BRIGHAM YOUNG UNIVERSITY COLLEGE OF BUSINESS/GRADUATE SCHOOL OF MANAGEMENT ADVERTISING REGULATION: WHEN THE SIZZLE SELLERS FORGET THE STEAK FALL/WINTER 1976 :XCHANG3 CONTENTS BRIGHAM YOUNG UN IVERSITY COLLEGE OF BUSINESS/GRADUATE SCHOOL OF MANAGEMENT FALL/WINTER 1976 VOLUME 1 NUMBER 1 Articles Looking to the Future(s) 2 Tear Down the Pyramids Paul H. Thompson 6 When the Sizzle Sellers Forget the Steak H. Keith Hunt 10 Return to Literacy Warner Woodworth 19 Retai ling - Some Strong Selling Points 24 The Challenge of Affluence J. B. Ritchie 28 Understanding the ORGANIZATION or How I Spent My Summer Vacation Paul D. McKinnon 32 Minding Your Business - The Auditor Jay M. Smith 36 36 Departments Profile I Jan Erteszek: Putting the Golden Rule into Production 14 Taking Inventory 40 Speaking Out: Social Critic Daniel Bell 44 Comment: The Paralysis of Pessimism Gene W. Dalton 46 Publisher: Merrill J . Bateman Published by the College of BusinesS/Graduate School of Management, Brigham Editors: Mary Kay Stout Young University, Provo, Utah. c Copyright 1976 by Brigham Young University. All rights Warner Woodworth reserved. All communications should be sent to Exchange, 154 Jesse Knight Building, Copy Editor: Richard B. Bronk Brigham Young University, Provo, Utah 84602, telephone area code (801 ) 374- 1211 Art Director: McRay Magleby ext. 4121 . Design: Thomas Pratt The views expressed in Exchange are those of the various authors and not necessarily the College of BusinesS/Graduate School of Management. Cover Photo by D. A Jones & Assoctates BYU and Merrill Lynch at Snowbird LOOKING TO THE FUTUREISI Mention commodities and even The talk may have centered on most play-for-high-stakes execu ­ the Chicago, New York, and tives get a little uneasy. For most, Londonexchanges,butnourban futures trading is synonymous skyline could stand up to Utah's with double-or-nothing-type risks Little Cottonwood Canyon with its -with odds on the nothing side 11 ,000-foot elevation and view of Since 1972, commodity prices. on the Wasatch and Oquirrh Moun­ the average, have doubled. Yet tains. In the winter, Snowbird the highly volatile prices of raw resort is host to 450 inches of materials often determine a com­ annual snowfall, not to overlook pany's ability to compete, and some thousands of skiers. In the compete effectively. Likewise, summer, the rough-timber beams, raw material sellers must hedge natural skylighting, and massive against sudden drops in price. stone fireplaces make a com­ This has forced many companies fortable, rustic setting for con­ to reexamine their positions as ferences, seminars, and retreats. buyers and sellers of raw materials. For the futures conference. gone The need was obvious. The were the three-button suits; it was nation's largest commodity strictly Saturday-morning attire The semmar provided time to take brokerage, Merrill Lynch, Pierce. in the mountain view while against the thick foliage and Fenner & Smith Inc., and the BYU discussing sessions and individual jagged cliff rocks. "This beats the Graduate School of Management commodtlies w1th others interested heck out of New Haven or Ph ila­ combined forces to cosponsor a in the futures markets delphia," commented an three-day summer conference for Easterner. " It's different for me 60 businessmen and leading cern for forecasting commodity not being able to see the air I commodity specialists from prices. breathe," said another. throughout the country. Presi­ Some businessmen needed in­ The casual setting invited con­ dents, treasurers, controllers, formation to "sell the idea to top versations. In specific com­ buyers, and sellers met experts in management and the board of modity sessions. over enchilda­ sugar. lumber, plywood, grains, directors." Others came to dis­ and-refried-bean lunches, on cocoa, fats and oils, meats, metals, cuss accounting aspects, look at steep mountain trail walks, and and money markets. Conglomer­ specific hedging plans, or examine during mid-morning breaks, busi­ ates and small fami ly firms; east­ various forecasting techniques. nessmen and specialists shared side New Yorkers and Idaho Many felt they should start some questions and experiences­ farmers ; those who had had a kind of hedging program and just some good. some not so good. taste of hedging and those who came with questions and inex­ The success rates of past in­ hadn't- they all shared a con- perience. volvements with commodities may :XCHANG3 FALL/WINTER 1976 3 A native of Belgium, Joseph Vandeputte has specialized in the feed grains oil seed complex. He is currently senior vice-president of Commodiiies Corporalio1 and manages the firm's Brussels office Cliff Lodge at Snowbird resort hosted BYU-Merri/1 Lynch's The structure of the futures industry was outlined by Jack B. cosponsored commodities conference vice-president at Merrill Lynch have varied, but the quali ty of the currencies, according to David modities in the forward markets or