Scorecard: Wesfarmers after Coles Acquisition

In the 1990s and early 2000s, Wesfarmers showed how a corporation could be successful with a similar strategy as GE in America: buying and selling unrelated businesses. But then private capital entered the acquisition market, bidding up the price for Australian corporations that were up for sales. Wesfarmers found it more difficult to pursue it disciplined strategy of finding acquisitions that you be managed more effectively and unlock shareholder value. Almost two years ago Wesfarmers but the underperforming Coles supermarket chain. Plenty of commentators were worried that Wefarmers, breaking its traditions, overpaid for Coles and would never be able to improve the performance of Coles as the Perth-based conglomerate had done with earlier acquisitions such as Bunnings.

So far the Coles acquistions is not perceived as a great success story. Wesfarmers stock has underperformed compared to the index.

Posted on Sep 12, 08

Alcaltel & Lucent: The French American Merger does not realize the promised benefits

WHEN Alcatel, a French maker of telecoms equipment, announced its plan in 2006 to merge with Lucent, an American rival, reactions were mixed. There was general agreement that bigger was better and that the combined firm would benefit from greater geographical reach. But there was also scepticism that its French and American managers would be able to get along. With good reason, it seems: on July 29th Alcatel-Lucent announced its sixth consecutive quarterly loss and the resignations of Serge Tchuruk, its French chairman, and Patricia Russo, its American chief executive. Their firm’s troubles stem in large part from its internal clash of cultures. Read more on Economist.com

Posted on Aug 22, 08

Adrian Finlayson on the Difference of Being a Consultant and Being a CEO

"It's much harder doing than telling. Things take a lot longer than you initially think, and along the way you have to manage a broad stakeholder base, including your team, investors and the board. A chief executive is a management consultant who has to implement his own recommendations."

How do you get the best out of your staff?
We make sure that when people do what is asked of them, they are continuously recognised. We practice what we preach - we run a formal, peer-to-peer nominating program that allows individuals across the company to recognise each other for demonstrating behaviour that aligns closely with our values, and delivers business results.

What are the challenges of running a growth business?
The biggest challenge is ensuring the right balance between existing growth businesses and picking new areas of investment. There is never a shortage of additional investment opportunities, but there will always be a constraint on being able to deliver on all the opportunities. This often requires the chief executive to say "no".

BRW, May 8-14, 2008

Posted on May 08, 08

Dell Needs to Change its Business Model

In SMI we are doing a case study of how Dell developed a market positioning and orgnanizational strategy that allowed it to outcompete all other firms in the PC industry. Dell seemed unstoppable and. The Economist reports on the current troubles of Dell and how the returned founder of the firm tries to turn the firm around and restore it to glory, i.e. growth and profitability. Read Story
September 5, 2008 update: Dell plans to sell all its factories

Posted on May 05, 08

LaudaMotion’s New Business Model for Car Rentals: 1 Euro a day if drive at least 30 kilometers

Laudamotion is gambling that it can charge advertisers rather than rental customers for the cost of renting out small car in a city. If you drive more than 30 kilometers a day in a metropolitan area, you only pay 1 euro. The service is presently available in some major German and Austrian cities. Will LaudaMotion's novel rental car business model work?

Posted on May 02, 08

Danger Looming in Different Market Segment: The iPhone Challenge for Blackberry

Blackberry's dominate the business PDA email market. But Apple's iPhone initially designed for consumers may invade the business market as well.

Since the iPhone went on sale last summer, amid long lines of shoppers and media adulation, the contours of the smartphone market have begun to shift rapidly toward consumers. An industry once characterized by brain-numbing acronyms and droning discussions about enterprise security is now defined by buzz around handset design, video games and mobile social networks.[...]In the short term, Apple’s noisy entrance into the smartphone market has elevated the visibility of smartphones and enhanced the prospects of most of its rivals. Worldwide, smartphone shipments jumped 60 percent in the last three months of 2007 over the same period the previous year, according to IDC, the tracking firm. Of the two billion cellphones sold last year, nearly 125 million were smartphones — a share that analysts expect to inexorably grow.
R.I.M. added 6.5 million subscribers in its last fiscal year, twice the previous year’s amount, and its stock hit the stratosphere, more than doubling in value as investors anticipated the coming Age of the Smartphone. And R.I.M. has already introduced catchy mainstream gadgetry. The BlackBerry Pearl and Curve, two phones aimed explicitly at the consumer market, have sold well, particularly during the holiday season, and now account for a majority of R.I.M.’s device sales. But there are also signs that R.I.M. faces steeper challenges. At the end of last year, BlackBerry had a 40 percent share of the United States smartphone market, down from 45 percent at the end of 2006, thanks largely to the 17.4 percent share the iPhone grabbed in its first six months.

