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A fundamental policy decision every government must make is whether, and to what extent, to manage the exchange rate. This note discusses some of the basic costs and benefits of fixed and floating exchange rates.

This note, intended to accompany the short booklet An Illustrated Book of Bad Arguments, discusses the logical framework behind argumentation and presents the basic logical rules necessary to reach sound conclusions. Throughout, it refers to the philosophical foundations of logical reasoning and attempts to address these concepts in the framework of management. By the end, diligent students should be able to identify the necessary structure and components of a sound argument-as well as the fatal attraction of unsound arguments-and be able to apply these ideas to create long-term value as leaders of firms and organizations.

Since ethics is an integral part of management, it is vital for managers to become comfortable with the language of ethics, and to understand how it is inextricable from the language of business. Students will examine key theories of ethics and how they apply to management decision making.

The following note attempts to catalog and analyze a set of flawed but common arguments made in business and organizational settings to drive strategic and operational decision making. The arguments are deconstructed into syllogistic form-a set of premises leading to a conclusion-and analyzed for validity and soundness. The final part of this note pays attention to ways decision makers can avoid such bad arguments and the rationalization that often goes hand in hand with them.

Intuition can be a good guide for decision making when the current situation generally matches the situations in which the intuition was formed. But for novel or ambiguous situations, relying only on intuition can blind us to possible negative consequences by focusing our attention only on data that support our intuition. To reduce the likelihood of these errors and to better imagine and prepare for the outcomes of our choices, we use a decision-making framework. This note outlines the process of how to apply a framework.

Mr D M Patel, Senior Manager, Mobile Fish-selling Vans project, Gujarat Fisheries Central Co-operative Association Limited (GFCCA), had to present a plan to the Governing Body for the project which had been making losses for the last few years. He had GFCCA's annual accounts for 2009-2010 with him, but did not have specific details on the financial performance of the three vans. He needs to decide whether the project should be wound up or should undergo some modifications, while taking into account the objectives of the Governing Body. This case is meant for use in an introductory class in decision making for postgraduate or undergraduate management students to illustrate the process of rational decision making. It is also aimed at helping students write decision reports. The case requires the student to intuitively arrive at an understanding of the problem of fixed costs not being covered by the margin that the project is allowed to make, thus making sales volume a critical factor in breaking even. A second aspect that the students will have to identify is the possibility of reducing fixed costs by addressing cost inefficiencies or by making operational changes.

CEO and founder of Uber Technologies, Travis Kalanick, had made clear to investors and the public that expansion into China was one of his company's major priorities for 2016. Uber had already demonstrated remarkable capacity for rapid, global scaling and for operating despite its unclear legal status in many markets. But the China market, while offering Uber unprecedented opportunity in terms of customer demand, presented Uber with a host of new challenges, including a murky regulatory framework and a strong, native incumbent, Didi-Kuaidi, that boasted the lion's share of the ride-hailing market. Could Uber overcome these obstacles and thrive in the China market?

After years of ups and downs, Germany won its fourth World Cup in 2014.This case examines the national team's recent history and the changes they made to set themselves up for success.

In 2014, the Allergan Inc. board of directors received a surprise takeover offer from Valeant Pharmaceuticals in alliance with hedge fund activist Bill Ackman's Pershing Square Capital Management. In the unprecedented arrangement between an acquirer and a hedge fund activist, Pershing Square had quietly amassed a 9.7% stake in Allergan prior to the Valeant bid, making Pershing Square Allergan's largest shareholder. The case presents students with many of the decisions Allergan's directors faced amid challenges to Allergan's governance, management, and business model. In particular, the Allergan board must decide whether to pursue a $10 billion acquisition of Salix Pharmaceuticals while under threat of a proxy contest and a special shareholder meeting to vote on replacing Allergan's directors with a slate more favorable to the Valeant merger. The proposed Salix acquisition would give Allergan a new therapeutic market but would also make Allergan too big for Valeant to acquire.

