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This case asks the student to decide whether Aurora Textile Company can create value by upgrading its spinning machine to produce higher-quality yarn that sells for a higher margin. Cost information allows the student to produce cash-flow projections for both the existing spinning machine and the new machine. The cash flows have many different cost components, including depreciation, the number of days of cotton inventory, and the liability costs associated with returns from retailers. The cost of capital is specified in order to simplify the analysis. The analysis has added complexity, however, owing to the troubled financial condition of both the company and the U.S. textile industry, which is in decline as manufacturers migrate to Asia to benefit from lower manufacturing costs. This begs the question whether management should invest in a declining business or harvest the company by paying out all profits as a dividend to the owners. The case is suitable for students just beginning to learn finance principles, but is also rich enough to use with experienced students and executives. The primary learning points are as follows: • The basics of incremental-cash-flow analysis: identifying the cash flows relevant to a capital-investment decision • The construction of a side-by-side discounted-cash-flow analysis for a replacement decision • How to adapt the NPV decision rule to a troubled or dying industry • The effect of financial distress on the NPV calculation • The importance of sensitivity analysis to a capital-investment decision

The organizers of a music festival may use video from the Friday concert to create a DVD to sell to those who come to the Saturday concert. Attendance on Saturday is uncertain, as is the percentage of those who attend on Saturday who will buy the DVD. Is this a good project? If so, what number of DVDs should be burned early Saturday morning and offered for sale at that evening's performance? By that time, Friday attendance is known, as well as whether it rained on Friday, and there is a forecast for whether it will rain on Saturday. Historical information on these variables may help us predict Saturday attendance using multiple regression; together with the results of a marketing survey, such analysis will help us make better purchasing decisions. This case series (see also the B case, UV0841) can be used to illuminate a multitude of concepts that are covered in basic decision-analysis courses. The series starts by examining the role of uncertainty in decision making, proceeds through the estimation of probability distributions from sample data with multiple regression, culminates in the development of a full decision model, and ends with a qualitative and quantitative analysis (with a tornado diagram) of how to add value and reduce risk. Key pitfalls for students are failing to recognize both limits on sales (supply and demand), incomplete reasoning in the determination of the attendance probability distribution, and oversimplifying the full forecast model (i.e., averaging the Saturday rain/no Saturday rain outcomes, rather than incorporating the uncertainty explicitly into the simulation).

Madison Memorial Hospital is deciding between a variety of quality improvement strategies. Highlights quality improvement collaboratives--organized programs popularized by the Institute for Healthcare Improvement in which teams from multiple institutions work together to improve care in a specified topic area (e.g., infection rates)--as a potential strategy. Allows debate around the criteria for selection of quality improvement strategies. Also motivates the discussion of the effectiveness of collaboratives and more broadly, the effectiveness of intra-organizational versus inter-organizational approaches to improvement.

Gokhan Hotamisligil is a star researcher at Harvard School of Public Health who has made groundbreaking discoveries linking fat cells, inflammation, and diabetes. He now wants to form a company to commercialize these discoveries. At the same time, Isaac Kohlberg, the head of Harvard's Office of Technology Development (OTD) is eager to improve Harvard's record in commercializing science. Describes the negotiations between Hotamisligil, OTD, the new company, and the School of Public Health to establish appropriate licensing and sponsored research agreements.

The senior portfolio manager at National Securities Inc. (National) is concerned about the recent decline in shares of Agnico-Eagle Mines Ltd (AEM), a Canadian gold producer with several years of precious metals mining experience that was considered one of the portfolio's strongest performers. The senior portfolio manager and his team recently spent time at one of AEM's mines and believed in the operational potential of the company. National's research department had prepared free cash flow forecasts for AEM, which the senior portfolio manager reviewed and modified, following their visit with the company. He knew that despite his team's belief in the future prospects of AEM, the stock may have become overvalued from a fundamental view point. The senior portfolio manager asked his team to perform a fundamental valuation of the equity of AEM. As normally, this meant the team would use the discounted cash flow (DCF) methodology, with financial assumptions that had been carefully examined. However, he knew that DCF valuation would likely undervalue resource companies, such as AEM, as the DCF valuation tended to overlook the flexibility provided at decision nodes during the life of the company with regards to extracting commodities from the ground. As a result, the senior portfolio manager reminded the team that the DCF method, when applied to a mining company, had to be expanded to explicitly include the value of the unmined metals. The underground unmined gold would need to be valued as a real option, using an adjusted Black-Scholes model.

Tamago-ya is a family-owned business located in Tokyo, Japan. The company has captured a unique position in the market of selling pre-packaged lunch boxes to business professionals by maintaining high quality and reliable delivery. In order for Tamago-ya to guarantee such a high level of customer service, it has created an operational culture wherein those who deliver orders also engage in judging customer demand and feedback, those who supply food materials must be able to respond to variation in demand on a daily basis, and those who plan the production and distribution schedule must forecast and adjust on a real-time basis. Tamago-ya competes with convenience stores, which offer less variety in their menu options throughout the month, can stock-out on popular choices, and tend to have long lines during the lunchtime rush. However, Tamago-ya is faced with many challenges--including demand forecasting, supply planning, and long-term strategic planning.

