In 2013, Germany-based athletic products maker Adidas AG (Adidas) formed a partnership with rapper Kanye West (who legally changed his name to Ye in October 2021) to launch the Yeezy shoe line. Starting in the 1980s, sneakers had crossed over into the mainstream market as fashion accessories and Adidas saw this as a way to catch up with industry leader Nike Inc. While the partnership was lucrative for Adidas—its sales and profits grew substantially during the partnership period—West’s public behaviour and in his dealings with Adidas employees caused both external and internal backlash. At first, Adidas ignored West’s adverse behaviour and pushed hard to monetize the relationship. Following a widely publicized action by West at a Yeezy fashion show in Paris, France, in October 2022, Adidas discontinued the partnership. However, HRSA-ILA Funds, an employee retirement fund manager, filed charges in late 2023 accusing Adidas of condoning West’s behaviour and not disclosing it to its shareholders. Adidas’s supervisory board chair, Thomas Rabe, and newly appointed chief executive officer, Bjorn Gulden, had to address both the legal and business consequences of the company’s actions.
In December 2023, Avenue Supermarts Limited, operating as DMart, celebrated its robust performance in the offline retail sector in India. Since its establishment in 2002, DMart had built a sizable network of profitable offline stores, showcasing industry-leading metrics. However, its online subsidiary faced losses, prompting the management to confront pivotal decisions for future expansion. The management grappled with the choice of expanding its physical stores and deliberated on the strategic approach: Should it broaden geographically or deepen existing clusters? Simultaneously, they confronted the challenge of resource allocation for the online business amid intense competition and recent financial setbacks. DMart’s leadership stood at a crossroads, weighing options to sustain offline success while addressing the complexities of online market dynamics and profitability.
In May 2023, Shake Shack Inc., the New York City-based fast-casual restaurant chain faced an activist’s campaign from Engaged Capital LLC. Citing poor performance compared to industry peers over the 2020–2022 period, Engaged Capital sought three board seats, with its nominees to have industry-specific expertise, to advise Shake Shack’s management team on turning around the multi-unit chain. Shake Shack had a dual-share capital structure with founder, Daniel Meyer, and his associates controlling 85.9 per cent of the voting rights. Meyer and the board had to consider and respond to Engaged Capital’s push for board seats at Shake Shack’s annual shareholder meeting on June 29, 2023.
In mid-September 2022, Saumil Majmudar, the co-founder, chief executive officer, and managing director of Sportz Village faced a problem. The company, based in Bengaluru, India, was India’s leading sports education organization, which provided a structured physical education (PE) curriculum to K–12 schools. Thirteen years after its inception, EduSports, a division of Sportz Village, was unable to reach its goal of penetrating 5,000 schools with its PE curriculum. Research had indicated that the low penetration rate stemmed from not offering inter-school sports competitions to showcase the ability of the students involved in the structured PE program. Majmudar had to evaluate between two funding sources to enable EduSports to offer inter-school sports competitions: pass on the increased subscription price to students or keep the subscription price the same but look for brands to offset the increased costs of running inter-school events. Given that the yearly sales cycle would begin in about two weeks, Majmudar’s decision was urgent.
In August 2022, Falguni Nayar, the founder and chief executive officer of Nykaa—a Mumbai, India–based omnichannel beauty, personal care, and fashion retailer—confronted declining profitability and a stock price that had fallen 36 per cent since the company’s initial public offering in late 2021. As a woman entrepreneur who had launched her venture at the age of 49, Nayar’s attempt to emulate the French multinational retailer Sephora in the Indian market had had a strong start amid heady media coverage. However, the company had been expanding out of its core beauty and personal care market, where it was an early entrant, to the crowded and highly competitive fashion market, which impacted profitability. Nayar and her management team had to address two major issues: determining how to increase profitability and deciding whether or not to make a strong push to India’s Tier 2 and Tier 3 cities, where the competitive intensity was likely to be lower, but the demographics were unlike those in the country’s large metropolitan areas, where Nykaa was successful.
In July 2021, Scarlett Johansson, the star of the Marvel Cinematic Universe (MCU) film Black Widow, sued The Walt Disney Company (Disney), the producer of the film, for breach of contract when it simultaneously released the movie in theatres and on Disney+, the company’s streaming platform, which resulted in a reduction of her compensation. The film saw a sharp drop in ticket sales in weeks two and three and ended its theatrical run with a much lower box-office take than many of the other MCU films. The lawsuit alleged that Disney’s vertical integration into streaming had caused a conflict of interest that had adverse consequences for talent compensation. Disney’s chief executive officer, Bob Chapek, was faced with the difficult decision of how to address talent compensation in light of streaming’s growing popularity, as Disney+ competed on the quality and availability of content.
