The Silicon Valley Bank of SVB Financial Group (NASDAQ: SIVB) supported tech startups and venture capital funds primarily in Silicon Valley. On 8 March 2023, the bank attempted to raise equity and sell debt securities to improve liquidity, but was unsuccessful. Doubts about the bank's solvency led its depositors to withdraw cash, totaling around USD42bn. On 10 March 2023, the US regulators shut down the bank and halted its shares from trading on NASDAQ. In 2021, SVB invested heavily in long-dated securities, such as mortgage bonds securities, and US treasury 10-year bonds to be held until maturity, thus classifying the majority of them as HTM. HTM securities were recorded at amortized cost, and changes in fair market value were only disclosed. After interest rate hikes starting at the end of March 2022, SVB disclosed unrealized loss on HTM securities, and on 31 December 2022, it was USD15.1bn, and total equity was USD16.3bn. Recording unrealized losses would force many US banks to incur significant losses, requiring replenishment of capital reserves. What approach should the board of the Financial Accounting Standards Board take to provide useful information to users of financial reports, and also balance the interests of the banking industry?
It is September 2021, and Kalshi is a new, Commodity Futures Trading Commission (CFTC)-approved trading platform for event contracts. Kalshi went online just a few months earlier, after a successful round of Series A funding. Sumer Sao, the first (and at the time the only) member of Kalshi's growth team, realizes that the key to the company's sustained success is to quickly grow the number of daily active users to increase liquidity on the trading platform. To achieve that, Kalshi needs to find the right pricing structure that can potentially attract different target segments while also encouraging trading.
In December 2022, after the independent film distributing company levelFILM Inc. experienced several box office failures, the company's manager of sales strategy was wondering if the company needed to re-examine its portfolio strategy. Based in Toronto, Ontario, levelFILM Inc. operated in the highly uncertain film industry, in which it was almost impossible to predict how any one film would perform at the box office. The various distributors in the industry employed different strategies for managing risk, including building a large diversified portfolio of projects or pursuing a blockbuster strategy with heavy investment in fewer projects. The company's manager was wondering which strategy would be most appropriate for levelFILM Inc. and how he might use extensive historical data that he had available to determine optimal risk management and investment returns options for the company.
A Hong Kong start-up, Senior Deli develops a wide variety of soft meal products targeted at mostly elderly patients suffering from dysphagia, or difficulty swallowing and chewing. Its patented technologies help supply softened food that retains the original taste and appearance and appeals to local palates. There is significant market potential for soft meal products amid the aging populations in Hong Kong, mainland China, and other developed countries. Yet the team has found that some patients and care homes have hesitated to adopt the products. In general, soft meal products are still new to many people and suppliers in Hong Kong. The stakeholders seem to hold up in adoption of the products. This market chasm is too costly for Senior Deli or any single start-up to overcome. Therefore, Senior Deli's major issues are educating target customers, legitimizing soft meals, and promoting its products amid such uncertainty. At the end of 2022, a localized guideline for care foods was announced in Hong Kong, but will it create an opportunity for Senior Deli to overcome the issues it has been facing?
In December 2022, Shariq Nomani had been living with his family in a rented apartment in Lucknow, India. Even though they liked the place, which had all the necessary amenities, they were thinking of buying a unit in the same community. After collecting all the necessary information, Shariq sat down to figure out the best alternative between two options: buying and renting. He needed to undertake a comprehensive quantitative analysis by applying the concept of time value of money to make the optimal decision.
