THE REGINA COMPANY CASE STUDY SOLUTION WHATSAPP +91 9924764558
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CASE STUDY 8
The Regina Company„ one of the largest inakets of vacuum cleaners recent') had scv cfc ptollkins
with the quality of its products. The market responsc to this 1ak of quality caused financial
problems for Ow company. in late 1995. Regina began having return rates as high as 30 to 50
percent on some of its Housekeeper and Housekeeper Plus models. These models were sold
primarily through discount stores. Further, Regina's Spectrum vacuum cleaner, an upgraded
version sold in specialty stores, was introduced in 1995 with many quality problems. ef The specific
problems identified for the Housekeeper and Housekeeper Plus models were associated with faulty
belts and weak suction. In the Spectrum model, the agitator was melting; and making a loud noise,
the foot pedals were breaking, and the steel-encased motor (which had been advertised as the power source for the vacuum cleaner) had been replaced with a less desirable. less reliable motor.
As a result of these problems, Target stores discontinued Regina's Housekeeper Plus model after
reporting that "at least half of those sold were returned." At Starmart, which accounts for about a
quarter of the Housekeeper sales, I. out of every 5 machines sold was returned. To help service
customer complaints, Regina set up an 800 telephone number for customers to contact the firm.
directly. The sales returns caused Regina's shareholders to question the 1995 fiscal earnings report.
Furthermore, both inventories and accounts receivable doubled during the 1995 fiscal year. At the
end of that period, Regina's chairman and 40 percent stockholders
Resigned. The chairman’s resignation was closely followed by a company announcement stating
that the financial results reported for the 1995 fiscal year were materially incorrect and had been
withdrawn. This announcement brought a suit from shareholders who had bought Reoina stock on
the basis of the 1995 camings report. It also prompted an audit of the 1995 results and a request to
another accounting organization to work on Regina's business and accounting controls. A few
months later, Regina 'agreed to be acquired by a unit of Magnum, a vacuum cleaner and Water-
purification Company. Under Magnum, Regina shut down production while engineers worked to
solve the problems inherent in the Housekeeper and Housekeeper Plus vacuums, particularly the
suction difficulties. In September 1998, Magnum and Regina decided to separate the two companies
again. Since then, Regina has been regaining market share with its Housekeeper models. The
'vacuums are popular because they carry on-board tools.
Questions:
Type of controls I would established to preclude the major returns experience by Regina are:
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IIBM CASE STUDY ANSWERS PROVIDED IIBMS CASE STUDY ANSWERS PROVIDED ISBM CASE STUDY ANSWERS PROVIDED ISMS CASE STUDY ANSWERS PROVIDED
CASE STUDY 8
The Regina Company„ one of the largest inakets of vacuum cleaners recent') had scv cfc ptollkins
with the quality of its products. The market responsc to this 1ak of quality caused financial
problems for Ow company. in late 1995. Regina began having return rates as high as 30 to 50
percent on some of its Housekeeper and Housekeeper Plus models. These models were sold
primarily through discount stores. Further, Regina's Spectrum vacuum cleaner, an upgraded
version sold in specialty stores, was introduced in 1995 with many quality problems. ef The specific
problems identified for the Housekeeper and Housekeeper Plus models were associated with faulty
belts and weak suction. In the Spectrum model, the agitator was melting; and making a loud noise,
the foot pedals were breaking, and the steel-encased motor (which had been advertised as the power source for the vacuum cleaner) had been replaced with a less desirable. less reliable motor.
As a result of these problems, Target stores discontinued Regina's Housekeeper Plus model after
reporting that "at least half of those sold were returned." At Starmart, which accounts for about a
quarter of the Housekeeper sales, I. out of every 5 machines sold was returned. To help service
customer complaints, Regina set up an 800 telephone number for customers to contact the firm.
directly. The sales returns caused Regina's shareholders to question the 1995 fiscal earnings report.
Furthermore, both inventories and accounts receivable doubled during the 1995 fiscal year. At the
end of that period, Regina's chairman and 40 percent stockholders
Resigned. The chairman’s resignation was closely followed by a company announcement stating
that the financial results reported for the 1995 fiscal year were materially incorrect and had been
withdrawn. This announcement brought a suit from shareholders who had bought Reoina stock on
the basis of the 1995 camings report. It also prompted an audit of the 1995 results and a request to
another accounting organization to work on Regina's business and accounting controls. A few
months later, Regina 'agreed to be acquired by a unit of Magnum, a vacuum cleaner and Water-
purification Company. Under Magnum, Regina shut down production while engineers worked to
solve the problems inherent in the Housekeeper and Housekeeper Plus vacuums, particularly the
suction difficulties. In September 1998, Magnum and Regina decided to separate the two companies
again. Since then, Regina has been regaining market share with its Housekeeper models. The
'vacuums are popular because they carry on-board tools.
Questions:
- What type of controls would you have established to preclude the major returns experienced by Regina?
Type of controls I would established to preclude the major returns experience by Regina are:
- Create Policies and Practices:Organizations must research, develop, and document policies and processes around defining, identifying, and reporting ethics violations. These policies should be articulated in the employee handbook and protections should be put in place for those who raise ethical issues. However, having a policy is not enough. You must practice what you preach. Case in point: Years ago, the Enron Corporation was known to have one of the most intricate ethics policies in the country. The 64-page document was given to new employees with a letter from Ken Lay, the company's Chairman and Chief Executive Officer. But, in 2001, it was revealed that Enron had engaged in major accounting fraud to disguise its poor financial health. After Enron declared bankruptcy, copies of their ethics policy went up on eBay
for more details https://www.iibmindia.in/
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