In early June 2021, an independent investigation team released its report into the way Japan-based Toshiba Corporation (Toshiba) had conducted its 2020 annual shareholder meeting, finding that the company had mishandled the annual general meeting with respect to shareholder rights. As a result, Toshiba had to deal with the immediate problem of putting up a new slate of nominee board directors to be put to a vote at the next annual shareholder meeting to be held on June 25, 2021. Toshiba also had to deal with the long-term problem of improving the company’s corporate governance and re-establish trust in the way the company was run. The board had one week in which to prepare a plan to present at the annual general meeting that would restore trust in the company.
On December 29, 2021, the independent shareholder advisory firm InGovern Research Services (InGovern) published a report accusing Asian Paints Limited (APL) of corporate governance lapses. Nearly 53 per cent of the shares of APL, which was based in Mumbai, India, were owned by its promoters and their families. InGovern had followed up on a whistle-blower’s report claiming that APL had engaged in several related-party transactions but had failed to adequately disclose them in its annual report. InGovern demanded large-scale changes in APL’s board of directors, and APL’s share price fell by approximately fourteen per cent after the charges were made public. The seven independent members on the company’s board had to respond to the accusations.
Vimeo, Inc. (Vimeo), led by Anjali Sud, was a New York City-based listed company that operated across the entirety of the video creation and distribution value chain. When the company was spun off from its corporate parent in a May 2021 initial public offering, Vimeo was growing but not yet profitable. As the country and the world was recovering from the COVID-19 pandemic, Vimeo and a fast-growing set of competitors were facing the end of a nearly two-year tailwind that had helped them grow very quickly. Sud and her team had to respond to growth and profitability challenges to help Vimeo maintain its industry leadership position.
On February 16, 2021, Slave Free Chocolate removed Tony’s Chocolonely (Tony’s), a chocolate company based in Amsterdam, the Netherlands, from its “Ethical Chocolate Companies” list due to Tony’s association with Barry Callebaut, a cocoa processor associated with child slavery in West Africa. Tony’s, a B Corp-certified company whose founding mission was to eradicate child slavery from the cocoa supply chain, had to address its public removal from the list immediately to maintain the company's credibility. How should the chief executive officer of Tony’s respond to the removal?
In late January 2021, Robinhood Markets Inc. (Robinhood), the California-based start-up that had upended the securities brokerage industry with its zero-commission trades, faced legal and market challenges. The US Securities and Exchange Commission had imposed a hefty fine on the company for its inadequate disclosure of payments to market brokers. In addition, a state regulator had filed an administrative complaint about the start-up's "gamification" of investing that had arguably led unwitting customers to lose money. A huge run-up in the stock of GameStop Corp. had put the spotlight on Robinhood and its business practices. On the competitive front, both traditional brokers such as Charles Schwab Corporation and Webull Financial LLC, a China-based start-up, were challenging Robinhood for the millennial investor customer base. Robinhood’s co-founder and chief executive officer, Vladimir Tenev, and his team needed to respond to these challenges so the company could file papers in March 2021 for a mid-2021 initial public offering.
In January 2019, eBay Inc. (eBay), a California-based e-commerce company, faced an activist campaign centred on its portfolio of businesses. Elliott Management Corporation, the hedge fund leading the campaign, believed that StubHub and Classifieds, two of eBay’s companies, did not belong in eBay’s portfolio and that their real value was hidden by eBay’s ownership. The hedge fund also argued that the lack of focus in eBay’s portfolio was distracting the company’s senior management from Marketplace, eBay’s core business, which was facing stiff competition from other major online retailers. What should the chief executive officer and board chairman do to address these charges about eBay’s corporate strategy?
In 2018, Nestlé, the Switzerland-based, multinational food and nutrition company, faced an activist campaign by Third Point LLC regarding the company's passive stake in L'Oréal. In its June 2017 letter, which was followed up by a July 2018 reminder, the activist fund urged Nestlé to sell its L'Oréal stake and use the funds to strengthen its position in its core health and nutrition markets. L'Oréal was also asking Nestlé to clarify its position regarding the investment. Nestlé's recently appointed chief executive officer needed to make a decision regarding the L'Oréal stake. How should he address the activist fund and respond to L’Oréal’s request?
