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Supplements the (A) case.

Chase Bank and Chemical Bank intend to merge, producing the largest commercial bank in the United States, the fourth largest in the world. Projected financial benefits under the merger reflect significant planned reduction in operating costs, including 17,000 employee layoffs. Management also expects the merger to produce significant revenue increases as a result of increased economies of scale and scope, and other benefits of size and market leadership. The task of valuing the merger gains, negotiating an acceptable merger price, and implementing the post-merger restructuring is extremely complex.

Explores the development of a new product offering based on the first issuance of "real" bonds in the United States. Looks at a specific organization's efforts to position itself to profit from this market development. Follows naturally from a case on nominal bonds.

Spreadsheet Supplement for case 298017

Spreadsheet Supplement for case 298106

This is an MIT Sloan Management Review article. Three forces are changing the customary rules of distribution channel management: proliferating customer needs, shifts in the balance of power in channels, and changing strategic priorities. Many firms are outsourcing the distribution function to third parties. Others, using IT, direct marketing, database marketing, and other variations, contact customers directly, so the roles of the distributor or dealer are evolving. And some firms are simultaneously experimenting with a number of distribution options before committing to one system. Firms are also dealing through specialists rather than generalists, because specialists tend to be more focused and nimble than the manufacturer in a turbulent environment. The authors propose a strategic approach to planning for future channel configurations, control of the channel, and resource commitment. The channel must address customer needs, ensure that the customer sees the value in the company's offering, be cost efficient, and handle any new products and services that emerge. The authors suggest that a company first assess its current distribution channels, each channel's profitability, its market coverage, and the cost of each channel function. Next, a company should choose a channel arrangement based on sound design principles that recognize that the distribution strategy must contribute to the business' overall objectives.

This is an MIT Sloan Management Review article. A company that initiates a customer loyalty program usually wants to retain existing customers, maintain sales levels and profits, increase the potential value of existing customers, and encourage customers to buy its other products as well. But, based on a review of behavioral loyalty research, the authors posit that the schemes do not fundamentally alter market structure and, instead, increase market expenditures without really creating any extra brand loyalty. Research shows that only about 10% of buyers for many types of frequently purchased consumer goods are 100% loyal to a particular brand over a one-year period. Consumers do not buy only one brand. For any loyalty program to be effective, say the authors, it must leverage the value of the product to the customer. Therefore, the program must have: (1) a direct or indirect effect, such as the General Motors rebate scheme that builds up savings toward a new car; (2) a perception of value, such as cash; and (3) timing--when rewards are available. The more delayed the reward, the less powerful. The authors suggest ways to design an effective program: ensure that it enhances the value proposition of the product or service, fully cost the program, maximize the buyer's motivation to purchase again, and consider the market conditions when planning.

George Zimmer, CEO of the Men's Wearhouse, is considering what has made the firm so successful; what, if anything, it should do differently to continue to succeed; and how to manage its growth and culture as the firm expands in the very competitive men's tailored clothing market. Retailing is the largest industry in the United States. Most retailing firms have traditionally been staffed with poorly paid, poorly trained, part-time help, and often experience tremendous turnover. Founded in 1973 in Houston, the Men's Wearhouse now has over 300 stores and is adding stores at the rate of 50 per year as it extends its geographic reach. This case provides information on the founder's beliefs, the firm's financial performance, the company's management practices, and detailed information on its various training activities.

Vic, the CEO of a sporting goods company in this fictional case study, is pleased with the numbers. For several years now, they've gone steadily in one direction: up. But there's trouble in paradise. Hidden from the public's view of industry-dominating winners--from the coolest snowboards to the hottest in-line skates--lies a product-development department that may be ready to shatter like cheap fiberglass. Carver, the company's chief of product development, is the workaholic mad genius who is responsible for most--he might say all--of the company's successful products. At the same time, he has managed to alienate the rest of his staff. Four commentators suggest how Vic can keep the company's product-development group intact and its sales growth strong. In 97401 and 97401Z, Victor Vroom, June Rokoff, David Olsen, and David H. Burnham suggest how Vic can keep the company's product-development group intact and its sales growth strong.

Vic, the CEO of a sporting goods company in this fictional case study, is pleased with the numbers. For several years now, they've gone steadily in one direction: up. But there's trouble in paradise. Hidden from the public's view of industry-dominating winners--from the coolest snowboards to the hottest in-line skates--lies a product-development department that may be ready to shatter like cheap fiberglass. Carver, the company's chief of product development, is the workaholic mad genius who is responsible for most--he might say all--of the company's successful products. At the same time, he has managed to alienate the rest of his staff. In 97401 and 97401Z, Victor Vroom, June Rokoff, David Olsen, and David H. Burnham suggest how Vic can keep the company's product-development group intact and its sales growth strong.

Vic, the CEO of a sporting goods company in this fictional case study, is pleased with the numbers. For several years now, they've gone steadily in one direction: up. But there's trouble in paradise. Hidden from the public's view of industry-dominating winners--from the coolest snowboards to the hottest in-line skates--lies a product-development department that may be ready to shatter like cheap fiberglass. Carver, the company's chief of product development, is the workaholic mad genius who is responsible for most--he might say all--of the company's successful products. At the same time, he has managed to alienate the rest of his staff. In 97401 and 97401Z, Victor Vroom, June Rokoff, David Olsen, and David H. Burnham suggest how Vic can keep the company's product-development group intact and its sales growth strong.

