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This case involves part of a module on financing large projects in the elective curriculum course entitled "Large-Scale Investment." It is set in August 1999, just after Iridium, a global communications firm, declared bankruptcy. Although the case describes Iridium's creation, development, and commercial launch, it concentrates primarily on the firm's financial strategy and execution as it raised more than $5 billion of capital. It describes the specific securities Iridium issued, the sequence in which it issued them, and the firm's financial performance prior to bankruptcy. Using analyst forecasts, students can value the firm prior to its bankruptcy, but will recognize how difficult it is to value technology start-ups given the uncertainty in demand.

Synthesizes and extends work on barriers to negotiated agreement. Five key types of barriers are described--structural, strategic, psychological, institutional, and cultural. Approaches to overcoming these barriers are discussed.

Supplements The Reagan Plan.

Describes the development strategy followed by Korea under the leadership of Park Chung Hee as well as the reform efforts embarked on by his successors.

Heartport, an entrepreneurial medical device maker, has introduced several innovative systems for conducting less-invasive cardiac surgery. Despite initially high expectations, the company has struggled to get its technology adopted by cardiac surgeons. The company's newest CEO, the third in less than four years, must figure out how to turn around the fledgling company. This case describes Heartport's method of performing minimally invasive cardiac surgery as well as rival techniques for treating cardiovascular disease. Describes the evolution of the company, its product strategy, and its fortunes over the period 1991-99.

What is the relationship between good fortune, professional success, and a moral obligation to other people? Jai Jaikumar, who as a youth was saved by a shepherd woman after a tragic mountaineering accident in the Himalayas, and who later rose to the top of his professional domain, believed that good fortune, success, and obligation were necessarily and inescapably connected. This case recounts the extraordinary true story of Jai's mountain fall and subsequent rescue. Contains remarkable parallels to the HBR classic The Parable of the Sadhu, except that here we learn the opposite perspective, with the story revealed through the eyes of the foreigner in distress who must place his fate in the hands of a stranger.

What is the relationship between good fortune, professional success, and a moral obligation to other people? Jai Jaikumar, who as a youth was saved by a shepherd woman after a tragic mountaineering accident in the Himalayas, and who later rose to the top of his professional domain, believed that good fortune, success, and obligation were necessarily and inescapably connected. This case describes Jai's understanding of the moral implications of his rescue, and its particular relevance for his subsequent professional success and ultimate appointment as a professor at Harvard Business School. As a teacher, Jai encouraged each of his students to ask the questions that he asked himself: How did you get this far in life, and what does this mean, if anything, for your duties to others?

Introduces students to negotiations between venture capitalists (VCs) and the limited partners who provide the VCs' capital. Also discusses negotiations between VCs and other VCs, including those within a VC firm itself. Explores interests, sources of negotiating power, barriers to reaching agreement, and common contractual terms. Describes how the parties try to reduce information asymmetries, align incentives, control decision making, and protect financial downside.

In 1995 McDonald's was the largest restaurant chain in the United States with domestic sales of almost $15.9 billion. McDonald's was also the country's fourth-largest advertiser, spending $490 million on measured media in 1995. On May 9, 1996, the company introduced the Arch Deluxe, a quarter-pound hamburger that was the first in a planned series of sandwiches targested to adults. By the end of May, McDonald's had sold or given away 100 million Arch Deluxe burgers. Despite this success, in the second quarter of 1996 some store sales at McDonald's restaurants declined slightly from the same quarter in the previous year. Thus McDonald's faced several key decisions. Should the Arch Deluxe burger be modified? What changes, if any, shoud be made in the marketing campaign? Should McDonald's proceed with plans to introduce fish and chicken line extensions?

This note addresses the methods used to value companies in an M&A (mergers and acquisitions) setting. It provides a detailed description of the discounted-cash-flow (DCF) approach and reviews other methods of valuation such as book value, liquidation value, replacement cost, market value, trading multiples of peer firms, and comparable transaction multiples.

