an range of shapes (ellipses and rectangles), lines, arrows, and colors. There are some powerful features - such as boxes containing boxes - and the diagram can be imported into word-processors. Limitations, for instance on rotation and curved lines, can be overcome using more advanced graphic tools sich as flowcharters and presentation graphics packages.


3. Text with Analysis, Vocabulary and Grammar

The main difficulty with this text is that sentences are long and complex.  The method of sentence decomposition can be used to help.  Pay special attention to the roles of conjunctions such as unless, or, and, if [then], and but and the use of colons : and dashes - to split sentences.
 
Trouble at Mill    
Bowing to environmentalists' demands could drive a paper maker to extinction to bow down 
to drive them to extinction - to lead to death - to force a collapse
 
Dilemma    
Eco-friendly plant is expensive, and the environmental manager's position on the board is weak.  plant - equipment in a factory 
eco - ecology
 
The letter from the environmental pressure group leaves no room for doubt: it is threatening to cause the Venlo Paper Company a lot of unspecified trouble unless immediate steps are taken to use recycled pulp in its paper manufacture, and to stop using chlorine to bleach it. no room for doubt 
unspecified - not stated 
pulp - the flesh of a plant 
manufacture - the process of fabrication
The letter leaves no doubt. 
The group threatens to cause trouble, 
unless steps are taken. 
Steps are to use ... and to stop ...
Martyn Lievaart, manager responsible for environmental affairs, stares at it in horror: he has only just been promoted to the management board, and does not yet feel his colleagues' support to be strong enough to face a challenge of this size affairs - business 
to stare in horror - to look at with dismay 
to be promoted - to get a better job 
strong enough -  
of this size . as big as this 
 
Lievaart stares at what in horror? 
Lievaart has recently ? 
Lievart thinks his colleagues will not support him strongly enough.
The company has made high-quality writing and business papers in the southern Dutch town for more than 80 years.  It has a reputation for making prestige products, but in truth, margins are slim and the paper mill, although reasonably modern, is below the standards [which are] now imposed upon such operations by the Dutch government and the European Commission high-quality 
writing papers 
business papers 
prestige products 
in truth - in reality - really 
margins are slim 
reasonably - moderately 
to be below standard 
to impose - to enforce 
Are the business papers also of high quality? 
a reasonably modern mill 
What does 'reasonably' describe?  What sort of word is it?
The management board is not insensitive to the environmentalists' demands - as Lievaart's appointment suggests.  The company has tried to conform to leglislation and buy its pulp from sustainable sources in North America, but the quality required cannot be achieved with ordinary recycled pulp using its existing equipment. Meanwhile, public pressure is growing for the industry to use more of the paper waste [which is] being collected for recycling, and to clean up its effluent not insensitive = sensitive 
to conform to legslation - to obey the law 
sustainable - able to be continued or maintained 
the quality required - the needed standard  
ordinary - common - usual 
pressure is growing - the ? is increasing 
effluent - outflowing waste water
double negative makes a positive 
Why is the ' sometimes before and sometimes following the 's' 
environmentalists' Lievaart's
At the moment, as Lievaart is aware, Venlo has no chance of being awarded an 'eco-label' for its stationery, and sales are starting to suffer as a result at the moment - now  
no chance 
'eco-label' - a certification that a product is environmentally safe
to be awarded 
sales are starting to suffer
The investment in plant that will enable recycled pulp to be used for high-quality papers and the bleaching process to be modified will, he calculates, amount to more than FL 3 million (ECU 1.4 million) - at least two years' profits, with no additional turnover.  Lievaart's colleagues on the board are mostly traditional paper makers, whose long experience of the struggle to survive commercially has given them a robust view of investment, pressure groups, public opinion - and of enthusiastic young environmental managers to enable - to permit - to allow 
recycled pulp 
high-quality papers 
bleaching process 
turnover 
the struggle to survive - the effort to live 
a robust view - strong and stable - their minds are not easily changed 
pressure group - lobby
The investment in X will amount to Y 
X=plant that will enable A and B 
Y=more than ... = at least ... 

