International Entrepreneurial Finance is the study of allocation of scarce resources by and to entrepreneurs in international settings. This note provides an overview of "International Entrepreneurial Finance," a second-year MBA course developed and taught at Harvard Business School. Discusses the interaction between the finance, entrepreneurship, and international domains. Also explains the structure of the course and describes a number of analytical tools that entrepreneurs and financiers can use to make investment decisions in international settings.
The Acer Group was one of the world's largest PC and computer component manufacturers. Members of Acer's R&D management team were considering the location of a new R&D lab with a view to maximizing the effectiveness of their global R&D strategy. They must examine the strategic role the lab should take, based on country strengths in China, as well as how logistical, communication, and cross-cultural issues should be managed, taking into account the social, political and economic environment in China. The case also looks at how critical an effective intellectual property protection strategy is in the globalization of R&D strategy.
The goal of strategy is clear--to increase shareholder value. But in volatile markets, it's difficult to predict how a particular investment will affect a company's value. In this article, Martha Amram, a partner with the consultancy Onward Inc., and Nalin Kulatilaka, a professor at Boston University's School of Management, explain how managers can draw on the frameworks and information of the financial markets to make better, more sure-footed strategic investments. The financial markets are adept at calculating the value of an investment under uncertain conditions--exactly the challenge faced by business strategists. By applying the discipline of the markets, executives can avoid basing important decisions on subjective judgments about the future. The application of market discipline to strategy involves three components. First, the decision is framed in terms of the real options it creates. Second, in evaluating an investment, all the relevant information on value and risk available in the financial markets is taken into account. Third, actual financial transactions are used, when appropriate, to acquire options or otherwise mitigate risk. In a series of cases, the authors show how applying market discipline can help illuminate a range of common business decisions--whether to add production capacity, or to invest in a new venture, or to upgrade an information system, for example. By providing disciplined insight into the uncertainty present in all markets, the real-options approach lets executives think more clearly and realistically about complex and risky strategic decisions.
American institutions of higher learning have long played a disproportionate role in supplying leadership talent to the world's business and professional organizations. New research by William Bowen and Derek Bok, former presidents of Princeton and Harvard respectively, suggests that the experience of these institutions can provide insight on how to create diverse organizations that succeed. The first insight has to do with clarity of mission. It is not enough to pursue diversity because it is "the right thing to do." The second insight concerns recruiting. The authors challenge what they call "the myth of pure merit," the notion that recruiting is a precise science based only on grades and test scores. Instead, they argue, merit is about assembling a team by deciding which applicants, considered individually and collectively, will contribute most to achieving the company's goals. The third insight concerns how organizations help employees perform to their potential. Of the factors contributing to high graduation rates at the most selective schools, higher expectations and the efforts of mentors stand out as most important. Finally, the fourth insight is about how to achieve accountability in a corporate setting. Boards must ask: Are our recruiting policies working? and How are recruited employees doing? While the authors' research was intended specifically to inform the debate over race in higher education, here the authors report on their findings, and with the help of Glenda Burkhart, a corporate executive working with them, they draw out the major lessons for business leaders. Ray Gilmartin, the CEO of Merck, discusses diversity initiatives at his company in light of the research.
In this fictional case study by HBR Senior Editor Sarah Cliffe, a merger that looked like a marriage made in heaven to those at corporate headquarters is feeling like an infernal union to those on the ground. The merger is between Synergon Capital, a U.S. financial-services behemoth, and Beauchamp, Becker & Company, a venerable British financial-services company with strong profits and an extraordinarily loyal client base of wealthy individuals. Beauchamp also boasts a strong group of senior managers led by Julian Mansfield, a highly cultured and beloved patriarch who personifies all that's good about the company. Synergon isn't accustomed to acquiring such companies. It usually encircles a poorly managed turnaround candidate and then, once the deal is done, drops a neutron bomb on it, leaving file cabinets and contracts but no people. Before acquiring Beauchamp, Synergon's macho men offered loud assurances that they would leave the tradition-bound company alone--provided, of course, that Beauchamp met the ambitious target numbers and showed sufficient enthusiasm for cross-selling Synergon's products to its wealthy clients. In charge of making the acquisition work is Nick Cunningham, one of Synergon's more thoughtful executives. Nick, who was against the deal from the start, is the face and voice of Synergon for Julian Mansfield. And Mansfield, in his restrained way, is angry at the constant flow of bureaucratic forms, at the rude demands for instant information, at the peremptory changes. He's even dropping broad hints at retirement. Nick has already been warned: if Mansfield goes, you go. In 99103 and 99103Z, Bill Paul, J. Brad McGee, Jill Greenthal, Dale Matschullat, Daniel Vasella, and Albert J. Viscio advise Nick on how to save his job by bringing peace and prosperity to the feuding couple.