Presents the story of a music retailer in Miami which started in the late 1940s, grew throughout the 1960s and 1970s, and went public in 1985 before experiencing a deep industry crisis in the mid-1990s. At issue in 1996 is whether the company should attempt to sell again after an aborted sale attempt two years earlier. Should the owners try again to sell before the industry economics become so unattractive as to make a future sale impossible? Or should they hold out, try to improve performance, and then try to sell in a couple more years? This question is asked against the backdrop of a strong history as a family-owned company. Martin Spector, the company's founder, has turned the company over to his daughters, Ann (CEO) and Roz (COO), who still defer to him on major decisions. In the context of the important decision of whether to sell the company, the family dynamics take center stage.

Explores the reasoning behind the final decision to sell and the decision-making process that leads to the final question of "if so, to whom?" Four of the bidders are music retailers and the fifth is a Tampa entrepreneur.

Describes the evolution of Microsoft's human-resource philosophies, policies, and practices and how they used as a core of the company's competitive advantage. In particular, the focus is on how Microsoft tried to retain its ability to recruit, develop, motivate, and retain first-class talent as it grew from a start-up to a global behemoth. Triggered by high-profile, senior-level departures in 1999, the company must decide if it is time to change its "hard core" culture came to be.

Spreadsheet supplement for case 300-001.

Artists for Humanity (AFH) is a nonprofit that hires 30 to 40 teenagers each year for after-school work and training in the arts and entrepreneurship. The young artists, working in six different studios, make and sell the art they produce. AFH was started in 1990 by local artist Susan Rodgerson and six middle school students in a Boston garage studio; in 1993, they were able to expand and move to two floors of a wharf-area warehouse. At the time of the case, Rodgerson, the executive director, is weighing issues of expansion, staff turnover, and a capital campaign to raise money to secure a building (the warehouse lease ran out in 2001). The case showcases the challenges that face many small nonprofit organizations, and outlines some of the particular characteristics that describe nonprofit organizations that also have an entrepreneurial arm.

Conventional wisdom says that companies from the periphery of the global market can't compete against established global giants from Europe, Japan, and the United States. Companies from developing countries have entered the game too late; they don't have the resources. But Christopher Bartlett and Sumantra Ghoshal disagree. The problem for most aspiring multinationals from peripheral countries, say the authors, is that they enter the global marketplace in low-margin businesses at the bottom of the value curve, and they stay there. But it doesn't have to be that way. They studied 12 emerging multinationals based in such countries--from emerging markets like Brazil to relatively more prosperous yet still peripheral nations like Australia to developing countries like the Philippines. These companies now enjoy global success because they treated global competition as an opportunity to build capabilities and move into more profitable segments of their industry. The path to globalization isn't easy, but the authors show that it is possible. Each company in the study overcame the same core challenges. They broke out of the mind-set that they were unable to compete successfully on the global stage. They adopted strategies that made being a late mover a source of competitive advantage. They developed a culture of continual cross-border learning. And they all had leaders who drove them relentlessly up the value curve. The companies discussed in this article are models for the thousands of marginal companies in peripheral economies that have the potential to become legitimate global players.

Why didn't a single minicomputer company succeed in the personal computer business? Why did only one department store--Dayton Hudson--become a leader in discount retailing? Why can't large companies capitalize on the opportunities brought about by major, disruptive changes in their markets? It's because organizations, independent of the people in them, have capabilities. And those capabilities also define disabilities. As a company grows, what it can and cannot do becomes more sharply defined in certain predictable ways. The authors have analyzed those patterns to create a framework managers can use to assess the abilities and disabilities of their organization as a whole. When a company is young, its resources--its people, equipment, technologies, cash, brands, suppliers, and the like--define what it can and cannot do. As it becomes more mature, its abilities stem more from its processes--product development, manufacturing, budgeting, for example. In the largest companies, values--particularly those that determine what are its acceptable gross margins and how big an opportunity has to be before it becomes interesting--define what the company can and cannot do. Because resources are more adaptable to change than processes or values, smaller companies tend to respond to major market shifts better than larger ones. The authors suggest ways large companies can capitalize on opportunities that normally would not fit in with their processes or values; it all starts with understanding what the organizations are capable of.