Since the first Carrefour outlet opens in China in 1995, the company makes outstanding achievements in the Chinese retailing market. In 1999, it is ranked as the third largest Chinese retailer and second in the franchising sector. By 2000, its sales in China has exceeded US$0.99 billion and by 2004, the number of outlets has reached 62, representing a 51.2% increase from the previous year and nearly equivalent to the total outlets of two other large, global retailers combined-Wal-Mart (43 outlets) and Metro (23 outlets). Recently, however, local retailers have become more competitive and other global retailers have also started to strengthen their presence in China. Moreover, retailers have begun to move inland and into second-tier cities where Carrefour lacks presence. Faced with such challenges, will Carrefour be able to maintain its past glory in China?

Arkadi Kuhlmann launched ING DIRECT USA in 2000. The direct bank was very successful and by 2006 it had grown to be the largest online banking business and the 3rd largest savings-and-loan institution in the US. Faced with fierce and growing competition from both other direct banks and the online banking operations of such major traditional banks as Citibank and HSBC was faced with some tough decisions about how to move forward. One of the options under active consideration was the launch of a high interest paying checking or payments account. This was a product that ING DIRECT USA had always avoided in the past due to its complexity and high support costs. Learning objective: The challenges facing a successful low cost competitor as it responds to a changing market environment and increasing competitive pressure from established banks.

This case presents students with an opportunity to develop an action plan for an executive education client program needs analysis. Evergreen Executive Education LLC (EEEL) has just landed a large, new corporate client. The case presents some basic background information pertaining to the client company and their general program needs. Students are expected to create a learning needs analysis plan by merging that background information with their own focused thinking pertaining to how best to uncover and make actionable a corporate learning agenda. The plan should be robust and focused enough to ensure that the insights emerging from its execution will serve as the key inputs in developing a detailed program design. Students are not asked to develop a management education program design.

In early 2006, it was apparent that PFM Devices was experiencing a significant downturn in consolidated earning among its three international divisions. To address this issue, the newly hired chief information officer was asked by the executive team to evaluate the two options of implementing a customer relationship management solution to improve revenue or a corporate data warehouse to cut costs. This case illustrates the importance of aligning information technology (IT) and business strategy and of the complex issues IT executives face in prioritizing IT investment alternatives.

Deals with the hands-on management of a difficult situation facing the subsidiary of a multinational corporation (Tetra Pak) in a developing country (Argentina). The situation arises from a major economic, social, and institutional breakdown that jeopardizes the subsidiary's existence. Argentina defaulted on it sovereign debt and devalued the peso by over 200%, but it differentiated the treatment of the FX rate to be applied to various transactions, depending on the jurisdiction of creditors and debtors. Local dollar-denominated credits and liabilities were converted on a 1:1.40 ratio, while obligations held with foreign entities continued to be enforceable at the new rate of 1:3. The crisis led to the impoverishment of a large portion of the Argentine population, and to an institutional breakdown where the rule of law was shattered in the country, thus posing challenges not just related to the current situation, but also to the future of the operation. The crisis bore consequences for Tetra Pak Argentina on both ends of its value chain, involving suppliers and customers. Tetra Pak focuses its growth on developing nations where it feels there is room for a valuable business, and it attains leading market positions. Shows how the foreign firm must cope with difficult domestic situations, where the levers of control are beyond its reach. The existence of value after the crisis turns out to be a relevant consideration.

Michael Fernandes, the Director of Custom Manufacturing Operations at the pharmaceutical company Nicholas Piramal India Limited (NPIL), schedules a meeting with three of his reports, whose interpersonal conflicts with one another are causing his business development function to falter. He struggles to know how to handle these conflicts and bring the three into a productive working collaboration. Fernandes is in charge of incorporating NPIL's new acquisitions in Canada and the United Kingdom to market NPIL globally. His three direct reports are each involved in different aspects of NPIL--the Canadian operations, the British operations, and the global business development, and the case explores the team dynamics among them. Unless Fernandes can resolve the conflicts, the integration of the acquisitions is in jeopardy.

Reading Rehab Hospital has experimented with a popular concept in health care--patient-focused care--intended to increase quality and reduce costs by organizing care delivery around particular diagnoses or "service lines," rather than around the functions or disciplines of the care providers. It is equivalent to a product rather than a process focus. Unfortunately, it is not clear whether the benefits of this new healthcare model are sufficient to compensate for the drawbacks.

The initial public offering (IPO) of Rosneft, Russia's state-owned oil giant, was scheduled for mid-July 2006, in both London and Moscow. It was expected to be one of the largest IPOs in history. However, as of July 1, the Russian government, Rosneft's management, and its financial advisors had yet to decide on the IPO price. Expert valuations varied substantially, ranging between $64 billion and $120 billion. Peter O'Brien, the new CFO of Rosneft (he had been appointed only in April), and his investment advisors had little more than a week to decide the structure and pricing of the Rosneft IPO.

