Grupo Elektra is Latin America's largest consumer finance company based on credit sales in its hard goods retail outlets. It has started to internationalize in Latin America but now must to decide whether to enter the U.S. Hispanic market and which of its two core businesses (retail and finance) to emphasize.
In-depth look at the emergence of venture capital (VC) in Israel, tracking not only the industry itself, but also its many drivers, including high technology and its roots in Israel (government sponsorship, etc.). Examines the VC industry in 2001. Professional VC has grown rapidly, with growth driven by internal players capitalizing on local knowledge and experience and by non-Israeli firms, which have come to Israel looking to invest in the next high-tech winner. Asks what role the Israeli VC firms have in the future: Will Israeli VC firms be able to survive or will U.S. firms come in and pluck the best deals away? Should Israeli firms partner with U.S. firms and, if so, how? Should and can Israeli firms venture out of the Middle East and attempt to compete with U.S. firms on U.S. soil?
Solectron Corp. grew rapidly from a small contract manufacturer in the early 1980s to the dominant company in the electronics manufacturing services industry by the late 1990s. In doing so, it evolved from providing peak capacity for its clients to providing services that clients could not provide on their own (low-cost materials and access to expensive capital equipment). Its next phase was to provide its clients with new ways of operating--such as outsourcing all operations except research, product conceptualization, marketing, and sales--allowing clients to outsource those activities that were not part of their core competencies. Describes this evolution and the rapid growth of the company. In 2001, the company's clients suffered severe business downturns, which in turn caused the first contraction in Solectron's history. Describes the company's initial response and raises questions about how the company should proceed.
A new director of this small German brewery must prepare to vote on three issues coming before the board of directors the next day: (1) approval of the financial plan for 2001, (2) declaration of the quarterly dividend, and (3) adoption of an incentive-compensation plan for the marketing manager. The task for students is to evaluate the past and prospective financial performance of the company and to critique its liberal credit and inventory policies.
Corporate health costs are again shooting up at double-digit rates. Employers need to take responsibility for that cost increase and redesign the structure of their health benefits.
Armed with their important-sounding titles, all the "chiefs" in a company naturally want to report directly to the CEO. But that's not always feasible--or wise. A chart illustrates a more reasonable reporting structure.
After a decade of economic weakness, the doors of Japan Inc. are opening for outsiders. In fact, research shows that foreign acquirers now have considerable advantages over domestic acquirers. Here's how companies can seize those advantages.
Harvard Business School professor William Sahlman comments on his 1999 HBR article, "The New Economy Is Stronger Than You Think." Despite the market crash, he says, the new economy continues to hold its value.
Describes USA Networks following its failed bid to buy the Internet portal Lycos in 1999. By 2001, USA Networks was an agglomeration of assets in two distinct areas: electronic commerce (something USA Networks refers to as "interactivity") and entertainment. In each of these two areas, USA Networks faced much larger competitors operating discretely. Explores USA Networks' attempts to compete simultaneously in the spheres of online retailing and television and filmed entertainment.
Jill Hoover was looking skyward, marveling at the heart-stopping beauty of Paradise Park-Seattle's newest attraction, its tallest and scariest roller coaster to date: the Anaconda. "Quite impressive," Jill thought. But a scuffle in the ride queue quickly brought the CEO of Paradise Parks back to earth. The company's 19 seasonal and year-round amusement parks had always been popular--ever since Jill's father founded the original Paradise Park just after the Second World War--but they hadn't been very profitable of late. Operating costs had been spiraling, and every dollar of extra revenue had been hard won. At the company's annual management off-site meeting, held that morning at the Seattle park, CFO Nathan Cortland proposed that Paradise offer its customers the option of a "preferred guest" card. Cardholders would pay more, but they would get first crack at the rides--entering through separate lines--and would get seated immediately at any of the parks' restaurants. According to Nathan, the plan would bolster Paradise's sagging finances because it would target the "mass affluents"--a rising demographic of moneyed but time-pressed people who might visit the park more often and spend more if it weren't for long lines at the rides. Jill respects Nathan's idea--but hasn't her plan to upgrade some of the parks' souvenir shops to gift boutiques already shown some promise? And doesn't Nathan's plan smack of elitism, as Jill's longtime friend and park manager Adam Goodwin suggests? The CEO has resolved to get back to Nathan with a decision about "Operation Upmarket" by the time she leaves Seattle and returns to headquarters. Should Paradise Parks offer guests different levels of service? In R0110A and R0110Z, John Harrington, Edward Goldman, Alexander Labak, and Robert Crandall offer their advice in this fictional case study.
