On March 3, 1999, the financial secretary of Hong Kong announced in his budget speech that the government planned to partially privatize the MTR Corp. through the sale and listing of a minority interest in the corporation's shares. The listing of this integrated rail operator on October 5, 2000, created an important precedent for future privatization of government assets. However, a host of uncertainties remained about how value enhancements are achieved in this privatization.
Daewoo Motors, South Korea's second largest car maker, was on the verge of bankruptcy in September 2000. The once proud Daewoo Group (the parent company of Daewoo Motors) has been charged with not only being reckless in its investments but also fraudulent in its practice. The government must decide whether to bail out the company or let it fail. Given the importance of the company's contribution to the South Korean economy, however, the decision would have a profound impact on the direction of ongoing market reforms as well as the livelihood of its workforce at home and abroad. This case traces the origins and growth of the Daewoo chaebol within the context of South Korea's economic development framework and highlights the advantages and disadvantages of such a system. Designed for an MBA level course in International Business.
At the October 2000 Association of Southeast Asian Nations (ASEAN) Economic Ministers meeting in Chiang Mai, Thailand, the Malaysian delegation proposed an extension to the ASEAN Free Trade Area (AFTA) tariff reduction scheme in an effort to protect Malaysia's auto industry. Given that the development of Proton and Perodua, the country's national cars, has received extensive government support, protection, and preferential treatment, there was concern whether Malaysia's cars would be competitive with other automakers in the region. Malaysia's request for the extension, however, has been a setback for AFTA, which had hoped that a strong push for further liberalization and Asian globalization would reenergize foreign direct investment in the region, following the devastating Asian financial crisis of 1997-99.
Phuket Beach Hotel has an opportunity to lease its underutilized space to a karaoke pub and earn a rental income. Alternatively, the hotel could develop the unused space and create its own pub. The general manager of the hotel must decide which of the two capital projects to recommend to the hotel owners. This case presents sufficient information to build cash flow forecasts for each project and to rank the mutually exclusive projects using various evaluation criteria.
Since the completion of its merger deal with Cable & Wireless HKT Ltd. in August 2000, Pacific Century CyberWorks Ltd. had been gripped by the full teeth of the bear. By early April 2001, the company had seen its share price plummet by nearly 90%. While many retail investors in Hong Kong were mourning their losses, some corporate insiders managed to find a clean exit route and were able to earn substantial profits. An interesting question to the general investors was: if they had followed the inside track, would they have been able to beat the market?
With growth of global air traffic expected to continue into the 21st century, governments around the world are showing increased interest in the option of privatizing airport operations. This case examines challenges and opportunities for governments, airlines, the traveling public, as well as private sector airport investors and operators. Will airport privatization lead to improved services and prices, or might there be long-term repercussions? Presents the options for airport ownership and operation and examines the arguments in favor and against privatization. Provides privatization experiences from around the world for added perspective.
The A case describes the start of a new business, Telezoo, and the challenges facing a start-up as it attempts to develop a unique place for itself in the marketplace.
John Bowen has aggressively interviewed with management consulting firms and Fortune 100 corporate planning offices. His efforts have paid off for he has received several very appealing offers. The contenders have been narrowed down to two prestigious, strategic consulting firms. One of the firms is Windburn Associates where the potential salary increase is just not enough to offset its lower starting salary offer. See also UVA-QA-0567 for Windburn's perspective.
The key objectives of this case are to: (1) familiarize students with a simple version of the Markowitz optimal-asset allocation model; (2) develop students' intuition regarding optimal-asset allocation as specific inputs into the model (e.g., expected returns, standard deviations, correlations) change values; and (3) develop students' intuition regarding constraints that alternative investors may face (e.g., the presence of shorting constraints) and their impact on the optimal portfolio.
Dick Mayo, one of the most celebrated value investors in America was puzzled by the New Economy's continuous bias toward growth investment strategies. He examines the basics of his philosophy versus that of a growth orientation by evaluating the long-term expected returns of several value and growth stocks. This case can be used to pursue several objectives: (1) to define value and growth investing--where the differences lie and whether one approach is superior to the other or whether both have merit; and (2) to discuss issues related to consistency of one's investment philosophy. Should one stay true to one's philosophy even when the market seems to run counter to it for a prolonged period of time? Can value investing deliver value in this New Economy or is it only an Old Economy concept? The students are instructed to perform basic valuations of Cisco Systems (a growth company), CVS, R.R. Donnelley, and Manor Care (value companies) and compute their long-term expected returns. The case comes with an Excel spreadsheet containing the data and relevant valuation ratios for the above firms. The valuations are straightforward, but they tell an interesting story: the expected returns of glamorous stocks in reality may not be so glamorous.
Strategic Capital Management, LLC, is a hedge fund that is planning to make financial investments in Creative Computers and Ubid. Creative Computers recently sold approximately 20% of its Internet auction subsidiary, Ubid, to the public at $15 per share. Ubid's stock price closed the first day of trading at $48, giving Ubid a $439 million market capitalization. Paradoxically, the parent's stock price did not keep pace with that of its subsidiary. At the end of Ubid's first day as a public company, Creative Computers' equity value was less than the value of its stake in Ubid. The market prices implied that Creative Computers' non-Ubid assets had a value of negative $79 million. The relative prices and ownership link between Creative Computers and Ubid suggest a potential arbitrage opportunity. To evaluate how best to exploit this investment opportunity, Elena King, the manager of the hedge fund, must understand both the risks and expected returns associated with different long and short equity positions.
Explores the controversy over the pricing of AIDS drugs in poor countries. This issue has received wide publicity due to two events: 1) a court case in South Africa that seeks to force drug companies to license their patents and 2) the announcement by the Indian pharmaceutical firm, Cipla, that it would copy U.S. firms' AIDS drugs and sell them at cost to countries in Africa. Made up of excerpts from 10 articles and highlights the intense feelings on both sides of the issue. Encourages students to think about the short- and long-term consequences of various approaches, the role of government and international institutions, and the pressures facing drug company executives.
Southwest Airlines is well known as the low-fare airline that has achieved ongoing financial success in one of the most financially troubled industries in the United States. Told from the perspectives of two Southwest customers--a frequent flier and a more typical customer--the case revolves around two customer service requests from the frequent flier, both of which provide a compelling temptation to cater to the satisfaction of the airline's highest revenue customers. The requests are intriguing because they would neither add cost nor increase the turnaround time of Southwest's service.
After its spin-off from one of the world's largest ultrasound makers, Sonosite attempts to popularize a new kind of handheld ultrasound units. Sonosite needs to decide if it should focus on new markets that will value the portability and ease of use of its products, or if it should evolve its offerings so that they appeal to radiologists and cardiologists, the largest purchasers of ultrasound systems.
In a deal marking the first acquisition of a domestic Japanese financial institution by foreigners, a consortium of Western investors purchased the assets of the Long Term Credit Bank (LTCB) of Japan in March 2000. The new management renames the bank Shinsei Bank, meaning new birth, and sets about implementing a bold new strategy calling for a hybrid bank that includes commercial, retail, and investment banking activities, managed according to Western banking principles. This case reviews the events that led up to LTCBs failure, nationalization, and subsequent purchase. The job of making the hybrid bank work falls to Shinsei president and CEO Masamoto Yashiro. Yashiro wonders how he can manage this hybrid bank.