In 2012, eHealth Centers (eHCs) digitally delivered affordable medical care and diagnostic support for patients in villages and remote areas of India where it was otherwise unavailable. The solution was initially conceived and developed as a mandate from Hewlett Packard India’s corporate social responsibility team under the leadership of the chief technology officer. The eHCs design incorporated a self-contained diagnostic centre in a container, operated by a staff of paramedics. Doctors located in urban health hubs provided consulting care through video conferencing, and patients could experience the feeling of being in a doctor’s office in real-time. These eHCs slowly turned out to be a business opportunity for Hewlett Packard India. By early 2016, there were 55 centres in operation. The challenge before the company was to scale up exponentially.
Nanjing Gaoke, a Chinese state-owned enterprise (SOE), has reformed itself into a listed company in China's emerging capital market with a strategic focus on equity investment in high-potential emerging companies, enabling the SOE to effectively leverage financial resources and expand its business portfolio into diversified industries. After merely 25 years of history, Nanjing Gaoke has built up four core business sectors for its investments: urban real estate development, pharmaceuticals, finance and venture capital investment. Its shareholder equity capital has increased by more than 1,000 times compared to its original paid-up equity capital. Since the Nanjing municipal government has been the major shareholder of Nanjing Gaoke, the state-owned asset has also increased substantially with Nanjing Gaoke's business portfolio expansion. With the increasingly diversified investment portfolio managed under the structure of a listed company, Nanjing Gaoke is no longer a typical SOE but a government-controlled shareholding company fully integrated into the market economy. Its multi-tier investment system under varying organisational structure of ownerships has enabled itself to deviate from the direct control of the government's State-owned Asset Supervision and Administrative Commission and manage its asset portfolio more efficiently by following changing market conditions.
In early 2015, the newly appointed country head of PharmaCorp’s operating unit in Ukraine faced internal and external challenges in managing the global pharmaceutical company’s operations in the crisis-ridden country. Since November 2013, Ukraine had undergone massive disruptions, including riots in Kiev, the annexation of Crimea by Russia, and a war in its easternmost region. Amid these economic and political turbulences, PharmaCorp Ukraine experienced plummeting sales, increased workload, amplified human resources issues, and decreased market share. Furthermore, the multinational corporation’s internal routines became less effective in the context of the crisis. Although the regional headquarters in Lausanne, Switzerland, offered guidance and resources, inefficiencies in responding to local issues emerged during the crisis. Should PharmaCorp exit the market? Or should it stay in Ukraine and revise its local marketing strategy by offering more innovative products? Should it implement cost-saving measures? Should the business model be revised to gain more autonomy for its operations? The country head was scheduled to meet with representatives from the regional headquarters and needed to prepare a comprehensive strategy for improving the local situation.
On January 18, 2016, the chief executive officer and chief technology officer of Geosoft Inc. (Geosoft) met in Toronto, Canada, with the company's executive team and regional directors for a critical three-day strategic planning session. Geosoft was a privately held, employee-owned, mid-sized global company that worked to help earth scientists and explorers make discoveries through innovative data solutions and services. The focus of the meeting-a new technology strategy to protect Geosoft from the impact of a global economic downturn affecting its primary markets-was pivotal to Geosoft's current and future growth. This new strategy, known within Geosoft as the digital intimacy strategy, would radically change the way the company communicated with its customers. Geosoft's customers were located in five major geographic regions: Latin America, Africa, Australia (including Asia), Europe, and North America. Rolling out the strategy demanded seamless communication of change to multiple stakeholders in vastly differing cultures across five continents. The new digital intimacy strategy was planned for rollout in September 2016 with implementation in 2017. For the new strategy to work, communication was crucial.
In 2016, a recently retired artilleryman from the Canadian Armed Forces was planning his next steps as a civilian. He had always been passionate about healthy lifestyles, and his sense of entrepreneurship led him to consider the viability of launching a series of fitness boot camps, based on different skill levels and age groups. He saw this boot camp idea as a way of providing health services to a group of clients who were already interested in exercise but who might become more involved if their fitness activities were held outdoors. He could either launch the boot camps on his own or partner with a small local gym. He needed to earn $2,000 after all expenses per month from May to August each year for the business to be feasible. The gym offered him cost-saving options, but was he ready to share his revenue with a partner?
