Ed Jones and John Rose decided to start a new business to manufacture
noncarbonated soh drinks. They believed that their location in East Texas,
dose to high-quality water, would give them a competitive edge. Although
Jones and Rose had never worked together, Jones had 17 years of experience in the soft drink industry. Rose had recently sold his own firm and had
funds to help finance the venture; however, the partners needed to raise additional money from outside investors. Both men were excited about the opportunity and spent almost 18 months developing their business plan. The
first paragraph of their executive summary reflected their excitement
The "New Age" beverage market is the result of a spectacular boom in demand for drinks with nutritional value from environmentally safe ingredients
and waters that come from deep, dear springs free of chemicals and pollutants. Argon Beverage Corporation will produce and market a full fine of
sparkling fruit drinks, flavored waters, and sports drinks that are of the high-
est quality and purity. These drinks have the same delicious taste appeal as
soft drinks while using the most healthful fruit juices, natural sugars, and
the purest spring water, the hallmark of the New Age" drink market
With the help of a well-developed plan, the two men were successful
in raising the necessary capital to begin their business. They leased facilities
and started production. However, after almost two yearn, the plan's goals were
not being met There were cost overruns, and profits were not nearly up to
expectations.
Question 1 What problems might have contributed to the firm's poor performance?
Question 2 Although several problems were encountered in implementing the business plan, the primary reason for the low profits turned out to be embezzlement Jones was diverting company resources for personal use, even taking some of the construction material purchased by the company and using it to build his own house. What could Rose have done to avoid this situation? What are his options after the fact?