Mini-Case 5: Information Flow, Decision Making and Incentive

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Background

Longs Drugs is an American chain with over 436 drug stores located in six western states (California, Colorado, Hawaii, Nevada, Oregon, and Washington. The first drug store was opened in 1938 in Oakland, California, by the brothers Thomas and Joseph. The company generated revenue of US$4.3billion in year 2002, while for the coming year they were planning on opening up 30 new stores in different geographical areas within the states. Further, the company closed down 19 stores in 2002 for unsatisfactory long-term profit. Additionally, it is evident that Long Drugs focuses on market preferences and serves customers with diverse income levels, education, and ethnic and cultural backgrounds. Improving Information Flows

Good internal communications are an essential ingredient of business success. Mostly, organization that might be very good about communicating with suppliers and customers often fails to give their internal communications the same degree of attention. This would be the same scenario for Longs Drugstore. Information should flow

Between people who are coordinating projects within the organization (for instance, marketing) Top Management to ensure the success of the business
From those who manage the business to the people they manage. Further, internal communications impact on three important areas: Decision making: all levels of management need accurate, timely and complete information to make the best quality decisions about the business. In order to address this, Longs Drugs installed bar code readers at the cashier station in its stores. This allows the company to identify newly popular or fast-selling items. Interdepartmental coordination: individual departments need to communicate with each other so that inter-related functions (like management and sales-team) work smoothly together. Accordingly, within a region with several Longs Drugs stores, store managers meet regularly to discuss business conditions in their area, to...
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