In 2014, the Allergan Inc. board of directors received a surprise takeover offer from Valeant Pharmaceuticals in alliance with hedge fund activist Bill Ackman's Pershing Square Capital Management. In the unprecedented arrangement between an acquirer and a hedge fund activist, Pershing Square had quietly amassed a 9.7% stake in Allergan prior to the Valeant bid, making Pershing Square Allergan's largest shareholder. The case presents students with many of the decisions Allergan's directors faced amid challenges to Allergan's governance, management, and business model. In particular, the Allergan board must decide whether to pursue a $10 billion acquisition of Salix Pharmaceuticals while under threat of a proxy contest and a special shareholder meeting to vote on replacing Allergan's directors with a slate more favorable to the Valeant merger. The proposed Salix acquisition would give Allergan a new therapeutic market but would also make Allergan too big for Valeant to acquire.

The marketing manager at a luxury car company attempts to deal with a range of issues that have surfaced in her first two months in the company's new China country office. China is a fast-growing country and is seen as one of the potentially largest markets for this brand of luxury vehicles in the future, and for that reason, the company has recently set up a country office to support market development efforts. In her attempts to make inroads in the China market, the marketing manager struggles to deal with issues related to language barriers and unfamiliar cultural norms for conducting business. As well, as a woman working in a male-dominant industry within a patriarchal society, she faces some resistance from staff and clients in terms of gender bias. She wonders how best to deal with these challenges while trying to establish her dealership's brand in the Chinese market for luxury sports cars.

Narrow-mindedness holds back many organizations in their efforts to turn global presence into a real source of competitive advantage. In this article, the authors explore the manifestations and costs associated with what they call the "headquarters knows best"syndrome, as well as ways companies can address the problem. Many of the things companies have done are fairly predictable, such as decentralizing global responsibilities, changing the reporting relationships, internationalizing senior management, and creating cross-national teams. At Irdeto B.V., a Dutch developer of security software for digital media, the remedy was more extreme: It elected to create two headquarters, one in the Netherlands and the other in China. While this was expensive -and something the CEO's successor ultimately did away with in 2015 -the decision to operate out of dual headquarters helped the company realign its focus, and it had significant positive effects on Irdeto's performance. The authors argue that many corporate executives aren't aware that the "headquarters knows best"syndrome exists. Typically, top executives interact with executives from the subsidiaries that are closest to headquarters (in terms of geography, economic development, and culture); the executives'frame of reference is based on subsidiary managers who benefit from ample attention, autonomy, or influence. Executives from peripheral subsidiaries are the ones who are most likely to be affected and least likely to be heard. In addition, the value of missed opportunities and lost talent is hard to assess, and headquarters executives can easily invoke contextual factors (such as competition for labor) to explain problems. They can also try to pin blame on the local entities. After establishing its dual headquarters in 2007, the authors note, Irdeto saw measurable improvements on four fronts: increased top management attention, greater subsidiary contributions, richer lateral exchanges,

This is an MIT Sloan Management Review article. The Chinese technology company Xiaomi cultivates a close connection with its customers through a product development process that invites user participation -as well as through social media and fan clubs.

While global supply chains are expected to be lean, agile, and sustainable, they have also become the focus of growing attention from a variety of external stakeholders seeking information that includes and frequently exceeds what the company is legally obliged to disclose. In this article, the authors discuss the pressures on companies to disclose supply chain information, the drivers and impediments to such disclosure, and the types of supply chain information typically made available to the public. The article identifies the broad disclosure strategies companies can use to release supply chain information and offers managers guidance on designing the optimal disclosure strategy for their company. In addition to exploring the topic with examples from companies including Nike Inc., WD-40, and Patagonia Inc., the authors take a detailed look at how Apple's approach to supply chain disclosure has evolved since 2009. In considering how to manage supply chain information disclosure, the authors argue that managers must appreciate the diverse forces and actors driving and enabling this trend. Aside from internal governance and risk concerns, external pressure has come from government regulations, best practices of peers, changing expectations from salient stakeholder groups, and, of course, external events (such as the 2013 Rana Plaza garment factory collapse in Bangladesh). The authors note that improving transparency can be expensive. The lack of standardized reporting systems, the absence of a common technology platform, ill-defined standards, and a lack of supplier education can also pose serious hindrances to companies wishing to improve their supply chain transparency. The authors identify four common types of supply chain information that tends to be publicly disclosed: supply chain membership, provenance of materials, environmental information, and information on social impacts such as working conditions.