In May 2000, Bob Eckert sat on a plane bound for the West Coast and thought to himself, "What have I done?" He was about to become CEO of Mattel, a struggling company in an industry he knew nothing about. And he was facing unrealistic expectations not only from Wall Street but also from Mattel's 30,000 employees, who hoped for an effective leader yet feared sweeping change. How did this former CEO of Kraft Foods address employees' anxiety, gain their trust, and start to turn Mattel around? By using the concept of "mealtime." When people gather together to share a meal, they are nourished in both body and spirit. They become face-to-face equals who exchange opinions, ask questions, receive answers, and share ideas. Eckert knew that he had to build brands and cut costs, but he found that the most crucial and challenging task was to make others comfortable enough to share their metaphorical meals with him. And he found that his favorite place to share these metaphorical--and actual--meals was the employee cafeteria. To make each meal a success, Eckert practiced what he calls "setting the table," which means preparing the atmosphere for honest dialogue by drawing on a set of tools--utensils, if you will--designed to quell apprehension. These include naming the source of tension and calling for honesty; deferring, when appropriate, to the other person's realm of expertise; and recognizing common experience. In this article, Eckert tells the story of his first steps from food guy to toy guy and describes what it takes to fit into the strange new world of another company.
In the last 20 years, business has become the dominant institution in American society, in many respects usurping the role once played by religion. As such, business has infiltrated every aspect of our lives--including the hearts and minds of our children. For many, it is an unsettling force. The wild competitiveness of business today compels managers to be constantly available for customers and colleagues, inevitably reducing the time and energy they can devote to their kids. Although stories of the impact of business life on children rarely appear in the business press, debate rages in the broader community, and many parents fear that their children may be paying the price for their success. Is that price too high? In an in-depth interview with HBR senior editor Diane Coutu, writer and child psychoanalyst Robert Coles speaks to that question. Perhaps surprisingly, given the fashion for criticizing the way children are raised today, Coles is optimistic about the next generation. He rejects the stereotype of the hopelessly spoiled rich kid, instead emphasizing children's extraordinary adaptability and ingenuity. "Wealth can weaken some children in certain ways," he says, "unless parents know how to ask of them as well as give to them." In this interview, Cole also examines the role of working women in parenting, explores the difference for children between healthy and narcissistic entitlement, and suggests how we might listen to our children better. "Our children are wonderfully aware and awake," Coles says. "If only we'd stop and listen to the spiritual reflections and questions of our sons and daughters, we might learn something very important about them and about ourselves."
What was it Wayne Gretzky said about why he was so good at hockey? He just skated to where the puck was going next. Executives and investors wish they could do so, too--to sense where profits are going next. Following a six-year study of profitability patterns, the authors have developed a model for doing just that. In the early stages of a product's evolution, companies compete on the basis of performance. And because they can't make substantial improvements in product performance unless the entire value chain is housed under one organizational roof, it works best if companies are vertically integrated. But as the underlying technology improves to meet the needs of most customers, companies begin to compete on the basis of convenience, customization, price, and flexibility. At that point, vertical integration is no longer an advantage--in fact, it quickly becomes a disadvantage. Different links in the industry value chain become modular, and the chain subsequently fragments. In either stage, most profitability goes to the companies that own the interdependent links in the value chain--the places where everyone's still vying to satisfy their customers with ever-better product functionality. Initially, that's the makers of the proprietary products aimed at the end-use consumers. But as those products become standardized, profitability shifts to the makers of components, and as components themselves become standardized, it can shift further back in the value chain. That's predictable, but it causes a problem for incumbents. As their products become commodities and profits decline, pressure from investors to maintain ROA causes them to spin off asset-intensive units that design and manufacture components--the very places where profits are heading.