In November 2016, Arun Madhok, CEO of Suntec Singapore (Suntec), a premier convention and exhibition centre in Singapore, was looking at processes in which productivity could be improved. The global MICE industry was becoming increasingly competitive. Suntec's strategy was to capitalise on its good location while providing a premium venue and good service. Singapore's pro-business and safe environment were positive factors for MICE organisers, and Madhok partnered with the Singapore Tourism Board (STB) and other local industry participants to attract them to the island. Suntec had recently undergone a major renovation to integrate new technology into its building design. Madhok made use of the downtime to improve his food quality and presentation by sending his staff for training at top hotels. Operationally, many companies were affected by government regulations that introduced quotas for foreign workers. Madhok began a productivity push to review the company's processes, beginning with dishwashing. A designated dishwashing area would be leased out to a vendor, who could solicit business from F&B outlets throughout the Suntec Mall. It proved to be a success as Suntec's dishwashing costs decreased and new checks were introduced to ensure the cleanliness of the items. Madhok was now keen to seek other process innovations.
Josie Sung and Greg McNamara founded Denver-based Lighthouse Systems in 2006 shortly after graduating from the Stanford Graduate School of Business in 2005. After exploring several ideas, they landed on a technology solution for helping large corporations better communicate with their customers. However, after running into a few roadblocks in the early days, the company pivoted as it learned more about its customers' needs. Now, almost seven years after its founding, Lighthouse had finally found its sweet spot with the launch of a mobile-based app that would allow companies to deliver valuable content to their employees (similar to a company intranet) via any electronic device. By the spring of 2013, Lighthouse had gained steady momentum, with 30 percent quarter-over-quarter sales growth, and it was on track to reach $150 million in revenue by year end. With the potential to really take off, Josie and Greg decided it was time to bring on a senior sales executive to drive revenue growth to the next level. In November 2013, Tristan Jones joined Lighthouse as the company's vice president of sales and quickly made a significant impact on the organization. After closing one of the company's largest deals in 2014, Tristan delivered outstanding results throughout the first half of 2015, and served as a valued member of Josie's eight-person management team. However, Josie is faced with a challenging situation when Tristan violates the company's gifting policy on more than one occasion. Should she find a way to accommodate her best salesperson so as to not sacrifice company performance, or terminate her top performer and deal with the fallout that will inevitably follow?
This Reading introduces practical problems encountered when estimating and applying the cost of capital in a DCF valuation. It applies, but does not derive, key ideas from modern portfolio theory and is accessible to readers who have not yet studied portfolio theory. The reading begins by defining the cost of capital narrowly, as a discount rate (in a DCF valuation) that must equal the opportunity cost of funds, or equivalently, the sum of the time value of money and a risk premium. This intuitive explanation is followed by the CAPM equation, and practical discussions of systematic risk, beta, and the equity market risk premium. The Reading then introduces WACC as an alternative calculation for the cost of capital and shows, graphically and mathematically, the correspondence between CAPM and WACC in the absence of taxes. The Reading also explains that the "(1-t)" adjustment term in the formula for WACC with taxes compensates for missing interest tax shields in the standard calculation of Free Cash Flow. The next section is a step-by-step explanation of how to calculate WACC for a real company, including discussions of data and sources commonly used by practitioners to compute leverage ratios, the cost of debt, the tax rate, the risk-free rate, and so forth. Finally, the reading walks through an illustrative calculation of WACC for Coca-Cola, as of December 31, 2015, using data from Coca-Cola's SEC filings and the capital markets. The Supplemental Reading section examines some of the limitations of WACC as a discount rate as well as some common errors that practitioners make in computing and using WACC. It also covers two alternatives to WACC-based DCF, the APV and CCF methods.
Managerial, executive, and entrepreneurial success requires the ability to negotiate. The essential reading and recommended module plan will help readers become more effective negotiators by: 1) mastering a negotiation framework that will help them analyze, prepare for, and execute negotiations more systematically-and hence, more effectively-in a wide variety of contexts; 2) building a negotiation toolkit that consists of practical strategies for creating and capturing value in negotiation; and 3) learning how to create a negotiation environment that helps diagnose individual needs, and allows negotiators to identify techniques for mitigating weaknesses and leveraging their strengths. The supplemental reading addresses two additional topics: cross-cultural negotiations and gender issues in negotiation.
This case explores the introduction of fleet management in the construction industry by the premium power tools manufacturer Hilti in 2000. Following its customers' needs, Hilti moved from selling power tools to leasing them as a service. The introduction of the new business model contributed significantly to the success of Hilti, since it sustainably differentiated the company from its competitors. For instance, the adoption of fleet management resulted in customer loyalty levels five times higher than under the dominant business model Hilti had formerly employed, and over-proportioned profit contribution at Hilti. Hilti's Chief Technology Officer described the importance of the innovation as follows: "Hilti developed many very innovative and successful products over the years, but they paled in comparison with the fleet management business model, which was the most important innovation in Hilti's history." All told, Hilti, which had about 22,000 employees and made about 4.5 billion Swiss Francs (or $4.589 billion USD) in sales in 2015, managed 1.5 million tools under fleet management contracts in 40 countries, resulting in a contract value of more than 1.2 billion Swiss Francs (approximately $1.4 billion USD). Case A describes the strategic decision-making process regarding the introduction of fleet management in its early planning stages. Case B (separate) tackles the implementation and scaling process of fleet management over the years and explores current challenges facing the BMI.
