Given widening bid-ask spread for a target stock, a small Australian portfolio manager considers front running the market makers by posting its own quotes inside the spread. Organized in a series of rounds, the case asks students to post bid and ask limit orders for shares. Each round allows orders to come in that execute against the limit order book, cash flow and end-of-round inventory to be calculated, and the market to revise the bid and ask quotes for the next round. This structure starkly illustrates the tension for market makers between bid-ask spread profits and inventory trading uncertainty.
The case details the history of AIG, its organizational structure, and involvement in the market for credit default swaps and the financial crisis. Edward Liddy has been appointed by Treasury Secretary Henry Paulson as CEO and chairman of AIG during the government's bailout of the insurance giant. He is preparing to address the U.S. House of Representatives' Financial Services Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises to provide testimony related to AIG's payment of $165 million in bonuses to several of its managers at the same time the government had been injecting billions of dollars into the company to help keep it afloat. Students are asked to reflect on the bonus payments, what factors in the organization might have contributed to the issues AIG faced in the financial crisis, and how to ensure the company did not face similar issues again in the future.
In June 2010, Mingzhe Ma, chairman and chief executive officer of Ping An Insurance (Group) Company of China ("Ping An" or "the Company"), sat down with Sun Jianyi, vice chief executive officer and executive vice president at Ping An, to discuss the future direction of the Company. They would have to answer questions at the upcoming shareholder meeting about Ping An's financial strategy for diversification within China and globally. Ping An had been founded by Ma in 1988 and had since grown into China's second largest life insurer. While Ping An had achieved past success in insurance, it looked to expand its business going forward. Ping An's ambition was to transform itself into a global financial conglomerate, with banking and investment, as well as insurance operations. Ping An's recent efforts at globalization and diversification had been challenging. In a highly publicized transaction, Ping An made an untimely investment in Fortis, a large European bank which failed in the global financial crisis in 2008. Ping An spent close to 24 billion Chinese Yuan (RMB) or 3.4 billion U.S. dollars ($) on Fortis. In the aftermath of the Fortis acquisition, Ping An had halted overseas expansion and focused on opportunities at home in mainland China.
Chris Exline founded Home Essentials, a furniture rental business targeted toward expatriates, in Singapore but rapidly moved the base of operations to Hong Kong. The company was highly successful in Singapore and Hong Kong and then pursued rapid global expansion. Lacking frameworks for deciding upon countries to enter and services to deliver in each country, Exline used gut instinct. Lacking control systems and information, he failed to identify problems early and had trouble understanding the root cause of failures. The global financial crisis intensified the problems. The case ends by describing how Exline was able to turn around the troubled company and develop necessary governance systems. The question of whether to once more attempt to grow beyond Hong Kong and, if so, the approach to take in selecting countries, is a central issue Exline faced at the time of the case.
Governments throughout the world have offered subsidies for a wide variety of reasons, including the objectives of increasing investments and jobs, particularly those that are high-tech, stimulating economically depressed regions, supporting domestic agriculture, and preventing bankruptcies through "bail-outs." Subsidies now play a key role in business location decisions, and impact their international competitiveness. Recipients of subsidies can offer their goods and services for sale at lower prices than would exist in the absence of subsidies. Foreign-based corporations may regard these lower prices as unfair competition in international trade. Consequently, international trade negotiations have come to focus on many of these subsidy programs as trade distortions that should be limited by formal international agreements. Some countries, especially the US, impose special countervail duties if their corporations are being hurt by foreign subsidies. With current and projected reductions in trade barriers, subsidies will become relatively more important as a trade-determining process. Nevertheless, subsidies are implemented to pursue certain social objectives, and so an intergovernmental pact that limits subsidies may diminish, rather that improve, the well-being of signatories.
The case describes the creation of Turkey's largest business group by Vehbi Koc. The foundation of this group in the interwar years, and its subsequent diversification into many industries, including automobiles, household goods, and services, are analysed. The case serves as a vehicle to explain why diversified business groups are so important in emerging markets such as Turkey. It explores the role of market imperfections, government policies, and entrepreneurial ambition in their creation, as well as the organizational challenges posed by managing such diversified firms owned by a family. Much of the firm's growth came from licensing and joint venture agreements with multinational firms that were unable, or unwilling, to invest directly in Turkey because of political risk and government restrictions. The case ends in 1988, when the founder has received a report from the management consultancy Bain calling for the firm to reduce the range of activities it undertakes because of the competitive challenges resulting from the liberalization of the Turkish economy.
