A new CEO must take action to return the company to profitability, to clarify the vision, and then to build the infrastructure (human, capital, and information) needed to support the long-term change in strategy and organization. The case provides a rich description of the evolutionary nature of the vision for change and the development of the organizational and information infrastructure needed to support it. The company institutes changes in structure, management systems, people, and processes in a second round of organizational change initiatives--this time more radical in nature.
Students evaluate the proposed terms of the Renault-Volvo merger, examining the shareholders' perspective. The case describes the unusual structure of the strategic alliance that predated the merger proposal, the motives for merging, and the expected financial synergies. This case may be taught singly or in combination with the epilogue case, "Volvo/Renault: The Contest for Shareholder Approval".
In July 1991, Lawrence A. Bossidy became chairman and CEO of AlliedSignal, the $13 billion industrial supplier of aerospace systems, automotive parts, and chemical products. The company's story since then appears to be the typical slash-and-burn turnaround, but the view from the inside is far more interesting for anyone grappling with what it takes to lead a competitive organization and sustain its performance over the long term. Bossidy is a straight-shooting, tough-minded, results-oriented business leader. But he is also a charismatic and persistent coach, determined to help people learn and thereby to provide his company with the best-prepared employees. In this interview, Bossidy explains his views on the leader's role in changing a large organization. He discusses how he uses values and goals to "coach people to win." And he explains his efforts to focus AlliedSignal's management on three core processes--strategy, operations, and human resources.
While the core competence concept appealed powerfully to companies disillusioned with diversification, it did not offer any practical guidelines for developing corporate-level strategy. To fill the gap, the authors propose the parenting framework, with tools for answering two questions: Which business should a company own? What parenting approach will get the best performance from those businesses? To determine the fit between a parent and its businesses, corporate strategists should look at four areas: the critical success factors of the business, the parenting opportunities in the business, the characteristics of the parent, and the financial results. Next, to determine which businesses to keep and which to divest, they should rank them into five categories: those that fit well; those that fit in some ways; those that fit but have little potential; those with a possibility of value destruction; and those that fit in parenting opportunities but not in critical success factors.
In January 1990, with inflation at 50%, the newly democratic Polish government introduced a draconian plan for a market economy. Most observers expected the Balcerowicz Plan, sometimes referred to as shock therapy, to spur reform through the restructuring of large state enterprises. When it failed to do so, they criticized it. But the plan succeeded in encouraging entrepreneurship, which now appears to be the main force driving economic reform in Poland. It was as if the Polish economy started over in January 1990. The central mechanism for the reallocation of labor and capital from state to private activity has enabled the growth of hundreds of thousands of private businesses. The authors argue that, although state enterprises have proved too unwieldy for rapid change, the Balcerowicz Plan has not failed. If anything, it could have gone further to stabilize inflation and help private enterprise.
Gordon Johnston has taken his elite health-club concept from the germ of an idea to the pinnacle of success. But the most difficult decision in managing his company lies ahead. Gordon must figure out how to lead Transition fitness clubs into the next phase. In each of the 15 years since Transition's flagship club opened in New York City, its sales have doubled. The company boasts fitness trainers handpicked by Olympic medalists, health-conscious cuisine by in-house chefs, huge facilities in prime locations, and reciprocal memberships at other Transition clubs worldwide. But recently, the company's margins have been shrinking. An aging membership could mean problems for future expansion. And new, upscale competitors are challenging Transition's flat-rate pricing policy. Will Gordon have to run fast to stay in one place? Should he change Transition's pricing policy? In 95205 and 95205Z, William Campbell, Robert J. Dolan, Anita K. Hersh, Peter H. Farquhar, David Aaker, and Mary Shelman offer advice on this fictional case study.
Gordon Johnston has taken his elite health-club concept from the germ of an idea to the pinnacle of success. But the most difficult decision in managing his company lies ahead. Gordon must figure out how to lead Transition fitness clubs into the next phase. In each of the 15 years since Transition's flagship club opened in New York City, its sales have doubled. The company boasts fitness trainers handpicked by Olympic medalists, health-conscious cuisine by in-house chefs, huge facilities in prime locations, and reciprocal memberships at other Transition clubs worldwide. But recently, the company's margins have been shrinking. An aging membership could mean problems for future expansion. And new, upscale competitors are challenging Transition's flat-rate pricing policy. Will Gordon have to run fast to stay in one place? Should he change Transition's pricing policy? In 95205 and 95205Z, commentators William Campbell, Robert J. Dolan, Anita K. Hersh, Peter H. Farquhar, David Aaker, and Mary Shelman offer advice on this fictional case study.
Gordon Johnston has taken his elite health-club concept from the germ of an idea to the pinnacle of success. But the most difficult decision in managing his company lies ahead. Gordon must figure out how to lead Transition fitness clubs into the next phase. In each of the 15 years since Transition's flagship club opened in New York City, its sales have doubled. The company boasts fitness trainers handpicked by Olympic medalists, health-conscious cuisine by in-house chefs, huge facilities in prime locations, and reciprocal memberships at other Transition clubs worldwide. But recently, the company's margins have been shrinking. An aging membership could mean problems for future expansion. And new, upscale competitors are challenging Transition's flat-rate pricing policy. Will Gordon have to run fast to stay in one place? Should he change Transition's pricing policy? In 95205 and 95205Z, commentators William Campbell, Robert J. Dolan, Anita K. Hersh, Peter H. Farquhar, David Aaker, and Mary Shelman offer advice on this fictional case study.