Posted on Apr 27, 08

Henry Kravis On Creating Value

Henry Kravis: The thing that is really important as you think about the private equity industry is that it has changed dramatically. In the late nineties we made a lot of mistakes at KKR. I’m not saying it’s good that we made the mistakes, but we did learn from our mistakes, because we changed the way we do business. The first thing we did was to make sure we acted and thought like industrialists. The days of just financial engineering are over. You have to really operate the business. Our whole approach at KKR since 1999 is that our job begins the day we buy a company. I like to say any fool can buy a company. There’s plenty of financing around. But what do you do with a business to create value? We’ve had an in-house consulting firm since the early eighties, but today we have a very large one. These operating consultants put metrics into every business that we’re involved with, they improve productivity, they shorten the supply chain, they improve sales. We expect everyone at KKR to understand their industry from the bottom up, and talk to purchasing managers, marketing people, salespeople, customers, suppliers, and understand the metrics, understand the best practices, the economic drivers, what drives an industry.

Read Full Interview at Columbia Business School .

Posted on Apr 25, 08

Has the Macquarie Group found a way to achieve higher returns without increasing risk?

Read the story on Economist.com

Posted on Apr 24, 08

Ford Turnaround

Ford has tried to regain a competitive position a number of times without success. Will the company succeed this time as its struggles for survial. Read article on WSJ.com.

April 24, 2008: In Surprise, Ford Swings to Profit in First Quarter

Posted on Apr 23, 08

CEO of GE Discusses Earnings Miss on TV

Part 1
Part 2

Posted on Apr 11, 08

Falling margins in Flat Panel TVs force Philips out of North American Producer Market

As prices decline, profits have been increasingly difficult to achieve. According to iSuppli, the average selling price for a 42-inch L.C.D. television has fallen from $2,082 one year ago to $1,544 today, a 26 percent drop. Depending on the manufacturer, the profit margin for that size set is between 9 and 16 percent.

Full Story at NY Times

Posted on Apr 08, 08

Coming Soon Superfast Internet

by Jonathan Leake, Science Editor, Times of London
THE internet could soon be made obsolete. The scientists who pioneered it have now built a lightning-fast replacement capable of downloading entire feature films within seconds. At speeds about 10,000 times faster than a typical broadband connection, “the grid” will be able to send the entire Rolling Stones back catalogue from Britain to Japan in less than two seconds. The latest spin-off from Cern, the particle physics centre that created the web, the grid could also provide the kind of power needed to transmit holographic images; allow instant online gaming with hundreds of thousands of players; and offer high-definition video telephony for the price of a local call. David Britton, professor of physics at Glasgow University and a leading figure in the grid project, believes grid technologies could “revolutionise” society. “With this kind of computing power, future generations will have the ability to collaborate and communicate in ways older people like me cannot even imagine,” he said.

The power of the grid will become apparent this summer after what scientists at Cern have termed their “red button” day - the switching-on of the Large Hadron Collider (LHC), the new particle accelerator built to probe the origin of the universe. The grid will be activated at the same time to capture the data it generates.

Cern, based near Geneva, started the grid computing project seven years ago when researchers realised the LHC would generate annual data equivalent to 56m CDs - enough to make a stack 40 miles high.

This meant that scientists at Cern - where Sir Tim Berners-Lee invented the web in 1989 - would no longer be able to use his creation for fear of causing a global collapse.

This is because the internet has evolved by linking together a hotchpotch of cables and routing equipment, much of which was originally designed for telephone calls and therefore lacks the capacity for high-speed data transmission.