Few CEOs of large companies leverage the power of Twitter to the fullest extent. As of September 2014, only 42 Fortune 500 CEOs had Twitter accounts. The authors argue that rather than waiting for impressions to be driven by the media or by individuals with ulterior motives, CEOs can use Twitter to help shape their public image and that of their companies. The authors studied the Twitter activity of 25 CEOs of publicly traded companies who were active on Twitter and identified common patterns and themes. Based on the type of content tweeted most often, the authors classified the CEOs they studied into four groups: Generalists, Expressionists, Information Mavens, and Business Mavens. Generalists used Twitter to share a wide range of content. At times they tweeted about personal opinions and interests; other times, they tweeted information closely related to the business (for example, strategy, existing products and services, customer references, etc.). However, on average they had the smallest networks among the groups of CEOs, perhaps because they were not sharing information that was unique. Expressionists used Twitter extensively for non-business content sharing. These CEOs shared their opinions about events and politics and gave their followers an insight into their daily lives. In many ways, they used Twitter as a brand-building platform for themselves as they do for their companies. Information Mavens frequently shared links to information, news, and other happenings. However, they did not generally tweet information specific to their company, acting more like curators of content. As a result, relatively few people retweeted or "favorited"their tweets. Business Mavens used Twitter extensively and primarily shared business-related content. In contrast to the other CEO groups that the authors identified, Business Mavens often shared new product announcements, information about existing products, customer references

Today's rapid technological changes have transformed the role of global IT outsourcing in companies'strategies. Traditionally viewed as a cost-saving measure, IT outsourcing is also increasingly being leveraged as a strategic tool for acquiring cutting-edge innovation. This pursuit of emerging technologies and capabilities, however, has elevated the complexity of managing supplier portfolios. In this article, the authors introduce the "long-tail"strategy, an innovative IT outsourcing model that combines a few key partnerships with a dynamically changing number of smaller contracts with other suppliers that can deliver specific value propositions beyond the capabilities of the key partners. Representing a dynamic, diversified, yet disciplined approach toward outsourcing, the long-tail strategy embraces and even fosters a flow of new suppliers, so companies are continually acquiring new capabilities that enable them to prosper in turbulent business environments. The authors'extensive in-depth interviews with major companies in financial services, business services, technology, manufacturing, and energy suggest that the long-tail strategy can help diverse organizations achieve their business goals. For example, the long-tail strategy helped a major global bank establish and maintain technological leadership in the financial-services industry, and allowed Toyota Motor North America to realize rapid innovation. In order to implement the long-tail strategy successfully, companies should institute five key practices: (1) distributing responsibility within the company for scanning for new technologies; (2) nurturing relationships with new "long-tail"suppliers; (3) encouraging sales pitches from suppliers; (4) governing the entire outsourcing portfolio; and (5) designing for integration. When implementing these practices, organizations should seek to create a more proactive, entrepreneurial, and dynamic culture in IT outsourcing.

This is an MIT Sloan Management Review article. When Martha Payne, a 9-year-old student in Argyll, Scotland, started a blog in April 2012 to photograph and rate her school lunches, she had no idea of the stir she would cause. The blog logged 2 million hits in its first six weeks. When the local area council asked her to stop, an online firestorm ensued and the council reversed its decision. It's a familiar story -every day, images or events with the potential to incite passions get captured digitally, posted to the Web, and "go viral."With social media, people share their experiences with friends or followers, who share with more people. Seemingly insignificant occurrences can strike a nerve with a nascent virtual community, and unsuspecting parties must respond to a dicey new problem. The capacity to generate causes and controversies almost instantly may be the most salient aspect of what authors Robert D. Austin and David M. Upton call the "super-transparent society." Historically, the authors explain, people in a particular community were the only ones who paid attention to the local goings-on. When information moved outside of that environment, it was due to deliberate action: some identifiable person or organization moving it. If you wanted to guard information, you built a barrier. Many things have changed, particularly the volume of information. The article suggests several steps that can help managers meet the new expectations for transparency, including the following: Examine your assumptions about how you can keep information contained. Review your strategy for dealing with vulnerability to unintended transparency. Review operations for issues that might be problematic if revealed. Assume that others will put out information about your organization for their own reasons and that you won't be able to prevent it. Recognize that new information flows change what people consider to be fair.