Identify the passive verbs:  
to be used, to be modified 
 

He knows that if he tries to push his colleagues too hard, particularly in a recession, he risks hardening their attitudes to the environmental issue and, indeed, to his job.  On the other hand, he realizes the letter is a straw in the wind of public opinion. If the company does nothing, sales, and its reputation, will be damaged, and the gradual tightening of regulations will in the end threaten its very existence.  Meanwhile, what [is] [there] to do about that letter to push someone 
to harden - to make hard 
indeed - in fact 
a straw in the wind 
tightening of regulations - enforcing the law 
to threaten its existence - to challenge its survival
Lievart knows what? 
If he pushes too hard, he risks A and B 
What to do about that letter.  Rewrite as a proper sentence. 
What should he do about that letter? 
What can be done about that letter?

4. Nouns and Adjectives and Mind Map 2

The next step is to expand this list and the initial mind map to include all characteristics which are mentioned for each object. The major advantage of the Mind Map is that it does not matter where in the text it occurs - each characteristic (attribute, description) can be placed in an appropriate place.

All the characterics can be placed on the mind-map. The following list is given to show an alternative presentation.
	object				characteristic	
	------				--------------					
the business environment		in recession	
	the public			opinion, winds of change	
	an environmental pressure group	sent the letter	
	the Dutch government		standards, eco-label
	the European commission		regulations	
					
the products				
	writing and business stationery	prestige, high quality, demand reducing
	prices / costs			low margins
					
the mill and the process of manufacture					
	the board					
	the board's conservatives	not easily persuaded			
	Lievert				new position, insecure, weak	
	finances (money)		low margins	
	plant (equipment)		old, unable to handle pulp	
	effluent (smoke, water)		polluting	
	raw materials (hard,soft,pulp)	cost and supply	

We can add further objects, not explicitly stated in the case study:
	object				characteristic
	------				--------------
the business environment
	customers			changing market
	shareholders			interest in profits
the products
	alternatives to glossy paper	low quality, low price	
the factory and process
	new equipment			requires investment
	new raw materials		recycled paper, pulp
	the work force			recession, job insecurity

After the Nouns and Adjectives Mind Map has been produced, there should be a break.  It could be as long as a week, during which time solutions will "suggest themselves" to the participants.

The first part has concentrated on understanding.  It has not been creative, since the aim was to represent the
existing text in another form and not to add anything.  The group work included a process of discovery and
organisation, as information from the text was brought into the mind-map representation.

For the next stage, the mind map could be redrawn in a better format.  However, be careful that nothing new is added and nothing is taken away.  Participants who use it at the beginning of the next meeting should have confidence that they know what is on it.

At the beginning of the next session, presentations can be made which describe the existing knowledge about the case.


5. Changes and Relationships

We now start the creative phase. We want to find out that possibilities there are to change the situation. This is a brainstorming step, we want to gather and create alternatives and we do not judge them. Cost, effectiveness, feasibility etc are not to be considered yet.

We first start with the Nouns - the actors, objects and abstracts. We already identified new Nouns: some like the customers and alternative products which have been mentioned indirectly, and others like the workforce or Venlo shareholders which have not been mentioned but which could take an important role depending on the actions which we will decide to take.

6. Changes in Nouns and Adjectives

We go through all Nouns and see how we can change any of their Adjectives.
  • Lienert - how do we make him stronger and feel more secure, to allow him to propose difficult choices?
  • How do we influence the public and our customers - though advertising?
  • Products - we can introduce an 'eco' product
  • Processes - we have to upgrade plant and reduce pollution

7. Changes in Relationships

The "relationships" phase uses a simple and logical way to analyse the situation and the possibilities for change. We look first at combinations of the Nons in the case and describe the linkage or type of relationship between them.

  • 1. regulations will force the company to change
  • 2. public attitudes will hurt sales since there is no ecolabel
  • 3. actions threatened by pressure group will damage the factory
  • 4. public attitudes will change government attitudes
  • 5. lower profits and lower sales will hurt the company
  • 6. company needs investment for new plant
  • 7. some decisions will make Lievert more insecure

then we look to see how we can influence the relationship.


