This case pertains to the foundational underpinnings of the accounting process and the statement of cash flows. In Part I, students are not given a list of business events to record, but rather, they must ascertain what they were from a 2011 balance sheet, a 2012 balance sheet, and a 2012 income statement. Part II requires students to prepare a 2012 statement of cash flows using the same three financial statements as given for Part I. In Part III, students must rely on a 2011 balance sheet and a 2011 statement of cash flows to work backward to derive the 2010 year-end balance sheet. There are two versions of this case: The Option 2 case is a bit more challenging than the Option 1 case. Instructors should use Option 2 if they feel students are well grounded in their understanding of financial statement relationships and the customary financial reporting of a typical set of business events. Both cases reinforce students' learning related to the accounting process and the connectivity between the financial statements. Please note that only one version of the case should be used due to the existence of some overlap between the two.
December 2011, Varese, Italy. MV Agusta, the legendary Italian racing motorcycle brand, had just launched its latest attempt to regain the fame it had enjoyed in the 1970s. In August 2010 Claudio Castiglioni, the famous motorcycle aficionado and serial entrepreneur, had acquired MV Agusta for the third time in 20 years. Claudio was an icon in the motorcycle world, having revived illustrious brands such as Ducati, Cagiva, Husqvarna and Moto Morini. Together with his son Giovanni and Massimo Bordi, the famous engineer behind the Ducati success stories of the 1990s, Claudio hoped that third time would be a charm. Unfortunately, Claudio did not get to see the fruits of MV Agusta's revival: He passed away on 17 August 2011 at the age of 64, leaving some big shoes for his son Giovanni to fill. Giovanni had been working in the company since 2002, as head of marketing and sales first then stepping in as CEO in 2010. He shared his father's vision and now it was up to him to turn it into reality. The first results after the re-acquisition looked promising but the motorcycle market had been shrinking dramatically over the past 10 years. The economic and financial crisis had hit Italy particularly hard during the last three years. What would it take to complete the turnaround successfully and rapidly gain momentum in this competitive market? How could he reignite the flame under this beacon of motorcycle racing prowess? How should the MV Agusta brand be positioned now? Should it put more emphasis on the brand's lifestyle elements, extending its offering of accessories for both bikes and riders? How large could the company become without compromising the brand's elements of exclusivity? Learning objectives: Rebuilding an iconic brand, positioning a luxury product, technology innovation and development, financing growth, entrepreneurship, corporate venturing, succession management, family business governance.
The case focuses on two major challenges in deal making in emerging market economies-deal sourcing and negotiation-by focusing on a real (but disguised) Indian private equity deal. In 2010 Surya Tutoring was a fast-growing tutoring academy for high school students aspiring to gain admission to the prestigious Indian Institute of Technology (IIT). Surya's CEO, R. K. Sharma, wanted to expand its reach beyond Kota (a city of 1 million people in the northern state of Rajasthan), which had become the center of the IIT prep school industry and home to tens of thousands of students studying for the rigorous IIT entrance exam. Sharma knew there was vast untapped potential in the teeming Indian metropolises of Mumbai, Chennai, Delhi, and Bangalore, as well as in foreign markets such as Dubai and Australia. Sharma had received term sheets from two private equity firms willing to finance Surya's expansion. By the end of the month he needed to decide which to accept: the offer from big bulge bracket fund Blackgem, or the one from ZenCap, a small Indian firm based in Mumbai with which he had become intimately familiar during the past year.
In July 2010, Robert Drake, senior director at Micawber Capital, one of India's largest microfinance organizations, needed to recommend a corporate structure and organization for Micawber after its scheduled IPO in August 2010. The IPO would bring to Micawber new stakeholders, primarily financial institutions. Drake was skeptical that the new investors shared Micawber's commitment to help alleviate poverty in rural India through microcredit loans; he assumed their primary interest was a good return on their investments. The two objectives-increasing ROI and meeting the financial needs of the poor-seemed at odds with each other. Drake had to consider how the interests of clients and investors would be represented in strategic decisions so that they balanced the conflicting values of the stakeholders.
EnerNOC is an energy company with an innovative business model: it serves as an intermediary between electric utilities and electricity users. It contracts with electricity users willing to reduce demand during periods of peak energy demand, and sells this as excess capacity to electric utilities. The company is facing an upheaval in the energy markets due to the dramatic growth in natural gas fracking and the resulting increase in natural gas supply. The case enables students to evaluate the EnerNOC's business model--including its environmental implications--and the potential impact of fracking on its business. The case is accessible to non-specialists, as it provides background on the electric utility industry and the debate about fracking for natural gas. Given the substantial environmental impact of the energy and electricity industries, the case is particularly relevant for courses that focus on energy, the natural environment, and environmental sustainability.
While on a visit to Haiti, a student entrepreneur realized the potential for economic development in a country that was rich in certain resources and virtually unexplored by the private sector. The entrepreneur decided on coffee as a business opportunity and he and his three partners imported their first burlap sack. By November 2011 the product was for sale - a premium coffee from Southeastern Haiti with a brand focused on assisting the redevelopment and sustainability of the Haitian coffee industry. After the product met success, the entrepreneur and his partners were ready to make an additional investment. They believed that a café focused on their own brand of Haitian coffee would be a great way to generate sales and further develop their product offering before pursuing a grocery-store strategy. However, they also knew that such an investment would be risky.
World population growth and increasing urbanization will require new cities in the future around the world. This technical note attempts to systematize the key design decisions that developers and policy makers alike must make to be able to proceed.
A small company in the graphic design business faces severe price competition. The company must respond by cutting costs and making process improvements.
