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By the summer of 2001, Japan's economy had been generally stagnant for nearly 10 years--since the collapse of the bubble economy in 1990-91. The development strategy that drove the nation during earlier decades was fulfilled, and by 1989 Japan's GDP per capita exceeded that of the United States. Facing another downturn, Prime Minister Koizumi seemed ready politically to undertake real change. A rewritten version of an earlier case.

Paula Evans is in her second year as principal of the only high school in Cambridge, MA. Her mandate when she arrived was to redesign the high school so that long-standing inequities in academic achievement rates across race and socioeconomic class were removed. In her first year, she succeeded in obtaining approval for her proposed redesign and completing the physical and administrative restructuring of the high school. Now in her second year, the reforms in how teachers teach and how the school operates are fully under way. From early indications, she and her hand-picked leadership team are moving the school in the desired direction. But the school committee has just made a policy decision that Evans and her team believe will undo all of the redesign efforts that have been made thus far. Evans has threatened to resign and now ponders what she will tell her leadership team and the faculty the next day.

Performance measurement is an important part of supply chain management. Timely, accurate, and detailed performance monitoring can allow a company to detect problems early, diagnose causes of problems, and come up with interventions promptly. SeeCommerce provides an Internet-based solution so that companies in a supply chain can have visibility of performance measures throughout the supply chain. This case describes the value proposition that SeeCommerce creates through its solutions and how the Mopar Division of DaimlerChrysler was able to make use of the solutions to improve greatly the efficiency and customer service of service parts operations at DaimlerChrysler.

Fred Bocock was examining the performance of the Energy Hedge Fund and the Energy Portfolio, a hedge fund and a mutual fund respectively, that he manages. Bocock had become increasingly aware that absolute returns or relative returns (returns relative to a benchmark) may not adequately capture his performance and some measure of risk-adjusted performance was necessary. The Dynamis Energy Hedge Fund extends the discussion of performance evaluation into the hedge fund arena. (See "Zeus Asset Management," UV0084, for an examination of performance evaluation techniques in the mutual funds arena.) More broadly, the case engages students in discussions on what hedge funds are, what investment strategies they use, and who their investors are. Since the portfolio manager of Dynamis manages both an oil sector equity mutual fund and an oil sector hedge fund, the case allows for a comparison between a hedge fund and a mutual fund. Students should consider the pros and cons of evaluating the performance of the oil stock mutual fund against a number of oil sector stock indices as well as against a number of generic indices, such as the S&P 500 Index. The use of futures, options, shorts, and leverage by hedge funds makes it a lot more difficult to measure their performance. The case comes with a spreadsheet that contains data on the energy mutual fund, the Dynamis hedge fund, and several relevant indices.

NASDAQ's mission "to facilitate capital formation" is threatened by the emergence of Electronic Communication Networks, which are not as heavily regulated by the SEC. This case reviews the development of NASDAQ and its evolution from a loose network of broker-dealers through to its proposed SuperMontage. SuperMontage is a centralized order book, where multiple parties can place orders (both buy and sell) for the stocks they wish to trade and where entire supply and demand curves can be displayed. To understand the context, students will learn about the structure of the capital markets and why it concerns regulators and investors.

Louise Ito examines option-pricing data from the Wall Street Journal. She wants to make sure that she understands the basic principles behind option pricing and examines whether these prices are consistent with respect to the effects of strike price and maturity. She also computes the intrinsic and the time value for each of the options and compares their relative magnitudes with what theory suggests. This case is taught during the first day in a two-day sequence of teaching the fundamentals of option pricing (second-day case: Ito's Dilemma UVA-F-1283). The teaching note includes a teaching plan of how to effectively teach this case and includes several examples that highlight the determinants of option pricing.

This case introduces students to the concepts of option valuation and asks them to estimate option prices using the Black-Scholes pricing model. It illustrates the importance of volatility to option pricing and allows the introduction of the concept of implied volatility. The case is used most effectively in sequence with "Ito's Delight" (UVA-F-1333) to introduce option-pricing concepts. Different versions of this teaching plan have been successfully used for both MBA and executive-education audiences.