8. Verbs and Adverbs

We can work out the points where we can make a change. This is to be discussed in a brainstorming session. The results are to be listed in a proposal, and presented in a simulation of a "meeting of the board."

Results of some sessions on this case are in graphic form and in a list.

In list format:
  • A. effluent cleanup (smoke and water) or none
  • B. change from chlorine bleach to something safer (peroxide, oxygen)
  • C. change raw materials from hard wood to soft wood or recycled paper (change the mix)
  • D. develop new,"eco-label" products - even by importing them!


9. Strategies

Then we work out how and when to cause a desirable changes in each relationship.
  • 1. get the government help,to avoid meeting standards
  • 2. inform the public about costs of a change in moneyand jobs lost
  • 3. get extra insurance and security protection
  • 4. no chance! - you can┤t swim against the stream
  • 5. raise prices for the prestige products because of environmental damage
  • 5. market the new ecolabel products at a higher price
  • 6. ask the government or E.C. for investment money
  • 6. ask the public to raise money for the change (loan, bonds)
  • 7. get public backing for Lievert against the board
  • A. get investment to change cleanup process
  • B. get investment to change bleaching process
  • C. Ask for public support to recycle paper at low cost
  • C. Ask for government help to reduce imports
  • D. Generate lots of support through advertising publicity

In order to pesuade the board, to counter the opposition of the conservative members, Lievaart may have to make a special effort:
  • convince the board of the power of public opinion
  • make them ecologically-minded
  • get figures of change in market share under various scenarios
  • propose financing alternatives
  • compare with competitors
  • propose an advertising campaign

The strategy should be presented in a simulation of a meeting of the Board. It can be written out in the form of a memo.


10. Further Exercises

The group may want to work further on the case. This occurred when we had several accounting - manager types in the group!
  • More detail is needed
  • Prices of Raw Materials
  • Usage of raw materials
  • Market share
  • Income Figures
  • Plant and Process costs
  • Results

The results should be presented to the Board.

More detail is needed

We need figures! We want to relate strategies to costs and profits. The results are presented in the following diagrams, then the method of reaching them.

Prices of Raw Materials

We set the prices as follows: Hardwood increases from $80 a ton by 5% each year, softwood remains constant and recycled reduces at 5% per year.

We aim to change the mix of hard and soft wood for the prestige products to have 50-50 in five years, and with the new plant we begin using an equivalent amount of recycled material after three years.

We begin selling eco-label products now using imported paper and replace this by our own after three years.
	A	B	C	D	E	F	G	H	I	J	K
4					1995	1996	1997	1998	1999	2000	
5	Raw Materials								 	
6	price	105%	Hardwood	$80 	$84 	$88 	$93 	$97 	$102 	$B6*I6
7	 	100%	Softwood	$60 	$60 	$60 	$60 	$60 	$60 	$B7*I7
8	 	95%	Recycled	$40 	$38 	$36 	$34 	$33 	$31 	$B8*I8
9	usage	Hard	prestige	100%	90%	80%	60%	50%	40%	 
10	 	Soft	prestige		10%	20%	40%	50%	60%	 
11	 	Recycle	ecolabel			0%	100%	100%	100%	 
12	cost	Hard	prestige	$80 	$76 	$71 	$56 	$49 	$41 	J9*J6
13	 	Soft	prestige	$0 	$6 	$12 	$24 	$30 	$36 	J19*J7
14	 	Recycle	ecolabel	$0 	$0 	$0 	$34 	$33 	$31 	J11*J8
15	Total	 	prestige	$80 	$82 	$83 	$80 	$79 	$77 	J12+J13
16	Total	$35 	ecolabel	$35 	$35 	$35 	$34 	$33 	$31 	$35ŽJ14

The prices of the raw materials are shown in the following diagram. This was an exercise with a spreadsheet program and business graphics - a useful practice for business presentations.

Usage of raw materials

This diagram is also derived from the above figures.

