Balancing Stakeholder Interests and Corporate Values: A Cummins Strategic Decision Harvard Case Solution & Analysis

A mutually consent decree was signed in 1998 between manufacturers of heavy-duty diesel engines and the Environmental Protection Agency (EPA) of the United States, which comprise many other things with pulling forward (“pull ahead”) i.e. to introduce a new standard for nitrogen oxide emission within next 15 months.

Detroit Diesel and Caterpillar were requesting EPA to provide relaxation for this initiative, while they also pressurized the Cummins Engine Business to join them in this proposal, on the other hand, many stakeholders, including EPA and other environmental organizations wanted Cummins to not divert from the requirements of the consent decree. The president of the Cummins Engine Business, Joe Loughrey, had to make a critical strategic decision that should be in consideration with all of the stakeholders.

Cummins had to decide that whether they should agree to the competitor’s demand that asking some relaxation in the time period of the consent decree which ultimately would allow the manufacturers to continue with the existing engine technology that already had customer support.

The second alternative for Cummins was to adhere to the requirements of the consent decree, against the wishes of many rival in the industry that might cause market retraction for Cummins. However, both of the alternatives had significant outcomes and demands a careful evaluation as Cummins was already passing through difficult economic times so the Company could not afford to make a mistake.

As this decision would not only cause the isolation for Cummins in the industry but would have the significant impact on the overall industry because all of the other company then would have to follow the authoritative order about the new standards.

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Balancing Stakeholder Interests and Corporate Values: A Cummins Strategic Decision

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