This case can be used as a supplement to "Berkshire Hathaway Inc.-Intercorporate Investments (A). Students are presented with hypothetical data related to one of Berkshire Hathaway's investments and asked to compare the financial statement impacts of the investment if it is classified as an available-for-sale security with the impacts if classified as a trading security.
Prudential Financial was a financial-services company whose stock value has declined due to the financial crisis that took hold of the markets in 2008 and to investor concerns regarding the financial leverage of financial-services companies during this time. Prudential's balance sheet, income statement, and statement of stockholders' equity are shown in exhibits accompanying the case. Each statement was presented by the company in its 2007 annual report to shareholders. Students are asked to answers a series of questions using these exhibits.
Until recently, SimpleTel had been a star performer in the telecom industry, and the CEO had been a darling of the analyst community. Several years back, SimpleTel's found itself in a situation where customers were migrating to smaller, local telecom providers to avoid the congestion on SimpleTel's network. At that point, SimpleTel's leadership had decided to invest heavily in expanding network capacity. But now the company was left with a huge amount of unutilized capacity. That, along with debt obligations related to the massive investments in capacity, and lack of demand was threatening to push SimpleTel to the verge of bankruptcy. The previously celebrated CEO had fallen out of favor and shareholders were baying for his blood. He was forced to make an unceremonious departure, and the search for a savior had begun. Today, the compensation committee was due to deliberate on the compensation package for SimpleTel's new chief executive.
Five years after its launch, the Latino Community Credit Union had made remarkable progress, garnering 40,000 members and $22 million in assets. More extraordinary was the LCCU's customer base: Hispanic immigrants, many of them undocumented. The credit union's next bold step was to consider introducing credit cards for their customers. The question was how to make it work.
This case can be used to discuss multiperiod financial forecasts and the relative desirability of various financing sources. As 2007 drew to a close, Panera Bread Company faced a new challenge. To date, it had relied on retained earnings and minor equity infusions to finance operations. But a decline in margins would limit future financing from internally generated funds. Complicating matters was the fact that its stock price was at historic lows and management was contemplating a large equity repurchase.
In the early months of the 2007-08 financial crisis, a loan manager faces a real estate financing decision. Should he approve a bullet structure three-year loan to a longstanding client, a legendary Texan developer? The developer, who near retirement downsized his business, is seeking financing for his only project: residential or commercial development on an attractive piece of land in suburban Houston. The loan manager considers the decision in light of the mortgage market turmoil, seeing commercial projects as safer, but also factoring that the residential market could bring higher returns if the market stabilizes soon. The manager collects the data and asks an analyst to assess the risks; that ultimately requires assessing the economics of both projects from both the bank's and the developer's perspectives. The bank could still change the interest rate on the loan to receive adequate compensation for the risk it carries, but the loan manager knows that doing so will change their long-term client willingness to take on the loan.
This case is suitable for graduate-level quantitative analysis, business and government, environment and sustainability, and global economics courses. Students must consider the tradeoffs between continuing to run an old coal-burning plant and purchasing emissions allowances (EAs) versus upgrading to emissions-reducing wet or dry scrubbers. Reducing emissions creates the possibility of selling the plant's surplus EAs (which are likely to increase in price). Choosing a wet or dry scrubber requires considering installation cost and construction time, variable cost, and SO2 removal efficiency. Ideally, the investment should pay back over time, but management believes some net investment could also be justified. For that, however, complete analyses from both economic and environmental perspectives are required. A supplemental spreadsheet is available to accompany the case (UVA-S-QA-0726).
Tata Consultancy Services Ltd (TCS), India's largest IT services provider, reached a major milestone when manpower strength crossed the 100,000-employee mark in October 2007. Based on a business model heavily reliant on low-wage software engineering talent, TCS tapped with great success, India's large pool of engineering graduates, mainly from top universities, for its human capital needs. These software project consultants formed the backbone of the company's service delivery system and the lynchpin of TCS' growth as a global IT company. TCS used a systems approach to design a training and development framework that had enabled the firm to scale up the human capital requirements to meet rapid business growth. By the end of March 2008, TCS' global employee strength was more than 111,000. Ninety percent of its IT consultants were Indian nationals, as were majority of the TCS consultants in the USA. However, as TCS followed its multinational clients and set up operations in China, the Chinese government expected TCS to tap on local engineering talent as much as possible. The challenge for TCS was whether the training framework it had used to build its India-based human resource pool would also be effective in the Chinese context where TCS hoped to grow its second global delivery hub after India.
