Analyzes the 1991 decision of the U.S. Court of Appeals for the District of Columbia Circuit in the seminal New Economy antitrust case United States vs. Microsoft Corp., 253 F.3rd 34 (D.C. Cir. 2001), which arose out of Microsoft's efforts to promote Internet Explorer and to supplant Netscape's Navigator Internet Web browser as the leading browser. This case contains a detailed discussion of the application of the U.S. antitrust laws (Sections 1 and 2 of the Sherman Act, in particular) to technologically dynamic markets characterized by network effects. Issues addressed include: 1) the legality of exclusive dealing arrangements, 2) what constitutes illegal monopolization (including how courts define the relevant market and what constitutes anticompetitive conduct), 3) predatory pricing and the rules of impossibility, 4) the essential facilities doctrine, 5) the exercise of intellectual property rights (such as patents or copyrights) as a business justification, and 6) what constitutes an illegal attempt to monopolize. The U.S. Court of Appeals' decision is summarized, and extensive excerpts from the opinion appear as an exhibit.
On September 5, 1997, the American Medical Association(AMA) withdrew from a contract with Sunbeam Corporation, the maker of samll home appliances. Sunbeam sued the AMA to pay for the damages or to comply with the contract. The fracas led to the dismissal of three top AMA executives. The AMA initiated an investigation into the episode. As a result of the failed deal, the AMA's CEO resigned, and the failed deal eventually cost the AMA an estimated $16 million. A rewritten version of an earlier case.
As a manufacturer and distributor of agriculture equipment, as well as a broad range of construction and forestry equipment, Deere & Co. had a lot riding on the smooth flow of its logistics function. FedEx Logistics provided outsourced transportation services to 11 Deere facilities across North America. But with each of Deere's individual business units responsible for its own logistics activities, and with each unit negotiating a separate service agreement with the FedEx facility, costs and services tended to differ across the units. Deere's manager of logistics design asked a summer intern student to evaluate the company's logistics agreement with FedEx, with a view to identifying opportunities for standardizing costs and services across the business units. The logistics manager is expecting a report containing details of each operation's work flow and cost information, as well as some recommendations for updating Deere's outsourcing arrangements with FedEx Logistics.
Examines issues encountered by a third-generation, family-owned business. Northwest Security Services (NSS) is a 55 year-old company that has developed a rich history since its founding by Ernest Wilson, a less-than-affable, junior college-educated family patriarch. The majority of the case is spent focusing on several NSS business challenges that are unique to family-owned businesses, including bringing younger generation family members into a business, underperformance by certain family member employees, asset diversification, establishing a corporate advisory board comprised of nonfamily members, division of ownership, payment of dividends, transferring authority and power to younger family members, and the sometimes hazy line between where business stops and family begins.
In early 1991, Reynolds Metals, the makers of aluminum products, decided to sell its holding of Eskimo Pie, a marketer of branded frozen novelties. Reynolds had an offer from Nestle to acquire Eskimo Pie. However, Reynolds decided instead to make an initial public offering of Eskimo Pie shares.
In 1998, BAESA, PepsiCo's largest bottler and distributor outside North America, experienced severe financial difficulty and had to restructure its debt and business operations to avoid bankruptcy or liquidation. Based in Argentina, with operations throughout South America, the company had for years been a spectacular success story and media darling, until it undertook an ill-fated expansion in Brazil. The company's debt was owed to banks and financial institutions in South America, Asia, Europe, and the United States. In addition, the company had $60 million of publicly traded bonds, much of them held by U.S. investors. The restructuring was the largest and most complicated undertaking of its kind ever taken in South America. In addition to negotiating with its bankers and making a public exchange offer for its bonds, the company made a massive common stock rights offering to its shareholders, giving them the opportunity to purchase new stock in the company. It also considered filing a "prepackaged" Chapter 11 bankruptcy in the United States to pressure U.S. bondholders to go along with the plan. The negotiations were greatly complicated by differences in the bankruptcy laws of Argentina, Brazil, and the United States.
Open book management (OBM) means opening a company's financial statements to all employees and providing the education that enables them to understand how the firm makes money and how their actions affect the bottom line. It is a method of managing without concealment that involves all employees in focusing on how to grow the business profitably. The experience of Manco, Inc., a medium-size supplier of branded consumer products for retail and office product channels, illustrates the four essential steps of OBM: 1) Get the information out there; 2) teach the basics of finance and business; 3) empower people to make decisions based on what they know; and 4) make sure everyone shares directly in the company's success, as well as its failure, with targets for net earnings and return on operating assets. With technological changes transforming business and the concurrent rise of intangible and human capital as the sources of wealth creation, OBM has begun to find its place in the business world.
