Frank Sills, the CEO and founder of ENVIRO-WEAR, is facing the first big challenge of his young com- pany. Frank began the company on the principle of environmental consciousness in the manufacture of sports and recreation wear. His idea was to develop clothing that would appeal to active people who were concerned about quality, about waste in manufacturing and packaging, and the environmental impact of the manufacture of the goods they purchased. Starting with a small shop in Zebulon, North Carolina, Frank was able to develop his small business through strategic alliances with mail-order merchandisers, and by effec- tive public relations about his environmentally concerned processes. A special advantage for the young firm was Frank’s knowledge of accounting and his prior experience as a CPA in a major public accounting firm and as a controller (and CMA) of a small manufacturing firm.

ENVIRO-WEAR had reached $25,000,000 in sales in its sixth year, when a disastrous set of events put the firm and its prospects in a tail spin. One of the key sales managers was overheard by a news reporter telling jokes about the poor quality of the firm’s clothing, and the news of it spread quickly. Also, rumors (largely unfounded) spread at the same time that the firm was not really as environmentally conscious in its manufacturing and pack- aging as it claimed. The result was an immediate falloff in sales, and some retailers were returning the goods.

Frank intends to fire the manager and deny publicly any association with the manager’s comments, as well as to defend the firm’s environmental record.

Required

1. On the basis of Porter’s analysis of strategic competitive advantage, what type of competitive strategy has ENVIRO-WEAR followed? What type of strategy should it follow in the future?

2. What are the ethical issues involved in the case, and how would you resolve them?