In this fictional case study by HBR Senior Editor Sarah Cliffe, a merger that looked like a marriage made in heaven to those at corporate headquarters is feeling like an infernal union to those on the ground. The merger is between Synergon Capital, a U.S. financial-services behemoth, and Beauchamp, Becker & Company, a venerable British financial-services company with strong profits and an extraordinarily loyal client base of wealthy individuals. Beauchamp also boasts a strong group of senior managers led by Julian Mansfield, a highly cultured and beloved patriarch who personifies all that's good about the company. Synergon isn't accustomed to acquiring such companies. It usually encircles a poorly managed turnaround candidate and then, once the deal is done, drops a neutron bomb on it, leaving file cabinets and contracts but no people. Before acquiring Beauchamp, Synergon's macho men offered loud assurances that they would leave the tradition-bound company alone--provided, of course, that Beauchamp met the ambitious target numbers and showed sufficient enthusiasm for cross-selling Synergon's products to its wealthy clients. In charge of making the acquisition work is Nick Cunningham, one of Synergon's more thoughtful executives. Nick, who was against the deal from the start, is the face and voice of Synergon for Julian Mansfield. And Mansfield, in his restrained way, is angry at the constant flow of bureaucratic forms, at the rude demands for instant information, at the peremptory changes. He's even dropping broad hints at retirement. Nick has already been warned: if Mansfield goes, you go. In 99103 and 99103Z, Bill Paul, J. Brad McGee, Jill Greenthal, Dale Matschullat, Daniel Vasella, and Albert J. Viscio advise Nick on how to save his job by bringing peace and prosperity to the feuding couple.
In this fictional case study by HBR Senior Editor Sarah Cliffe, a merger that looked like a marriage made in heaven to those at corporate headquarters is feeling like an infernal union to those on the ground. The merger is between Synergon Capital, a U.S. financial-services behemoth, and Beauchamp, Becker & Company, a venerable British financial-services company with strong profits and an extraordinarily loyal client base of wealthy individuals. Beauchamp also boasts a strong group of senior managers led by Julian Mansfield, a highly cultured and beloved patriarch who personifies all that's good about the company. Synergon isn't accustomed to acquiring such companies. It usually encircles a poorly managed turnaround candidate and then, once the deal is done, drops a neutron bomb on it, leaving file cabinets and contracts but no people. Before acquiring Beauchamp, Synergon's macho men offered loud assurances that they would leave the tradition-bound company alone--provided, of course, that Beauchamp met the ambitious target numbers and showed sufficient enthusiasm for cross-selling Synergon's products to its wealthy clients. In charge of making the acquisition work is Nick Cunningham, one of Synergon's more thoughtful executives. Nick, who was against the deal from the start, is the face and voice of Synergon for Julian Mansfield. And Mansfield, in his restrained way, is angry at the constant flow of bureaucratic forms, at the rude demands for instant information, at the peremptory changes. He's even dropping broad hints at retirement. Nick has already been warned: if Mansfield goes, you go. In 99103 and 99103Z, Bill Paul, J. Brad McGee, Jill Greenthal, Dale Matschullat, Daniel Vasella, and Albert J. Viscio advise Nick on how to save his job by bringing peace and prosperity to the feuding couple.
In the last decade or so, technological changes--mainly voice mail and e-mail--have made a lot of face-to-face interaction unnecessary. Face-to-face contact has also fallen victim to "virtuality"--many people work at home or are otherwise off-site. Indeed, most people today can't imagine life without such technology and the freedom it grants. But Edward Hallowell, a noted psychiatrist who has been treating patients with anxiety disorders--many of them business executives--for more than 20 years, warns that we are in danger of losing what he calls the human moment: an authentic psychological encounter that can happen only when two people share the same physical space. And, he believes, we may be about to discover the destructive power of its absence. The author relates stories of business people who have dealt firsthand with the misunderstandings caused by an overreliance on technology. An e-mail message is misconstrued. Someone forwards a voice-mail message to the wrong people. A person takes offense because he was not included on a certain circulation list. Was it an accident? Often the consequences of such misunderstandings, taken individually, are minor. Over time, however, they take a larger toll--both on individuals and on the organizations they work for. The problem, however, is not insoluble. The author cites examples of people who have worked successfully to restore face-to-face contact in their organizations. The bottom line is that the strategic use of the human moment adds color to our lives and helps us build confidence and trust at work. We ignore it at our peril.
