Business Ethics Case StudyCase Study

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Ventria

'Part II: Company Analysis

Ventria is a small company that does not yet have a commercially-viable product. Its main strengths lie with its technology, which holds significant promise. The company does not appear to have too many other strengths. There is the talent that got it to this point, but otherwise they are a couple of people and a good idea. At this stage, they have received some preliminary approvals and their product looks like it could be close to entering the marketplace, which is cause for optimism.

Ventria has a number of weaknesses, however, and several were exposed in this case. First, the company does not have much cash flow, because of its lack of products. Thus, it has a significant imperative to begin commercial-scale production. The delays that it is facing right now pose almost an existential threat to the company. If it had stronger cash flow, it would be in a better position to withstand these delays, but it appears to be surviving based on investment from a few key investors. Another weakness that Ventria has is that the company is rather tone deaf and myopic.. It has not done much to acknowledge the concerns of the industry, which just happens to be a lot more economically important than they are. As much as Ventria's people believe in their product, they are clueless about their position in the market. Thus, instead of finding a home in an area without a strong entrenched industry, they have walked into direct conflict with a billion-dollar export business.

The leadership structure within the company is both a strength and a weakness. There are some excellent people, researchers in particular, and this is a strength in that respect. However, the company appears to lack experience in other areas. So the leadership team is not particularly well-rounded at this point, and that is a weakness that it must overcome, and quickly, in order to avoid these sorts of problems in the future.

The big opportunity that Ventria is focused on is getting their product to market, by planting enough rice to make commercial production possible. The company has been myopically focused on this, without taking consideration of what it might take to get to that point. Hence the current trouble. But for Ventria, it needs to find a way to get rice in the ground, even if this is not in California. There are other places a company can grow rice.

There are several threats, as the case highlights. The rice industry is California has some legitimate concerns about cross-contamination and the threat that this crop would pose to the rice export markets. Ventria has not dealt with that threat, and as such it now is faced with a powerful industry lobby that is all but shutting them down. But there are other threats as well. If a competitor with a similar concept can get to market first, because of these delays, that would be a crisis for Ventria. They appear to have competitive advantage in their technology, so this risk is low, but the outcomes if it was to come to pass would be catastrophic. There are also risks associated with the regulatory environment. Not only is the regulatory environment complex and uncertain, but Ventria has walked a fine line in trying to get its product over the different regulatory hurdles. An example of this would be trying to have the rice classed as Generally Recognized as Safe, which was probably not the right classification. So the company in trying to shortcut the regulatory process has ended up with greater regulatory risk than maybe it needed to have.

Ventria faces an uncertain political environment. This is perhaps the biggest threat that the company faces. The rice industry in California is not only entrenched, but it is powerful because it exports. The company has chosen to wage this battle in the state's prime rice growing regions. It is noteworthy that the other major rice-growing states are typically ones with a less stringent regulatory environment than California. However, a lot of the regulations also exist at the federal level. Ventria has done better with respect to fulfilling its federal requirements. At issue now is the fight Ventria has chosen with the rice growers of California. Given the balance of the facts, it is likely that Ventria will be blocked -- nobody in their right mind would put an established, multi-billion dollar industry at risk for an upstart company that has never sold anything. Simply put, from the perspective of political decision-makers, Ventria is not worth the risk.

Navigating the political environment in part requires the company to navigate the social environment. The competitors are challenging Ventria's plans because they see risk in those plans, and the opposition is strong because they feel that the stakes are substantial. They may be correct in that assessment. The social environment surrounding GMO crops is generally unfavorable, not just in California but in the major rice markets like Japan. The Japanese consumer is an important stakeholder here, because they are defining the issue for California's rice growers. While Ventria is correct in assuming that the public will generally favor its drugs once they are released, the current social environment offers strength to Ventria's opponents while offering Ventria itself little support.

The economic environment is generally favorable. Ventria has been able to raise sufficient capital thus far, and if it can get its products to market, there is no reason to believe that their projections for sales are wild.

The technological environment is favorable to Ventria. The company is one of just a few that can execute on its core technologies. While it cannot hold this competitive advantage forever, Ventria presently has a technological advantage, and sits at the fore of innovation in this field. Indeed, some of the opposition to its products among the rice growers appears to relate to their not being as familiar with the technology as Ventria is, and certainly this is the case for the key rice buying consumers. The pace of technological change is fairly rapid, but Ventria seems well-positioned at the leading edge of this.

Overall, Ventria faces an interesting situation. . The biggest challenges in the external environment pose a substantial threat to the business. There is a risk that they will not be able to produce in California, and if they are allowed it might not be this year. The fact that management did not anticipate this, and does not appear to have any sort of backup plan, is a failing of management. The Ventria team mostly consists of researchers, and they were tone deaf in assessing the social environment in which they operate, and as such seem unprepared for this opposition. One of the biggest challenges for Ventria will be for the company to evolve internally, shore up its weaknesses and start taking advantage of the opportunity that it has right now. They are showing that they are, despite their technology, a young company without much experience. Not only have they walked unnecessarily into a major problem, but they have no backup plan, as though they live in a world without options. For Ventria to succeed, they will need to either win their battle with the other rice growers or they will need to relocate their rice field to a place where they can grow. They should have done that from the beginning, building redundancy into their supply chain, given how critical it was to the company's survival to grow this year.

It is recommended that Ventria seeks out other sites for its rice. The present strategy appears to be something on which management has become fixated. Yet, they need to get rice in the ground. They should have planned to grow double the rice they think they need, in part because of issues like this and in part because all agricultural products are subject to weather and pests. Having other places to grow rice would also take Ventria away from this controversy, especially if they choose their site wisely. They were always taking an unnecessary risk with this plan to grow medical rice in an area that grows food rice, never mind the GMO/export issue. The current strategy is ill-conceived and myopic, so it is recommended that the company pursue other options, ones that are probably better than the current course of action.

Further, it is recommended that Ventria brings in at least one new senior manager. The current team seems to lack when it comes to things like stakeholder management, or just understanding some of the business issues. The company is only going to face more such issues going forward. The researchers and product development people need to focus on that, because that is their strength. But somebody else, a professional manager, needs to be added to the team to provide that balanced perspective that can help the others to handle situations such as this, and perform a key role in stakeholder management, public relations, lobbying… [END OF PREVIEW]

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