By contrast, the grid has been built with dedicated fibre optic cables and modern routing centres, meaning there are no outdated components to slow the deluge of data. The 55,000 servers already installed are expected to rise to 200,000 within the next two years.

Professor Tony Doyle, technical director of the grid project, said: “We need so much processing power, there would even be an issue about getting enough electricity to run the computers if they were all at Cern. The only answer was a new network powerful enough to send the data instantly to research centres in other countries.”

That network, in effect a parallel internet, is now built, using fibre optic cables that run from Cern to 11 centres in the United States, Canada, the Far East, Europe and around the world.

One terminates at the Rutherford Appleton laboratory at Harwell in Oxfordshire.

From each centre, further connections radiate out to a host of other research institutions using existing high-speed academic networks.

It means Britain alone has 8,000 servers on the grid system – so that any student or academic will theoretically be able to hook up to the grid rather than the internet from this autumn.

Ian Bird, project leader for Cern’s high-speed computing project, said grid technology could make the internet so fast that people would stop using desktop computers to store information and entrust it all to the internet.

“It will lead to what’s known as cloud computing, where people keep all their information online and access it from anywhere,” he said.

Computers on the grid can also transmit data at lightning speed. This will allow researchers facing heavy processing tasks to call on the assistance of thousands of other computers around the world. The aim is to eliminate the dreaded “frozen screen” experienced by internet users who ask their machine to handle too much information.

The real goal of the grid is, however, to work with the LHC in tracking down nature’s most elusive particle, the Higgs boson. Predicted in theory but never yet found, the Higgs is supposed to be what gives matter mass.

The LHC has been designed to hunt out this particle - but even at optimum performance it will generate only a few thousand of the particles a year. Analysing the mountain of data will be such a large task that it will keep even the grid’s huge capacity busy for years to come.

Although the grid itself is unlikely to be directly available to domestic internet users, many telecoms providers and businesses are already introducing its pioneering technologies. One of the most potent is so-called dynamic switching, which creates a dedicated channel for internet users trying to download large volumes of data such as films. In theory this would give a standard desktop computer the ability to download a movie in five seconds rather than the current three hours or so.

Additionally, the grid is being made available to dozens of other academic researchers including astronomers and molecular biologists.

It has already been used to help design new drugs against malaria, the mosquito-borne disease that kills 1m people worldwide each year. Researchers used the grid to analyse 140m compounds - a task that would have taken a standard internet-linked PC 420 years.

“Projects like the grid will bring huge changes in business and society as well as science,” Doyle said.

“Holographic video conferencing is not that far away. Online gaming could evolve to include many thousands of people, and social networking could become the main way we communicate.

“The history of the internet shows you cannot predict its real impacts but we know they will be huge.”


http://www.timesonline.co.uk/tol/news/uk/science/article3689881.ece

Posted on Apr 06, 08

Book Review Instructions

During the SMY, each student will present a review of a book or an article that has extended their thinking about Strategic Management. The article or book should not be a core management text that most students would be already familiar with. New insights often come from another domain. For this reason we encourage you to look far afield for texts that provide you with some insight into the problems of the general manager or entrepreneur. For example, “It’s Only a Game” by John O’Neill (former CEO of the Australian Rugby Union and Football Federation of Australia) is a good insight into managing a complex organisation. We have posted an example of such a book review on the eLearning website along with some background information on the value of this assignment.

Prepare a 2 ½ minute presentation on your book or article review. After your presentation (which will be stopped after 2 ½ minutes whether you have finished or not) there will be a 2 ½ minute Q&A with members of your cohort and residential leader, for a total presentation of 5 minutes.

This assignment is graded Pass / Fail only. The following criteria will be used to judge your oral presentation:

• Is it well-organised and clearly presented?
• Does it engage the audience?
• Does it provide insight for the General Manager or entrepreneur?
• Does it articulate lessons for you or your organisation?

Here you find an example of a book review:

What Don Quixote Can Teach Managers and Entrepreneurs


Miguel de Cervantes. 2003. Don Quixote. HarperCollins Publishers, New York. Translated by Edith Grossman.