Most companies focus on matching and beating their rivals. As a result, their strategies tend to take on similar dimensions. What ensues is head-to-head competition based largely on incremental improvements in cost, quality, or both. The authors, Chan Kim and Renee Mauborgne from INSEAD, have studied how innovative companies break free from the competitive pack by staking out fundamentally new market space--that is, by creating products or services for which there are no direct competitors. This path to value innovation requires a different competitive mind-set and a systematic way of looking for opportunities. Instead of looking within the conventional boundaries that define how an industry competes, managers can look methodically across them. By so doing, they can find unoccupied territory that represents real value innovation. Rather than looking at competitors within their own industry, for example, managers can ask why customers make the trade-off between substitute products or services. Home Depot, for example, looked across the substitutes serving home improvement needs. Intuit looked across the substitutes available to individuals managing their personal finances. In both cases, powerful insights were derived from looking at familiar data from a new perspective. Similar insights can be gleaned by looking across strategic groups within an industry; across buyer groups; across complementary product and service offerings; across the functional-emotional orientation of an industry; and even across time. To help readers explore new market space systematically, the authors developed a tool, the value curve, that can be used to represent visually a range of value propositions.
The current worldwide economic crisis illustrates how global the economy has become. But are global markets creating globally minded companies? Bruce Kogut, a professor of management at the Wharton School of Business, answers this question in his review of The Myth of the Global Corporation. The book, written by Paul N. Doremus, William W. Keller, Louis W. Pauly, and Simon Reich, argues that multinational corporations are still heavily influenced by the characteristics of their home country. It focuses on differences in corporate governance and research and development, and it finds that multinational companies are generally not accessing a global technology base. Kogut agrees that these and other national differences remain a steep hurdle in the way of creating a corporate strategy, but he says they do not imply that national differences are actually undermining the global competitiveness of multinational companies. As goods and people move freely across borders, companies are increasingly able to compete on a worldwide basis without straying far from headquarters. And when countries open up to international trade and investment, the theory of comparative advantage indicates that their companies tend to specialize in whatever the country of operation does best. This specialization can actually strengthen national differences, not weaken them. In this new environment, Kogut says, managers and other leaders face a difficult balancing act. They must meet the demands for global convergence in economic institutions while supporting the national policies that undergird a nation's distinctive competitiveness.
The idea of one-to-one marketing (also called "relationship marketing") is simple: accommodating a customer based on your knowledge of that customer, as well as the customer's input. This Manager's Tool Kit includes exhibits designed to help managers understand one-to-one marketing and provide guidance for those who may be interested in implementing their program. One-to-one marketing promises to increase the value of your customer base by establishing a learning relationship with each customer. Although the theory behind one-to-one marketing is simple, implementation is complex. The authors offer practical advice for implementing a one-to-one marketing program correctly. They describe four key steps: identifying your customers, differentiating among them, interacting with them, and customizing your product or service to meet each customer's needs. This tool kit will help you determine what type of program your company can implement now, what you need to do to position your company for a large-scale initiative, and how to set priorities.
In this article, William P. Ryan, a Cambridge-based consultant to foundations and nonprofit organizations, examines how nonprofits need to adapt to the new competitive environment. For most of this century, society's caring functions have been the work of government and charities. But social services in the United States are in a period of transition. Today the U.S. government no longer considers nonprofits to be entitled--or even best qualified--to provide social services. Profit-seeking companies like Lockheed Martin are now winning contracts for such services. The author describes how government outsourcing and a new business mind-set have changed the landscape of social services. The change raises fundamental questions about the mission and future of nonprofits. Ryan attributes the growth of for-profits in the social service industry to four factors: size, capital, mobility, and responsiveness. While those attributes give for-profits an advantage in acquiring new contracts, nonprofits have not yet lost their foothold. Ryan cites examples of organizations like the YWCA and Abraxas to demonstrate various ways that nonprofits are responding--from subcontracting to partnership to outright conversion to for-profit status. By playing in the new marketplace, nonprofits will be forced to reconfigure their operations and organizations in ways that could compromise their missions. Because nonprofits now find themselves sharing territory with for-profits, sometimes as collaborators and sometimes as competitors, the distinctions between these organizations will continue to blur. The point, Ryan argues, is not whether nonprofits can survive opposition from for-profits. Many have already adjusted to the new competitive environment. The real issue is whether nonprofits can adapt without compromising the qualities that distinguish them from for-profit organizations.
The topic of empowerment is receiving a lot of attention, but how many employees are truly empowered? At the global electricity giant AES Corporation, the answer is all 40,000 of them. In this interview with HBR Senior Editor Suzy Wetlaufer, AES Chairman Roger Sant and CEO Dennis Bakke reflect on their trials and triumphs in creating an exceptional company and explain how their employee-run company works. When they founded AES in 1981, Sant and Bakke set out to create a company where people could have engaging experiences on a daily basis--a company that embodied the principles of fairness, integrity, social responsibility, and fun. Putting those principles into action has created something unique--an ecosystem of real empowerment. What does that system look like? Rather than having a traditional hierarchical chain of command, AES is organized around small teams that are responsible for operations and maintenance. Moreover, AES has eliminated functional departments; there's no corporate marketing division or human resources department. For the system to work, every person must become a well-rounded generalist--a mini-CEO. That, in turn, redefines the jobs of the people at headquarters. Instead of setting strategy and making the "the big decisions," Sant and Bakke act as advisers, guardians of the principles, accountability officers, and chief encouragers. Can other companies successfully adopt the mechanics of such a system? Not unless they first adopt the shared principles that have guided AES since its inception. "Empowerment without values isn't empowerment," says Sant. "It's just technique," adds Bakke.
