Having already made 10 acquisitions of competitors in the last decade, the CEO of Arrow is evaluating the acquisition of another small competitor to boost sales, become #1 in a niche market segment, and achieve economies of scale. He is struggling with whether the deal makes strategic sense given forecasts that this niche segment is declining, whether the price is too high given the competitor's lack of profitability, and how to integrate the company into Arrow to maximize its value if he does the deal. Provides information to permit valuing the acquisition and developing a post-merger integration strategy and plan.
Reviews the principal ways in which the owners of a family business achieve their governance objectives of a suitable identity and sensible direction and the discipline to achieve these. Covers the responsibilities and rights of owners, plus governance procedures, plans, policies, statements, rules, agreements, and structure.
Examines the ways in which a leader can create, influence, and manage a school district's organizational culture to support continuous improvement of student achievement outcomes.
Since the company launched its software product in August 2003, the word "Skype" has become synonymous with free calls over the Internet. Skype developed software that allowed people around the world to talk to each other for free. Prior to the company's $2.6 billion acquisition by eBay, announced in September 2005 and finalized in October 2005, the Skype network had grown to over 55 million registered users. Within two years of the Skype beta product launch, the software had been downloaded over 205 million times and the user growth rate had climbed to an impressive 130,000 new users per day. Skype's registered user growth rate exceeded that of KaZaa, Hotmail, and ICQ over the initial 24-month period after each company launched its product. From Skype's inception until the company's acquisition by eBay, the company had secured over $20 million in venture capital funding, while operating with just over 200 employees. eBay announced its intention to acquire Skype in a cash and stock transaction totaling $2.6 billion on September 12, 2005. The acquisition was completed on October 14, 2005. Within six months of the announcement, Skype went on to sign co-marketing deals and partnerships with Motorola, Intel, Kodak, Netgear, Panasonic, Philips, and Warner Music Group. Skype continued to break new records and achieve significant growth: the total number of registered users climbed to over 100 million in April 2006 and the number of simultaneous Skype users online was propelled to 6 million. By mid-2006, it was believed that Skype carried an estimated 7% of all global international voice traffic. Looking forward, the Skype team had a number of challenges with which to contend. How would the eBay acquisition impact Skype's distinctive culture? How would Skype compete with emerging services such as GoogleTalk and incumbents such as AT&T? What strategy should Skype pursue to sustain its growth?
GFS-China Technologies is a joint venture between Standard Industries (Standard) of the United States and Good Fortune Enterprises (Good Fortune) of China. The joint venture was created to manufacture various automotive heating ventilation and air conditioning parts. Two weeks after GFS-China began operating, Good Fortune's president stopped the joint venture and would not allow the joint venture general manager into the plant. Good Fortune's president wrote a letter to Standard and demanded that the venture general manager be replaced. After various meetings and communications between the partners, it was decided that a new general manager would be appointed and would come from Stan-dard. Steve Parker, a Standard manager who was in China working as Asia Pacific purchasing manager for Standard HVAC, was asked if would be interim general manager in GFS-China. It was now up to Parker to decide if he should accept the position and, if so, what he should do to get the joint venture back on track.
Ocean Park was the only amusement park in Hong Kong until 2005, when Hong Kong Disney exploded onto the scene. Outlines Ocean Park's history and its response to Disney's encroachment into its market. Ocean Park acted swiftly and decisively to capitalize on the excitement generated by Disney, thus turning what could have been a threat into an opportunity. In terms of business-level strategy, the park moved to accentuate the differences with Disney rather than compete head-on. As the CEO stated, "We have no intention of trying to out-Disney Disney." The park focused on its aquarium, animals, and thrill-rides as opposed to the "fantasy" and animated characters that make up Disney's core competence. By following this strategy, the park was able to capture a large portion of Disney visitors that came from Mainland China. Also discusses a recent restructuring, human resources management issues, and other challenges that the park faced in 2006.
Assesses the costs and benefits of pursuing diversity and pinpoints the primary barriers to creating diverse workplaces. It also proposes some options for advancing diversity in an organization.