Orange County, Metallgesellschaft, Procter & Gamble, and Gibson Greetings all have one thing in common: all are losers in the new global derivatives markets. Those visible losses in a market that has long been suspected of being uncertain and dangerous have raised new concerns about the stability of the international financial system. Two new publications provide contrasting perspectives on the issue. In The Vandals' Crown: How Rebel Currency Traders Overthrew the World's Central Banks, U.S. journalist Gregory J. Millman warns about the potential power of the free marketers from Chicago who trade anything that can be priced. The other perspective comes from a report by the Bretton Woods Commission led by Paul Volcker, former chairman of the Federal Reserve. The authors of Bretton Woods: Looking to the Future argue that regulators must defend and strengthen the markets against the speculative attacks of the traders. Richard O'Brien, chief economist of American Express Bank, gives his perspective on the struggle, and John Calverley, American Express Bank's chief investment strategist, writes a companion piece on the currency wars between governments and the markets.
Britain's Imperial Chemical Industries (ICI), founded in 1926, was for decades the dominant producer in its home market. As early as the 1940s, the board wondered whether a company so big and diverse was manageable, but ICI kept growing. During the 1980s, the company sought new sources of growth to offset sluggish sales of older products. The result was increased complexity of an already hard-to-manage portfolio. The stock price failed to reflect the value of many of ICI's businesses, and a takeover threatened the company in 1991. A company task force, aided by outsiders, discovered that ICI's businesses could be divided into two clusters. Each group needed its own style of corporate parenting, and ICI could not parent both of them effectively. In 1992, ICI spun off its pharmaceuticals, agrochemicals, and specialty chemicals into a second company called Zeneca. So far, the demerger has been a financial success. ICI's story shows how parenting skills that are developed in one phase of an industry's evolution may become less relevant in the next. The challenge for managers of multibusiness companies is to recognize the shift--and act on it before a crisis.
The age of the empowered board of directors is here. Major public corporations now acknowledge that they have no choice but to make management more accountable to shareholders and that strengthening the hand of outside directors is the logical means for doing so. But exactly how to proceed remains an open question. More specifically, directors and managers wonder how the relationship between the board and the CEO should be recast. Most directors and managers agree that the board should be a more effective watchdog without undermining management's ability to run the business. They also say boards need to decide how to distance themselves more from their CEOs without turning a constructive relationship into an adversarial one. Five corporate leaders--John G. Smale, Alan J. Patricof, Sir Denys Henderson, Bernard Marcus, and David W. Johnson--share their views.
Customers, whether consumers or businesses, do not want more choices. They want exactly what they want--when, where, and how they want it--and technology now makes it possible for companies to give it to them. But few companies are exploiting that potential. Most managers continue to view the world through the twin lenses of mass marketing and mass production. They try to churn out a greater variety of goods and services and to tailor their messages to ever finer market segments. But they end up bombarding their customers with too many choices. A company that aspires to give customers exactly what they want must use technology to become two things: a mass customizer that efficiently provides individually customized goods and services, and a one-to-one marketer that elicits information from each customer. The process of acquiring those skills will bind producer and consumer together in what the authors call a learning relationship--an ongoing collaboration to meet the customer's needs over time that will continually strengthen their bond.
At its core, corporate governance is not about power but about ensuring that decisions are made effectively. That is why reforms of power relationships will not by themselves create more smoothly run organizations. What is needed is a system in which senior managers and the board truly collaborate on decisions and both regularly seek the input of shareholders. The first step to improving a company's governance system is rethinking the role of directors. They must have expertise in the company's industry and in finance; meeting procedures should focus on new strategies, not just on reviewing past performance; directors need better access to company information; they should be required to devote substantial time to the corporation; and their compensation should be linked to stock performance. Second, managers, board members, and shareholders must set up lines of regular and direct communication.
A problem facing managers in the 1990s is how to exercise adequate control in organizations that demand flexibility, innovation, and creativity. How do senior managers protect their companies from control failures when employees are encouraged to redefine how they do their jobs? Today's managers must permit employees to initiate process improvements and new ways of responding to customers' needs--but in a controlled way. Fortunately, the tools to reconcile the conflict between creativity and control are at hand: Belief systems communicate core values and inspire all participants to commit to the organization's purpose. Boundary systems establish rules and identify pitfalls. Diagnostic control systems allow managers to ensure that employees are meeting goals efficiently and effectively. And interactive control systems enable top-level managers to focus on strategic uncertainties.
Enrique Felgueres, Jr., general manager of Rosenbluth International's (RI) Mexican operations, had recently been given the task of transforming Bancomer Travel Services, a small Mexican-owned agency, into a branch office of RI. The Rosenbluth service concept has contributed to RI's success in the U.S. and Canadian business travel industry, but the U.S./Canadian success does not imply that the Rosenbluth service concept can be taken carte blanche into Mexico. This case challenges students to consider if and how to adapt the service concept for the Mexican market, the Mexican business traveler, and for travel in Mexico.
Provides an overview of the U.S. gambling industry and the rapid expansion of gambling beyond Nevada and New Jersey since 1988. Focuses on Harrah's, a traditional top-tier casino company, which was the first to aggressively expand into emerging gaming markets and that needs to consider how best to sustain its competitive position.
Amoco Corp. is negotiating to sell a wholly-owned subsidiary, MW Petroleum, to Apache Corp. MW owns large reserves of oil and gas comprising many properties at different stages of engineering, development, and production. The proposed acquisition is a large one for Apache and poses several important financing and valuation problems. This case focuses on evaluation and execution of a creative financing structure that allows the buyer and seller to reallocate oil price risk.
The MasterCard vice president for global promotions and other MasterCard executives are appraising the results of MasterCard's worldwide sponsorship of the 1994 World Cup soccer championship. They must decide whether to commit to sponsor the 1998 championship to be held in France.