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Supplements the (A) case.

Introduces the fundamental notions of activity-based costing (ABC). Motivates ABC by means of a simple example, a single and a diversified pen factory. Proceeds to show how ABC assigns costs more accurately to products and customers by: 1) identifying the activities being performed by organizational resources; 2) assigning resource costs to the activities; 3) identifying all the products, services, and customers of the organization; and 4) assigning activity costs to these outputs via activity cost drivers. Also covers activity attributes, such as the cost hierarchy, value and non-value added, and business processes, as well as different types of activity cost drivers: transaction, duration, and intensity. Closes with the admonition to balance the benefits from more accurate cost estimates with the cost of developing an appropriate activity-based cost system.

As in most emerging markets, a significant portion of the Indian private sector is dominated by extensively diversified, often family-owned or controlled, business groups. This case examines the strategy and structure of one of the largest business groups in India, at a time when the economy is going through substantial transition. RPG Enterprises' restructuring in response to the policy reforms in India (1991-95) allow one to understand the underlying reasons for the existence of the business group in the first instance. Also permits a discussion of some of the difficulties of restructuring in an emerging market.

Describes the operations and strategy of the world's largest, fastest growing branchless bank. Using a person-to-person interface over conventional phone lines, First Direct provides standard banking and related financial products to nearly 700,000 customers throughout the United Kingdom. By employing a sophisticated customer information system and a highly educated workforce on the frontline, the bank has achieved customer satisfaction and retention levels that are roughly twice those of its nearest competitor in either direct or traditional retail banking services. This outcome was achieved through the use of information infrastructure to personalize services, model preference profiles, and cross-sell relevant products in the course of over-the-phone banking interactions. This breakthrough service model has demonstrated that banks may deliver greater quality of service at significantly lower costs by exploiting virtual or "marketspace" channels for service delivery and customer relationship management. The question facing the bank, a unit of Midland plc (which was, in turn, owned by HSBC), was how fast, in what manner, and in what market segments the organization should grow.

In early 1997, Smith Breeden Associates, a money management and consulting firm, was pondering the future of the Equity Plus Fund. The Equity Plus Fund was an S&P enhanced-index fund that tried to outperform the S&P Index by replicating the index using low-cost derivative strategies and investing the remaining cash in a hedged portfolio of mortgage-backed securities. The fund had performed well since inception, with an annualized total return above that of the S&P Index. However, this performance had not resulted in significant growth of the fund's assets. With its performance record, Smith Breeden had a number of options. It could market the fund more aggressively, it could offer other sector-specific funds, or it could set up an enhanced index fund based on an international stock-market index.

Spreadsheet Supplement for case 297089

Provides a brief overview of the history of the savings and loans, the savings and loans crisis of the 1980s and 1990s, and the creation of the mortgage markets in the United States. Also explains briefly the most common types of mortgage-backed securities available.

A small team of Canadian managers from the Bank of Nova Scotia are faced with the challenge of managing a recently acquired Mexican operation. Managers must cope with a language barrier and cultural differences as they try to restructure the over-staffed Mexican financial institution.

Management at Sprint Corp. must decide what action to take with a small telemarketing operation that is about to vote on union representation. If employees vote in favor of a union, the operation would become the first business unit within Sprint Long Distance to be represented by a union. Closure of the plant is an option to be considered. This case illustrates some of the reasons employees seek union representation and requires that the student consider what implications such representation would have for the employer.

The Exxel Group, a private equity group based in Buenos Aires, is considering a buyout of Argencard, Mastercard's exclusive licensee in Argentina. To complete the deal, however, it will need to raise additional financing from U.S. investors. Both the valuation and the terms of the proposed deal prove problematic.

In early 1997, Harrington Bank, a small Indiana savings and loan (thrift) wondered what its next move should be. Harrington was acquired in 1988 by the principals of Smith Breeden Associates, a money-management and consulting firm specializing in the application of modern financial technology to the pricing, hedging, and risk management of mortgage securities. The Smith Breeden principals had established an arms-length contract with Harrington, where Smith Breeden advised Harrington on the pricing, hedging, active management, and risk management of Harrington's assets and liabilities. Since the acquisition, the bank had done very well. Assets had grown from $75 million in 1988 to over $520 million at the end of 1996. Its net interest margin had more than tripled, core operating profits had grown by over 400%, and return on equity had been substantially increased. Still, Harrington in 1996 was not an average thrift. 80% of its assets consisted of mortgage-backed securities (vs. 30% for the median thrift), and most of its liabilities were not deposits but other forms of wholesale funding.

James McDowell, vice president of marketing at BMW North America, Inc., must design Phase II communication strategies for the launch of the new BMW Z3 Roadster. The program follows an "out-of-the-box" prelaunch campaign centered on the placement of the product in the November 1996 James Bond hit movie, "GoldenEye", and including other "nontraditional" elements such as a product appearance on Jay Leno's Tonight Show, an offering of a Bond Edition Roadster in the Neiman Marcus Christmas Catalog, and large-scale public relations activities. McDowell must assess the effectiveness of the prelaunch activities and design marketing tactics that can sustain product excitement until product availability in March. Includes color exhibits.

Spreadsheet supplement for case 597-002.

Spreadsheet Supplement for case 297088.

Spreadsheet Supplement for case 297088

Spreadsheet Supplement for case 297068

Jim Sharpe, 11 years after receiving his MBA from Harvard and working for others, has finally become his own boss and 100% owner of manufacturer of aluminum extrusions. After 10 months of an unfunded search, he acquires the business in an LBO and prepares to face his employees on the first day.

Updates Apple Computer--1992.

Supplements Wal-Mart Stores, Inc.

A venture-funded start-up runs into trouble when health care reimbursement policies change radically. With the help of its board, the company develops a new strategy, becomes profitable, and makes a public offering. The second wave of changes introduced by Clinton health-care initiatives create the need for strategic reevaluation and operational changes. The case traces the development and strategic changes