If you think the Internet has changed the shape of business, just imagine what genetic engineering is going to do. In this groundbreaking article, Juan Enriquez and Ray Goldberg explain how advances in genetics will not only have dramatic implications for people and society, they will reshape vast sectors of the world economy. The boundaries between many once-distinct businesses, from agribusiness and chemicals to pharmaceuticals and health care to energy and computing, will blur, and out of that convergence will emerge what promises to be the largest industry in the world: life science. And as scientific advances continue to accelerate, more and more businesses will be drawn, by choice or by necessity, into the life-science industry. Companies have realized that unlocking life's code opens up virtually unlimited commercial possibilities, but operating within this new industry presents a raft of wrenchingly difficult challenges as well. Companies must rethink their business, financial, and M&A strategies. They must make vast R&D investments with distant and uncertain payoffs. They must enter into complex partnerships and affiliations, sometimes with direct competitors. And perhaps most difficult, they must contend with a public that is uncomfortable with even the thought of genetic engineering. The optimal structure of the life-science industry--and of the companies that compose it--is as yet unknown. But the actions that executives take now will go a long way toward determining the ultimate role their companies play in the world's largest and most important industry.

A leader's singular job is to get results. But even with all the leadership training programs and "expert" advice available, effective leadership still eludes many people and organizations. One reason, says Daniel Goleman, is that such experts offer advice based on inference, experience, and instinct, not on quantitative data. Now, drawing on research of more than 3,000 executives, Goleman explores which precise leadership behaviors yield positive results. He outlines six distinct leadership styles, each one springing from different components of emotional intelligence. Each style has a distinct effect on the working atmosphere of a company, division, or team, and, in turn, on its financial performance. The styles, by name and brief description alone, will resonate with anyone who leads, is led, or, as is the case with most of us, does both. Coercive leaders demand immediate compliance. Authoritative leaders mobilize people toward a vision. Affiliative leaders create emotional bonds and harmony. Democratic leaders build consensus through participation. Pacesetting leaders expect excellence and self-direction. And coaching leaders develop people for the future. The research indicates that leaders who get the best results don't rely on just one leadership style; they use most of the styles in any given week. Goleman details the types of business situations each style is best suited for, and he explains how leaders who lack one or more of these styles can expand their repertories. He maintains that with practice leaders can switch among leadership styles to produce powerful results, thus turning the art of leadership into a science.

Stock option grants have come to dominate the pay of top executives. But while they've made many people wealthy, their impact on business in general remains controversial. Critics say options motivate corporate leaders to boost stock values in the short run rather than build companies that will thrive over the long run. Drawing on an extensive analysis of the real-world impact of options, Brian Hall argues that the critics are wrong. Option grants are the best compensation mechanism we have for getting managers to act in ways that ensure the long-term success of their companies and the well-being of workers and stockholders. But because options tend to be poorly understood, companies often end up with counterproductive plans. The author explains the three types of option plans that can be used. Fixed value plans, for which executives receive options of a predetermined value every year, are ideal for companies that set pay according to compensation surveys, but they weaken the link between pay and performance. Fixed number plans, which stipulate the number of options executives will receive over the plan period, provide a much stronger link. The lump-sum megagrant is the most highly leveraged type of grant because it not only fixes the number of options in advance, it fixes the exercise price as well. The type of plan must be carefully matched to the company's strategy. The article is accompanied by several exhibits, including a chart entitled "Which Plan?" that succinctly sets out the weaknesses and strengths of each type of option program.