Describes the evolution of USA TODAY Online, the electronic version of the newspaper, within the organizational structure of the newspaper. Describes the tensions and issues that develop and the pressure from the Online division to be spun off. At the same time, CEO Tom Curley sees a greater strategic need for integration. Poses the question of what degree or type of strategic integration is required, what degree of organizational integration this implies, and how it can be achieved.

Centra is a pioneer in software eLearning. It is debating how to modify its go-to-market strategy, adding telesales to improve sales force productivity. At the same time, its market is evolving, and management thinks it may be about to "cross the chasm" in Geoffrey Moore's terminology. Should it "fish where the fish are biting" or should it concentrate on the enterprise customer and exclude small and mid-size corporations? If a shakeout is coming, how can Centra ensure that it either survives or is acquired by one of the survivors?

In September 2000, the president of Bridgestone-Firestone, the U.S. subsidiary of Japan's Bridgestone Corp., was invited to appear before a U.S. congressional subcommittee investigating the August 2000 recall of more than 6.5 million tires made by the subsidiary. The tires had been implicated in several hundred auto accidents and dozens of fatalities in the United States and elsewhere around the globe. This case depicts the tire controversy and the decisions it posed for Bridgestone's management. Tracing Bridgestone's evolution from a regional multinational to a global player by way of acquiring Firestone, a U.S. tire maker founded in 1900, the case shows how cultural differences between the two business systems played a part in creating the situation and in shaping Bridgestone/Firestone's responses to it. A rewritten version of an earlier case.

This case requires students to prepare an analysis of Microsoft Corporation's financial statements and footnotes to understand the impact of its use of stock options. In addition to a general analysis of Microsoft's use of stock options and their impact on the financial statements, students focus more specifically on Microsoft's April 2000 megagrant of 70 million options after a substantial decline in Microsoft's stock price. The primary issues that students must explore are (1) the differences in financial reporting under the intrinsic-value and fair-value methods, (2) the effect of stock options on the company's financial statements, (3) the income tax benefit from stock options, and (4) the net cost or benefit to Microsoft from granting stock options.

Progressive Insurance had refused to play Wall Street's earning game. Progressive didn't manage reported earnings nor did management give guidance to analysts. Management then considered taking their unique disclosure strategy one step further to become the first to move to monthly reporting of operating results. Significant benefits had accrued from Progressive's refusal to play the earnings game. Management's time wasn't wasted manipulating reported results or talking to analysts, and reported numbers didn't mislead internal or external decision making. However, there were significant costs, as well. Unguided analysts' forecasts were often well off the mark, causing Progressive's stock price to fluctuate widely around quarterly earnings announcements. Analysts' forecasting abilities seemed to be getting worse--during four consecutive quarters in 1999-2000, management felt compelled to give mid-quarter warnings that earnings would fall significantly below the First Call's consensus estimate. To eliminate the need for such mid-quarter warnings, management considered moving to monthly reporting of operating results. With this data, analysts presumably would be able to update their forecasts. Management must decide if the release of monthly results would give competitors information to use against Progressive, and if the release of monthly results would increase or decrease Progressive's stock price volatility.

ServiceMaster, a Fortune 500 supplier of home services such as Terminex, Trugreen (lawn care), and MerryMaids, has a 50% interest in an Internet start-up designed to attract new customers to its services and help service providers improve quality and lower costs. Should ServiceMaster buy the remaining 20% from VC Kleiner Perkins, or should ServiceMaster make WeServHomes.com even more independent?

It is early 2001 and the Medicines Co. just received FDA approval to market Angiomax, a blood thinner to be used during angioplasties and heart procedures. It is intended to be a better alternative to Heparin, an 80-year-old drug that costs less then $10 per dose. The company believes it can sell Angiomax for a much higher price than Heparin--but how much more? Angiomax also represents the first of several drugs being developed under a rather unique business model. The company is in the business of "rescuing" drugs that other companies have given up on--i.e., they purchase or license the rights to drugs that other companies have halted development on, with the intent of completing the development process and bringing the drug to market. With the success of Angiomax, the company feels that this business model has been validated.

