The night before she assumes her new role as vice chairman of Rodale Press, Maria Rodale prepares her coming-out speech and polishes her 90-day plan for how she will "make her mark." Recent financials indicate positive results, causing Maria to wonder how she will be able to imbue the firm with a sense of urgency given the fast-changing publishing business.
In an average week, more than 300 companies fail. And more than 75% of those desperate firms file for a "liquidation bankruptcy," agreeing to a complete distribution of their assets to creditors. The remaining 25% refuse to surrender until a final option is exhausted: petitioning the courts for a "reorganization bankruptcy," trying to persuade its creditors to freeze their claims temporarily while it reorganizes to rebuild profitable operations. Proper and timely use of reorganization bankruptcy can bring relief from otherwise devastating indebtedness; chosen for the right reasons and correctly implemented, it can provide a financially, strategically, and ethically sound basis for serving the interests of all stakeholders. A model is offered for analysis of the bankruptcy situation and the turnaround response. The successful integration of reorganization bankruptcy as a key component of a strategic plan is based on an understanding of bankruptcy law and how its provisions affect the company, as well as the timely use of Chapter 11 protection as it was intended--to retrench systematically and put together a new strategy that evokes support of all stakeholders. It should never become a popular strategic choice; but if properly exercised, it can revive a deserving organization.
The Honeywell Technology Center (HTC) is the central R&D organization for Honeywell, Inc. almost 40% of Honeywell sales comes from outside the U.S. and this figure is expected to reach 45% or more by 2000. However, HTC, based in Minneapolis, is a long distance from international markets. Within HTC there is a growing consensus that HTC has to become more international to support Honeywell's growth opportunities. But, HTC management is far from consensus on how to internationalize R&D. Can the HTC culture be replicated outside the United States? How quickly should HTC move? Who will manage new R&D organizations? How will these organizations be funded? Should international R&D sites be centers of excellence for specific technologies, or should they be application centers using technology developed in Minneapolis, or both?
Costco Companies, one of the major players in the wholesale club industry, has developed a new class of membership that offers discounted services--auto, health, and home insurance, business credit card processing, real estate services--in exchange for a higher annual fee ($100 vs. $40). The case poses two questions: 1) how should the new membership be marketed, to whom, and how much should be spent on the effort? and 2) what are the potential risks and benefits for Costco, which generated $22 billion in 1997 selling products in bulk, in offering services? Which question is emphasized depends on whether the case is taught in a marketing or a retailing course.
A turnaround expert must determine whether a firm in distress is worth more as a going concern than its liquidation value. If so, the finances of the firm must be restructured in a way consistent with the bargaining power of the holders of the various securities. The restructuring requires a delay in principal repayment, rate concessions, and a debt-for-equity swap.
The new owner and CEO of Arnold Advertising, a relatively small regional agency, aims to build it into Arnold Communications--a much larger, stronger firm competing successfully for national accounts. As part of this growth strategy, the agency develops a process for identifying the "brand essence" of a client's product and using the essence to guide the development of all creative work on the client's campaign. In most cases, the approach appears to be successful at winning new business. Questions arise, however, about the effectiveness of the process for guiding the ongoing creative development and implementation of advertising campaigns.
Since the beginning of 1997, Vanguard's assets under management have increased more than 60% from $240 billion to almost $400 billion, making it second in market share only to Fidelity. Vanguard views this success as another vindication of its low-cost strategy of no-load funds, small expense ratios, candid client communication, high-quality service, and predictable performance. But the organization also is mindful of the unprecedented changes occurring in the financial services industry. Financial institutions have been rapidly consolidating, with firms such as Citigroup, UBS, and Merrill Lynch each now holding customer and other assets in excess of a trillion dollars. And technology-especially the Internet-is dramatically altering the creation, pricing, and delivery of financial services. Vanguard has to carefully consider its future, and faces key decisions such as expanding its range of products and offering asset management services in other countries.