Reviewed by J. Peter Murmann


When I first encountered Don Quixote, I thought that a manager or entrepreneur could not possibly learn anything from this lunatic Spaniard. But on reflection I realized that Don Quixote provides some valuable insights into leadership and the challenge of dealing emotionally with the uncertainties inherent in any new venture.

Let me briefly summarize the book:

Alonso Quixano, an unmarried retired country gentleman, has become addicted to reading fictional accounts of chivalrous knights who allegedly secured peace, justice, and prosperity for medieval society and were rewarded with great social prestige and extraordinarily beautiful maidens. Not realizing these knight tales are fictional, he commits himself to fight the evils in his native land by becoming a knight-errant, renaming himself Don Quixote. The book documents his adventures that invariably lead to failure and ridicule. Except for his neighbor Sancho Panza, who becomes Don Quixote’s squire, everybody realizes that Don Quixote is mad. His imagination transforms the real world into the fantasyland of a medieval knight: His castle is a commonplace inn, his ladylove -- a peasant woman once met many years ago. The invading armies are flocks of sheep. The giants he attacks are just windmills.

There are two main lessons in the book: one for leaders and one for entrepreneurs.

A great vision is not sufficient to be successful. Without a good grasp of reality, you cannot make vision come true. But when you are an ultra-realist as Sancho is, you cannot inspire anyone to follow you. Don Quixote is able to lead and later keep Sancho from defecting in the wake of constant setbacks precisely because Don Quixote has no doubt that his vision is right and that they will succeed in the end. Sancho cannot take over this leadership role from Don Quixote because he lacks the ability to imagine a different future. Therefore, to become effective leaders we also need to cultivate the imagination. When I help organizations develop their leadership, I will put more emphasis on the need to recruit skills to imagine a new future as well as skills to develop and execute the current strategy. Those skills don’t need to coincide in the same person.

The second key insight from the book for me is that we can deal much better with failure when we take on a job because we truly want to spend our lives in this line of work. Failure will almost certainly occur in some form for entrepreneurs, and in this book, Don Quixote repeatedly fails as a knight-errant. Someone with little commitment to their work would perceive these setbacks as a reason to abandon the quest, but Don Quixote simply sees them as the cost of becoming who he wants to be. As entrepreneurs, we had better not start a new business just for the money! When I recruit people in my organization for important jobs, I need to make sure that they are not doing it just to increase their paychecks.

Posted on Jul 21, 07

Myer is more valuable after becoming once again independent from Coles

In August 1985, the Myer Emporium Ltd and GJ Coles & Coy Ltd merged, becoming the largest ever Australian Corporation. The merger did not work nearly as well as anticipated, a common fate for merged companies. In 2006 Myer was sold off to private equity. Within in a year the firm was worth an additional 1 billion, illustrating powerfully that free-standing companies often create more value than when they are part of a larger corporate structure.
More details are provided in a recent articles in the Australian.

Myer's makeover reaps $1bn

Here are some excerpts from the article "Myer buyers put Coles to shame."

The stunning Myer turnaround is a tribute to the successful implementation of basic retailing techniques by an experienced management team, as well as a board where six of nine directors have extensive industry experience.

The contrast with the former owner Coles Group, now a takeover target itself, could not be more stark.

Chief executive John Fletcher has an industrial services background at Brambles, while former Tesco executive Michael Wemms is the only director with a genuine retail background.

[...]

Asked later by The Australian how Myer has changed under its new owners, he says there's "more drive and enthusiasm", and the management team is better.

Bails, though, will not specifically discuss the discredited previous owners.

"I have no comment on the past," he says.

Posted on Mar 30, 07

How to get around the difficulty of estimating returns from innovation

Bombardier Recreational Products, based in Quebec, has spent C$225m ($195m) over 11 years developing the Can-Am Spyder Roadster, a three-wheeled motor vehicle. When it goes on sale later this year the $15,000 Spyder will be aimed at baby-boomers who like the idea of riding al fresco but do not feel comfortable on a two-wheeler, says Jose Boisjoli, BRP's boss. Mr Boisjoli admits that his firm has no idea how much demand there will be for the Spyder. One way to think about how much you should spend on innovation is to ask: how much money can I lose with a failed innovation without jeopardizing the existence of the firm.

