This exercise provides an opportunity to gain insight about designing, negotiating, and responding to incentives. The setting is investment management. A class is divided into a certain number of investment firms. Each company has one CEO and begins with four portfolio managers (PMs), who manage their portfolios by choosing from a restricted set of assets. The game takes place over approximately two weeks and is divided into three periods. Each period will last from two to four days. At the end of each period, new funds flow to high-performing portfolios, wheras funds flow out of poorly performing portfolios, simulating contributions from investors. CEOs and PMs negotiate compensation arrangements and PMs may move from one company to another, subject to some costs and rules regarding how much of their portfolio they take with them to their new companies. CEOs try to maximize the value of their companies at the end of the game, whereas PMs attempt to maximize their total compensation during the game.
On the morning of September 11, 2001, four U.S. passenger planes were hijacked during transcontinental domestic flights. Two of them were crashed into the twin towers of New York's World Trade Center, leading to the collapse of both skyscrapers. Another one hit the Pentagon, the headquarters of the U.S. Department of Defense near Washington, D.C. The fourth hijacked plane crashed in western Pennsylvania after passengers attempted to take control back from the hijackers. The death toll from the unprecedented attacks was estimated at around 3,000. In addition to the human, political, and military impacts, the events of September 11 also would have far-reaching economic impacts. One of the industries most affected was the airline industry, which was already suffering before the attacks. Some airlines closed, some saw massive layoffs, and all were faced with substantially lower profits or higher losses. As the year 2002 began, managers throughout the airline industry wondered which effects would be permanent and which would be transitory. They also wondered how they and their airlines should deal with the fallout from the attacks and the other forces that already had been reshaping the airline industry. The case gives an overview of the global airline industry before September 11, showing it was a tough industry with not a great deal of profits even before the disaster. It then highlights the impact of the events of September 11 on the airline industry.
Describes the development of Argentina's financial system after the "Tequila Crisis" that came about as a result of the speculative attack on the Mexican peso's peg to the U.S. dollar in December 1994. Although Argentina's banking system was strengthened overall due to changes implemented to address the crisis, most of the country's domestic private banks were either taken over by foreign banks or failed. Focuses on how in the year 2000, in an effort to remain Argentine owned, the last remaining large domestic private bank adopts a share offer considered by some--particularly a vocal member of one of the bank's controlling families--to be unfair to minority shareholders.
In 1970, the Indian government significantly revised its patent law, Patents and Design Act of 1911. The 1911 act was enacted when India was a colony of Great Britain, and it was controversial because it led to the total dominance of India's pharmaceutical market by multinational corporations. The 1970 act substantially reduced both the scope and the extent of patent protection, and some credited the act with the creation of India's own indigenous pharmaceutical industry. In 1994, the Indian government committed itself to conforming its intellectual property rights regime to the requirements of the WTO. Domestic political opposition was fierce toward any attempts to move away from the 1970 act.
Identifies many of the legal issues likely to arise in the course of starting and growing a company. Suggests strategies not only for ensuring compliance with the law but also for using the law and the legal system to increase predictability, maximize value, marshal resources, and manage risk. Explains why entrepreneurs and managers cannot just rely on lawyers to deal with the legal aspects of business and offers ways to manage legal risk and handle legal disputes. Also describes the relevance of a variety of laws to managers and entrepreneurs, including intellectual property, securities regulation, taxes, contracts, employment, business organization, product liability, environment, and alternative dispute resolution.
Governments are increasingly faced with the delicate task of balancing the need to effectively regulate and control trade while not stifling its development. These controls have to be reinvented, shedding their old garbs as rigid barriers to trade to reveal more up-to-date trade enhancement and facilitation characteristics. Tatis Ltd, a Geneva-based startup company, is developing an integrated web-based solution for the management of pre-shipment inspections in emerging and developing countries, a key component of trade and customs management. But how can a Swiss-based startup extend itself to five continents to implement its solutions in the ever-changing world of taxes and tariffs? The case investigates the challenges of Business to Government (B2G) activities, of developing a global partnership for solution implementations with a leading consulting firm, of raising funds with a leading venture capitalist and of balancing the needs of end-users (custom services in developing nations) with those of the solution funders (mostly multinational and donor organizations such as the World Bank and the World Trade Organization).