In May 2023, partners from a private equity (PE) fund, Jefferson Capital, and a private (mezzanine) debt fund, Cavalier Capital, need to join forces to design their bid for Williams-Sonoma, Inc., to take the company private. May 2023's market environment looked unfriendly for LBOs: interest rates were steadily climbing as the Federal Reserve was trying to rein in inflation, the risk of the economy entering a recession was high, and banks themselves were under pressure from financial turmoil and were tightening their lending standards. Dealmaking at the top investment banks seemed to have frozen. At the same time, the PE industry was sitting on a record amount of dry power, and players were eager to move from the sidelines into the heat of the investing battle. Investing in iconic home-goods retailer Williams-Sonoma was the biggest opportunity of the year. Jefferson Capital's team knew that its initial 7.05x EBITDA bid was not super competitive. The fund had to apply all of its operational and financial engineering muscles, including expanding its debt financing to include mezzanine debt. Subdued before 2022 when investors had easy access to senior debt, mezzanine financing has regained popularity in early 2023, catalyzed by higher interest rates and reductions in the availability of traditional debt finance. Cavalier Capital and its mezzanine debt fund were perfectly positioned to aid Jefferson Capital in its aspiration to acquire Williams-Sonoma. The case is designed as a platform for a negotiation exercise between equity and mezzanine debt investors who need to put their heads together and form a bid to acquire Williams-Sonoma via an LBO. Students can be separated into paired equity and mezzanine teams. Faces with fixed amount of Tranche A and Tranche B debt (4x to 4.5x, depending on instructor risk appetite), each equity-mezzanine consortium needs to decide the amount of capital it is willing to invest and interest rates and warrant overage for the mezzanine
In this short vignette on ethics in consulting, Brenda Thompson, a new Associate at a prestigious consulting firm, learns that a fellow Associate is using the firm's meal expense benefits to pocket the difference between the maximum daily allowance and his actual amounts spent in the form of prepaid gift cards. Though this practice was not explicitly said to violate the policy, Brenda feels uneasy about the situation and must decide how to act on her ethical sensibilities.
In this short vignette on ethics in consulting, John Child, a new Associate at a prestigious firm who is eager to impress, decides to use an AI tool to expedite his analysis and craft his presentation due to a short project timeframe. Feeling uneasy about his decision not to inform his team after a successful presentation, he must weigh the tradeoffs of providing late disclosure, whether partial or full, or continuing to withhold his decision from his team and client, and the ethical and career implications those decisions might carry.
This note provides an overview of how psychological principles may be used as part of a seller's pricing strategy. The note defines the concept of psychological pricing and explains the motivations for firms to engage in it. Prominent practices and tactics, with detailed reference to the psychological and behavioral principles at play, are featured. Numerous examples are given to illustrate the material covered. The note also highlights several concerns companies might have in employing psychological pricing techniques, along with thoughts on how to mitigate or counter these reservations.
In the fall of 2019, the CEO and MD of Hindustan Unilever (HUL), India's largest fast-moving consumer goods (FMCG) firm, is wondering what to do about their experiments to digitize distribution. Despite three years of intense efforts, their apps to empower retailers have not seen any traction. Is it time to shut them down and focus on another area with more potential for digital transformation?
This field-based case describes the situation facing David Bronner, cosmic engagement officer (CEO) of Dr. Bronner's Magic Soaps (Dr. Bronner's), the top-selling brand of natural soaps in North America in 2019. Since its founding, the company has centered advocacy for unity and social change in its products and giving. The question before David and the leadership team is whether to extend the brand further by publicizing its support for the use of psychedelics to treat mental health. David believes passionately in this cause, and he has been a major supporter of scientific and political efforts to support the informed use of psychedelics to alleviate suffering. While scientific studies are increasingly highlighting their promise and Dr. Bronner's has experience with other "label" campaigns for social issues, psychedelics remain Schedule I drugs, and other key decision-makers lack David's zeal for the cause. Dr. Bronner's established its unique position in the mid-20th century based on founder Emil Bronner's "All-One" vision of universal love and his German family's multigenerational expertise as soap makers. Since his death in 1998, the family-owned firm has grown rapidly and profitably, reaching revenues over $120 million in 2018. Students are asked to make a recommendation about whether to introduce a label campaign declaring support for psychedelic therapy and to assess that decision in ways that align clearly with the firm's perspective on value creation. The case is designed primarily for a core curriculum course in business strategy or business ethics. Because of the issues it raises, it also works well in brand marketing and leadership courses. The decisions embedded in the case are pertinent to all levels-MBA students, undergraduates, and executives.
This case is about designing and scaling up an innovative business model that leverages technology to solve the age-old Indian problem of expensive, unreliable, and unresponsive rural distribution of consumer goods. It explores an important decision concerning the growth path of a digital native, unicorn organization, ElasticRun, via exploit-led or explore-led strategy. The case is an inspiration to managers to take on yet-unsolved problems by leveraging the potential of crowdsourcing and technology.
