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The CEO of Enron Gas Services (EGS), a subsidiary of the largest U.S. integrated natural gas firm, considers the risks and opportunities of selling a variety of natural gas derivatives, both embedded in gas delivery contracts and as free-standing financial contracts. In its three years of existence, EGS had been successful by offering buyers and sellers of natural gas a variety of innovative pricing contracts. In order to mitigate the risks of having mismatch between its commitments to buy and sell gas, EGS established a system to decompose all of its commitments into a handful of different risks of exposures. Its centralized risk-management group not only measures the firm's exposures but also enters into financial contracts to offset the exposure brought about by the firm's business activities.

Fremont Financial is an asset-based lender to middle-market companies. This case considers two options for Fremont to raise capital to finance its loan portfolio. Fremont can: 1) extend its existing bank line of credit, or 2) issue commercial paper through a special purpose conduit. The case emphasizes comprehension of Fremont's business as a non-bank lender and the manner by which these two financing choices address asymmetric information and moral hazard problems endemic to financial intermediation.

Fremont has a third option to finance its loan portfolio, which involves securitizing and selling the small-business loans into the capital markets. Emphasizes asymmetric information and moral hazard problems involved in designing an asset securitization. When used in conjunction with the (A) case, the sequence highlights the relative strengths and weaknesses of institutions and markets in providing solutions to funding problems.

Spreadsheet Supplement for case 294076

Spreadsheet Supplement for case 294098

Spreadsheet Supplement for case 294090

Deals with the decision of whether to split Marriott into two companies Marriott International and Host Marriott. Marriott has run into problems owing to the decline in real estate valuation. At the time of the case, it has a significant percentage of assets in hotels it planned to sell. The problem makes it difficult for Marriott to pursue growth strategies. Furthermore, the market price of the company has declined significantly. The reorganization proposed in the case is meant to deal with these problems.

Materials Technology Corp. (MTC) is an MIT-based start-up company that identified an initial product market for its advanced materials-processing technology using conventional market research techniques. While pursuing that market--advanced microelectronic components--customers from very different markets such as steelmaking and electricians' hardware approach MTC, offering to pay MTC substantial money to develop and manufacture products for it. This calls into question MTC's initial market and product strategy.

Introduces and explains the six major interest rate derivative products: swaps, forward rate agreements, Eurodollar futures, bond options, caps/floors/collars, and swap options.

In this fictional case study, Ann Reardon, CEO of the Eldora Co. (EDC), has led her organization to become the largest and most profitable bicycle maker in the U.S. market. When her competition was moving its operations overseas because of lower labor costs, she chose to keep EDC's plant on the same campus as corporate headquarters in Boulder, Colorado. She believes that decision has been the primary reason for EDC's success. With the marketing, engineering, and manufacturing staff having easy access to one another, the company has been able to take advantage of the latest technical and stylistic innovations and deliver a more timely product to the retailers. Now, however, the U.S. market is reaching saturation, and the Asian market is nearly doubling annually. EDC's vice president of manufacturing wants Ann to build a new plant in China, but the marketing vice president wants to put a direct sales operation in Asia and outsource production on either a short- or a long-term basis. Manufacturing experts give their views.

However popular comprehensive research and planning may be in some business arenas, they don't suit the fast-moving environment of start-ups. Entrepreneurs must move quickly or opportunity may no longer exist. Theirs is a world of ingenuity, spontaneity, and hustle. Profitable survival requires an edge derived from some combination of a creative idea and a superior capacity for execution. Research on more than 200 thriving ventures reveals four helpful guidelines for aspiring founders. First, effective entrepreneurs screen out unpromising ideas as early as possible, and they accomplish this through judgment and reflection, not gathering lots of data. Next, they assess realistically their financial situation, personal preferences, and goals for the venture. To conserve time and money, successful new founders also minimize the resources they devote to researching ideas. And, unlike managers in big corporations, entrepreneurs don't need all the answers to act.