The (B) case tackles the implementation and scaling process of fleet management over the years. Finally, the case explores current challenges facing the BMI.
This is a B case written as a follow-up to the original case, Uber: Changing the Way the World Moves (316101). It describes a slew of controversial incidents besetting the company in early 2017.
This case examines the strategic choices and business model with regards to branding at Mavi, a leading Turkish apparel retailer. The case is presented from the perspective of the company CEO and its global brand director who is also part owner. In 2015, Mavi had sales of $419 million, up 20% from the previous year. Growth rates like these were becoming routine at Mavi. But, the path to growth was getting more challenging, and Turkven, Mavi's private equity partner, was planning its options after seven years of investment. There were four growth levers Mavi could pull, but each involved selecting one growth path while neglecting another. Should the company invest in growth domestically or internationally? Should they change the price positioning of the brand to move upmarket or down market? Which value proposition offered the most future promise: functional differentiation, lifestyle differentiation, or celebrity endorsement? Should the company continue to serve both men and women of all ages, or were there specific consumer targets that offered the most promise? Managers realized that these choices would not only determine the company's short-term growth trajectory, but also shape the longer-term value of the Mavi brand.
Lending Club follows the path of founder and CEO Renaud Laplanche as he scales his successful P2P lending company both pre- and post-IPO. From debating with bankers on the proper valuation metrics for the company, to managing customer acquisition costs as the competitive landscape rapidly changes, the Lending Club case explores several key challenges that come with operating a fin-tech company at scale.
This case scenario is based on a real company (with name disguised and artificial but representative data) that uses search engine advertising, running paid search ads on the two major search engines, Google and Bing. Students are presented with weekly traffic data for both Google and Bing and are asked to perform an ROI analysis for the company. Solution Notes are available for both student and instructor use for this case.
This case study discusses Magic: the Gathering (Magic), a collectible card game that is owned by Wizards of the Coast (Wizards), a subsidiary of Hasbro. In particular, it focuses on how Wizards manages the Magic player community and its need to learn how to respond to various kinds of consumer-generated content (CGC) created by players. Magic is a collectible card game that has seen tremendous growth since its inception in 1993. By 2015 it had 20 million players worldwide and generated annual revenue of $200 million USD. Its primary revenue stream comes from selling sealed packs of Magic cards, and it releases a new set every three months. There are various types of packs available; each contains about 15 cards. Players must use these cards to construct a 60-card deck, which they use to play head-to-head against an opponent's deck. The case study describes in detail how Wizards interacts with its community. Predominantly, the company uses social media to release news, gather feedback, and respond to issues. Particularly noteworthy are how Wizards uses Spoiler Season to increase the anticipation for new card sets, and Friday Night Magic, casual tournaments at local game stores to connect players with vendors. The player community is very diverse, both in terms of age (roughly from 12 to 45 years old) and level of engagement (from occasional/casual to tournament-level, competitive players). In addition, Magic players are drawn to the game for a variety of reasons, which is illustrated by the three player types (or personas) Timmy, Johnny and Spike. This diversity is important for Wizards to keep in mind when the company develops new products, promotes its products, organizes events, and interacts with the community.
In November 2015, U.S.-based biopharmaceuticals company Pfizer [NYSE: PFE] and Ireland-based pharmaceutical company Allergan [NYSE: AGN] announced a $160 billion merger to move Pfizer's domicile out of the United States to Ireland in the largest inversion deal ever. The announcement came just days after the U.S. Treasury Department laid out a set of restrictions on tax inversions; however, the deal was structured to avoid those restrictions. According to the U.S. Department of the Treasury, "By undertaking an inversion transaction, companies move their tax residence overseas to avoid U.S. taxes without making significant changes in their business operations." Two primary benefits provided by inversions were: (1) the removal of a company's foreign operations and income from the U.S. taxing jurisdiction to achieve pure "territorial" tax treatment (in which income was taxed only in the country where it was earned); and (2) the reduction of U.S. taxes on income from U.S. operations through the use of various "earnings stripping strategies" (e.g., making payments of deductible interest or royalties from the U.S. entity to a new foreign parent). According to Reed College economist Kim Clausing, inversions and other income-shifting techniques reduced Treasury revenues by as much as $111 billion in 2012.