Attempts to leverage a brand's value by brand extensions run the risk of undermining the value of the brand. This article offers an approach to assessing a brand's leverage power before deciding to extend the brand. Evidence suggests managers need to assess both consumer familiarity with, and consumer regard for, the brand. Analysis indicates that brands balanced in terms of consumer familiarity and consumer regard have higher potential for leveraging than do brands high in one of those characteristics but low in the other. A fivefold typology of brands--Coveted Icons, Tarnished Treasures, Developers, Troopers, and Diamonds--is offered for describing the degree of brand balance.
The manager for Asia of James Hardie, a major Australian company in the building products industry, must decide whether to recommend a proposed $50 million investment in the Philippines. If James Hardie is to make the investment and grow the company, should it do so as a joint venture with Jardine, James Hardie's Hong Kong-based distributor in the Philippines, go it alone, or form a joint venture with a Philippine company? This is a major investment for James Hardie and marks the beginning of its new growth initiative into Asia after a period of consolidation. If the project goes ahead, James Hardie's Asia headquarters would be moved from Kuala Lumpur to Manila.
Lincoln Electric, a 100-year-old manufacturer of welding equipment and consumables based in Cleveland, Ohio, motivates its U.S. employees through a culture of cooperation between management and labor and an unusual compensation system based on piecework and a large bonus based on individual contribution to the company's performance. Despite opening a few international sales and production ventures in Canada, Australia, and France, Lincoln remained focused on manufacturing in the United States until 1988. At that time, the company's new CEO expanded manufacturing through acquisitions and greenfields in 11 new countries, attempting to transfer its unique management philosophy to each. However, Lincoln was unable to replicate its highly productive system abroad. Operational problems led to a major restructuring in the early 1990s, supervised by Anthony Massaro, a newcomer to the company. In 1996, Massaro was named CEO and set about expanding the company's manufacturing base through a new strategy. The case concludes in Asia, where Lincoln's regional president is trying to decide whether and how to establish a manufacturing presence in Indonesia, and in particular whether to try to transfer Lincoln's unique incentive-driven management system.
As of early 1998, virtually all U.S. states had adopted legislation permitting the organization of limited liability companies. This note describes this new type of entity and the reason why it has become so popular.
The director of human resources for Grupo Industrial Bimbo, S.A., was involved in a corporate re-engineering initiative. In response to the changing Mexican business environment, the company's senior executives had initiated a review of operations in an attempt to increase competitiveness and ensure the company's survival. The conclusions of the initial benchmarking studies, and some people dedicated to the re-engineering effort, recommended laying off 6,000 of the company's 40,000 workers to reduce and control costs. The directors were concerned about how the company could preserve its corporate culture. A follow-up case (9A98M011) is available.
The director of human resources for Grupo Industrial Bimbo, S.A., was involved in a corporate re-engineering initiative. The conclusions of the initial benchmarking studies recommended laying off 6,000 of the company's 40,000 workers to reduce and control costs. This case describes what the company did and is intended to be used in conjunction with the (A) case, 9A98M010.
An Internet start-up company is developing an online marketplace for specialty chemicals and reagents. David Perry has been named a runner-up in the 1st annual HBS Business Plan contest and now faces seed-stage financing questions--how much money to raise, at what valuation, in how many stages, and from whom.
Discusses the efforts of three Israeli software engineers' efforts to bring a network security software product to market. The firm needs an investment to complete programming and start marketing.
Discusses various valuation methodologies for analyzing entrepreneurial firms. Gives a description of the methodologies and describes when each method is appropriate.
In early 1998, William and Victor Fung had to review their business, the Li & Fung Group, to plan for the next three years. Examines strategic and organizational issues including company culture, international expansion, and venture capital projects. A rewritten version of an earlier case.
Presents a compilation of primary and secondary sources as well as a set of data exhibits on the German hyperinflation of 1923. The hyperinflation represented a defining moment in German history and certainly one of the two or three most important economic events of the 20th century. Memories of it continue to shape economic policy in Germany to this day. Equally important, the story of the world's most spectacular hyperinflation is rich in lessons about the many interconnections between money, prices, production, and politics in a modern capitalist economy.
This note provides an overview of the current state of capital-structure theory. It is well suited to an advanced corporate-finance course, after students have been exposed to the basic theory. One perspective on capital-structure choice is to view it as posing trade-offs among five elements: (1) the tax benefits of financing, (2) the explicit costs of financial distress, (3) the agency costs of debt (including an array of indirect costs linked to financial distress), (4) the agency costs of equity, and (5) the signaling effect of security issuance. The first two elements reflect the "modern, traditional" balancing theory of capital structure. The third and fourth build on agency theory and imperfect information and emphasize the individual incentives of decision makers. The fifth element recognizes that the very act of issuing a security can convey new information to investors when there is imperfect information. While newer theories provide a rich array of insights into aspects of financial policy beyond how much debt the firm should undertake, the downside is that at present there is no overarching synthesis of these theories. As a result, practical application requires careful identification of how these particular theories are relevant to the business, the markets, and the situation at hand.
This case focuses on analyzing financial statement data for seven large companies in the pharmaceutical industry. The data was obtained from COMPUSTAT PC Plus. The seven firms are all listed on the New York Stock Exchange (NYSE). The firms (ticker symbols) are American Home Products Corp. (AHP), Bristol-Myers Squibb Co. (BMY), Eli Lilly & Co. (LLY), Merck & Co., Inc. (MRK), Pfizer Inc. (PFE), Pharmacia & Upjohn Inc. (PNU) and SmithKline Beecham PLC (SBH). The seven companies are all headquartered in the U.S., except SmithKline Beecham which is headquartered in the U.K. All are involved in the development, production and distribution of prescription pharmaceutical drugs.
While many contemporary American corporations continue to exemplify high levels of corporate social responsibility, virtually all publicly held firms are finding themselves under growing pressure from the investment community to maximize shareholder value. As a result, the interests of the firm's non-shareholder constituencies are being neglected. The government must step in and function as arbiter, enacting rules and regulations that define what we expect of corporations in the way of such things as working conditions, environmental protection, and job training. But since the political process constitutes the only remaining vehicle for the expression of non-shareholder stakeholders, if corporate managers wish to be free to maximize shareholder value, it is inappropriate for them to also participate in shaping public policy.
Advocates of the World Wide Web claim it is a great leveler and that participants have a more equal voice. This flatness of the Web creates a major challenge for many businesses: How do you attract visitors and prospective customers to the firm's Web site? The Web site that can attract more visitors, all other things being equal, is more likely to communicate its message to a wider audience or sell its product to more people. Organizations want to build mountains--or "attractors"--in the otherwise flat landscape of Web-based marketing and advertising. This article classifies existing approaches to creating attractors, identifies four basic types of attractors, and predicts that there will be a move toward creating highly interactive attractors as a device for mass customization. The article also addresses the notion of sustainable attractiveness and presents recommendations for designing an attractor.
This study of 453 supplier-automaker relationships in the United States, Japan, and Korea examines the extent to which automakers manage their "arm's-length" and "partner" suppliers differently. The findings indicate that U.S. automakers have historically managed the majority of their suppliers using an arm's-length model, Korean automakers have managed suppliers primarily as partners, and Japanese automakers have somewhat different relationships with suppliers depending on the nature (i.e., degree of asset specificity and value) of the component. Only Japanese automakers have strategically segmented suppliers in such a way as to realize many of the benefits of both the arm's-length as well as the partner models. Firms should think strategically about supplier management and should not have a "one-size fits-all" strategy for supplier management.