Science-based industries such as biotechnology offer the potential of high growth, but they are fraught with risk. The payoffs can take many years to materialize or may never come. Even though the traditional venture capital/entrepreneurial model has been shown to stimulate innovation in a wide range of technology settings (software, computers, Internet, electronics, etc.), it wasn't designed to deal with the costs, risks, and slow payout of science-based industries. Although venture capital continues to flow into industries like biotechnology, there has been a significant shift away from funding ventures at the earliest stages. A key concern is that lack of availability of future rounds of financing can shut off the flow of venture capital funding abruptly. In this article, authors Andrew W. Lo and Gary P. Pisano draw on comparisons to projects in the moviemaking industry and propose the project-focused organization (PFO) as an alternative structure for undertaking long-term, high-risk, highly capital-intensive R&D programs in science-based industries such as biotech. PFOs are entities created to conduct a specific R&D project. The authors discuss how they could work in practice, using the example of biopharmaceutical R&D. Researchers innovating in a science-based context must overcome two specific challenges. First, they need to raise sufficient capital to fund a long-term, highly risky, and very expensive project. Second, they must have a governance mechanism for allocating capital (human and financial) and conducting projects. The authors propose that governance centered on the project rather than the company may be a more efficient way to organize innovation in science-based industries. To reduce overhead, they propose contracting out for resources as necessary. As with movie projects, investors could choose projects they want to invest in, with the understanding that they will receive returns only if those projects succeed.

This is an MIT Sloan Management Review article. Large companies frequently exploit their vastly superior legal resources and capabilities to the disadvantage of smaller competitors. The mere threat of litigation and the prospect of a prolonged lawsuit are often all that is necessary to persuade a smaller business to acquiesce to the larger competitor's legal demands. The author writes about a defensive strategy he calls "lawsourcing"that turns the tables on large companies by gathering public support, typically through social media and public relations. The idea of lawsourcing -which is a variation of what has become known as "crowdsourcing"-isn't completely new. Back in 1984, when Ben & Jerry's Homemade Inc. was a six-year-old upstart in the ice cream business, Pillsbury (then the owner of the Häagen-Dazs ice cream brand) attempted to pressure some of its distributors not to handle Ben & Jerry's products. Ben & Jerry's fought back hard, with a scrappy campaign built around the slogan "What's the Doughboy Afraid Of?" Well-executed lawsourcing campaigns can deliver significant benefits to companies, including greater brand awareness and loyalty and increased sales. The author cites a number of examples, including: Hampton Creek Foods Inc., a small San Francisco-based food producer. In the fall of 2014, Unilever, owner of the Hellmann's brand of mayonnaise, filed suit against Hampton Creek for using the word "mayo"to describe its vegan mayonnaise substitute, called Just Mayo. Hampton Creek fought back by commenting about the lawsuit on Twitter and Facebook and engaging with media sympathetic to its plight. Unilever withdrew its lawsuit. Vermont artist Bo Muller-Moore, who sells T-shirts adorned with the slogan "Eat More Kale."Atlanta-based fast-food chain Chik-fil-A Inc. claimed that Muller-Moore's slogan infringed upon its federal trademark rights to the phrase "Eat Mor Chikin."After a spirited social media campaign, Muller-Moore got his own trademark.

Eden McCallum is a Management Consulting firm founded by two ex-McKinsey partners. It has offices in London, Amsterdam and Zurich, and is planning further expansion. The company is founded using a distinctive new business model, based on operating a pool of experienced, freelance consultants. Hence, it operates as a double-sided market. Eden McCallum's 15 partners secure client projects and then assemble teams of consultants to work on these projects. They screen consultants extensively before admitting them into their pool. Furthermore, the company provides office space, a team of analysts, and operational assistance (in terms of IT, legal, billing, etcetera). The case stimulates discussion in terms of how the company might grow, whether its value proposition can remain distinctive as it expands, and how it can attract and retain the people in the various markets - independent consultants, partners and staff - needed to make further growth a success. In particular, the case explores business model innovation by creating a novel value proposition for employees, i.e., by giving management consultants more control over their time and lives.