This case considers the strategies of Charles W. Engelhard, an American mining magnate who made large investments in apartheid-era South Africa. Engelhard was widely believed to have been the model for the James Bond villan Auric Goldfinger. During the 1950s and 1960s Engelhard, who was well-connected with the leadership of the Democratic Party in the United States including President Lyndon B. Johnson, was one of the largest American investors in that country. His close relationship with Harry Oppenheimer, the head of the Anglo-American Corporation, gave him substantial influence within the South African business system. The case starts with anti-apartheid demonstrators protesting outside a ceremony awarding him a prize in Newark, New Jersey. It provides an opportunity to debate the political and ethical responsibilities of businesses in repressive regimes, and the challenges faced by entrepreneurs operating in countries with different value systems and political regimes.
On January 29, 2013, Elliott Management, a hedge fund run by Paul E. Singer that owned 4.5% of Hess Corporation stock, put forward a slate of five independent directors it wanted elected to improve the company's performance. Elliott argued that Hess lacked focus and was distracted by ventures outside its core exploration and production business. Further it argued that John Hess, CEO and son of the founder, of being more interested in "maintaining a family dynasty than instilling accountability and addressing chronic underperformance."
On July 12, 2012, Bill Ackman's Pershing Square Capital Management announced publicly that it had purchased about $2 billion of Procter and Gamble (P&G) stock. Shares in the company closed up 3.75% the day the disclosure was made public. Ackman told the New York Times that Pershing would be a major P&G shareholder. ""We think it's an underrated stock,"" he said. ""We think there is a lot of great opportunity there."" During the next several months there was little or no public discussion of the matter although people familiar with the situation reported that Ackman held conversations with P&G directors individually. Then, on April 24, 2013, P&G announced that its 3rd quarter earnings had risen 6%. However its 4th quarter forecast fell short of Wall Street's expectations. Shares fell 5% based on this outlook. P&G results were lagging its peers by 4% in 2012 and 2% in the first quarter of 2013. Then, abruptly in late May, CEO Robert A. McDonald, who was 59, resigned. The board selected A.J. Lafley, (65) who had been McDonald's predecessor to return to lead the company. There was speculation about how long Lafley would stay and in what direction he would take the company. On June 6th, P&G announced that Lafley had appointed four senior executives to lead the company's major businesses, reporting directly to him.
Kfar Giladi Quarries (KGQ), situated in northern Israel, faces a crisis: the national economy is in recession; the government budget for infrastructure development and construction, on which the company depends, has been reduced; transportation and distribution problems limit its ability to export (or import) cheap raw materials; and there is increasing competition in the industry. The company had recently dissolved its partnership with Malibu Israel Company Ltd., an international company that had given it access to the central part of Israel where most infrastructure and construction jobs and investments are located. The result has been loss in business and a negative cash flow. The case allows students to practise basic tools for strategic planning and permits guidance to companies hesitating over a recovery program, especially during an economic recession; companies in a reorganization phase after separation from a partner; and/or companies that have to shift their management paradigm.
Maruti Suzuki India Limited, India’s largest car manufacturer and the only company in that country to have crossed the 10 million sales mark, was struggling with labour problems in one of its manufacturing units. As a result, it was rapidly losing its market share to competitors and its position as market leader was at stake. The strike not only damaged property at the plant and caused one death and hundreds of injuries, it also heavily impacted revenue and market share as customers and dealers dealt with the negative publicity and the shortage of production that resulted in long wait times for the company’s most popular models. The company must come up with a strategy to deal with its vulnerability in light of production cuts, demanding customers, disgruntled dealers and charged-up competitors.
This case traces the rise of Chinese piano maker Pearl River Piano (PRP) from a factory with dirt floors producing just four pianos a month using crude machinery to the world's largest acoustic piano maker in 2012. PRP's success is compelling: it accounted for over 20 percent of the global piano market by unit volume, with 14 percent growth despite tough industry conditions in 2012. In addition to dominating its domestic market (28 percent market share in China), it exported its pianos to more than 100 countries and regions worldwide. The journey was an extraordinary one: PRP was able to overcome major quality issues in order to carve out market share in a mature industry with huge entry barriers, and dominated by established Western and Japanese players. How did PRP earn the trust of consumers purchasing a fine, expensive, musical instrument for their home? How was PRP able to successfully compete on quality with companies that had been making pianos for centuries, while also building the marketing and leadership expertise needed to grow a global piano brand?
The case explores the methodologies for valuing an early stage, IP based business. Endomagnetics is a university spin-off based on technology from University college London. By the time of the case the business has raised (and largely spent) a seed round and is about to raise 'Series A'. The new CEO, Eric Mayes, is in discussion with investors. There is some interest and he knows that he'll soon need to propose - and justify - a pre-money valuation. He has the usual set of base assumptions on market size and penetration along with information on similar businesses. The question is how he can assemble this information to produce a valuation. The case uses a series of spreadsheets (created by a MBA intern as it happens) that take us through all the alternatives from detailed bottom-up 'decision -tree' methods through to more sweeping market comparables, examining the strengths, practicalities and limitations of each approach.