Reviews the ways to achieve governance of the family business. Points out the importance of plans (e.g., strategic plans), statements (e.g., mission statements), policies, rules, and agreements to the governance process. Discusses the roles of three structures in family business governance: the top management team, the family employee council, and the board of directors.
This case presents a summary of U.S. trade and investment sanctions in effect as of 2006. The case examines in detail the U.S. sanctions against Cuba, and it discusses the challenges and opportunities that these sanctions have created for Cuba's largest foreign investor, Sherritt International. The discussion concerning Sherritt presents the wide array of forces that impact a business that is contemplating trade or investment with a country against which sanctions have been imposed. In spite of U.S. sanctions, Sherritt International, based in Canada, developed profitable businesses in Cuba, in mining, oil and gas, hotels and food processing. The U.S. policies, while imposing costs, also reduced the competition that Sherritt would otherwise have faced. The ability to work with the Communist government gave Sherritt a strong competitive advantage and a protected market. Sherritt had positioned itself with a first mover advantage if sanctions were lifted.
In 2001, the Dabhol Power Company (DPC) ceased operations following several years of bitter acrimony between the state of Maharashtra and the foreign owners. GE and Bechtel each owned 10 per cent of the equity, the Maharashtra State Energy Board (MSEB) owned 15 per cent and Enron owned 65 per cent. The Overseas Private Insurance Corporation (OPIC), a U.S. government agency, had lent $138 million and also had provided insurance against political risk for some of the other 19 foreign lenders. The lengthy and convoluted experiences of the Enron Dabhol power project are described in detail in Andrew Inkpen's case Enron and the Dabhol Power Company, Thunderbird Case # A07020008. The purpose of India's Negotiations Concerning the Dabhol Power Company 2001-2005 is to discuss the negotiation between the various foreign investors and the government of India in an attempt to reactivate the Dabhol project. Ultimately, in 2005 a settlement was negotiated. This case adds a further dimension to the case by Andrew Inkpen, and it can be taught most effectively as a sequel to that case.
Many nations have created geographically distinct areas with special features designed to attract foreign investment. In deciding where to locate various operations, businesses today must investigate the benefits and incentives offered by a plethora of special economic zones (SEZs) throughout the world. The business location decision involves a comparison of many alternative sites, each with its own set of incentives. Many small nations have put in place minimal corporate tax rates as a way of gaining some revenue by attracting head office functions, particularly those tasks related to finance. This government revenue may be only a very small percentage of a corporation's international profit; nevertheless, it may form a significant portion of the tax haven's income. Many businesses make their international location decisions so as to accumulate their taxable profits in tax havens. Apart from these zero-tax regimes, countries impose a wide range of corporate profit tax rates. A business can often find a country with a tax rate lower than both the country where it was incorporated and the country where it wishes to invest. By funneling profits to a zero-tax or even a lower tax jurisdiction, a business is able to minimize its aggregate tax payments. Although recent international agreements have sought to limit these practices, opportunities are still available for tax minimization. Tax havens, as well as SEZs, can play an important role in business location decisions.
By 2006, Hungary had experienced more than 15 years of transition from central planning to free markets. The reform process had involved several distinct phases. The initial leap to the market, with its widespread privatizations, included a dramatic deregulation with a guillotine procedure. A more refined process of regulatory impact assessments (RIAs) followed this period. A newly empowered competition office sought to strengthen the extent of competition within markets dominated by a single firm or a small group of firms. The goal of EU membership was a consistent driver of the reforms as early as 1991, since the EU model was compulsory for EU members. These years had been turbulent, and the transition was not yet complete. In 2006, Hungary faced the challenge of a fiscal deficit that was 9.5 per cent of GDP, and responded by raising corporate tax rates from 16 per cent to 20 per cent as an attempt to close the fiscal gap. However, Hungary was in an intense competition with Poland, the Czech Republic and Romania to attract opportunities. Tax rates were an important element in this competition, but so were the regulatory impediments and distortions that still remained in the economy. How to create a rapidly growing economy was a question at the forefront of public policy debate. A 2006 Financial Times article discussed this dilemma.
