By definition, forecasted numbers in a financial statement involve educated guesses. But that's not always clear in the statement itself. To reduce legal liability for off-the-mark predictions, a proposed new model for financial statements clearly distinguishes hard numbers from forecasts.
New York's public parks, brought to their magnificent peak by the legendary Parks Commissioner Robert Moses in the mid-20th-century heyday of direct government activism, were in disarray in a new era of public-sector austerity. As the City's hard-pressed government found itself short of money and manpower the parks-from the iconic Central Park to neighborhood playgrounds-grew dingy and dangerous. With few other options, park officials began experimenting in the 1980s with a new approach: Shifting responsibilities to the private sector. By 2003 this "partnership" strategy had become the linchpin of the park system. Private organizations-ranging from sophisticated organizations funded by New York's rich and famous to informal networks of neighborhood volunteers-had taken on major roles in maintaining, upgrading, and day-to-day management of the City's park system. Commission Adrian Benepe, though a veteran Parks Department employee deeply committed to public service, had contributed to the development of the partnership approach throughout his career. But as he was promoted to the top job, he faced the challenge of pursuing a complex mission when much of the essential capacity was subject to his influence but by no means under his control. Attending fundraisers, massaging donors' egos, and motivating volunteers-rather than the direct exercise of authority-are Benepe's most important management tools. HKS Case Number 1743.0
Microlending, defined as very small loans advanced to very low-income entrepreneurs, has attracted wide attention as a potentially effective means to aid the economic development of impoverished nations. This case focuses on one of the largest and most successful of such microlenders, Mexico's Compartamos ("we share") organization, and raises questions about the most effective business model and scale of microlenders. Specifically, the case tells the story of how Compartamos, which had found great success making small loans in villages and rural areas, fared when it sought to expand into Mexico City. A series of reverses--higher default rates, personnel problems, and unexpected competition and regulatory issues--implicitly pose the question of whether Compartamos and microlenders of its type, which historically have relied on peer group pressure to ensure repayment of otherwise unsecured loans to small start-up businesses, can expand and adapt to an urban setting. HKS Case Number 1761.0
Microfinance is a field that has received increasing attention over the years in the development community. It consists of the delivery of financial services to people excluded from traditional banking institutions. For many years, most work was done on issues like credit and saving methodologies. However, the emphasis has switched in recent years to institutional sustainability to maximize impact through the commercialization of microfinance. A key component of microfinance commercialization is the mobilization of funds from money and capital markets, to decrease dependency on donors and governments and to enhance the financial intermediation of microfinance institutions. One of the most innovative ways to mobilize funds for microfinance lending is through the establishment of microfinance funds that channel investments from capital markets to microfinance institutions either as loans, guarantees or - less often - equity. BlueOrchard Finance has been a major actor in this arena through the management of the Dexia Microcredit Fund (DMCF). HKS Case Number 1762.0
In a world of increasingly fluid boundaries, public and private managers often face ethical challenges that cross familiar geographical and cultural lines. This disguised case recounts the experience of a chemical engineer from Brazil who crosses gender lines to forge a successful career in the masculine world of the Latin American petrochemical industry. The central focus of the case is a project to construct a pipeline in Ecuador to carry crude oil from Indian territories in the Amazon to a delivery point on the Pacific coast. Because of her business acumen and skill in working with representatives of a multinational consortium, the protagonist becomes a project leader for her company-taking on managerial responsibilities even while being denied a managerial title. Her work goes well, until she decides to visit one of the Indian communities whose way of life is being disrupted by the pipeline project. The dramatic encounter with tribal members-including the ritual drinking of traditional chicha-produces a crisis of conscience that leads her to wonder whether her professional ambitions require willful indifference to the plight of indigenous cultures. HKS Case Number 1764.0
The Toronto Symphony Orchestra is one of Canada's foremost orchestras with considerable international exposure. The orchestra has just celebrated its 80th birthday but was in a situation that could result in its downfall. The relationship with the landlord was less than ideal and the renegotiation of the musician's' contract could put a strain on the organization's finances. The orchestra's board of directors brought in a consultant to provide recommendations on how to address these issues. The board, pleased with the recommendations and the outcome, is offering the consultant the position of chair of the board. The consultant must decide whether to accept this role or to continue with his consultant's position.