In mid-2007, Infosys was an extremely successful business. Headquartered in India, it had played an important role in transforming global business. Revenues were growing rapidly, and the company was highly profitable. The company's revenue growth was closely linked to its ability to recruit, train, and retain talented employees. The demand for talent among IT companies in India was straining the country's education system. At the end of March 2007, Infosys had 72,000 employees, an increase of nearly 20,000 from the previous year. Increasing growth would require even higher numbers of new employees. Attrition was also an issue, running at about 13% annually and adding to the number of new employees required to meet revenue objectives. In mid-2006, Mohan Pai moved from his position as CFO to take over human resources, education, and research. Describes the Infosys culture and human resources environment in 2007, and focuses on the issues faced by Pai in hiring, training, motivating, and retaining employees in a business that was dependent on a highly talented employee base. Specifically, asks students to consider ways of addressing the issues of hiring, attrition, and allocation of employees.

China's oil industry, with majority ownership vested in the government, had engaged in an "equity oil" strategy for the past few years--acquiring equity interests in oil producing nations including Sudan, Angola, and Iran. Outside critics, however, suggested that the Chinese companies could buy oil in the highly fungible global marketplace. But Sinopec, the nations largest refiner, was one of the three companies (together with PetroChina and CNOOC) engaged in the equity oil play. With China's energy demands swelling--especially petroleum of which it had limited reserves--Sinopec was struggling to increase output rapidly enough to keep pace with the rapid growth of their automobile sector. And it had to make money soon.

In 2007, Bunge, an agribusiness company, had over $26 billion in worldwide sales and was considered, along with Cargill and Archer Daniels Midland (ADM), one of three very integrated worldwide agribusiness companies. Headquartered in White Plains, NY, the company has traditionally possessed a strong presence in Brazil. Describes Bunge's tradeoff between efficiency of global operations and local responsiveness in an uncertain business environment. New world developments were effecting Bunge directly: high oil prices, a growing demand in emerging economies like China and India, and the possibility of agribusiness companies competing successfully in the production of biofuels. Bunge had traditionally followed an organizational model that was integrated but decentralized, trying to strike a balance between the efficiency of a global entity and the speed of local businesses. What would be the best strategy for Bunge to respond to the external changes imposed by high energy prices and increasing demand from emerging economies? How aggressively should Bunge invest in the rising biofuels markets?

As the chief financial officer of The Walt Disney Company, Tom Staggs was responsible not only for the financial management of the company, but also for the communication of the company's financial and strategic objectives to its investor base. Because of Disney's stature as the world's most iconic entertainment brand, the company had a particularly broad investor base: over 991,000 common shareholders in fiscal year 2006 compared with 51,400 for Time Warner. Staggs had to develop and implement a communication strategy that was appropriate for the diversity of this investor base, which included individual, institutional, brokerage house, and mutual fund investors. In doing so, he had to be mindful of the fact that these constituencies often had different time horizons and investment perspectives. In addition, Staggs had to bear in mind several other factors. First, he had to consider that any message delivered was perceived by investors as a direct reflection of management's capability and credibility. Second, he had to consider how the company's stated objectives influenced the behavior of its employees. Third, he had to decide how to implement the communication strategy across a wide array of channels, keeping in mind the purpose of the forum, regulatory requirements, and investor expectations.

The case begins with an overview of the business environment that led Hydro-Quebec to adopt a new approach to managing its information resources. The main external factors at play are described, along with their impact on Hydro-Quebec's decision to create six independent corporate divisions. This restructuring had the effect of substantially modifying Hydro-Quebec's organizational environment. The case chiefly describes how the company's response to these external pressures led to major internal changes, such as the establishment of a shared services centre and the transfer of responsibility for information resource management to the divisions. The case demonstrates how, through a major project to computerize Hydro-Quebec Distribution's (HQD) activities, a new IT management model came to be and how the sharing of roles and responsibilities was implemented. Finally, the case study discusses the challenges faced by the company in implementing the new information resource management model.

Flayton Electronics is showing up as a common point of purchase for a large number of fraudulent credit card transactions. It's not clear how responsible the company and its less than airtight systems are for the apparent data breach. Law enforcement wants Flayton to stay mute for now, but customers have come to respect this firm for its straight talk and square deals. A hard-earned reputation is at stake, and the path to preserving it is difficult to see. Four experts comment on this fictional case study in R0709A and R0709Z. James E. Lee, of ChoicePoint, offers lessons from his firm's experience with a large-scale fraud scheme. He advises early and frank external and internal communications, elimination of security weaknesses, and development of a brand-restoration strategy. Bill Boni, of Motorola, stresses prevention: comprehensive risk management for data, full compliance with payment card industry standards, and putting digital experts on staff. For the inadequately prepared Flayton, he suggests consulting an established model response plan and making preservation of the firm's reputation its top priority. John Philip Coghlan, formerly of Visa USA, discusses the often-divergent positions of data-breach stakeholders and puts customers' interests first. Swift disclosure by Flayton, he argues, would empower consumers to protect themselves against further fraud and might even enhance the company's reputation for honesty. Jay Foley, of the Identity Theft Resource Center, recommends that Flayton emphasize quality of communication over speed of delivery. More broadly, he advocates cautious management to prevent data thefts, which are proliferating and could have long-term consequences.