PacificLink iMedia was a Hong Kong based Internet marketing company that specialized in Web design using Flash technology. The company had grown six-fold since its inception 18 months ago. The directors of the company anticipated that the company would double in size in the next six months, and they were considering moving into three new markets, as well as into new business areas. The concepts of competitive advantage in the Internet industry, and the structure of this industry are introduced from the perspective of a company that provides business services. See also the second and third cases in the three-part series, 9B09M023 and 9B16M202.
This case presents the managerial dilemma faced by the treasurer of South Carolina in 1998. Until last year, the South Carolina state pension fund (with over $17 billion in assets) was barred by the state constitution from investing in equities. After the constitution was amended, the state government had to decide how much to invest in equities and what assets to choose. Using domestic and international data, the concepts of standard deviation, correlation, covariance, diversification, and risk are introduced. Additionally the case looks at the equity premium from a global setting. This case covers two days and will be used early in the Risk and Return module, just before the introduction of the CAPM.
Reuters Greenhouse Fund had successfully invested in a portfolio of 79 companies working in areas relevant to Reuters Group's strategic interests. It had itself facilitated a powerful network among the companies and, become a respected global venture capital firm. Funding requirements for 2001 had grown beyond Reuters Group's expectations, and CEOs John Taysom and David Lockwood must decide on the best funding strategy.
Bush Boake Allen, a flavor and fragrance firm, is considering strategic options that would integrate customers into its innovation process via a potentially disruptive Internet-based technology. As this approach could result in dramatic changes to the firm's business model and relationship with customers worldwide, Julian Boyden, president, CEO, and chairman, faces serious opposition from senior managers.
The founders of University Technology Ventures, a fund of funds designed for university professors, face numerous challenges in raising their first fund. The role, economics, and structure of funds-of-funds are examined in the course of examining the partners' dilemma.
A publicly traded funeral home and cemetery consolidator faces imminent financial distress. The company has aggressively grown through use of debt. Restructuring the debt is potentially very costly to creditors, shareholders, suppliers, and other corporate stakeholders. Cross-border and accounting issues potentially complicate the restructuring.
Beenz.com, an incentive-based Web currency and customer management tool, is reassessing its business in August 2000, one year after launch. The original vision was to make the currency globally available and recognized. However, the company's rapid internationalization and growth have presented a number of pressures that challenge that vision.
Pokemon, the colloquial name given to a collection of 150 fantastic, animal-inspired creatures with organic powers and the capacity to evolve, are the stars of video games, trading card games, and TV cartoons. Conceived in Japan in 1996, Pokemon quickly became that nation's favorite toy phenomenon, and attracted the attention of Nintendo of America, which, in February 1998, purchased all intellectual rights to everything bearing the Pokemon name outside Asia. Launched in September 1998, Pokemon quickly took the United States by storm, single-handedly resuscitating Nintendo's lagging video game sales and earning stature as one of the top three licensing success stories by year-end 1999 (on worldwide sales of $7 billion and U.S. sales of $1.2 billion). How did management at Nintendo and licensing partner 4Kids Entertainment accomplish this and, perhaps more importantly, can they sustain (and perhaps grow) Pokemon's success over time? Is Pokemon just a passing fad to be "milked," or can it be managed as a sustainable brand franchise? Was Pokemon's success simply a fluke, an unpredictable function of mere good fortune, or is sound brand strategy and planning the cause? Includes color exhibits.
As retailers adopt lean retailing practices, manufacturers are feeling the pinch. Retailers no longer place large seasonal orders for goods in advance--instead, they require ongoing replenishment of stock, forcing manufacturers to predict demand and then hold substantial inventories indefinitely. Manufacturers now carry the cost of inventory risk--the possibility that demand will dry up and goods will have to be sold below cost. And as product proliferation increases, customer demand becomes harder to predict. Most manufacturers apply one inventory policy for all stock-keeping units in a product line. But the inventory demand for SKUs within the same product line can vary significantly. SKUs with high volume typically have little variation in weekly sales, while slow-selling SKUs can vary enormously in weekly sales. The greater the variation, the larger the inventory the manufacturer must hold relative to an SKU's expected weekly sales. By differentiating inventory policies at the SKU level, manufacturers can reduce inventories for the high-volume SKUs and increase them for the low-volume ones--and thereby improve the profitability of the entire line.
It's no secret that the track record of corporate acquirers has been dismal. But there is a group that's had consistent success. A recent study on M&A reveals that between 1984 and 1994, fund investors at some 80% of LBO firms enjoyed returns equal to or greater than their cost of capital on their M&A investments. And this was true even though in many cases the prices paid for the companies were pushed up by competing bidders. Why are financial acquirers so much more successful than their corporate counterparts? It's because they approach the negotiation process differently. Fund investors treat deal management as a core part of their business conducted by a permanent group of experienced executives, and they have well-established processes that they stick to. The authors examine how the best acquirers approach all five stages of deal negotiations--screening potential deals, reaching initial agreement, conducting due diligence, setting final terms, and reaching closure--comparing good practice with bad, to reveal the secrets of their success.