Posted on Mar 30, 07

Conglomerate Watch: Immelt find it tough to follow Jack Welsh’s act

GE's CEO Jeffrey Immelt finds it difficult to convince markets that his new strategy will deliver value as his predecessor did.
Two articles in the Financial Times highlight how important it is for CEO to communicate effectively to financial analysts whose recommendation drive the stock price of a firm. Here are excerpts from the informative articles.

GE redoubles efforts to woo investors.

Francesco Guerrera in New York, 25 February 2007, Financial Times (FT.Com)

GE's shares have underperformed the market by more than 20 per cent since Jeffrey Immelt took overfrom Jack Welch as chairman and chief executive in 2001. The sluggish performance has surprised GE insiders because the company met its financial targets, sold low-margin operations and expanded faster-growing businesses. General Electric is to redouble efforts to woo investors and bolster its underperforming share price after admitting it has so far failed to persuade the market that its sprawling business can deliver sustained profit increases.The investor relations offensive, centred on the theme "invest and deliver", will attempt to allay fears over GE's "quality of earnings" - the perception that recent results were flattered by tax rates and one-off items. Executives say the shares' poor performance is partly due to the company's failure to persuade investors it can achieve consistent quarterly profit growth. "Jeff and I can do a better job of explaining our performance quarter by quarter," Keith Sherin, chief financial officer told the Financial Times. "What's the difference between Jeff and Jack? Jeff introduced the growth playbook," said Nicole Parent,an analyst at Credit Suisse. "When you have growth and your stock price doesn't move, investors ask questions, but management is acutely aware of what it has to do." GE also plans to take analysts to research centres in New York state, Shanghai, Bangalore and Munich, which are charged with producing new products and technologies. The move could dispel fears that GE's size will eventually slow its profit growth by highlighting its investments in research and development.



Share price keeps Immelt in Welch's shadow.
Francesco Guerrera in New York, 25 February 2007, Financial Times (FT.Com)

As long as the share price underwhelms, it will be tough for the 50-year-old executive to come out of the overbearing shadow of his predecessor Jack Welch. Mr Welch's own brand of ruthless cost and employee cutting, daring acquisitions and self-promotion contributed to a 38-fold rise in GE's shares during his two decades at the helm. Since Mr Immelt got the top job the shares have failed to respond to his strategy of refocusing GE on high-growth industries in order to increase profits and revenues. "Jack made GE into a financial institution with a manufacturing arm and Jeff is taking it back to the core," says William Rothschild, a former GE corporate strategist and the author of The Secret to GE's Success. "But he has to show he has picked the right shots. He is still earning his stripes." Investors' willingness to give Mr Immelt time - nobody on Wall Street has yet called for his head - is partly driven by their respect for a personality and management style that are near-polar opposites of the "imperial CEO" qualities epitomised by Mr Welch.

Posted on Feb 25, 07

Understanding the Strategies of Airbus and Boeing

Boeing and Airbus are pursuing different strategies with their next generations planes (the superlarge A380 and the supereffecient Boeing 787 Dreamliner). A recent article in the New York Times nicely demonstrates that the differences on the two companies' strategic bet are driven by two different views how passenger travel will develop in the future. In essence, the firms tried to create strategies that fit with the perceived future environments of airplane travel.

Posted on May 21, 06

The World’s Most Innovative Companies

Rachael Powell (Cohort A2) brought to my attention an interesting article from Business Week. From a methodological point, it would have been nice if the BW staff had looked at companies that were not innovative and confirmed that these firms did not do any of the practices that characterize the most innovative companies. Read Article.

Posted on Apr 24, 06

Wesfarmers: Interview with Former CEO Michael Chaney

In the spirit of "Where are the Now", here is an interview with the outgoing CEO of Wesfarmers, Michael Chaney, before he became chairman of the National Australian Bank (NAB).

Posted on Apr 19, 06

Course Outline

SM1_course-outline_July23_2008.pdf

Posted on Jul 21, 05

Links

Useful Links for Students

AGSM Career Services

Posted on Jul 21, 05

eLearning Link

Click here to be taken to the elearning login page

Posted on Jul 21, 04