Market share

We assume that the absolute market for prestige paper is declining at 5 % each year and the market for eco products is growing at 20%. We have most of the prestige market and we wish to take half of the eco market from 1998. The formula in column K gives the equation used to calculate the previous cell.
	A	B	C	D	E	F	G	H	I	J	K
4					1995	1996	1997	1998	1999	2000	
18	Sales	 	 	 	 	 	 	 	 	
19	Market	95%	prestige	800	760	722	686	652	619	$B19*I19
20		120%	ecolabel	200	240	288	346	415	498	$B20*I20
21			total		1000	1000	1010	1032	1066	1117	J19+J20
22	Venlo	90%	prestige	720	684	650	617	586	557	$B22*J19
23	share	20%	ecolabel	40	48	58	69	83	100	$B23*J20
24		50%	ecolabel	100	120	144	173	207	249	$B24*J20
25		est.*	ecolabel	40	48	58	173	207	249	J23ŽJ24

Income Figures

In the following model we keep the sales price constant and subtract the cost of the raw material (which we assume reflects the processing costs) to give the margin figures.
	A	B	C	D	E	F	G	H	I	J	K
4					1995	1996	1997	1998	1999	2000	
26	Price	100%	prestige	$100 	$100 	$100 	$100 	$100 	$100 	$B26*I26
27		100%	ecolabel	$40 	$40 	$40 	$40 	$40 	$40 	$B27*I27
28	Raw Materials	prestige	$80 	$82 	$83 	$80 	$79 	$77 	J15
29			ecolabel	$35 	$35 	$35 	$34 	$33 	$31 	J16
30	Margin	 	prestige	$20 	$18 	$17 	$20 	$21 	$23 	J26-J28
31			ecolabel	$5 	$5 	$5 	$6 	$7 	$9 	J27-J29
32	Income	 	prestige	$14400 	$12586 	$11333 	$12614 	$12538 	$12902 	J30*J22
33		 	ecolabel	$200 	$240 	$288 	$986 	$1539 	$2252 	J31*J25
34	Total				$14600 	$12826 	$11621 	$13600 	$14077 	$15154 	J32+J33	

Plant and Process costs

We have not gone into detail here, apart from setting a fixed price on plant replacement. Decision of the group was that we will not invest in water filtration, but that wee need to clean the smoke and will do this at a cost of $400,000 in the year 2000. Until we have the new chlorine-free production running in 1998, which will cost $2,000,000, we have to process the pulp specially.

The team became impatient with the details and decided that we must also consider

  • insurance for the possible activities of the environmentalist pressure group
  • security costs to protect the mill until the new plant is running
  • advertising
  • fines from government for non-processing of industrial waste
    The fines would according to the new law be in the form of purchase of "pollution credits", which can be purchased on the stock market. In fact, we already plan to hedge in this market by purchasing future optionos.
    	A	B	C	D	E	F	G	H	I	J	K
    4					1995	1996	1997	1998	1999	2000	
    35	Additional Costs									
    36	Advertising	prestige	$100 	$500 	$300 	$1,000 	$700 	$300 	
    37	Security		 	$100 	$100 	$100 	$50 	$50 	$50 	
    38	Insurance			$200 	$200 	$200 	$0 	$0 	$0 	
    39	Fines/pollution credits		$60 	$40 	$20 	$20 	$20 	$0 	
    41	Plant	water filter	never	 	 	 	 	 	 	
    42		smoke filter	in 2000	 	 	 	 	 	$400 	
    43		new bleach	in 1997	 	 	$2,000 	 	 	 	
    44		pulp handling		$600 	$400 	 	 	 	 	
    45	Running costs			$12000 	$11000 	$10000 	$10000 	$10000 	$10000 	
    46	Total				$13060 	$12240 	$12620 	$11070 	$10770 	$10750 	J37:J45
    47
    48	Profit				$1540 	$586 	($999)	$2530 	$3307 	$4404 	J34-J46

    The original spreadsheets may be examined, for instance to see the effects of changing parameters: venlo1 and venlo2