Every manager is familiar with the employee who just won't change. Sometimes it's easy to see why--the employee fears a shift in power or the need to learn new skills. Other times, such resistance is far more puzzling. An employee has the skills and smarts to make a change with ease and is genuinely enthusiastic--yet, inexplicably, does nothing. What's going on? In this article, two organizational psychologists present a surprising conclusion. Resistance to change does not necessarily reflect opposition, nor is it merely a result of inertia. Instead, even as they hold a sincere commitment to change, many people unwittingly apply productive energy toward a hidden competing commitment. The resulting internal conflict stalls the effort in what looks like resistance but is in fact a kind of personal immunity to change. An employee who's dragging his feet on a project, for example, may have an unrecognized competing commitment to avoid the even tougher assignment--one he fears he can't handle--that might follow if he delivers too successfully on the task at hand. Without an understanding of competing commitments, attempts to change employee behavior are virtually futile. The authors outline a process for helping employees uncover their competing commitments, identify and challenge the underlying assumptions driving these commitments, and begin to change their behavior so that, ultimately, they can accomplish their goals.
It's bad enough to lose a trusted employee who works well within your organization, but when you lose a star performer who has built up strong customer relationships, something else is at stake: The star's customers may also walk out the door. In a two-year study of more than 200 people from 57 companies, Neeli Bendapudi and Robert Leone found that most strategies to keep customers when stars leave are largely ineffective because they grow out of a company's perspective, not a customer's. The authors asked customers how they felt and discovered three main concerns. First, customers can become attached to a particular key contact employee, and if that person leaves, they wonder whether service will suffer. You can forge a broader relationship by ensuring that customers interact with many employees, using techniques like deploying teams, rotating staff, and offering one-stop shopping. Second, customers fear that a replacement won't be as good as the employee who left. You can combat this by stressing the quality of all your employees--not just superstars. Publicize your hiring practices, training, and employees' achievements. Third, customers want information about the changeover and how you will manage the transition. Communicate the identity of a replacement in advance of a departure, and have the outgoing employee introduce the new person. Addressing all areas of customer concern in concert tells customers that you value their business and that you deserve to keep it. In the article, the authors also include a scorecard to rate your company on how well you are protecting customer relationships when employee turnover occurs.
When you think of UPS, what comes to mind? Most likely, you conjure up images of brown delivery vans, but this $30 billion company is much more than a package delivery carrier. Since its founding in 1907, UPS has continually broadened its territory, its offerings, and its mission to better serve a changing marketplace. Today, it employs over 360,000 people and operates in some 200 countries and territories. In this interview, CEO Jim Kelly--who began his UPS career 37 years ago as a driver--talks candidly about the challenges of trying to grow such a huge, mature business. He explains the company's focus on international expansion: "Going forward, the rest of the world offers more growth opportunity than the United States because we have a long way to go to achieve the same density abroad that we have domestically." And he discusses how UPS chooses which new business streams to pursue. To move forward, Kelly says, UPS has had to recast its mission: UPS enables global commerce not just by delivering packages but by facilitating the worldwide flow of information and funds as well. His biggest problem, he admits, has been giving UPS employees the confidence to take on all that new territory. He talks about how he helped foster a new self-image as a company of innovators, undaunted by an uncertain world. Once UPSers reflected on the many changes the company had undergone--from a local messenger service to a common-carrier wholesale business to an airline offering next-day deliveries to a logistics management and finance business--they developed, as Kelly puts it, a sense of, "Yeah, it's new and it's different...but that's okay. We've done that successfully for many years."