questions didn't. The executives Meiselman, a keynote speaker and performing the same types of knew the jolt from 1972 corn author of The Phenomenon of transactions in the various tutu res prices of $1.25 per bushel to a Worldwide Inflation. " Du ring markets represent forms of hedg ­ current average of $3. Within the recent years it has become almost ing . A disadvantage of cash same time period, many of the habi tual for an Englishman to sell markets is the difficulty of revers­ food processors had had to deal sterling for copper, cocoa, sugar, ing your position if market condi­ with sugar prices soaring from 9 or some other internationally tions change. On the other hand, cents to 50 cents per pound. traded commodity at the slightest futures markets provide flexibility Likewise, soybeans have climbed suspicion of sterling weakness. in reversing your position but have from $3.50 to $7 per bushel, and This additional demand factor has very strong cash flow risks, and cocoa has jumped from 30 cents been partly responsible for the operations in these markets must to $1 .10 per pound. strong price rises in many of the be carefully controlled. The dramatic increases in price commodity markets," he said. Whether they were producers, indicate that internationally traded Other discussions centered on consumers, or middlemen, those commodities are particularly different forms of price protection attending the conference were volatile because they represent for commodity buyers and sellers. interested in financing of raw an alternative to depreciating Buying or selling physical com- materials, organizational struc- 4 Photography by Doug Martm ........,.....__ __,'" ~ 'V"'I!ftiii--.-,J Conference participants met m small groups to d1scuss tndividual commodities. Highlighted were cocoa and sugar. lumber and plywood. grains. fats and oils. money markets. meats. and metals. Companies represented included Safeway, Campbell Soup. Eli Lilly, Green Giant. and Wickes Cocoa and sugar expert F. .Helmul Weymar heads Ann Beggs Rautt attended the conference H. Fred Baerwald, chairman of International Minerals the New Jersey-based Commodities Corporation mdependenlly of any firm and Metals Corp., led a discussion on metals futures lures for hedging, building fore­ Louis, added, "I hear these things buyers and sellers who had felt casting models, and evaluating and I know they're possible they faced a limited number of operational costs. ("It doesn't We 're not doing hedging and we options. Although the participants take a million or even $250,000 to probably should. We 'lllook to represented various positions in get started," the experts agreed.) bring in a specialist." commodity transactions, they Developing internal staffs or going "My company is growing," said shared the expertise of leading to outside firms as well as one vice-president of purchasing. specialists. The obvious interest brokerage research were key " Our inventory is growing and we in futures indicated by those issues. need to protect that through the attending the Snowbird con­ "The conference didn't give all use of the futures markets. We 've ference, combined with numerous the answers but it gave you ques­ been using hedging on a limited inquiries about additional semi­ tions you can go back and start basis but haven't been that active nars, has led BYU and Merrill working on," commented E. N. and we need to expand. The or­ Lynch to consider a number of Henney. vice-president of Safeway ganizational procedures that were suggestions. including the re­ Stores, Inc. outlined will be a real help." quest that winter and skiers be G. L. Zang agreed. The presi­ Perhaps the greatest benefit of given equal time by scheduling dent of the Sunmark Companies. the conference was the discussion sessions in the evening leaving manufacturers of candy in St. of alternative approaches for days free for stem christies. • :XCHAN<E FALUWINTER 1976 5 I rs not unusual to hear man­ TBAB professors have indicated frequent agers comment on the difficulties disenchantment with professional they have managing their pro­ DOW I employment. fessional employees. The most "Engineering doesn't have the visible evidence of this problem prestige it once had. The glamor has been un ion activity. An in­ TBB has worn off. " creasing number of doctors, "I'd never let my son go into teachers, and engineers are wal k­ PYBA.IDS this field. " ing picket lines and pressing for by Paul H. Thompson "My brother makes more money improvements in pay, hours, and as a plumber than I do with a Ph.D." Illustration by Ron Eddington working conditions. Membership in professional unions or associa­ Managing "Knowledge Workers" tions involved in collective bar­ We are not doing a very good gaining has increased dramati­ job of managing our professional cally in the last decade. work force. Peter Dru cker has Much of that increase has been written on our inadequate knowl­ in th e public sector.