SADAFCO has long enjoyed a dominant position in the milk and ice cream markets in Saudi Arabia. In the mid-1990s, this dominance was under threat as Nestle, Unilever, and Mars all entered the ice cream market. The case outlines the Saudi Arabian ice cream wars.
Describes Lotus' acquisition by IBM, its movement from proprietary standards to open standards, and its current market position. Microsoft is gaining ground with its Exchange Server, and Lotus has received unfavorable press.
Bill Copacino, Andersen Consulting's managing partner of Strategic Services Americas, needed to submit his recommendation to Peter Fuchs, Strategic Services worldwide director, for the operating plan for Strategic Services Americas for fiscal year 1999. Strategic Services had grown by over 40% per year in headcount since 1989, but remained a relatively small part of Andersen Consulting. Copacino and Fuchs were challenged to grow Strategic Services at the level required to increase its relative position in the firm to 10% of its people and 15% of its revenues. As they discussed options, there were no easy answers. Should Strategic Services continue to try to grow at 30% plus per year? Would Strategic Services be able to find enough new and experienced hires to continue to grow? Could the unique culture be maintained? Should they consider acquisitions? Was there an effective way to meet their growth targets?
In the early 1980s, Turkey adopted policies that liberalized trade as a part of a structural adjustment program. Within the garment industry, small- and medium-scale enterprises were not well positioned to take advantage of the new opportunities to compete in international markets. In order to overcome challenges in marketing, obtaining financing, and negotiating with government trade officials, competitors came together to form Ege Giyim Sanayi ve Dis Ticaret A.S. (EGS). EGS's rapid expansion forced it to face crucial questions about both its governance structure and future diversification opportunities.
A new company that manufactures computer games must begin to capitalize computer software development costs. Issues that must be addressed include the effects of capitalization and decisions about how to match costs with future revenues.
Presents an analytical report on the company's competitive position and on the industry structure in 1991. Used to show how a company can generate value through steady, incremental investment over a long period in a business model tailored to the industry context. Also illustrates the challenges of market leadership.
Describes the challenges facing the Saturn Corp., General Motor's (GM) small-car company, as it enters a phase of transferring its knowledge, technology, and experience throughout GM. Describes the urgency of Saturnization at GM and the continuing pressure to retain traditional job design and vertical integration. Used to demonstrate the extraordinary time and expense required in some situations to generate competitive advantage.
For many decades, a high degree of political risk discouraged foreign investment in Latin America. Recent years have witnessed major changes in the nature and extent of Latin American country risks, with a dramatic reduction of political risks, and a new focus on economic risks. At the same time, there has been a vast opening up of investment opportunities where Canadian corporations can transfer modern technology and business practices that exceed the capabilities of domestic corporations, creating country- and industry-specific competitive advantages. However, Latin American countries still rank very poorly in the factors underlying international competitiveness, with the result that labor-intensive export facilities are more likely to be located elsewhere, in spite of Latin America's low wage levels.
The executive assistant to the Army Chief of Staff prepares the nomination forms for all Army officers eligible for promotion, which are then submitted to the Senate Armed Services Committee (SASC) for approval and later confirmation by the Senate. During the officer's tenure, a SASC investigation reveals that serious racial incidents have occurred at four military bases. In response, the SASC establishes new guidelines for the promotion process, requiring a disclosure statement outlining any involvement or allegations of involvement in racial incidents, whether substantiated or not. The statement must also include any incidents involving the nominee's subordinates. Although the officer and the Chief of Staff have developed a relationship of mutual respect and admiration, on this issue they disagree. The officer believes that all information should be supplied to the SASC as required. The Chief has utter disdain for the guidelines, since even unproven allegations must be reported, and thinks it is unreasonable to hold superiors accountable for subordinates. The officer wants to preserve his relationship with his superior, yet does not want to engage in any wrongdoing. Under pressure, he chooses a strategy of outward compliance to the guidelines while knowing that his reports will be altered by the Chief before their submission to the SASC. HKS Case Number 1458.0