This case is a relatively straightforward exercise in valuing a potential acquisition target. The case affords students an opportunity to use both discounted cash flow and multiples in their analyses. In addition, at the instructor's discretion, students can do a simple valuation of an option contract and analyze currency choice in a debt issue. The latter two objectives arise if the case is used as an examination. Case Exhibit 1 poses the relevant questions for student preparation.
This aggressive retailer is adding store space at the rate of 25% per year. The case presents an external financing requirement amounting to $1.4 billion over the next five years. Students must decide how to meet this requirement wisely, acknowledging the relationship between business strategy and financial policy. Analysis of the firm's share price reveals a substantial overvaluation in the market.
CarPoint.com was Microsoft's Web-based entry into on-line automobile retailing. While it could not, in fact, "sell" or deliver any cars, it could shift much of consumer search, comparison, and decision-making, including pricing, the traditional car dealer to the Web. This shift in buying behavior from marketplace to marketspace was significant in its implications for consumers and dealers, CarPoint and its competitor firms face a double challenge in creating effective e-commerce businesses and in influencing their channel partners to provide effective service experiences. CarPoint, however, was a late entrant, and it faced competition from category first-movers AutoByTel.com, AutoWeb.com, and AutoVantage.com. As a result, the case deals with larger issues of channel and consumer behavior change as well as tactical issues pertaining to competitive positioning in a competitive market both on-line and off-line.
Ken Zelazny, general manager of COM DEV's Chinese facility, which assembled satellite components, was trying to decide whether the plant should seek ISO 9000 certification. Not only did ISO 9000 registration have a number of advantages and disadvantages, but also the decision in the Chinese plant would have some implications for COM DEV's other facilities in Canada and Europe. In addition, if Zelazny decided to seek ISO 9000 certification for his plant, he would have to decide which level of certification to seek. The case is intended to expose students to the ISO 9000 series of quality standards.
Starbucks is faced with the issue of how it should leverage its core competencies against various opportunities for growth, including introducing its coffee in McDonalds, pursuing further expansion of its retail operations, and leveraging the brand into other product areas. The case is written so that students need to first identify where Starbucks' competencies lie along the value chain, and then assess how well those competencies can be leveraged across the various alternatives. Also provides an opportunity for students to assess what is driving growth in this company. Starbucks has a tremendous appetite for cash since all its stores are corporate, and investors are betting that it will be able to continue its phenomenal growth so it needs to walk a fine line between leveraging its brand to achieve growth and not eroding it in the process.
Analyzes the competition between Netscape and Microsoft in the market for Web browsers and related products. Despite its first mover advantage, Netscape sees its market share fall once Microsoft becomes "hard-core" about the Internet. By the spring of 1998, the future of both companies is on the line.
Brand loyalty is one of the core concepts of the marketing discipline that has enjoyed practical and academic attention for over 75 years. The era of relationship marketing, with its focus on retaining customers for life, has instilled yet greater interest in the concept, precipitating unprecedented growth in frequency programs designed to lock in customer loyalties over time. Despite this rich history, many questions remain about the definition, measurement, and significance of brand loyalty. Some state that brand loyalties are declining and that in today's consumer world, multibrand usage--not brand loyalty--appears the norm. Others feel that the concept of loyalty itself is not outmoded or outdated, but rather that new theoretical and methodological perspectives are required that can revitalize what has become a theoretically uninspired, overly simplistic, and conceptually limiting idea. This case seeks to inform this latter point of view by encouraging students to "see" brand loyalty from the perspective of the consumers that live it. Includes color exhibits.
Wells Fargo, the industry leader in electronic banking, has implemented a Balanced Scorecard in its online financial services group (OFS) to track and measure performance. The OFS group develops and supports services that allow existing and future banking customers to perform transactions via the Internet. The new division faces rapid change and must invest heavily in new technology and in the development of innovative products and services. OFS was finding it difficult to balance the need for a clearly articulated strategy and measurable objectives with the flexibility required in its dynamic environment. Wells Fargo had a culture that embraced financial metrics. Yet OFS management believed that its business could not be measured and evaluated on the basis of financial metrics alone. For example, the group was not yet profitable, yet it provided a critical component to the bank's long-term strategy. The OFS group believed that the Balanced Scorecard would allow them to develop a set of integrated, multidimensional measures to assess performance against its goals and to communicate and update its strategy in a rapidly changing environment.
Egghead Software, an entrenched traditional chain retailer specializing in computer software and peripherals, had established a nationwide chain of mall and shopping center stores and a well-organized national brand. In early 1998, management made a highly unusual, and perhaps unprecedented, decision: the company closed down all its stores in North America and moved its retail operations exclusively to the Web. This rejection of marketplace in favor of marketspace illustrated the differences in managing retail operations for "information products," such as software, and "physical products," such as home furnishings or tools. The fact that software could be examined, sampled, purchased, and even distributed on-line indicated to Egghead management the high costs in PPE and labor represented by physical retailing were no longer justified by the category. The brand promise of Egghead could be realized as effectively at lower cost of operations on the Web, and the Web could begin to provide new sources of consumer value as the Egghead site harnessed the unique attributes and advantages of the digital environment.
After a 15-year absence, the Royal Bank of Canada returned to Thailand in 1997. During a period of high economic instability, the bank must weigh the merits of Thailand versus other markets within Asia-Pacific. The case provides details on subsidiary start up costs (including staff, capital expenses) and requires decisions on organization/human resources issues as well as the best strategic approach to the market.
Dixon Corp.faces the task of valuing a plant and an associated project that it is considering buying. The revisions are designed to enable the application of adjusted present value technique for valuation. A rewritten version of an earlier case.
Reviews basic techniques for estimating terminal value in the valuation of businesses. Among the techniques discussed are perpetuities, growing perpetuities, use of multiples, and liquidation value. A rewritten version of an earlier note.