Friday, February 26, 2010

“Case Study on Decision-Making – What Is To Be Done?” – Prof.M.S.Rao

Dear Friends,

Please post your comments after reading this case study. There is no right or wrong answers.

Maxwell stood at the window of his shop looking outside and thinking deeply what had to be done. He was 36 years old. He had four children who were all below ten years of age. He was a shrewd businessman. He was trading clothes in wholesale market. Initially he started the enterprise with a capital of 100,000 dollars. His business was flourishing and was doing great. He had been in business for the last 9 years and assets rose up to one million dollars. However, for the last 2 years he had several setbacks in business and incurred heavy losses to the tune of one million dollars due to the bankruptcy of three major customers whom he gave stocks on credit. He also took loans unofficially from other financiers with a heavy interest burden to manage his working capital and ensure smooth functioning of trading business. The financial troubles started for Maxwell. He did business transactions through unofficial means (That means taking capital from financiers through unaccounted means for heavy interest and giving stocks on credit to his customers through unofficial means but based on trust and good will).

Being a wholesaler, he bought goods against cash and sold on credit to his customers in huge quantity. That was how Maxwell was doing business. He needed more capital to buy stocks against cash as he had no liquidity. Adding further woes, the supplier to whom Maxwell paid cash to buy stocks went bankrupt. Having sensed this, the financiers began pressurizing Maxwell for refund of amount. His business account was in debit balance (That means, his invested capital was gone and he owed around one million dollars to his financiers who funded him with heavy interest without official documents but based on trust and good will of Maxwell).

The financiers were threatening Maxwell and his family with dire consequences if funds were not refunded. The money he took from financiers was not in legal accounts. The interest burden was mounting.

One way his reputation as a businessman was at stake. He was equally worried about the safety of his family who had no connection with business. The financiers could probably trouble Maxwell and his family members. He was torn between professional ethics and personal prestige and also about the responsibility towards his family members.

What decision did Marshal have to make?

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