In 1993, the Financial Accounting Standards Board issued two statements--Number 116: Accounting for Contributions Received and Contributions Made and Number 117: Financial Statements of Not-for-Profit Organizations. These statements required significant changes to the financial statements issued by nonprofit organizations. This case discusses changes in the context of Stanford University, a private, not-for-profit educational institution. Discusses financial reporting prior to FAS 116 and 117, the objectives of FAS 116 and 117, and their implementation by Stanford. Prepares students for a discussion of nonprofit financial reporting, fund accounting, donor-imposed restrictions, the various stakeholders, and the advantages or disadvantages of financial statements prepared under the provisions of FAS 116 and 117.
Jan Karl Karlsen is the CFO of The Far East Trading Company, a 100-year old Swedish company with operations throughout Asia and Latin America. It is November 1997, and the firm has just issued its second official profit warning to its stockholders in Stockholm, its corporate home. The company is now feeling the effects of the Asian currency crisis, which began in July 1997 in Thailand, and then spread to the neighboring countries of Indonesia, Malaysia, the Philippines, Taiwan, Singapore, and Korea. As Jan Karl Karlsen pondered what specific actions were needed to navigate the treacherous waters of the market crisis, he focused on the "three C's of corporate financial management; control, confidence, and cash flow."
Discusses the largest electric distribution company in Chile and one of the five largest private Chilean companies. Introduces the exercise of operating control in order to improve the profitability of the investments, privatization, and international expansions.
The Royal Bank of Canada uses customer relationship management and customer profitability tools to gain a competitive advantage in Canada's increasingly crowded financial services market. The case presents two pricing and customer management issues: one from the point of view of the vice president of customer relationship marketing and the other from a line manager's perspective.
Describes activity-based budgeting at W.S. Industries. Also describes target costing-led product redesign, and product, customer, and order profitability.
Mondragon Corp. Cooperativa (MCC) is a conglomerate of more than 100 cooperatives in Basque Country, Spain. From 1996, MCC has pursued an internationalization strategy. As the company goes global, MCC's business model, based on trust and social involvement, seems to be threatened. Can MCC effectively become a global player while being truthful to the principles on which its past successes have been built?
This case recounts the strategy of Terra Lycos, an integrated global media company formed by the October 2000 merger of Spain's Terra Networks and US-based Lycos, to achieve profitability and a leading market position. At the time the case was written (November 2001), Terra Lycos trailed its three heavyweight contenders, AOL-Time Warner, Yahoo! and Microsoft/MSN.
Can deregulation and the unleashing of competitive forces be combined with continued social obligations such as a duty to serve? This note uses the experience of U.S. telecommunications to illustrate the existence and influence of social obligations. Recognizing these obligations enhances understanding of the dynamics of deregulation. Finishes with a discussion of recent issues in telecom deregulation and how social obligations continue to play a part in determining regulatory responses. Focuses exclusively on telecommunications, although the same points--that social obligations exist in regulated industries and that finding a way to continue to address these obligations in a more competitive environment is a major element of regulatory reforms--apply to many other regulated industries.
The partners of a new midmarket buyout fund are working on a buyout of a closely held modular building company. Although originally structured as a stock deal, they have realized that an asset deal would be preferable from their point of view and are trying to determine what benefits it might hold for the sellers, whose continuing involvement in the company is essential for success. This case describes the process of the deal's due diligence and the state of the LBO industry in the early 21st century.
PetroChina, the largest oil and gas company in China, was made a showcase for sound corporate governance in China's state-owned enterprises (SOEs). Its initial public offering (IPO) was part of the government's plan to lay the groundwork for other large capital-starved SOEs on the global capital market. In spite of the restructuring efforts, some analysts felt that the company was not yet close to where it needed to be in terms of international governance standards. In analyzing China's political and economic background and PetroChina's governance model, this case demonstrates that the corporate governance system in China offers limited protection for minority shareholders.
The U.S. energy company AES is in the process of entering the Nigerian market through acquisition of a controlling equity interest in a 270-megawatt power generator project. AES has a unique mode of organization and operation that emphasizes integrity, empowerment, and social responsibility. The Nigerian environment is very different in many dimensions (high levels of corruption, low infrastructure availability, different work ethic, and highly charged politics) from the origins of AES in North America. How does AES juggle its core values and company culture in entering this new environment? How can AES be successful in this environment and remain committed to its core values?