Competition on the Internet is creating fierce battles between industry giants and small-scale start-ups. Smart start-ups can avoid those conflicts by moving quickly to uncontested ground and, when that's no longer possible, turning dominant players' strengths against them. Authors David Yoffie from HBS and Michael Cusumano from MIT call this competitive approach judo strategy. They use the Netscape-Microsoft battles to illustrate the three main principles of judo strategy: rapid movement, flexibility, and leverage. In the early part of the browser wars, for instance, Netscape applied the principle of rapid movement by being the first company to offer a free stand-alone browser. This allowed Netscape to build market share fast and to set the market standard. Flexibility became a critical factor later in the browser wars. In December 1995, when Microsoft announced that it would "embrace and extend" competitors' Internet successes, Netscape failed to give way in the face of superior strength. Instead it squared off against Microsoft and even turned down numerous opportunities to craft deep partnerships with other companies. The result was that Netscape lost deal after deal when competing with Microsoft for common distribution channels. Netscape applied the principle of leverage by using Microsoft's strengths against it. Taking advantage of Microsoft's determination to convert the world to Windows or Windows NT, Netscape made its software compatible with existing UNIX systems. While it is true that these principles can't replace basic execution, say the authors, without speed, flexibility, and leverage, very few companies can compete successfully on Internet time.
On January 1, 1999, 11 European nations formally adopted the euro as a common currency. What will the new monetary union mean for managers? In this Perspectives piece, senior executives from Merloni Elettrodomestici, PricewaterhouseCoopers, DaimlerChrysler, Sara Lee/DE, and ICI discuss how the euro will alter the European business landscape and change the rules of management. The contributors suggest that the single currency will require executives to rethink many of their long-held assumptions about doing business in Europe. Because consumers will be able to easily compare prices across the Continent, for example, it will become much more difficult to have different product positioning and pricing strategies from country to country. Similarly, the need for pan-European thinking may require companies to reconsider their decentralized organizational structures, which grant autonomy to national units. And at the operational level, fragmented supply chains may turn into severe disadvantages. There are many other changes that managers must consider with the introduction of the euro. Not only will they have to cope with confused and suspicious customers, they will also incur major up-front costs in implementing the changeover to the new currency. No two companies will take the same course in responding to the myriad challenges, but the practical insights of these five contributors will help all companies think clearly about their options.
After restructuring Scott Paper with a 34% reduction in head count and successfully selling the company to Kimberly Clark, Al Dunlap is hired as CEO by Sunbeam. This case describes the management principles of this corporate turnaround expert and his actions at Sunbeam.
It had been almost a decade since the first article surfaced in the media alleging that factories subcontracted by Nike in China and Indonesia were forcing workers to work long hours for low pay and for physically and verbally abusive managers. The article was the seed of a media campaign that created a public relations nightmare for the company. A financial crisis in Asia and intense competition in the domestic market contributed to a decline in Nike's revenue and market share after three years of record performance. Though no direct correlation could be proven between the consumer's negative perceptions of Nike and the company's decline in market share and stock, it certainly did not help in its efforts to establish itself as the global leader in a hotly competitive industry.
This case illustrates an industry that is experiencing intensifying competition and regulation. The Chinese fireworks industry thrived after China adopted the "open door policy" in the late 1970s and grew to make up 90% of the world's fireworks export sales. However, starting from the mid-1990s, safety concerns led governments both in China and abroad to set up stricter regulations. At the same time, there was rapid growth in the number of small, family-run fireworks workshops, whose relentless price cutting drove down profit margins.
Monsanto, a biotechnology giant highly committed to sustainable development efforts, needs to assess the attractiveness of the drinking water treatment industry before deciding its entry to it. Four dimensions of the global water treatment industry are described: types of products and services, applications, end users, and geographical markets. The drinking water treatment segment, which is classified into municipal drinking water treatment and residential drinking water treatment, is examined in depth. Players in these two categories produce the chemicals and equipment necessary to purify tap water supplied to consumers and residential water purification devices. The bottled water industry is considered a substitute of the drinking water treatment segment. Teaching purpose: To answer the question "Is the industry attractive?" and to introduce students to industry analysis and industry segmentation.