Marriott International for many years had a deeply ingrained culture of face time--if you weren't working long hours, you weren't earning your pay. That philosophy didn't seem totally off base in an industry that provides 24/7 service, 365 days a year. But it had a price: By the mid-1990s, Marriott was finding it tough to recruit talented people, and some of its best managers were leaving, often because they wanted to spend more time with their families. "Our emphasis on face time had to go," recalls Bill Munck, a Marriott vice president for the New England region. In this article, Munck describes how Marriott transformed its "see and be seen" culture by implementing an initiative dubbed Management Flexibility at several of its hotels. This six-month pilot program was designed to help managers strike a better balance between their work lives and their home lives--all while maintaining Marriott's high-quality customer service and its bottom-line financial results. Munck explains how he and his leadership team took the first, relatively easy, step of eliminating redundant meetings and inefficient procedures that kept managers at the office late. The tougher task, he says, was overhauling the fundamental way managers thought about work. Under the pilot, Marriott's message to employees was: Put in long hours when it's needed, but take off early if the work is done--and don't be shy about doing so. As a result of the program, managers are working five fewer hours per week with no drop-off in customer service levels; they report less stress and burnout; and they perceive a definite change in the culture, with less attention paid to hours worked and a greater emphasis placed on tasks accomplished.
Retailing is and always has been an inefficient business. Retailers, particularly those that operate large chains, have to predict the desires of fickle consumers, buy and allocate complex sets of merchandise, set the right prices, and offer the right promotions for each individual item. Inevitably, there are gaps between supply and demand, leaving stores holding too much of what customers don't want and too little of what they do. Now, however, a new set of software tools promises to revolutionize the entire merchandising chain. These merchandising optimization systems, as they're called, determine the right quantity, allocation, and price of items to maximize retailers' returns. By applying sophisticated data processing techniques to existing inventory and sales data, they accurately model future patterns of supply and demand at the item and store level. In other words, they turn the art of merchandising into a science. Early users of the new software, such as Gymboree and J.C. Penney, are already reporting promising gains in gross margins in the range of 5% to 10%. Retailers are also seeing significant increases in efficiency: At one chain, for instance, planners' productivity rose 20%. Equally important, retailers are showing improvements in customer satisfaction, as shoppers become more likely to find desired merchandise in stock at fair prices. This article provides retailers with a guide to merchandising optimization systems, explaining how they work and how they change processes at each step of the merchandising chain.
Jill Hoover was looking skyward, marveling at the heart-stopping beauty of Paradise Park-Seattle's newest attraction, its tallest and scariest roller coaster to date: the Anaconda. "Quite impressive," Jill thought. But a scuffle in the ride queue quickly brought the CEO of Paradise Parks back to earth. The company's 19 seasonal and year-round amusement parks had always been popular--ever since Jill's father founded the original Paradise Park just after the Second World War--but they hadn't been very profitable of late. Operating costs had been spiraling, and every dollar of extra revenue had been hard won. At the company's annual management off-site meeting, held that morning at the Seattle park, CFO Nathan Cortland proposed that Paradise offer its customers the option of a "preferred guest" card. Cardholders would pay more, but they would get first crack at the rides--entering through separate lines--and would get seated immediately at any of the parks' restaurants. According to Nathan, the plan would bolster Paradise's sagging finances because it would target the "mass affluents"--a rising demographic of moneyed but time-pressed people who might visit the park more often and spend more if it weren't for long lines at the rides. Jill respects Nathan's idea--but hasn't her plan to upgrade some of the parks' souvenir shops to gift boutiques already shown some promise? And doesn't Nathan's plan smack of elitism, as Jill's longtime friend and park manager Adam Goodwin suggests? The CEO has resolved to get back to Nathan with a decision about "Operation Upmarket" by the time she leaves Seattle and returns to headquarters. Should Paradise Parks offer guests different levels of service? In R0110A and R0110Z, John Harrington, Edward Goldman, Alexander Labak, Robert Crandall, offer their advice on this fictional case study.