In January 2007, Gary Wendlandt was concerned about the US economy. As Chief Investment Officer of the New York Life Insurance Company (NYLIC), he was responsible for managing a $147 billion investment portfolio. The US housing market was weakening at a time when financial institutions had significant assets tied up in mortgage-backed securities and collateralized debt obligations. Credit risk spreads were narrowing despite a general easing of underwriting standards. Wendlandt outlined his concerns in a memo to Ted Mathas, NYLIC's Chief Operating Officer. The question before Wendlandt and his investment management team was how to implement a "quality tilt" strategy. This would require placing more of NYLIC's new cash flows into safer fixed income products. NYLIC had a responsibility to its policyholders. It was management's duty to protect the longevity and financial strength of the firm, so that it could continue to pay policyholder claims, distribute payments from annuities, and issue dividends. Wendlandt faced a classic risk/return tradeoff - i.e., lower current interest income to avoid the higher potential risk of capital losses. How should he adjust NYLIC's investment portfolio?
When Cote arrived at Honeywell, in 2002, the company had gone through three CEOs in four years. It had repeatedly missed earnings, and it had environmental liabilities that had never been dealt with. Virtually no pipeline of new products existed, because managers had been disinvesting to boost profits. Over the next five years he worked to fix many of those problems, and by the end of 2007 the company's credibility had been reestablished with investors and its share price had more than doubled. Then the recession hit. Cote's view was that any restructuring Honeywell did in response should be what was best for business efficiency and profitability over the long term--not solely a reaction to the recession--and should have no impact on the company's ability to outperform in recovery. The leadership team settled on furloughs, and this is the story of how they worked.
For most of the 20th century, the relationship between employers and employees in the developed world was all about stability and lifetime loyalty. That has recently changed, giving way to a transactional, laissez-faire approach that serves neither party well. A new arrangement is needed, the authors argue--one built on alliance (usually temporary) and reciprocity. The high-tech start-up community of Silicon Valley is pointing the way--and companies that wish to be similarly agile and entrepreneurial can learn valuable lessons from its example. Under the new compact, both employer and employee seek to add value to each other. Employees invest in the company's adaptability; the company invests in employees' employability. Hoffman (a cofounder of LinkedIn), Casnocha (a technology entrepreneur), and Yeh (an entrepreneur and angel investor) outline three simple, straightforward ways in which companies can make the new compact tangible and workable. These are (1) hiring employees for explicit "tours of duty," (2) encouraging, even subsidizing, employees' efforts to build networks outside the organization, and (3) establishing active alumni networks that will enable career-long relationships with employees after they've moved on. In the war for talent, such a compact can be a secret weapon that helps you fill your ranks with the creative, adaptive superstars who fuel entrepreneurial success.
For decades, the business world has been fixated on achieving sustainable competitive advantage, a position within an industry that allows a company to best its rivals over the long term. Though we can all point to organizations that have succeeded with this approach--think GE and Unilever--in today's world, the edge of most companies doesn't last long. The forces at work here are familiar: the digital revolution, disappearing barriers to entry, globalization. In a turbulent environment, businesses can't afford to spend months crafting a single long-term strategy. They need a portfolio of multiple transient advantages that can be built quickly and abandoned just as rapidly. Transient advantages call for a whole new playbook, says Columbia Business School's McGrath. It involves a view of strategy that is less industry-bound and more customer-centric. Executives who grasp this shift don't rely solely on analysis to develop strategy; they use tools like advanced pattern recognition and observation to set broad strategic themes and then let people experiment within them. They also adopt decision metrics that support entrepreneurship, replacing the net present value rule, for instance, with the logic of real options. And, knowing that product features can be copied instantly, they focus on providing experiences and solutions to problems to customers, and turn relationships into competitive barriers.
Asked to define strategy, most executives would probably come up with something like this: Strategy involves discovering and targeting attractive markets and then crafting positions that deliver sustained competitive advantage there. This view of strategy as position remains central in business school curricula around the globe. Unfortunately, writes the author, investors don't reward senior managers for simply occupying and defending market positions. Equity markets are full of companies with powerful positions and sluggish stock prices. Merely sustaining prior financial returns, even if they are outstanding, does not significantly increase a share price; tomorrow's positive surprises must be worth more than yesterday's. Zenger argues that managers' most vexing strategic challenge is not how to win or sustain competitive advantage but, rather, how to keep creating value. He offers what he calls the corporate theory, which reveals how a given company can do just that. Drawing on the history of Disney and Apple, he describes what makes a corporate theory strong, shows how it informs strategic choices, and warns what can happen when a company loses sight of its theory.
In 1979 Michael Porter's five forces model transformed the field of strategy. But the 1996 article "Value-Based Business Strategy," by Adam Brandenburger and Harborne Stuart Jr., may prove to be even more significant, as it applied mathematics to the evaluation of strategic decisions. Ryall, of the University of Toronto's Rotman School of Management, now introduces a model of competitive strategy that is built on Brandenburger and Stuart's mathematical work. The value capture model (VCM) has an explanatory, predictive power that no other theory of competitive strategy can claim. It defines competition in an industry as a tension between the value generated from transactions that a firm undertakes with a given set of agents and the forgone value it could have generated from transactions with other agents. An important implication is that strategists must shift from looking at how a firm competes with other players to examining how players compete for a firm. Work on the VCM is already revealing important insights to leaders who chart the strategic direction of their firms. A streamlined version with a reasonably full complement of input variables, bolstered by empirical research and further refinements, could illuminate the way to better business practices.