The newly promoted inventory manager wonders if there is an easier, more reliable means of forecasting the sales demand. Currently forecasts are based on the plant manager, sales/marketing manager and inventory manager's knowledge of industry trends, competitive strategies and sales history. He must decide if using statistical forecasting methods would ease the forecasting process and make the forecast more reliable. Students are exposed to different forecasting techniques, including executive opinion, linear regression and time series. The data characteristics include seasonality, trend and random fluctuations.
Circus Oz was Australia's premier international circus, having performed in 26 countries on five continents. In early 2002, Circus Oz enjoyed its strongest financial position since its founding in 1977, making a profit and sitting on a surplus of AUD$1,169,313. Although in recent years the company had increased the percentage of revenue generated from the box office, more than 60% of its funding still came from the Australia Council, its largest government sponsor. Linda Mickleborough, general manager of Circus Oz, was pondering how to respond to a recent offer by the Australia Council to fund a new position, director of development, at Circus Oz. The Australia Council was strongly encouraging the circus to hire development professionals to expand its funding from corporate donors. As an enticement, the council offered to underwrite the cost of the position for two years. Mickleborough had found the ideal candidate. The decision, however, was still a difficult one. Circus Oz had relatively flat salaries, reflecting deeply held egalitarian and democratic values. These values were central to the company's creative process, culture, and aesthetic. The suggested salary of the development director position was more than two times the highest salary currently paid to any employee at Circus Oz. Such a large salary disparity might wreak havoc on the company's morale and culture.
This case captures the cash-flow and working-capital management problems typical of small, growing businesses. At the end of 2015, Bob and Maggie Brown have completed their third year of operating Horniman Horticulture, a $1-million-revenue woody-shrub grower in central Virginia. While experiencing booming demand and improving margins, the couple is puzzled by their plummeting cash balance. The case highlights the difference between cash flow and accounting profits, as well as the common negative effects of growth on cash flow. The case provides a forum for establishing appreciation for the relevance of free cash flow to business owners and managers, introducing financial ratio analysis, developing the concept of the cash cycle and working-capital management, and motivating the use of financial models.
This note describes the chi-square statistic as applied to goodness-of-fit tests. Goodness-of-fit tests check to see how closely a sample matches a particular probability distribution (e.g., normal, Poisson, binomial).
In late 2004, Hilmi Panigoro, CEO of the publicly traded Indonesian oil company Medco Energi Internasional, is striving to regain majority control of the company his brother Arifin founded in 1980. The Asian financial crisis of 1999 led to a major restructuring that left the Panigoros with a 34.1% equity stake in Medco. Two other large shareholders are now looking to sell their combined stake of the 50.9% and have selected Temasek, the Singapore government's investment arm, as their preferred bidder. The Panigoros have a right of first refusal, but only a four-month window to raise the capital needed to head off Temasek's bid. The Panigoro brothers are considering a two-stage plan: a leveraged buyout to be followed by a secondary equity offering at a share price high enough to enable them to repay the loan and maintain majority control of their company. As attractive as the plan seems, they worry about the high cost of the loan and the risk that the offering might fail. In January 2005, with no time left to consider alternative financing plans, the Panigoro brothers have to decide whether to go ahead with the plan or lose control of Medco to Temasek.
The Khemka family of India--founders, managers, and majority owners of Russia-based SUN Brewing--faces a difficult decision in 1998. Following the ruble's massive devaluation in August 1998, the stock price of SUN Brewing, which is publicly listed on the Luxemburg exchange, has declined by over 90%. Only two months earlier they had planned a $200 million to $400 million equity and debt offering on the New York Stock Exchange to finance major investments in the face of increased competition from international beer companies in the Russian market. However, the rouble devaluation and the deep financial crisis that has ensued has led to the cancellation of the proposed NYSE listings--and to a $40 million bridge loan that now needs to be repaid. The family is debating the merits of two main alternatives: To bring in a major global beer company as a strategic partner at this difficult time or to stay on as controlling owners, inject millions of dollars into the company from other parts of the family business group, and weather the storm until better terms can be expected from any outside capital provider.