In March 2000 a fire broke out at the Royal Philips Electronics plant, damaging its supply of semiconductor chips. Nokia Corporation and Ericsson LM relied on these chips to produce their cell phones; together they received 40 percent of the plant's chip production. Both companies were about to release new cell phone designs that required the chips. At Nokia, word of the setback spread quickly up the chain of command. Nokia's team, which had a crisis plan in place, sprang into action. With an aggressive, multipronged strategy, Nokia avoided any cell phone production loss. In contrast, the low-level technician who received the information at Ericsson did not notify his supervisors about the fire until early April and had to scramble to locate new sources for the chips. This search delayed production and proved a fatal blow to Ericsson's independent production of mobile phones. Nokia's handling of its supply chain disruption provides a dramatic example of how a company's strategic risk management can alleviate financial disaster and lay the groundwork for success in the future. Perturbations in supply chain management are inevitable, and grow harder and harder to assess as the marketplace becomes more globalized.
Young Man Inc., a new clothing retail store, has completed its first year of operations effective May 31, 2012. The owner is anxious to know how the company has performed financially and to assess this performance. Based on the case information, the first fiscal year's financial statements (income statement and statement of financial position) must be prepared along with an assessment of performance.
This very short and seemingly straightforward case is an efficient vehicle for exploring the nuances of hypothesis testing via regression modeling and t-tests in the context of an MBA or advanced undergraduate analytics course.
In 2001, Allianz Capital Partners and Goldman Sachs acquired a majority stake in Messer Griesheim, a European industrial gas concern held by Hoechst. The dealmakers faced several challenges, including delicate corporate governance issues due to partial family ownership and a consolidating market for industrial gases. Aiming to make Messer Griesheim a more attractive potential acquisition, Messer Griesheim management had drawn up a restructuring plan as early as 2000. By late 2003 the private equity players were ready to exit and the Messer family agitated for further control. Several factors were in play: the family had a buy-back option, the window of which was quickly closing; there were few possible strategic buyers, given the anti-trust issues facing a European player interested in buying the firm; and the family made no secret of its desire to retain a piece of the firm at the very least and some measure of control. The case explores the the steps taken by the private equity investors to restructure the firm, and the relationship the partners forged with the family owners, to bring about a favorable exit for the private equity partners and ownership for the Messer family. The case explores the steps taken by private equity investors to restructure a European industrial gas concern held by Hoechts, and complicated by partial family ownership. The case considers the relationship the partners forged with the family owners to bring about a favorable exit for the private equity partners and ownership for the Messer family.
Datavast Inc., a product designer and manufacturer based in China, had just launched its new private cloud storage product, the Data Security Box. The general manager of Datavast was faced with the dilemma of who to sell this product to. He determined that segmenting by size was the most effective method, as customers in different industries and regions did not have very different needs or buying characteristics. However, SMEs (companies with 200-500 computers) and large companies (companies with 1,000+ computers) exhibited vastly different needs and purchasing behaviour. The general manager had limited resources, so he faced the decision of focusing on either SMEs or large companies. Although Datavast did not have any direct competitors at the time, its decision was complicated by the company’s current state and capabilities, as well as the data storage industry in China. Also, the general manager was hoping to retire within five years and was unwilling to make additional capital investments in the company. Datavast was operating at a loss and his goal was to bring the company into profitability within the next year. A net loss also meant that the company could not afford to be burdened with large additional expenses. Lastly, private cloud storage was a new technology in China and the market needed to be familiarized with the concept.
The chairperson of the United Church Housing Corporation (UCHC) of Regina, Saskatchewan, received some information from an external consultant who was hired to assess the state of affairs of the UCHC. This non-profit organization had operated for over 50 years and had built accommodations for many seniors that were both affordable and offered personal independence. In 2005, the UCHC board approved a new four-storey assisted living facility, Wascana Wing, which was to be built in response to long waitlists. With this decision, the UCHC board had taken out a $3 million mortgage to finance the project. Since opening the new facility, UCHC had been plagued by high vacancy rates as new for-profit competitors entered the market for senior accommodations. The combination of high vacancy rates and UCHC's highly leveraged financial position were the source of losses from 2006 to the present. The board's break-even mentality was not working. UCHC was at a major crossroads - the housing situation of more than 100 seniors residing in assisted living apartments and cottages would need to be decided upon at the next meeting. The question was whether or not June, a retired nurse, would recommend that the board proceed with winding up UCHC or make suggestions that would call for major changes to the current business model.
On July 13, 2012, JPMorgan Chase & Co. announced a larger than expected loss for the quarter, $4.4 billion from positions held in the Chief Investment Office (CIO), raising the total losses to $5.9 billion. Since the substantial risks in the CIO had first been revealed on April 5, the firm and its CEO, Jamie Dimon, had been the source of intense scrutiny by regulators, legislators, the media, shareholders and analysts. The situation represented a rare, but significant, misstep by Dimon who had successfully steered Morgan through the financial crisis and was regarded as one of the financial industry's best leaders and risk managers. The firm also revealed that it was restating its first quarter 2012 results because of what it had learned as it investigated the CIO losses.
The case is concerned with Elia Nuqul, the founder of Jordanian-based Nuqul Brothers, a large diversified business group. It shows how Nuqul, a Christian Palestinian whose family was forced to flee to Jordan after the creation of Israel in 1948, built a business in his new home, first in trading and later in consumer products such as hygienic paper mnaufacturing. The case shows the challenges of building such an entrepreneurial business in a developing region with high political instability. The case is positioned within the wider context of the regional conflict in Palestine and Israel, and it provides a vehicle for exploring the role and responsibility of entrepreneurs, if any, in such conflicts.