Though boards claim they strive for diversity, the number of female directors remains low; women held only 16.6% of Fortune 500 board seats in 2012. To find out why--and learn about the women appointed to boards and their experiences--Harvard Business School's Groysberg and organizational researcher Bell teamed up with Heidrick & Struggles and WomenCorporateDirectors to conduct annual surveys of board members. In this article they reveal the findings of their 2010 survey of 294 women and 104 men, presenting a profile of the typical female director, what directors thought about the benefits of diversity and the dynamics between men and women on boards, and best practices for recruiting and managing directors. Three themes emerged from the data: (1) Women had to be more qualified than men to be considered for boards. Contrary to popular belief, female directors had more operational and leadership experience than male directors. (2) Boards don't know how to leverage diversity. The women said they were not treated as full members of the group, though the men were largely oblivious to this problem. (3) Great talent is not enough to create a great board. Boards need processes and cultures that encourage inclusiveness as well as diversity.
Leaders find transitions into new roles the most challenging times in their professional lives, when they either build credibility and create momentum or stumble and sow doubts about their effectiveness. Much attention has therefore been given to how they should take charge in their early days--but far too little to how the organization should set them up for success from the start. Failure to announce appointments in the right way can undo all the work that went into the selection and and hobble even the strongest leader from the start. When someone unexpected is chosen, the transition can set off an emotional storm. To avoid a bad start, the leader who made the selection, his or her HR partner, and the communications, investor relations, and legal professionals who advise them must provide good answers to four fundamental questions: (1) What message is this appointment meant to convey? (2) Why is this person the right one for the job? (3) Which members of the organization need to be informed? (4) What should they be told and when? In the critical days following an appointment, senior leaders must continue to communicate the rationale for the appointment and signal consistent and enthusiastic support in words and deeds.
Do highly creative ads really inspire people to buy products? Studies have found that creative messages get more attention and lead to positive attitudes about the products, but there's little evidence linking those messages to purchase behavior. To address this gap, Reinartz and Saffert developed a consumer survey approach that measures perceived creativity along five dimensions--originality, flexibility, elaboration, synthesis, and artistic value--and applied the approach in a study of 437 TV ad campaigns for 90 fast-moving consumer goods brands in Germany. The study then linked the assessments to sales figures for the products. The findings confirm that creative campaigns are, in general, more effective than other types of ads. The research also shows that the various creativity dimensions deliver different results. Elaboration, for instance, had a far more powerful effect on sales than did originality, a more commonly used dimension. Indeed, many companies focus on the wrong dimensions in their campaigns. This article reveals which product categories are best suited to creative advertising and which dimensions of creativity have the most influence on sales.
As the cosmetics company L'Oreal has transformed itself from a very French business into a global leader, it has grappled with the tension that's at the heart of every global enterprise: Achieving economies of scale and scope requires some uniformity and integration of activities across markets. However, serving regional and national markets requires the adaptation of products, services, and business models to local conditions. Since the late 1990s, the L'Oreal Paris brand--which accounts for half the sales of the consumer products division--has dealt with that tension by nurturing a pool of managers with mixed cultural backgrounds, placing them at the center of knowledge-based interactions in the company's most critical activity: new-product development. L'Oreal Paris builds product development teams around these managers, who, by virtue of their upbringing and experiences, have gained familiarity with the norms and behaviors of multiple cultures and can switch easily among them. They are uniquely qualified to play several crucial roles: spotting new-product opportunities, facilitating communication across cultural boundaries, assimilating newcomers, and serving as a cultural buffer between executives and their direct reports and between subsidiaries and headquarters.
For more than 30 years, the TED conference series has presented enlightening talks that people enjoy watching. In this article, Anderson, TED's curator, shares five keys to great presentations: Frame your story (figure out where to start and where to end). Plan your delivery (decide whether to memorize your speech word for word or develop bullet points and then rehearse it-over and over). Work on stage presence (but remember that your story matters more than how you stand or whether you're visibly nervous). Plan the multimedia (whatever you do, don't read from PowerPoint slides). Put it together (play to your strengths and be authentic). According to Anderson, presentations rise or fall on the quality of the idea, the narrative, and the passion of the speaker. It's about substance-not style. In fact, it's fairly easy to "coach out" the problems in a talk, but there's no way to "coach in" the basic story-the presenter has to have the raw material. So if your thinking is not there yet, he advises, decline that invitation to speak. Instead, keep working until you have an idea that's worth sharing.
A family business in Indonesia is hit hard by the economic downturn, and some family members want the former CEO--the founder's son--to retain the reins. Others argue that this would be a mistake. This fictional case study is written by William C. Kirby, featuring expert commentary by Les Trachtman and Lilli Friedland.