In July 2007, Wachovia Corporation's CEO is pleased with a report that shows the firm's record-setting second quarter results. In the past three months, Wachovia has doubled its earnings and posted record revenues, mostly attributable to the large consumer real-estate loans related to the Golden West Financial acquisition that has contributed to the bank's growth. The transition of Golden West into Wachovia's platform had been quick and smooth, despite their cultural, geographic, and product-offering differences. The CEO was excited that the acquisition provided new opportunities for lending in what were perceived as less risky markets, particularly single-family home mortgages with adjustable rates. But he wondered if there were any adjustments necessary to extract ultimate value from Golden West.
Whole Foods and Wild Oats were both natural- and organic-food stores that competed for similar customers on values such as high-quality and healthy products, excellent customer service, knowledge of products, and an enjoyable shopping experience. In February 2007, Whole Foods announced that it would purchase a smaller, yet formidable competitor, Wild Oats. There was tremendous geographic complementarity involved: The merger would give Whole Foods the largest footprint within the natural- and organic-grocery industry in North America.
This case traces UPS's first corporate sustainability report (CSR), "Operating in Unison," from its origins up to its publication in 2006. It is based on interviews with managers who championed and shaped the report internally. UPS took its CSR quite seriously, basing its reporting and goals on the more stringent Global Reporting Indices (GRIs) as opposed to merely complying with U.S. regulations. Soon after going public, UPS was significantly expanding its European operations; it followed that its CSR ultimately took the form of many European CSRs, addressing the relationships among financial performance, environmental sustainability, and engaging stakeholders such as employees and the community. By 2008, some form of CSR would become routine in the United States. Yet not all CSRs are created equal; the case includes copious examples from UPS's first report, with key performance indicators in all categories. Given UPS's employee-centered culture, the company debated how much internal information to report. UPS also has an engineering culture whose innovative thinking helped align its business model with efficiency and reduce its carbon footprint. UPS managers and employees are invariably motivated by "doing the right thing"-a phenomenon increasingly found in strong brands. UPS's reporting grew out of its culture. Yet a major topic for our times is how to manage reputational risk, especially when these risks are inherent to the business. As corporate social responsibility gains public attention, will first-movers such as UPS be rewarded for taking CSR seriously?
RSSWorks Inc. represents a very early stage funding opportunity - the business model has not been decided. The case provides an introduction to the thinking behind seeking first external funding for an early stage founder-funded company. Students will gain an overview of how a very early stage company gets going and begins to operate by exploring the funding options open to a company at this early stage, considering the needs and wants of the founders and the potential funders, and assessing a company at this early stage. The case also introduces the notion of an ecosystem for technology companies and its role in the success or failure of early stage companies, and the idea of launching "on the cheap."
This technical note requires students to define and describe a practical application deploying the 5S process steps of lean thinking methodology: Sort, Set in Order, Shine to help future business managers organize, create new habits, and visually control a personal area or workplace setting in order to eliminate waste in the activities undertaken by one or more individuals. The note provides guidance for students to document their 5S journey, reflect their on their learning, and then summarize the experience.
Business entities must continually respond to shifts in the competitive landscape. When internal or external pressures cause a company to undertake an operational improvement process such as Six Sigma or Lean, managing the human aspects of implementation is critical. Change management in an operational-improvement setting can be challenging; however, it is well worth understanding and utilizing the appropriate tools and the FEEL-SEE-DO-PRACTICE-OBSERVE iteration. Ultimately, the robustness of an organization may be due in large part to its ability to build a continuous-improvement cycle solidly into the infrastructure of its culture and operations.
A summer intern in the Supplier Development department at XS Inc. is participating in a two-day Value Stream Mapping (VSM) event at SysInteg. This is his first chance to put his knowledge of lean principles and tools into practice working with a key supplier. As this is XS's first time sponsoring an improvement initiative led by a third party, it was under tight scrutiny by the XS corporate-level senior management. XS saw this as an opportunity to deploy external lean experts as some members of senior management were skeptical about the lack of oversight on milestones, performance management, or (supplier) resource allocation; however the intern is concerned that a poor performance at SysInteg would affect his chances for future employment at XS. After today's event at SysInteg, he is expected to establish a communication plan and identify stakeholders for each future VSM event.
Right Media considers systems and policies to make sure that ads are only shown on web sites where they are appropriate, and vice versa. Setting standards is particularly challenging given the large and growing marketplace, the numerous participants, their diverse requirements, and the dynamics of policy enforcement when market participants are competing intensely.
Shane Immelman, founding CEO of the Lapdesk Company of South Africa, is facing a number of challenges in taking Lapdesk from South Africa and into the rest of the African continent. How should the African strategy be different from that of South Africa? What is the appropriate structure?