As Fair As

(AFA)
Sam Temperton attended a large international school in the capital of a
developing country.
The school had students from many different nationalities and cultures. At the
age of sixteen,
Sam demonstrated several qualities of an entrepreneur, such as
determination, resilience and
creativity, by setting up his own business at school. He bought chocolate bars
at a supermarket
and then added a small mark-up. Sam sold chocolate bars to his schoolmates
when he saw the
long queues at the school shop. Sam only ever traded in cash. The cost-plus
(mark-up) pricing
strategy was very popular with Sam’s target market. He sold chocolate bars to
classmates well
below the high prices charged by the school shop.

Students were not allowed to engage in trade for profit on the school
premises. In response,
Sam started selling chocolate bars to students just off the school premises.

After completing his International Baccalaureate diploma in 2015, Sam

decided to turn his
business into something more substantial. At school, he had studied
motivation theory and he
liked Daniel Pink’s ideas. He wanted to become a successful entrepreneur
working on his own
and to make a difference to the lives of stakeholders. In his business
management classes,
the fair trade movement inspired Sam. From secondary market research
conducted by a
non-governmental organization (NGO), Sam had learned, to his surprise, that
the only places to
buy fair trade products were supermarkets. He had the idea of creating a shop

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fully dedicated
to fair trade products. Sam wanted to practice corporate social responsibility
(CSR) in his
business operations, which he hoped would eventually operate at a global
level.

Sam hoped to set up a retail store selling fair trade chocolate, but he had
insufficient funds.
He created a marketing plan for a local bank manager who was offering young
entrepreneurs
the chance to seek business finance and advice. The manager was impressed
with Sam’s
enthusiasm but was concerned about some elements of the plan and Sam’s
poor understanding
of accounting and finance. The bank manager thought that Sam did not know
the difference
between cash flow and profit and that selling only chocolate would not be
enough to sustain
the business.

Undeterred, Sam came across the idea of pop-up stalls1 to sell fair trade
chocolate. A growing
trend, pop-up businesses are flexible and agile and can be established quickly.
With his new
idea and an improved marketing and business plan, Sam was able to raise
enough finance to
open his first pop-up stall. However, in his hastily prepared application for a
pop-up business
licence, Sam forgot to include some important accounting and finance
information. His business
goals were not seen as ethical and his application was declined. Realizing his
mistake, Sam
hired an old school friend, Kim, to prepare a second application and help with
the businesses’
accounts and finances. Soon, his business – named As Fair As (AFA) – was

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registered.

Sam set up a pop-up stall near a local train station, a crowded location with
limited space.
Here, the logistics would be difficult but there would be high foot traffic2,
especially commuters
and young travellers. Other pop-up businesses had been located in a less
busy part of
the station. However, Sam’s location decision worked well: AFA’s sales
revenue and profits
grew quickly.

Encouraged by the success of AFA’s first pop-up stall, Sam decided to expand
the range of fair
trade products and open three additional pop-up stalls, each run by a new
manager. To do this,
he needed to find new suppliers of fair-trade products, which were proving to
be very popular
with his customers. These fair-trade products included coffee, clothing and
stationery, many of
which could be sourced locally.
At first, some suppliers of these fair-trade products were not willing to
supply Sam, as his order and re-order quantities were very small. However,
as AFA grew and the suppliers understood Sam’s purpose, they became
more willing to supply AFA. Sam worked with two types of suppliers:
• wholesalers that imported products from many parts of the globe
• local producers that met fair trade standards.

Sam decided to build on the success of his pop-up business by creating an

e-commerce business to consumer (B2C) website on which to offer his fair-
trade products.

By 2017, AFA was a great success. Sales revenue had grown significantly
and Sam had opened four traditional brick-and-mortar retail outlets selling
a much larger range of fair-trade products. Instead of using the stalls at

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semi-permanent locations, such as the train station, he now used them at
temporary venues, such as festivals and concerts. Sam made most of the
growth decisions himself with limited consultation with Kim. One of the
decisions that later caused problems was his promotion of the four pop-up
stall managers to managers of the new retail outlets and the recruitment of
school leavers to replace the managers at the pop-up stalls.

Faced with growing complexity, Sam decided that some form of

restructuring of AFA was required. He invited a close friend, Finn, to
become his second business partner. With Kim promoted to chief financial
officer, Finn was recruited to become chief operations officer. Finn’s
responsibilities included supervising the four managers of the new retail
outlets and being in charge of the e-commerce website. Sam retained
overall control of AFA.

Signs soon began to appear indicating that business growth was outstripping
Sam and Finn’s ability to manage. Despite lower transport costs and greater
bulk buying, some diseconomies of scale were affecting AFA’s operations.
Gross and net profit margins were being eroded, so Finn increased prices.
Sam accepted this decision but reminded Finn that AFA’s vision was to create
opportunities for both internal and external stakeholders. Finn responded by
telling Sam that if costs were not kept under control then AFA would have to
adopt some new pricing strategies. By following the fair-trade movement, AFA
was creating opportunities but Sam was concerned that new pricing strategies
could undermine AFA’s position in the retail market.

Sam generally did not participate in the day-to-day running of AFA. He focused
on developing strategic plans, ensuring AFA remained true to its mission, and
strengthening relationships with stakeholders. Finn was methodical and risk
averse. He focused on financial details, logistics, tactics and day-to-day
operations.

Sam was generally pleased that Finn ran the administration of AFA. Sam got

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bored easily and was always restless, constantly looking for new ways to
grow the business. Finn enjoyed the challenges of managing systems. He
had previously worked in an industry that was highly bureaucratic and
centralized, with narrow spans of control and top-down communication.
As growth of the four stores and the e-commerce website continued, Finn
argued that a further restructuring was inevitable, but Sam was concerned
about Finn’s leadership style. Sam had heard rumours that the managers of
the four stores were complaining to each other that they had little input in
decision making. Rarely visiting any of the stores, Sam effectively left Finn to
manage AFA on his own. Sam was spending an increasing amount of time
visiting countries to source new suppliers of fair trade goods and speaking to
NGOs and charities about ways that AFA could help them.
The combination of increasing costs and management unhappiness led to
Finn calling an urgent meeting with Sam to discuss organizational issues. At
the meeting, Finn argued that AFA worked well as a concept but that
changes were needed. He felt that the current management system was
unable to cope with the growth of the business.
Sam wondered whether he should convert AFA to a cooperative, with
managers acting as associates rather than being paid a salary. Sam felt this
conversion would align AFA with the ideas of Daniel Pink. He asserted that
Pink’s theory should be extended to the managers of the four stores and to
Kim. Finn did not like this idea and felt that he was not being listened to. He
feared that the mission and corporate social responsibility aspects of AFA
would be lost. He saw these as essential aspects of the positioning
(perception) of the business.
Thinking that Sam was still not listening to his concerns, Finn brought up his
latest management idea to highlight the problems at AFA. Finn revealed
that, unknown to Sam, he had hired a mystery (secret) shopper to visit two
of the stores. She had visited stores at their busiest times. Finn was appalled
at what she had reported, including:
• poorly organized stores
• unhelpful staff
• a failure to regularly mention the importance of fair trade at the checkout.

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Finn was left wondering whether these two stores were devaluing the vision
and mission of AFA
as a fair-trade store.

Though Sam was disappointed with what the mystery shopper reported, he
was angry at Finn’s deception. Finn countered that his decision to use a
mystery shopper revealed the true nature of some of AFA’s problems. The
meeting broke up without any final decision being reached. It was their first
significant disagreement about the current situation and strategic direction of
AFA.
***

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