A multinational entering a new market in a developing country knows that on its own, it cannot master local business practices, meet regulatory requirements, hire and manage local personnel, and gain access to potential customers. So it partners with a local distributor. At first, sales take off, revenues grow, and the entry seems like a smart move. But when sales plateau, the corporation begins blaming the distributor for not investing sufficiently in business growth or expanding markets, and the distributor claims that it hasn't received enough support and that the corporation's expectations are too high. The key to solving such problems lies in recognizing that the phases are predictable and can be planned for. As a new business grows in an emerging market, its marketing strategy needs to evolve, and each sequential phase requires different skills, financial investments, and management resources.
Although the integration of an acquired company with the parent organization is a delicate and complicated process, traditionally no one has ever been responsible for that process--for charting how the two companies will combine their operations, for seeing to it that the integration project meets its deadlines and performance targets, and for educating the new people about the parent company and vice versa. Some enlightened companies have recognized this gap and have appointed a guide--the integration manager--to shepherd everyone through the rocky territory that two organizations must cross before they can function effectively together. The authors have interviewed a number of these leaders in depth, as well as some of the people with whom they've worked. They've determined that integration managers help the merger process in four principal ways: they speed it up, create a structure for it, forge social connections between the two organizations, and help engineer short-term successes. In this article, the authors detail five acquisitions--at TI, General Cable, Meritor Automotive, Lucent, and Johnson & Johnson--and discuss the role that integration managers played in each.
C.J. Albert, the head of family-owned Armor Coat Insurance, receives an unsettling phone call from his star salesman. Fifty-two-year-old Ed McGlynn has just returned from a business dinner with his younger technology mentor, and he's none too happy with the way he's being treated. If C.J. doesn't take this attack dog off him, Ed warns, he's gone. C.J. had indeed assigned 28-year-old Roger Sterling--the company's monomaniacal, slightly antisocial director of e-commerce--to teach Ed about digital strategy and the Web. Reverse mentoring seemed like a good way to create synergy between the sales and technology groups. The goal was to create a digital insurance product that would allow Armor Coat to keep up with its competitors. But there'd been tension between Ed and Roger right from the start--stemming from their personalities and their two departments. So when the two reluctantly agreed to meet for dinner to talk, the conversation didn't go well. C.J. faces some difficult discussions with both disgruntled parties. What should he do? Six commentators, including a mentor-protege pair, offer their advice in this fictional case study.
Word-of-mouth promotion has become an increasingly potent force, capable of catapulting products from obscurity into runaway commercial successes. Harry Potter, collapsible scooters, the Chrysler PT Cruiser, and The Blair Witch Project are all recent examples of the considerable power of buzz. Yet many top executives and marketing managers are misinformed about the phenomenon and remain enslaved to some common myths. In her article, author Renee Dye explores the truth behind these myths. As globalization and brand proliferation continue, writes Dye, buzz may come to dominate the shaping of markets. Indeed, companies that are unable to control buzz may soon find the phenomenon controlling them.
By the time Greg Summe joined EG&G in 1998, the company badly needed to shed the weight of past glories and rediscover the technological innovation that had been at its heart. First as president and COO and later as chairman and CEO, Summe applied a cool rationalism to the company's strategy and paid close attention to preparing its people for a new competitive environment. The result, less than three years later, is PerkinElmer, a high-tech darling whose stock has more than tripled since Summe's arrival. The first task, he says, was establishing more ambitious performance goals, specific metrics and rewards, and more accountability. The company also consolidated its 31 businesses into four strategic business units, integrated sales forces, shifted production to the Far East, developed a corporatewide materials-purchasing program, and raised profit and growth goals. It established four rigorous, corporatewide processes: goal setting to drive strategy; a leadership and organizational review to develop talent; an annual operating plan to set performance goals; and a procurement, quality, and productivity program for continuous improvement.
The painful truth is that the Internet has been a letdown for most companies--largely because the dominant model for Internet commerce, the destination Web site, doesn't suit the needs of those companies or their customers. Most consumer product companies don't provide enough value or dynamic information to induce customers to make the repeat visits--and disclose the detailed information--that make such sites profitable. Instead of trying to create destinations that people will come to, companies need to use the power and reach of the Internet to deliver tailored messages and information to customers. Companies have to become what the authors call "contextual marketers." Delivering the most relevant information possible to consumers in the most timely manner possible will become feasible, the authors say, as access moves beyond the PC to shopping malls, retail stores, airports, bus stations, and even cars. The authors describe how the ubiquitous Internet will hasten the demise of the destination Web site--and open up scads of opportunities to reach customers through marketing "mobilemediaries," such as smart cards, e-wallets, and bar code scanners.
Before the days of the Internet, it was primarily venture capitalists who coached young entrepreneurs in Silicon Valley. Today, because of the phenomenal number of new companies, venture capitalists are just too busy. To fill the void, a new breed of adviser has stepped in to coach entrepreneurs. Called mentor capitalists, they help entrepreneurs with everything from recruiting top talent to attracting their first million in seed money. The mentor capitalists in Silicon Valley are cashed-out, highly successful business architects who no longer want to start businesses but who love the thrill of the entrepreneurial game. They spend hours and hours with first-time entrepreneurs, guiding them as they create and refine a business model, test their ideas in the marketplace, build business processes, raise money, and find talent. Mentor capitalists seed Silicon Valley with expertise and knowledge, augmenting or even substituting for classes in entrepreneurship at local universities. But, as the authors note, the role of the mentor capitalist is essential to any start-up, anywhere.