In January 2001, Mary Linn, vice president of finance for Ocean Carriers, a shipping company with offices in New York and Hong Kong, was evaluating a proposed lease of a ship for a three-year period, beginning in early 2003. The customer was eager to finalize the contract to meet his own commitments and offered very attractive terms. No ship in Ocean Carrier's current fleet met the customer's requirements. Mary Linn, therefore, had to decide whether Ocean Carriers should immediately commission a new capsize carrier that would be completed two years hence and could be leased to the customer.
Provides a framework for understanding the role of financial reporting and various intermediaries as mechanisms for reducing both adverse selection and moral hazard problems in capital markets. Financial reports reduce adverse selection by providing basic information for investors and their agents before they make initial capital resource allocation decisions. Subsequently, after capital is allocated to particular business ventures, financial reports reduce moral hazard between managers and investors by supplying information used in contracting between investors and managers to reduce conflicts of interests. Various institutional mechanisms and information intermediaries monitor and limit the manipulation of reported information by managers and constrain managers' ability to act in their own self-interest, rather than investors' interests. They also improve information production, reduce incentive conflicts, and enable capital markets to function effectively and efficiently, channeling the economy's savings to the most productive opportunities.
The Percy Group is a diversified real estate development company. The president must decide whether to invest $7.9 million to convert one of the company's apartment buildings into a retirement home. The company had not previously converted or operated a retirement home. He must evaluate industry trends and the expected cash flows necessary to determine whether the investment is expected to earn the company's cost of capital. He must also undertake sensitivity analysis and a qualitative evaluation.
Pembina Pipeline Corporation transports light crude oil and natural gas liquids in western Canada. The president of the company is abruptly awakened one night by a phone call from his operations manager. He is informed that one of Pembina's pipelines has burst and is spilling thousands of barrels of crude oil into a nearby river. Emergency crews have responded to the disaster but more help is needed. The president has to decide how the best way to handle this situation with the media and plan a strategy for the company in containing the spill.
Birch Point Lodge is a small family run resort. The managers of the lodge are trying to incorporate technology into the daily operations of the resort. With little experience, staff that are not very computer savvy and limited resources, using technology effectively have become a real challenge. They have twice tried to purchase a computerized system for handling reservations, billing and other processes. Most recently they spent $9,000 to purchase a system that was never used. They are faced with another option and must decide whether to purchase the new software or not.
Pibrex is one of the world's largest developers of petrochemical-based polymers for the plastics market. The company has purchased a plant in Russia and after three years of serious operating losses has appointed a new general manager of the plant. The plant lacks a strong organizational culture; communications within and between departments are poor; inequity in wages, working conditions, and training exist but motivation and retention problems are prevalent, Pibrex headquarters is losing interest in the Russian operation; and two sub-cultures exist within the Pibrex Russia organization. The general manager must develop an action plan that can turn operations around with minimal expense to Pibrex. A supplement, Managing Pibrex Russia (B): Developing Organizational Strategies to Ensure Sustainable Profitability (product 9B01M021) discusses issues facing the company two years later.
Pibrex is one of the world's largest developers of petrochemical-based polymers for the plastics market. In the Managing Pibrex Russia (A) case, (9B01M020) a new general manager inherits serious problems and develops an action plan to address the issues. This supplement illustrates what the management team has done to begin a turnaround of the firm and also highlights the many problems that remain. In particular, the company must reassess its management strategies and take steps to maintain its competitive position.
Lucent Technologies is a worldwide provider of telecom network infrastructures. The government of India has deregulated the state-run control of the telecom sector presenting significant opportunities for telecommunication providers. India appeared to be a nation of enormous investment opportunity, with a population of one billion and a relatively high growth rate. Lucent Technologies must evaluate the opportunities in this changing market and decide whether they should invest more resources in this area or withdraw completely.
Huazhang is a joint venture between China Machine Press and Multi-Lingua Publishing International, Inc. of the United States. Since its establishment, Huazhang had developed from a company with three employees to more than 100 employees. The shareholders are interested in determining how well the company has been managed and the board decides the best way to do this would be to value the company. The board also wants to measure the general managers' future performance based on the increased value of the company. The issue for the newly-appointed general manager is to determine which of the many possible methods should be used to value the company, including the discounted cash flow model, and to perform sensitivity tests.