It's panic time at Blackheath Manufacturing. Profits have been declining, so the owner's son comes to the rescue to run the company. He asks a consultant to determine what's wrong. And the consultant has specific answers: The company's pricing guidelines are all wrong, there needs to be a budgeting system to reverse the downward slide in profits, and a former employee should be rehired. This case provides students with the data for constructing a production and raw-materials budget, flexible-expense budget, income statement, balance sheet, and cash budget. See also "Blackheath Manufacturing Company" (UV1728).
Endius Inc. is a start-up company entering the medical products market. Endius has developed a design and a working prototype for a new and promising endoscopic surgical instrument--steerable surgical forceps. Endius recently hired a new president, Tom Davison, who is determined to move Endius from the research and development phase into product commercialization and launch. To do so, he needs to achieve two related objectives: complete development of a technically and financially viable product and secure funding to address the cash burn typical of a start-up firm. Davison is seriously considering two product development alternatives: developing the steerable forceps using an in-house staff or partnering with an outside product development consultancy that he used previously.
Eli Lilly and Company is a leading U.S. pharmaceutical company. The new president of intercontinental operations was re-evaluating all of the company's divisions, including the joint venture with Ranbaxy Laboratories Limited, one of India's largest pharmaceutical companies. This joint venture had run smoothly for a number of years despite their difference in focus, but recently Ranbaxy had been experiencing cash flow difficulties due to its network of international sales. In addition, the Indian government was changing regulations for businesses in India, and joining the World Trade Organization would have an effect on India's chemical and drug regulations. The president must determine if this international joint venture still fits Eli Lilly's strategic objectives.
John Schmidt's project to convert the information system of his auto parts distribution business is in real trouble, putting his company at risk. He must decide what his decision problem is and set appropriate objectives as well as create a good set of alternatives from which to choose. This case can be used in courses on decision making as well as those that address management of information technology projects.
After suffering years of volatility and crises, Turkey desperately sought macroeconomic and political stability in an ever-worsening region of the world. In the short term, Turkey had to repay its debt, which amounted to more than 80% of GDP. By January 2004, Turkey had entered the final stages of the IMF's latest $17 billion loan program. Each review required that Turkey meet specific goals of monetary control (e.g., reducing inflation), restructuring the banking sector, reforming the public sector, and increasing privatization. The country's long-term goal, joining the European Union, would be reached only if the EU's required criteria were met. Elected in November 2002 and the first absolute majority in Parliament in 15 years, the AKP party promised to meet both IMF and EU requirements. Although his AKP party had Islamic roots, Prime Minister Erdogan planned to prove that Turkey was a stable, secular democracy. After Turkey met the EU's requirements, the question remained: Would the EU's "Christian club" accept a Muslim Turkey?
Lee High, the newly hired cost accountant at Blackheath Manufacturing Company, computes the variable cost and the fixed cost per unit on a weekly volume of 500 units of the Great Heath. He uses this information to develop some pricing guidelines. His boss, Charlton Blackheath, endorses the guidelines and adds a feature: a higher commission on sales at a higher price. While both High and Blackheath are away, the file clerk, Adelaide Ladywell, accepts an order below the guidelines and is fired. Students are asked to develop an appropriate set of decision rules for pricing Great Heath and to evaluate Ladywell's decision. See also "Blackheath Manufacturing Company-Revisited" (UV1729).
This case describes the everyday decisions made by an alliance team. The case focuses on a budgetary decision where the two parties are $100 million apart, and describes the prior decisions of which each partner is clearly aware. Weighing partnership needs against individual company needs is one of the critical concerns manifested.
The vice-president of IBM Corporate Community Relations is developing the launch program for IBM On Demand Community, a suite of 140 technology tools designed to enable IBM employees to assist nonprofit community organizations and schools worldwide.
The board has asked Ron Tolbert, an employee in the Risk Assessment and Control Group, to analyze three SPE transactions executed by Enron executives: the Destec, Rhythms, and Fishtail/Bacchus transactions, which were prominently featured in the Examiner's Report in the ensuing Enron bankruptcy. Tolbert's job is to assess why Enron used SPEs for these transactions, whether risk was successfully transferred off the balance sheet, and whether risk transfer was the only motivation.
Explores the role of intellectual property in firms' strategies. Explains the legal and strategic differences between patents, copyrights, trademarks, and trade secrets and explores the multiple ways firms use these different legal protections to gain competitive advantage in the marketplace.