In August 2018, MoviePass, a New York City–based movie ticket subscription service, faced an acute cash crisis that threatened its ability to continue in business. The company had disrupted the movie exhibition industry by offering movie tickets at a discounted monthly subscription price. Despite having quickly grown its subscription base to 3.2 million, it faced several challenges. The company had cash to survive for only the next two months, and a competitor was pushing its own subscription service. As a disruptor in the newly emerging subscription economy, MoviePass faced an existential crisis. How could the chief executive officer and his team increase MoviePass's subscription base and turn the company’s first-mover and wider-network advantages into greater profitability—before the company ran out of capital?
In August 2017, AMC Networks Inc. (AMCN), a New York City–based cable television provider, faced a lawsuit from the creative talent behind the hit show The Walking Dead. The lawsuit charged that AMCN used its vertical integration into content development to reduce the profits available for distribution to participants. For AMCN, which was originally a content distributor, expanding into content creation through its AMC Studios had several benefits. However, the industry was changing with the advent of online streaming services such as Netflix Inc., Hulu, and Amazon Prime, as well as an industry-wide shift among cable networks to offer proprietary content. These changes had an impact on the relationship between the business and the creative side of the industry. AMCN’s chief executive officer had to decide how to respond to the lawsuit.
In 2016, Fair and Handsome, a skin-whitening cream produced by Emami Limited, led the men's fairness skin cream category in India, with a market share of 60 per cent. In late 2017, however, the company faced both a public backlash and an adverse court decision about its marketing of the product. A growing movement called Dark is Beautiful was galvanizing support against companies that portrayed fairer skin colour as a means for both personal and professional fulfillment. The company had also appealed a lower court's decision to ban the company's use of skin whitening in its advertisements. Since the product was earmarked for significant growth in the next five years, the company needed to develop an immediate response. What should it do?
Viacom, Inc., a New York City-based media company, owned Paramount Pictures and popular television channels such as MTV, Comedy Central, and Nickelodeon. Viacom was controlled by Sumner Redstone and run by his hand-picked second in command. In 2016, the 92-year-old Redstone, facing a claim of mental incompetency because of his advanced age, stepped down from his role as executive chair of the board. This led to several issues regarding corporate governance at the company. Viacom’s board of directors faced a lawsuit from a shareholder claiming that a mentally incompetent Redstone was playing a role on the board; an activist investor accused the company of a lack of governance and poor leadership. The newly elected lead independent director needed to address the board of directors’ role in this embattled company.
<p style="color: rgb(197, 183, 131);"><strong> AWARD WINNER - John Molson MBA Case Writing Competition</strong></p><br>When Etsy proceeded with an initial public offering on the New York Stock Exchange in April 2015, it was the second U.S. company to go public as a certified B Corporation. Etsy’s status as a B Corporation meant that social responsibility was ingrained in its mission. However, as an online marketplace for artisanal goods, Etsy faced a number of challenges. Principal among them was the launch of the new online store Handmade at Amazon, a direct attack on Etsy. Etsy had a core base of merchants and buyers, but Amazon had significantly more as well as a greater level of financial security than Etsy. Etsy’s fast growth had also put pressure on its merchants’ ability to offer larger quantities of handmade goods. Many merchants were pressing the company to allow sales from large-scale manufacturing, a path the company had eschewed since its start. Could Etsy find a way to successfully confront these challenges while maintaining its B Corporation ethos?
In 2014, the vice-president and director of recycling at the Arizona-based First Solar, Inc., the world's leading solar energy company, was considering a business plan to convert its solar panel recycling initiative from a cost centre to a profit-making business. Although the company pre-funded the recycling of photovoltaic solar panels by adding the recycling cost to the end-customers’ purchase price, Europe had recently enacted laws requiring that solar modules be recycled after their useful life had ended. First Solar’s vice-president and director of recycling recognized a business opportunity in recycling solar panels but wondered about the timing of entry into this area and the profit potential of such a move. How could they best position First Solar's recycling offering to take advantage of the North American recycling regulations that they believed were imminent but that had not yet transpired?
The Children’s Place was a New Jersey-based specialty retailer of apparel and accessories for children up to age 12. Starting in fiscal 2013, the company was moving from a clearance-centre model, where it sold a variety of national brands, to a made-for-outlet model that emphasized its own brands. This was necessitated by intense price competition in its market. The new strategy involved developing, coordinating and controlling its own global apparel value chain. When the Rana Plaza building in Dhaka, Bangladesh collapsed on April 24, 2013, killing and injuring a large number of workers, products destined for The Children’s Place were found in the debris. The adverse publicity that ensued meant that the company’s top management had to re-evaluate its strategy. What should be their response?