Laser City was a gaming company with a laser tag facility that provided a variety of fun activities for children, groups, and corporate events. Most services were delivered face-to-face in Edmonton and Calgary locations in Alberta, Canada. To mitigate the impact of the global COVID-19 pandemic and the Alberta Government's restrictions on in-person services on the business, Laser City's management team launched an online gaming service called Codo in March 2020. Presented with the new challenges of leading Laser City employees remotely, the company's co-founder needed to design selection tools to better identify and hire engaged remote employees, find innovative ways to foster casual virtual interactions among workers, and identify new methods to support employees through the challenges of remote work.
In July 2021, Scarlett Johansson, the star of the Marvel Cinematic Universe (MCU) film Black Widow, sued The Walt Disney Company (Disney), the producer of the film, for breach of contract when it simultaneously released the movie in theatres and on Disney+, the company's streaming platform, which resulted in a reduction of her compensation. The film saw a sharp drop in ticket sales in weeks two and three and ended its theatrical run with a much lower box-office take than many of the other MCU films. The lawsuit alleged that Disney's vertical integration into streaming had caused a conflict of interest that had adverse consequences for talent compensation. Disney's chief executive officer, Bob Chapek, was faced with the difficult decision of how to address talent compensation in light of streaming's growing popularity, as Disney+ competed on the quality and availability of content.
The need for business agility, that is, the capacity to adapt to changing external circumstances (and even to shape them), is high on the agenda of executives around the world, as they face up to increasing levels of uncertainty. But uncertainty still abounds about what business agility is, and most executives still struggle to master this capability. The introduction to this special issue reviews what we know and still do not know about business agility and introduces the six articles and suggests a path for more research.
Full-on CEO engagement is needed for a successful organization redesign but many CEOs have difficulty maintaining that level of involvement. While the most effective CEOs keep their finger on the pulse of the redesign on an almost daily basis, from start to finish, leaders who lose control tend to have weaknesses such as half-heartedness, over-appeasement, indecisiveness, and incapacitation. The authors present a framework to help leaders recognize and overcome these vulnerabilities.
The "Moral Complexity in Leadership" series of cases and teaching notes help business instructors harness the power of fiction to prepare students for the moral and ethical dilemmas they will face throughout their careers. Meaningful fiction challenges students intellectually and emotionally; it reveals the inner worlds of human players and enables learning that can be difficult to access through case studies, commentary, or reporting. Through literature, students will wrestle with the kinds of problems they will face as leaders looking to make courageous decisions aligned with their moral codes. The works in this series represent a wide range of settings, viewpoints, and cultural frameworks; the characters are complex and contradictory, and the systems within which they operate (whether family, organizational, or cultural) influence them in varied ways. They have been taught to executive, full- and part-time MBA student audiences for many years. The series aims to increase students' understanding of moral frameworks and enhance their skills in facilitating and participating in healthy and productive dialogue about complex and provocative issues. This installment of the series examines Raymond Carver's "A Small, Good Thing," in which married couple Howard and Ann find comfort from an unexpected source after losing their son. In the story, their child is hit by a car on the morning of his birthday and later dies. As his parents grieve, they receive threatening phone calls from a baker who is angry that Ann never picked up the cake she ordered. Once the baker discovers their son has died, he apologizes and they talk into the morning of loneliness and grief. Carver's story examines how humans sometimes fail to communicate effectively due to misinterpreted context.
Elsa Blix, (fictitious), a political appointee in the Foreign Affairs Ministry of Sweden, tackles two undersecretary positions. In the first (Case A), she is ignored and has to carve out her own remit in order to make a legitimate contribution to Sweden's chairmanship of the Barents Euro-Arctic Council (BEAC). She chooses a subject well known to her and employs an egalitarian approach, taking on much of the work herself. In the second (Case B), she has a defined role, but repeatedly meets resistance from the permanent employees of the division. This time she has to find a way to bring them all on-side in order to deliver a massive amount of data within a tight deadline. The seccond case is set against the background of the Arctic Council which Sweden chaired from 2011 to 2013.