IT specialists often promise that technology will serve as a catalyst for change. But, as the author points out, it is a promise that usually goes unfulfilled. IT managers put too much emphasis on hardware and not enough emphasis on the soft science of how people actually share information. Too many managers still believe that, once the right technology is in place, appropriate information sharing will follow. To achieve its promise IT needs to take a human-centered approach. Looking at companies that have successfully addressed this problem--like Symantec Corp., Chemical Bank, Hallmark Cards, and Rank Xerox, U.K.--the author directly addresses how to rebuild an organization's information culture and how to get beyond the technologies to changing people's behaviors.

New Age entrepreneurs are redefining the way business is conducted, placing environmental and moral needs and job satisfaction at or near the top of the corporate mission. Today's company is a place where managers encourage employees to do community work on office time and where everyone creates products that they themselves love. This view of work may seem overly idealistic to many, but New Age ideals are growing in popularity among today's workers whose futures seem increasingly uncertain in the wake of layoffs and restructurings. While the founders of companies like Tom's of Maine or The Body Shop believe they are making the world a better place, writers like Paul Hawken and Charles Handy have discovered a more pragmatic use of New Age ideals, as a way for business people to think about their organizations.

Ethics is as much an organizational as a personal issue. Managers who fail to provide leadership and institute systems that facilitate ethical conduct share responsibility with those who knowingly benefit from corporate misdeeds. Executives who ignore ethics run the risk of personal and corporate liability. In addition, they deprive their organizations of the benefits available under new federal guidelines that recognize for the first time the organizational and managerial roots of unlawful conduct and base fines partly on the extent to which companies have taken steps to prevent that misconduct. An integrity-based approach to ethics management combines a concern for the law with an emphasis on managerial responsibility for ethical behavior. When integrated into the day-to-day operations of a company, such strategies can help prevent damaging ethical lapses, while tapping into powerful human impulses for moral thought and action.

As a manager and executive with Johns-Manville, Bill Sells witnessed one of the greatest management blunders of the twentieth century. This blunder was denial, and in the end it took thousands of lives, destroyed an industry, and wiped out as much as 98% of stockholder equity. From today's perspective, it hardly matters what and when Manville knew about asbestos. Modern liability standards seem to hold that the company should have known. When the author was promoted to head Manville's fiberglass division, with asbestos virutally banned, fiberglass had become its chief source of revenue. When fiberglass too came under suspicion as a health hazard, the author used the lessons he had learned in asbestos to implement a policy of product stewardship; intensive workplace monitoring; full disclosure; assiduous communication with customers, workers, regulators, and the media; and an active scientific research program. Studies now indicate that fiberglass is safe. Sales and profits indicate that product stewardship is a source of competitive advantage.

There's a difference between being an international company--selling globally, having global brands, or having operations in different countries--and being a global enterprise. Few companies leverage their capabilities around the world to create powerful, cohesive organizations. CEO David Whitwam's vision is for Whirlpool to become an integrated, global enterprise. But a CEO can't change a company's mission and mind-set by edict alone. He or she must be able to convince employees throughout the organization that such change is not only possible, but also the best course of action. Employees must want to change their beliefs and behavior. The CEO must then create crossborder processes that force that change to occur.

The authors have seen North American and European companies make improvements by implementing lean production techniques. The authors now argue that linking these individual breakthroughs up and down the value chain, creating a lean enterprise, is the next step in achieving superior performance. The lean enterprise is a group of individuals, functions, and legally separate but operationally synchronized companies that creates, sells, and services a family of products. Few companies have created a lean enterprise. Individuals, functions, and companies have needs that conflict with each other and with those of the lean enterprise. The strengths and weaknesses of the German, U.S., and Japanese industrial traditions suggest that trade-offs between these three entities are inevitable.

Written from the point of view of Richard Jenkins, the president of CelluComm. Presents his reflections on the series of events leading to the firing of one of CelluComm's general managers, Erik Peterson. A rewritten version of an earlier case.

Banc One's share price has been falling recently due to analyst and investor concern over the bank's heavy use of interest rate derivatives. Dick Lodge, chief investment officer in charge of the bank's investment and derivative portfolio, must recommend to the CEO a course of action to allay investors' fears and communicate to the market the reasons for Banc One's use of derivatives. The bank uses interest rate swaps to manage the sensitivity of its earnings to changes in interest rates and as attractive investment alternatives to conventional securities.

Supplements Project Ghost Busters (A).