Tim Williams, the new CFO of a publicly-traded enterprise software company, attempts to rebuild his company's reputation for reliable financial reporting following a highly visible financial reporting crisis. The crisis begins with an earnings shortfall warning, which precipitates a dramatic share price drop, culminating in an SEC investigation and resulting in several shareholder lawsuits. Armed with an understanding of the company business model, sales cycle, and revenue recognition policy, Williams must piece together why the reporting crisis happened. He must assess how these various factors interacted to contribute to the company's crisis, and which policies and business practices under his control can be changed to prevent future financial reporting issues. Looking to rebuild the company's credibility with the financial community, as a first-time CFO of a publicly traded company, Williams must also attempt to understand the role of regulators and capital market intermediaries--in particular, financial analysts.

An MBA student founds an e-education business and must decide which customers to target and which products/services to produce.

Jack Sheaffer had a unique wastewater treatment system that produced no organic sludge, no odor, and was cheaper than conventional systems. He was worried, however, that his business might suffer if there were a turndown in the marketplace. His previous business venture had failed when interest rates rose at the end of the 1970s. He wanted a business plan that would insulate him from marketplace shocks and found it with the BOOM program of build, own, operate, and maintain. BOOM put Sheaffer's company in charge of owning and maintaining the wastewater treatment systems designed by the company. It offered a steady source of income through long-term contracts with food processors, municipalities, and the like. A facility built on the North Fork of the Shenandoah River in northern Virginia would be BOOM's first test.

As far as anyone could tell, Vigor Skin Care's star was rising, mostly on the strength of Ageless Vigor, its new line of enriched skin cleansers and cosmetics. In fact, this evening, the three employees responsible for developing the product line were slated to receive the parent company's highest award for performance. But CEO Peter Markles knew that despite the accolades, the business unit--and its "fearsome threesome"--had hit a rough patch in recent months. When Peter took the reins four years ago, Vigor Skin Care was the sleeping dog of the health-and-beauty industry; his challenge was to rejuvenate the maturing business. He knew a turnaround would require equal parts discipline, politics, and creativity--so he pulled together a team that could address those needs. Their all-consuming, intensely collaborative efforts resulted in the successful Ageless Vigor line. Then reality set in. The team found the day-to-day operations of manufacturing Ageless Vigor a bit tedious. Peter felt relegated to troubleshooting distribution problems. Another team member was meeting with executives from another division who were actively recruiting the wunderkind. Another member was simply on the verge of burnout. Tonight, at the award ceremony, there would be speeches and applause and toasts. But tomorrow, Peter would have to face the question: Should he try to salvage the Ageless Vigor team? In R0107A and R0107Z, Marshall Goldsmith, Nancy Bologna, Martin Puris, and John R. Katzenbach offer their advice on the problem presented in this fictional case study.

As far as anyone could tell, Vigor Skin Care's star was rising, mostly on the strength of Ageless Vigor, its new line of enriched skin cleansers and cosmetics. In fact, this evening, the three employees responsible for developing the product line were slated to receive the parent company's highest award for performance. But CEO Peter Markles knew that despite the accolades, the business unit--and its "fearsome threesome"--had hit a rough patch in recent months. When Peter took the reins four years ago, Vigor Skin Care was the sleeping dog of the health-and-beauty industry; his challenge was to rejuvenate the maturing business. He knew a turnaround would require equal parts discipline, politics, and creativity--so he pulled together a team that could address those needs. Their all-consuming, intensely collaborative efforts resulted in the successful Ageless Vigor line. Then reality set in. The team found the day-to-day operations of manufacturing Ageless Vigor a bit tedious. Peter felt relegated to troubleshooting distribution problems. Another team member was meeting with executives from another division who were actively recruiting the wunderkind. Another member was simply on the verge of burnout. Tonight, at the award ceremony, there would be speeches and applause and toasts. But tomorrow, Peter would have to face the question: Should he try to salvage the Ageless Vigor team? In R0107A and R0107Z, Marshall Goldsmith, Nancy Bologna, Martin Puris, and Jon R. Katzenbach offer their advice on this fictional case study.