Kellogg Company, one of the largest cereal companies in the world, is struggling with inefficient production flows. The popular Raisin Bran and Frosted Flakes cereals are produced on the same production line. The process is often starved of cereal, which is costing Kellogg thousands of dollars every day in lost revenue. John A. Bryant, Kellogg's chief executive officer, must come up with a viable solution before next week's board meeting. This simple production process shows how complications can arise when a resource requires setup time.
Since its 1999 merger Reckitt Benckiser (RB), a global consumer goods company, led by its CEO Bart Becht, RB developed a reputation for rapid product innovation and industry leading profit margins. RB's stated strategy was to focus on its Powerbrands and high growth categories and to nurture the Powerbrands with innovation and roll them out globally. The Powerbrands had steady double digit growth year over year, attracted a devoted customer base and typically grabbed high margins. This case examines the Powerbrands strategy, RB's devotion to fast and focused innovation and its execution of that strategy.
Warren Adams founded Patagonia Sur in 2007 as one of the world's first for-profit land conservation businesses. His goal was to purchase over 100,000 acres of land in southern Chile and to run a variety of sustainable businesses to generate annual returns for investors. Patagonia Sur planned to derive various streams of revenue from the land-including eco-tourism, sustainable land development, carbon credits, water rights and eco-brokerage-thereby giving a financial return to investors on top of achieving a positive environmental impact. By 2011, Warren had raised over $20 million from high net worth individuals and Patagonia Sur had over 60,000 acres in Patagonia under management. However, institutional investors seriously questioned whether Patagonia Sur could ever do more than break even on an annual basis. Further, they worried that in fact the risk of the investment went up significantly as the company spent both its capital and management time on so many different revenue streams. In addition, some investors felt that for-profit conservation was morally wrong. Warren needed to convince both individual and institutional investors that his vision would succeed in both generating returns and preserving the natural beauty of Patagonia.
This case has two aspects. First, it provides a tutorial on the basic concepts associated with straightforward time-value-of-money scenarios. The topics of future value (FV) and present value (PV) are discussed and exemplified for both lump sum and recurring cash flow situations. In this vein, the derivation and use of four useful time-value-of-money reference tables are presented to highlight the underlying logic, connections, and mechanics of determining FVs and PVs. Second, this case provides students with several simple vignettes in which they can apply the foregoing time-value-of-money insights and techniques. The case can be effectively used in degree and nondegree programs, and it requires no additional reading materials. It is well suited for one 90-minute class period, and all or selected subsets of the vignettes contained in it may be assigned. A Teaching Note is available to registered faculty.
It's well known that China has been working to spur domestic consumption. But it's making faster progress than many outsiders realize; for example, China is already the first or second largest market in a number of important consumer categories. Here are some trends Western multinationals should be aware of, along with advice on how to better position themselves so that they don't get left behind.
Corporate social responsibility remains a deeply controversial issue. Vermaelen proposes a creative way to finance CSR initiatives: through equity spin-offs that create separate alternative businesses funded by shareholders who opt in, knowing they may see lower returns but enthusiastic about the cause.
A study of 10,000 accounts in a large German bank showed that customers obtained through referrals are both more loyal and more valuable than other customers, making referral programs well worth the cost. The effect is strongest among young people.
When professors Anita Woolley and Thomas Malone studied the factors that increased a group's collective intelligence, they made some surprising discoveries: A team's intelligence, as measured by performance on a range of tasks, had relatively little to do with the individual IQs of its members. But it had a lot to do with the gender of those members.
In theory, customer feedback, whether positive or negative, is good. In reality, it can be hard to figure out which online reviews are legitimate-and how responsive to be.
Viral features embedded in your product can have an explosive effect on adoption. Automatic notifications, which are passive, get the most hits. But personalized features, such as user-to-user invitations, are three times as effective per message.
This case is set five years after the Stanford Graduate School of Business case "Infosys Consulting in 2006: Leading the Next Generation of Business and Information Technology Consulting." Since then Infosys Consulting (IC) had become quite successful in the IT consulting world through its model of offsite technology development and its new Value Realization Method, which had driven IC's profits and reputation while becoming the company's key differentiator. The method involved quantitatively linking IC programs back to the creation of shareholder value on one side and to customer value on the other. While IC brought in zero dollars of revenue in 2004, in fiscal year 2011 direct revenue hit $200 million. In addition, IC drove another $600 million in revenue for its India-based parent company, Infosys Technology Limited (ITL). IC also had an operating margin of 25 percent. The company had grown very rapidly - by 2011 it counted 700 consultants worldwide and 42 partners. This quick growth provided both opportunities and challenges for the new company. IC's parent company ITL was also growing extremely rapidly, and the case discusses IC relationship with its parent company, which was across the world and had a much more formalized method of operation. By contrast, IC described itself as a maverick culture, which it saw as a great asset and helped the company attract and retain top-notch consultants.