Describes Standard & Poor's sovereign credit ratings business. Provides background on the history of credit ratings agencies, the meaning of credit ratings, the expansion of the sovereign ratings business over recent decades, and the market for credit ratings. Also, discusses current debates in the United States and elsewhere relating to the use of credit ratings in financial and prudential regulation.
Describes Standard & Poor's sovereign credit ratings scales and the credit rating process. In particular, describes the role and function of the rating committee and the analytical categories considered in arriving at a final sovereign credit rating.
Sun Life Financial is a large insurance conglomerate with $14.7 billion in annual revenues. The vice-president for China must formulate an approach for his company's entrance into China. Sun Life has achieved two important milestones: the right to apply for a license and the signing of a Memorandum of Understanding for Joint Venture with China Everbright, a local securities company. The financial vice-president must consider strategic options for entry and choose a city in which to focus his efforts in getting a license. In doing so, he needs to consider Sun Life's overall priorities, strategic direction, and how he will sell the concept to senior management in Canada.
The president of Loblaw Companies Ltd. must decide what to do in response to the rumored introduction of Wal-Mart's SuperCenters (combining grocery and nonfood items) in Canada. The potential launch of SuperCenters in Canada was seen by observers as a threat to Loblaw, the market leader in Canadian grocery. Wal-Mart is a vigorous competitor, and the Every Day Low Prices strategy of Wal-Mart's SuperCenters could wean away traffic from Loblaw's various banners.
Molecular Insight has developed a novel biopharmaceutical to detect heart attacks. The company's unique approach to intellectual property protection uses the Hatch Waxman Act and the Orphan Drug Act. The company is struggling to raise $7 million in Series B financing. Should it continue its current strategy or change its approach? Includes color exhibits.
Kohler Co., best known for its plumbing fixtures, is a large, private family firm. As part of a recapitalization aimed at preserving family ownership of Kohler Co., nonfamily shareholders, who held 4% of common stock, were required to sell their shares to the company. A group of dissenting shareholders filed a lawsuit claiming that the buyout price undervalued their shares by a factor of five. In April 2000, Herbert V. Kohler, Jr., chairman and CEO, has to decide whether to settle with the dissenters and, if so, at what share price. The decision calls for a detailed valuation of the company at the time of the recapitalization. Provides the necessary data for students to value the company using both a discounted cash flow approach and a multiples (comparable companies) approach. Students must identify and understand the different valuation assumptions that can lead to a wide range in price, including the applicability of discounts for lack of marketability and lack of control. Exhibits are available in electronic form to facilitate analysis of the data (HBS courseware 9-205-707).
Tsingtao Brewery Co, Ltd, the best-known Chinese beer producer in the world, had been surpassed in market share by Yanjing Beer in the mid-1990s due to its inefficient operations. From 1994 to 2002, Tsingtao Brewery acquired over 47 small and medium-sized companies and regained its dominant position in the beer industry. However, this resulted in many problems including increased levels of bureaucracy, lack of integration of corporate cultures of the acquired companies, lack of brand focus, low profitability and other problems resulting from the rapid expansion. In July 2001, the General Manager Peng Zuoyi suddenly died of a heart attack. Jin Zhiguo, his successor, believes he should change the company business strategy from 'growing large to become powerful' to 'growing powerful to become large', which focuses on post-acquisition integration.
In just 15 years, founder Huang Guangyu had turned Gome Home Appliance Co. Ltd. into the largest home appliance retail chain in China in terms of sales. However, the company faces several internal and external challenges. It is becoming increasingly difficult for Gome to attract qualified employees, to obtain capital for its continued growth and to ignore its competitors. To respond to these challenges and the changing environment of the industry, Gome's once retired leader, returned as the company's General Manager and has implemented a major reorganization.
Tsingtao Brewery Co. Ltd. had several problems due to its aggressive expansion from 1994 to 2002. This case reviews a number of initiatives which were implemented in order to address these problems. The initiatives include: downsizing, process re-engineering using ERP, redesigning of the incentive system, organizational restructuring, forming a strategic partnership with Anheuser Busch, integrating the culture and values of the company, and building a learning organization. This is a supplement to Tsingtao Brewery Co., Ltd. (A), product 9B05M063.
CEMEX, based in Mexico, has grown through acquisitions from a local cement producer to the world's third largest. Over the last 20 years, the company has been a consistent leader in using IT and managing business information in innovative ways in the cement and ready-mix concrete business. CEMEX has also accumulated knowledge about integrating acquired companies across the world and developing business processes that incorporate best practices in diverse countries and regions. In 2000, CEO Lorenzo Zambrano decided to codify best-practice knowledge across the company around 8 key global business processes through a three-year project called the CEMEX Way. Although implementation cost $200 million, the company could save over $120 million per year in IT and procurement costs. In 2004, the project became a permanent part of CEMEX's approach to doing business globally, but had to be modified to incorporate more local innovation and flexibility as well as to capture best-practice changes more rapidly across the company. How can CEMEX align the behaviors and values of its people and strike the right balance between local business flexibility and global standardization to grow in the future?
Subtle misdemeanors that are not illegal but rather blur the line between right and wrong can cause serious damage to corporations as they are both widespread and widely accepted. This author argues that over the long run it is the pursuit of both societal and economic value that yields long term and stable profits. The article highlights the economic value versus the societal value argument. While institutional structures in most capitalist countries reinforce the economic argument, economic arguments erroneously assume the existence of perfectly competitive markets. However, because the perfect market is an abstraction, negative externalities impact those who have had no role in, nor consented to the economic transaction. On the other hand, focusing exclusively on societal value yields extremely high short term costs and is likely to lead to closure when profits are persistently negative. The author argues that the either-or approach in the debate between economics and ethics has polarized the discussion and distracted attention from the space where economics and ethics converge and where potential solutions exist. Business should, like some have in the past, focus on building sustainable value. To do so, businesses should focus on the long term and invest in social processes, thus building greater resilience to changes in the market place while addressing social issues throughout the organization. The article also chronicles the advantages of active and up-front stakeholder engagement, community participation and involvement, and strategic decision making by using examples of social processes in companies such as Tembec Inc, Home Depot Canada and TransCanada Pipelines.
It's been slow in coming, especially compared to actions in the United States, but shareholder activism in Canada is gathering momentum, albeit somewhat slowly.
Earnings, for example, may surprise the street but boards that implement an Early Warning Summit will see it coming and be able to prepare for it and other surprises.
The global apparel industry is known to be a buyer-driven industry, led by retailers, marketers, and branded manufacturers. In the United States, in particular, a handful of giant retailers (Wal-Mart, Sears, Kmart, Dayton Hudson, JC Penney), which account for over two-thirds of all apparel sales, dominate the industry. In recent years, these companies have increasingly deployed information technologies to gain market knowledge, streamline their value chains, and manage their extensive global sourcing networks. In response to market demand, TAL Apparel Ltd. (TAL), a no-name Hong Kong-based garment manufacturer, has developed a sophisticated information management system to manage the supply chain for its retailer customers, thus solidifying its position in the apparel value chain. By taking ownership of the customer ordering, inventory management, and shipment dispatch functions, the manufacturer has gained valuable access to real-time market information, allowing it to venture into the design and test marketing business. Explores how a traditionally weak member in the apparel industry uses IT to gain competitive advantage in the intensely competitive global marketplace.