Business owners who have found venture capitalists (VCs) willing to put money into their companies may be tempted to take the money on any terms. Because they need the capital, the last thing they want to do is upset a deal. Owners don't have to agree without negotiation to each provision the VCs want. Owners do have some leverage in the negotiations, particularly if their businesses already show a profit or if they are selling a highly desirable service or product.
Traditional compensation systems that value status instead of contribution do not reward the entrepreneurial activity U.S. companies need. They're also unfair, costly, and inefficient. Now U.S. employers are changing their pay practices to forge better links between compensation and performance. Traditional ideas about hierarchy come into question every time one of these changes is made, so attacks on pay that look like fine-tuning are actually revolutionary in what they portend for organizational design.
No matter what their business, managers need to know how much cash they have to pay their obligations. Unfortunately, some of the cash flow measures they usually use to check their cash position--including net income plus depreciation (NIPD) and earnings before interest and taxes (EBIT)--only work when sales are steady. When sales skyrocket, the measures overestimate cash; when sales plummet, they underestimate cash. A new concept, net operating cash flow--double prime, more clearly indicates the position of a company's cash bottom line.
Managers often take projects well past the point at which they should drop them. To see if they have come to this point, managers must look closely at themselves and recognize which of the influences they may be under. Some influences are psychological--they've been rewarded in the past for sticking to their guns, so why shouldn't the same thing happen this time? Some are social--no one likes a loser. And some are structural--important members of the organization are publicly committed to the project. The rest of the job belongs to top management. Its course is to rethink what behavior it rewards and how it staffs projects and to ensure that its information systems report the real odds.
Discusses the background of the foreign exchange market. This includes information about the participants and how the market operates. The problem set verses students in the arithmetic in the many common foreign exchange problems such as calculating forward premium and discounts, determining hedge ratios, covered interest arbitrage, etc.
Canada's largest chemical company produces and markets butyl rubber in two divisions, each treated as a profit center. The new plant in the North American Division operates below capacity resulting in a significant volume variance and an operating loss. The European Division is at capacity and is profitable. The actions of the European Division affect the capacity utilization of the North American Division. Includes divisional financial statements and interviews with the vice-presidents of each division.
Bill Ryan, president of the Gillette Co.'s Personal Care Division, is considering changing the division's planning and control system for marketing. White Rain, the division's most recent success, had been launched by taking shortcuts through the system, while other marketing programs the system produced sometimes still faltered. The case examines the components of a planning and control system for marketing, criteria for good systems and good programs, and ways that marketing managers work with a system.
Involves the initial public offering of a firm's stock. The offering includes a money-back guarantee to investors from the issuing firm which comes in the form of a "put" option. Option valuation is thus an important issue in this case.
Focuses on the competitive interaction between Coca-Cola and Pepsi-Cola specifically and the effect their dominance has on the other industry participants. Coke and Pepsi's competitive strategies are examined in an in-depth analysis; each firm's behavior is used to demonstrate the influence their strategic choices have on the future evolution of the industry. Taught in the section entitled "Predicting Competitive Behavior" of the Competition and Strategy course and should be taught in conjunction with Note on the U.S. Soft Drink Industry in 1986.
Walt Disney is considering hedging future yen inflows from Disney Tokyo. It is evaluating techniques using FX Forwards, swaps, and Yen term borrowings. Goldman Sachs presents a rather unusual but potentially attractive solution: Disney could issue ECU Eurobonds and swap into a Yen liability. The case explains how this alternative would work and suggests to the students ways to evaluate the hedging choices.
Reynolds must source a substantial portion of the financing of its Nabisco acquisition in offshore bond markets. Morgan Guaranty has proposed a yen/dollar dual currency Eurobond that could be hedged into dollars. This structure is compared to Eurodollar Bonds, Euroyen Bonds, and Euroyen Bonds swapped or hedged into dollars.
In the 1980s Japan dominated the world industry for video cassette recorders. This case looks at the evolution of the technology and competition in VCRs, the battles between VHS and Beta, and the emerging threats to Japanese dominance.
Discusses the trials and eventual success of two young Harvard MBAs who chose to purchase a company immediately upon graduation from their MBA program. Having no assets of their own, Kirk and Jamie raised a search fund to meet expenses during their search process, and then spent two years locating an acquisition. Offers unique opportunities to value a business and explore fundraising opportunities. In addition, provides motivation for MBAs interested in going into business for themselves directly out of the MBA program.
The Appletons and Bakers own homes on adjacent parcels of land. Larry Appleton has been transferred by his company and is selling his home. The Appletons also own a half lot between their lot and the Bakers' lot, which is too small to be buildable in its own right. The Appletons wish to sell this half lot to the Bakers, because the purchasers of their home are not interested in the half lot, and the Bakers are the only abutters who would be interested.
The Appletons and Bakers own homes on adjacent parcels of land. Larry Appleton has been transferred by his company and is selling his home. The Appletons also own a half lot between their lot and the Bakers' lot, which is too small to be buildable in its own right. The Appletons wish to sell this half lot to the Bakers, because the purchasers of their home are not interested in the half lot, and the Bakers are the only abutters who would be interested.