Top level managers know that conflict over issues is natural and even necessary. Management teams that challenge one another's thinking develop a more complete understanding of their choices, create a richer range of options, and make better decisions. But the challenge--familiar to anyone who has ever been part of a management team--is to keep constructive conflict over issues from degenerating into interpersonal conflict. From their research on the interplay of conflict, politics, and speed in the decision-making process of management teams, the authors have distilled a set of tactics characteristic of high-performing teams. These tactics work because they keep conflict focused on issues; foster collaborative, rather than competitive, relations among team members; and create a sense of fairness in the decision-making process.

Many global companies believe they have a moral duty to respond to the world's problems but are unsure how to do that and still pursue a reasonable profit for their shareholders. Ryuzaburo Kaku, honorary chairman of Canon, the Japanese technology company, suggests that companies consider kyosei, a business credo that he defines as a "spirit of cooperation" in which individuals and organizations work together for the common good. Kyosei, Kaku claims, has helped Canon make a significant and positive impact on many world problems as the company has grown to become one of the world's preeminent innovators and manufacturers of technology.

Core competencies and focus are now the mantras of corporate strategists in Western economies. But while managers in the West have dismantled many conglomerates assembled in the 1960s and 1970s, the large, diversified business group remains the dominant form of enterprise throughout many emerging markets. As those markets open up to global competition, consultants and foreign investors are increasingly pressuring groups to conform to Western practice by scaling back the scope of their business activities. Already a number of executives have decided to break up their groups in order to show that they are focusing on only a few core businesses. There are reasons to worry about this trend, say the authors. Focus is good advice in New York or London, but something important gets lost in translation when that advice is given to groups in emerging markets.

Can the U.S. economy grow much faster than the two-point-something percent it has in recent years? Standard economic analysis suggests that it cannot. But many influential business leaders and journalists--and even a few economists--have embraced a radical economic theory that argues that the old speed limits to growth are obsolete. According to this so-called new paradigm, rapid technological change means that the economy can grow much faster than it used to; global competition means that a booming economy will not produce high inflation. Many people in the business community take the new doctrine very seriously, notes MIT economist Paul Krugman. Unfortunately, he says, it is riddled with gaping conceptual and empirical holes. Krugman lays out in clear terms the macroeconomic principles that explain how markets interact and why there are limits on growth. We would all like the U.S. economy to grow faster than it has, says Krugman, but all the evidence suggests that it cannot.

Innovate or fall behind: The competitive imperative for virtually all businesses today is that simple. Responding to that command is difficult, however, because innovation takes place when different ideas, perceptions, and ways of processing and judging information collide. And it often requires collaboration among players who see the world differently. As a result, the conflict that should take place constructively among ideas all too often ends up taking place unproductively among people. Disputes become personal, and the creative process breaks down. The manager successful at fostering innovation figures out how to get different approaches to grate against one another in a productive process the authors call creative abrasion. Managers who want to encourage innovation need to examine what they do to promote or inhibit creative abrasion.

Most profitable strategies are built on differentiation: offering customers something they value that competitors don't have. But most companies concentrate only on their products or services. In fact, a company can differentiate itself at every point where it comes in contact with its customers--from the moment customers realize they need a product to service to the time when they dispose of it. The authors believe that if companies open up their thinking to their customers' entire experience with a product or service--the consumption chain--they can uncover opportunities to position their offerings in ways that neither they nor their competitors thought possible. The authors show how even a mundane product such as candles can be successfully differentiated. By analyzing its customers' experiences and exploring various options, Blyth Industries, for example, has grown from a $2 million U.S. candle manufacturer into a global candle and accessory business with nearly $500 million in sales and a market value of $1.2 billion.

Every seasoned investor knows that detailed financial projections for a new company are an act of imagination. Nevertheless, most business plans pour far too much ink on the numbers--and far too little on the information that really matters. Why? William Sahlman suggests that a great business plan is one that focuses on a series of questions. These questions relate to the four factors critical to the success of every new venture: the people, the opportunity, the context, and the possibilities for both risk and reward. A great business plan is not easy to compose, Sahlman acknowledges, largely because most entrepreneurs are wild-eyed optimists. But one that asks the right questions is a powerful tool. A better deal, not to mention a better shot at success, awaits entrepreneurs who use it.

In the two decades following World War II, U.S. productivity grew at an annual rate of 3%. But since the beginning of the 1970s, it has grown at only about 1%. What is preventing a productivity revival in the U.S. economy? Clearly not the manufacturing sector, which has rebounded since the early 1980s. The service sector, on the other hand, has seen productivity growth rates stagnate during the same period. Why? Michael Van Biema and Bruce Greenwald believe that the usual explanations are incomplete and have resulted in some serious misconceptions. The authors point out the limitations of those explanations and offer one of their own. They lay the blame in two places: the ineffectiveness of many service-sector managers at improving productivity and the inherent complexity of the sector itself.

As the traditional system of health care in the United States gives way to a regime run increasingly by the private sector, a powerful force is emerging: the patient. According to Harvard Business School professor Regina Herzlinger, health care is much like other service industries. Providers that hope to survive must cater to increasingly demanding and well-educated consumers. In a review of Herzlinger's book Market-Driven Health Care: Who Wins, Who Loses in the Transformation of America's Largest Service Industry, Alexandra Wyke, managing editor at the Economist Intelligence Unit, argues that the path to consumerism in medicine will be longer and bumpier than Herzlinger suggests.