Focuses on the difficulty established companies face when confronted with disruptive technological innovations. The power that their prior asset investments, their cost structures, and their customers have in constraining their investment and innovation decisions are clearly illustrated. Rewritten version of an earlier case.
In 1993, the firm began to move from a traditional hierarchical structure to client-focused teams. The case describes the process and some consequences of this restructuring. Performance seems to be improving, but some employees preferred the structure certainty and client variety of the old days. How does management deal with these issues?
Project management techniques have met with widespread acceptance as a means of expediting product development, making efficient use of resources, and stimulating cross-functional communication. Not only manufacturing firms, but also legal offices, hospitals, and local governments have accepted project management as an indispensable part of their operations. Yet failures and outright disasters abound in the history of project management. A study of these failures indicates a dozen sure-fire methods for dooming a project: ignore its environment; push a new technology to market too quickly; don't bother to build in fallback options; when problems occur, shoot the person most visible; let new ideas starve to death from inertia; don't bother conducting feasibility studies; never, ever admit a project is a failure; micromanage the project managers and their teams; never, ever conduct post-failure audits; never try to understand project trade-offs; let politics dictate crucial project decisions; and make sure the project is run by a weak leader. However, past failure need not discourage us from future efforts. Indeed, it is through these past failures that we gain the savvy to push on to successful ventures.
This case explores a proposal by Labatt management to purchase a 22% interest in a Mexican brewing business and strike associated agreements for cooperative activities throughout North America. An evaluation of the deal requires an assessment of the prospects of the venture in the Mexican and U.S. beer markets, the potential for synergies in the cooperative activities, and ultimately the pricing and financing of an investment in a developing economy. This case is similar to Una Cerveceria Por Favor: Labatt Buys Into Mexico, case 9A95G013, in that it varies primarily in the time perspective from which the issues are addressed. Only one of these cases is necessary in a course.
Describes management's attempts to design and install a sophisticated planning and control system in an international company as it changes its strategy. Issues of strategy implementation, accountability, and performance measurement are at the core of the analysis, as managers confront difficulty and resistance in using the system for "strategic, operational, and financial" control.
Two recent MBA graduates acquire a small and ailing metal-machining company that had manufactured small aerospace components. Through clever application of state-of-the-art manufacturing, engineering, and marketing/sales concepts, they turned the company into a growing and profitable business. The owners must now decide what new business opportunities to undertake given that they have achieved market share leadership in their niche.
The focus of the case is on deal-making in the context of a structured note. The challenge for the student is the placement of US$125 million of Special Purpose Trust (SPT) paper. The financing was to fund SPT's forward purchase of a portion of the future oil production. The structure of the note has to be modified in order to place the paper in a short period of time.
The owners of Xantrex Technology Inc. are negotiating an injection of equity capital of $3 million. Students are asked to design a deal which is acceptable to both the venture capitalists and the owners. They must also design an appropriate shareholders' agreement. This case should be used in conjunction with Xantrex Technology Inc., case 9A96B051.
Designed to illustrate the complexity of buyer-seller arrangements in an established industry. When movie studios negotiate with theater operators to show new films, the costs to the studios of making the films are largely sunk. Similarly, the costs to the theaters of showing films are also sunk. Thus, both parties to the exchange have high bargaining power and are vulnerable to hold-up. Allows students to identify the implications for industry structure. In particular, the case highlights the recent trend toward multiplexes and small screen sizes.
This case explains the plan of the Equitable Companies to sell a 20 percent interest in Donaldson, Lufkin & Jenrette (DLJ) via an equity carve-out in an initial public offering (IPO), and presents students the task of pricing DLJ's shares in the IPO. The company approached the pricing task using the method of comparable multiples. The case gives ample information on valuation multiples of peer firms. A key point of assessment is to choose which industry segment DLJ competes in so that an appropriate multiple may be chosen. The case also describes the equity-underwriting process in detail. It presents a rich range of industry information, affording an opportunity to discuss forces of change in the investment-banking industry. The teaching note explains how the case may be used to explore the trade-off between maximizing the offering price and supporting the trading of shares in the aftermarket. This case is an abridgement of the A (F-1145) and B (F-1146) cases, which may be taught alone or together. Taught together, they would ordinarily require two class periods. The instructor may cover the general subject matter of the A and B cases by using this abridged version.
Describes U.S. antitrust policy, including major judicial decisions and their impact on competitive strategy. Omits information on the history of antitrust policy and on the specific prohibitions of the various acts.
The case traces the story of Canadian Airlines from its early days of profitable regional operations, growth through acquisitions to the status of a national and international carrier, and ultimately to the crisis of the early and mid 90s. Fundamental questions of strategy need to be resolved. How is revenue generated? What are the sources of cost? How do airlines make profits? In pursuing these questions, students need to sort out the realities of the airline industry and the specific opportunities and challenges facing Canadian.
This is an MIT Sloan Management Review article. Although few would deny that vision serves a critical role in today's organizations, in practice, most managers are intimidated and frustrated by the challenge of developing one. The author explores the notion of vision by first explaining how and why visions work. He presents a template, tested in organizations representing the corporate, nonprofit, and public sectors, that outlines the principal themes necessary for an effective vision. Because not all great visions succeed, the author analyzes why they sometimes fail.
ETrade pioneered the electronic deep-discount brokerage business and experienced phenomenal growth by making extensive use of technology to achieve significant cost advantages over traditional firms. ETrade's strategy has been to pass these cost savings from automation on to its customers as it amortized its fixed costs over a greater number of accounts. By 1996, a flood of new competitors are establishing Internet sites and ETrade has been dethroned as the price leader. While some executives within ETrade believe they should continue to lower prices and go head-to-head with eBroker, others believe the company faces a larger challenge from Charles Schwab's entry into the market. Defending against Schwab would require focusing resources on enhancing its product/service offering, which might jeopardize ETrade's low-cost position. ETrade must decide where it can create a profitable and sustainable position along the price/quality (service) trade-off.
Our understanding of how markets and businesses operate is based on the assumption of diminishing returns: products or companies that get ahead in a market eventually run into limitations so that a predictable equilibrium of prices and market shares is reached. The theory was valid for the bulk-processing, smokestack economy of Alfred Marshall's day. But in this century, Western economies have gone from processing resources to processing information, from the application of raw energy to the application of ideas. The mechanisms that determine economic behavior have also shifted--from diminishing returns to increasing returns. Increasing returns are the tendency for that which is ahead to get further ahead and for that which is losing advantage to lose further advantage. If a product gets ahead, increasing returns can magnify the advantage, and the product can go on to lock in the market.
Managers have recently begun to think of good marketing as good conversation, as a process of drawing customers into progressively more satisfying relationships with a company. And just as the art of conversation follows two steps--first striking up a conversation with a likely partner and then maintaining the flow--so the new marketing naturally divides itself into the work of customer acquisition and the work of customer retention. But how can managers determine the optimal balance between spending on acquisition and spending on retention? The authors use decision calculus to approach the large, complex problem through several smaller, more manageable questions on the same topic.
Many U.S. managers want to enlist their suppliers in their efforts to develop products faster and to reduce manufacturing costs. But they have wondered whether they can have the sort of mutually supportive relationship that characterizes manufacturers and suppliers in a Japanese keiretsu. Chrysler Corp. shows that the model can indeed be adapted successfully. Chrysler's relationship with its suppliers used to be one of mutual distrust and suspicion. At the end of the 1980s, however, dire financial straits convinced the company that it had to rethink its supplier relations. The resulting new model has played a major role in Chrysler's stunning revival.